SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1999 or

/ / Transaction report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from ____________________ to ________________________

Commission file number: 0-22529
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inTEST Corporation
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(Exact name of Registrant as specified in its charter)

Delaware 22-2370659
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(State or other jurisdiction (I.R.S. Employer Identification No.)
or incorporation or organization)

2 Pin Oak Lane, Cherry Hill, NJ 08003
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(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: 856-424-6886

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.01 per share.

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 / /

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant computed by reference to the closing price
of such stock on March 22, 2000 as quoted on the Nasdaq National Market
system was $90,354,167.

The number of shares outstanding of the Registrant's Common Stock, as of
March 22, 2000 is 8,582,827.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) 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. / /

inTEST Corporation
Annual Report on Form 10-K

INDEX

Part I: Page
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Item 1: Business 3

Item 2: Properties 13

Item 3: Legal Proceedings 14

Item 4: Submission of Matters to a Vote of Security Holders 14

Part II:
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Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters 15

Item 6: Selected Financial Data 17

Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 18

Item 7A: Quantitative and Qualitative Disclosures About
Market Risk 23

Item 8: Financial Statements and Supplementary Data 23

Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23

Part III:
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Item 10: Directors and Executive Officers 24

Item 11: Executive Compensation 24

Item 12: Security Ownership of Certain Beneficial Owners and
Management 24

Item 13: Certain Relationships and Related Transactions 24

Part IV:
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Item 14: Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 24

Signatures 26

Index to Exhibits 27

Index to Consolidated Financial Statements and Consolidated
Financial Statement Schedule 28

inTEST Corporation
Annual Report on Form 10-K

PART I:
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Item 1. BUSINESS

INTRODUCTION
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On March 9, 2000, we acquired all of the stock of Temptronic Corporation.
The acquisition was in the form of a merger of Temptronic into a subsidiary of
ours, and was accounted for as a pooling of interests. (The financial
statements included in this report do not reflect the acquisition of
Temptronic.) Temptronic makes and sells high-performance temperature
management products used in the manufacture and testing of integrated circuits,
or ICs, and other electronic products. These temperature management products
are complementary to the manipulator and docking hardware and tester interface
products manufactured by us prior to the merger.

Although the merger occurred after the period covered by this report, the
following discussion of our business is presented on a post-merger, combined
basis, except where information is specifically given as of December 31, 1999
(such as in the sections describing "Employees," "Backlog," "Customers,"
"Patents and Other Proprietary Rights," and "Engineering and Product
Development") or as otherwise noted. The portions of this discussion of our
business that describe the design, manufacture and marketing of "temperature
management products" relate to the business of Temptronic and did not
contribute to our results of operations in 1999.

We are a leading independent designer and manufacturer of test head
manipulators, docking hardware, temperature management products and tester
interface products. Semiconductor manufacturers use our products in
conjunction with automatic test equipment, or ATE, in the testing of ICs. The
testing of integrated circuits is an essential step in the IC manufacturing
process and comprises a significant percentage of the total cost of
manufacturing integrated circuits. We focus on producing high quality products
and developing innovative proprietary technologies designed to improve the
efficiency and cost-effectiveness of the ATE used in the IC testing process.
Our products are used by leading semiconductor manufacturers worldwide.

We were incorporated in New Jersey in 1981 and reincorporated in Delaware
in April 1997. We established inTEST Limited in the U.K. in 1985, inTEST
Kabushiki Kaisha in Japan in 1987 and inTEST PTE, Limited in Singapore in 1990.
inTEST Limited designs, manufactures and markets our products principally in
the European market. inTEST Kabushiki Kaisha acts as a liaison office with
Japanese ATE manufacturers and markets our products in Japan. In addition,
inTEST Kabushiki Kaisha initiated our business of designing and marketing
related tester interface products, including sockets and interface boards.
inTEST PTE, Limited designs, manufactures, markets and provides technical
support to customers in Southeast Asia. In 1997, we completed our initial
public offering. In 1998, we acquired all of the stock of TestDesign
Corporation, which expanded our capabilities in the design, manufacture and
marketing of tester interface products. As described above, we acquired all of
the stock of Temptronic Corporation in the first quarter of 2000.

IC INDUSTRY BACKGROUND
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Overview
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The semiconductor market is a high volume, high growth market
characterized by rapid technological change and wide fluctuations in demand.
Semiconductor manufacturers generally compete based on product performance and
price. Therefore, they seek to maintain high production yields and maximize
the utilization of the expensive facilities and capital equipment required in
the manufacturing process. The quality of testing during manufacturing
directly affects both production yield and efficiency. Accordingly,
semiconductor manufacturers seek to use testing processes that optimize the
utilization of ATE and floor space dedicated to testing.

The demand for ATE is driven by several factors, including demand for
products that incorporate ICs, increasing complexity of ICs and the emergence
of new IC technologies. The increasing use of ICs in a variety of consumer
products is well recognized, as are the continuing advances in the performance
characteristics of ICs. Some of the newer IC technologies include the use of
300 mm wafers in production and system-on-a-chip ("SOC") where digital, analog
and memory functions are combined on a single IC. As a result of these and
other advances, semiconductor manufacturers must purchase additional ATE to
handle the increased production and more sophisticated testing requirements.

Driven by higher demand for ICs and the emergence of new IC technologies,
we believe semiconductor manufacturers will increase their capital expenditures
for the expansion and upgrading of their manufacturing operations over the next
few years.

IC Test Process
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ICs are the building blocks of modern electronics. Microprocessors,
memory chips, telecommunication ICs, digital signal processors and various
other types of ICs are used in a variety of products, ranging from complex
products such as computers, cell phones, televisions, automobile electronics,
digital cameras and DVD players to a simple household lamp dimmer. As
electronic products become more intricate, so do the ICs that perform the
necessary functions. Manufacturers have continued to seek innovation in the
design, architecture and functionality of the ATE used in the testing of ICs
because of the need to produce increasingly complex products more efficiently.

ICs are typically manufactured in multiples of several hundred on a
silicon wafer which are later separated or "diced" into individual ICs.
Extended leads are then attached to the individual ICs, for later connection to
other electrical components, and the ICs are put in a plastic, ceramic or other
protective housing. This process step is called "packaging." Wafers are
tested before being diced and packaged, to insure that only properly
functioning ICs are packaged. This testing step has several names including
"front-end test," "wafer test" or "wafer probe." In front-end test, a
piece of equipment known as a wafer prober automatically positions the wafer
under a "test head," which is connected electronically to a test system.
Once the good ICs have been identified, they are packaged. The packaged IC also
requires testing, called "back-end test," to determine if it meets design and
performance specifications. Packaged ICs are placed into a machine called a
handler, which then plugs the packaged ICs into an environmentally-controlled
test head, which includes a test socket, for testing.

Testers range in price from approximately $500,000 to over $3.0 million
each, depending primarily on the complexity of the IC to be tested and the
number of test heads, typically one or two, with which each tester is
configured. Probers and handlers range in price from approximately $100,000 to
$500,000. A typical test floor of a large semiconductor manufacturer may have
100 test heads and 100 probers or 250 handlers supplied by various vendors for
use at any one time.

Test head manipulators facilitate the movement of the test head to the
wafer prober in front-end test, and to the handler in back-end test. Docking
hardware connects the test head to the wafer prober and handler. Tester
interface products provide the electrical connection between the test head and
the wafer or packaged IC. Traditionally, temperature management products are
used in back-end test to allow a manufacturer to test packaged ICs under the
extreme temperature conditions in which the IC may be required to operate.
However, inTEST believes temperature-controlled testing will be an increasingly
important part of front-end wafer testing as the demand for front-end testing
grows.

Trends in IC Testing
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While the basic purpose of testing ICs during production is to identify
unacceptable products, a related goal of the semiconductor manufacturer is to
perform the test in the most efficient and cost-effective manner possible. To
provide testing equipment that can help manufacturers meet this goal, the ATE
industry must respond to the following developments:

Change in Technology. Currently, most semiconductor manufacturers use 150
mm and 200 mm wafer technology. In order to increase throughput and lower IC
cost, 300 mm wafer production capability will be needed over the next few
years. In addition, end-user applications are demanding ICs with increasingly
higher performance, greater speeds, and smaller sizes. ICs that meet these
higher standards are more complex and dense. SOC designs are expected to be
subject to growing demand in the future. These technology trends have
significant implications for the IC testing process, including:

* the need for larger, heavier and more complex test heads;
* higher pin densities;
* increasing test speeds; and
* a new generation of testers for SOC and other technologies.

Need for Plug-Compatibility and Integration. Semiconductor manufacturers
need test methodologies that will perform increasingly complex tests while
lowering the overall cost of testing. This can require combining ATE
manufactured by various companies into optimally performing systems.
Semiconductor manufacturers have to work closely with various test hardware,
software, interface and component vendors, therefore, to resolve design and
compatibility issues. Independent ATE manufacturers not only have to meet
higher product performance requirements, but they must make their products
plug-compatible with test equipment manufactured by other vendors.

Testing under Extreme Conditions. ICs are expected to perform across a
wider spectrum of temperature and environmental conditions than ever before.
Temperature testing is expected to find an increasing role in front-end, wafer
level testing. Creating a uniform thermal profile over much larger areas, as
in the case of wafer level testing, represents a significant engineering and
design challenge for ATE manufacturers.

Demand for Higher Level of Technical Support. As IC testing becomes more
complex, IC manufacturers are increasingly demanding higher level of technical
support on a routine basis. ATE manufacturers must commit greater resources
to technical support in order to develop close working relationships with
their customers. This level of support also requires close proximity of
service and support centers to customers' facilities.

Cost Reduction through Front-End Testing. As the cost of testing ICs
increases, semiconductor manufacturers will continue to look for ways to
streamline the testing process to make it more cost-effective. inTEST believes
that this factor will lead to more front-end wafer testing.

inTEST'S SOLUTIONS
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We have focused our efforts on designing and producing only high quality
products that provide superior performance and cost-effectiveness. We seek to
address a manufacturer's individual needs through innovative, customized
designs, use of the best materials available, quality manufacturing practices
and personalized service. We design solutions to overcome the evolving
challenges facing the ATE industry by providing the following advantages:

High Performance Technology. Our universal test head manipulators provide
six degrees of motion freedom to enable the maximum flexibility with the
minimum amount of effort. As a result, our products can be used in virtually
any test setting. Our manipulators have kept pace with the rapidly increasing
size of test heads, which can weigh up to 900 pounds and are expected to
continue to get larger as the required level of testing sophistication
increases. Our docking hardware offers precise control over the connection to

test sockets, probing assemblies and interface boards, reducing downtime and
minimizing costly damage to fragile components. We believe that these
characteristics will become even more important as testing becomes more
complicated.

Broad ATE compatibility. A hallmark of our products has been, and
continues to be, compatibility with a wide variety of ATE. Our universal
manipulators can handle different test heads produced by different
manufacturers. We also design and manufacture docking hardware that can be
used with otherwise incompatible ATE. Such an integrated approach to ATE leads
to smooth changeover from one tester to another, longer lives for interface
components, better test results and lower overall test costs.

Wafer Level Testing. Our redesigned ThermoChuck* products can be used for
front-end temperature stress screening at the wafer level. This can provide
significant cost savings from early identification of IC that will not perform
at specified temperatures, thus improving IC production yields as well as
product quality and reliability. ThermoChuck products are capable of handling
any size wafer, including a 300 mm wafer, for thermal test without causing the
wafer distortion that can occur as temperature changes are introduced. In
addition, our Pro Dock* can be used in front-end testing by a single operator
to position a test head weighing up to 1,000 pounds. The Pro Dock has a
relatively small footprint that significantly increases test floor space
utilization. We believe that these characteristics will become even more
important as testing becomes more complicated.

Worldwide Customer Service and Support. We have long recognized the need
to maintain a physical presence near our customers' facilities. We have
manufacturing facilities in New Jersey, Massachusetts, California, the U.K. and
Singapore, and we provide service to our customers from 11 sales and service
offices in the U.S., the U.K., Japan, and Singapore. Thus, our engineers are
easily accessible to, and can work directly with, our customers from the time
we begin developing our initial proposal through the delivery, installation and
use of the product by our customer. In this way, we are able to develop and
maintain close relationships with our customers.

* "ThermoChuck" and "Pro Dock" are registered trademarks of inTEST
Corporation.

inTEST'S STRATEGY

Our goals are to increase our recognition as the designer and manufacturer
of the highest quality products in our markets, and to become a supplier for
all of our customers' ATE needs, other than probers, handlers and testers. Our
general strategies to achieve these goals include the following:

Providing technologically advanced solutions. We are committed to
designing and producing only the highest quality products which incorporate
innovative designs to achieve optimal cost-effectiveness and functionality for
each customer's particular situation. Our engineering and design staff are
continually engaged in developing new and improved products and manufacturing
processes.

Leveraging strong OEM relationships. Our technical personnel work closely
with ATE manufacturers to design tester interface and docking hardware that are
compatible with their ATE. As a result, we are often privy to proprietary
technical data and information about these manufacturers' products. We believe
that because we do not compete with ATE manufacturers in the prober, handler
and tester markets, we have been able to establish strong collaborative
relationships with these manufacturers that enable us to develop ancillary ATE
products on an accelerated basis.

Continuing our international expansion. Our existing and potential
customers are concentrated in certain regions throughout the world. We believe
that we must maintain a presence in the markets in which our customers operate.
We currently have offices in the U.S., the U.K., Japan, and Singapore, and we
will be opening an office in Germany in the near future.

Pursuing synergistic acquisitions. A key element of our growth strategy
is to acquire businesses, technologies or products that are complementary to
our current product offerings. Our TestDesign and Temptronic acquisitions have
expanded our line of product offerings and given us the opportunity to market a
broader range of products to our customer base. We expect to make acquisitions
that will further expand our product lines, enabling us to become a single
source supplier to the test floor for a complete selection of equipment
compatible with testers, probers and handlers of all manufacturers.

OUR PRODUCTS
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We design and manufacture manipulators, docking hardware, temperature
management products and tester interface products, all of which are designed
to improve the utilization and performance of ATE used by semiconductor
manufacturers in the testing of ICs. Our primary line of manipulators and our
docking hardware are used most frequently during back-end testing of
specialized packaged ICs. Our temperature management products and tester
interface products are used in either front-end or back-end testing of
specialized packaged ICs. Specialized ICs include microprocessors, digital
signal processing chips, application specific ICs and specialized memory ICs,
and are used primarily in the automotive, computer, consumer products and
telecommunications industries. Most of our products are custom-designed for
our customer's particular combination of ATE. We have designed over 5,000
products, each of which is used to facilitate the use of one or more of over
175 different test heads with one or more of over 30 probers or 300 handlers,
all of which are mechanically different models.

Manipulator Products
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Universal Manipulators: Our primary line of manipulator products consists of
the in2* Test Head Positioners, which are free-standing universal manipulators.
Universal manipulators are manipulators that can hold a variety of test heads
and enable the test head to be repositioned for alternate use with any one of
several probers or handlers on a test floor. The in2 is distinguished from
universal manipulators manufactured by competitors by our innovative, floating-
head design. This design permits a test head weighing up to 900 pounds to be
held in an effectively weightless state, so it can be moved manually up or
down, right or left, forward or backward and rotated around each axis by an
operator using no more than 22 pounds of force. Consequently, an operator can
manually reposition the test head by grasping it in his or her hands and gently
moving the test head into position to dock with the prober or handler. This
same design feature enables the operator to dock the test interface board
without causing inadvertent damage to the fragile electrical contacts. As a
result, after testing a particular production lot of ICs, a test head held in
an in2 manipulator and equipped with our docking hardware can be disconnected
quickly and easily and docked to another handler for testing either a
subsequent lot of the same packaged IC or to test a different IC. in2
manipulators range in price from approximately $12,000 to $100,000.

Dedicated Manipulators: In addition to our free-standing universal
manipulators, we manufacture several models of dedicated manipulators. We
recently developed a fully-automatic, electrically-powered and microprocessor-
controlled dedicated manipulator we call the Pro Dock. We believe it is the
only fully-automatic manipulator which enables a test head to be automatically
docked to a prober or handler with the push of one button. The patented,
overhead design of the Pro Dock series manipulator uses a powered scissor
mechanism to raise and lower a test head to a prober or a top docking handler.
This design enables a Pro Dock to dock very large test heads (weight tested to
1,000 pounds). We believe that the Pro Dock series of manipulators will be
attractive to semiconductor manufacturers for testing 300 mm wafers and
packaged memory ICs because the size of test heads for these wafers and ICs
make manual manipulation cumbersome. In addition, we believe that the Pro Dock
will enable semiconductor manufacturers to increase floor space utilization of
their ATE systems by 25% to 40% over that achieved by other dedicated or
universal manipulators because a Pro Dock series manipulator has virtually a
zero footprint. We have not yet sold, and do not expect significant sales of,
Pro Dock manipulators until demand for 300 mm wafers reach levels warranting
significant investment in new testing equipment by semiconductor manufacturers.

* "in2" is a registered trademark of inTEST Corporation.

Docking Hardware
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Our docking hardware products mechanically control the delicate
interface between the test head's interface board and the prober's probing
assembly or the handler's test socket, and protects them from damage as
they are brought together, or "docked." A simple cam action docks and
locks the test head to the prober or handler, thus eliminating motion of
the test head relative to the prober or handler. This minimizes
deterioration of the interface boards, test sockets and probing assemblies
which is caused by the constant vibration during testing. Our docking
hardware is used primarily with floating-head universal manipulators when
maximum mobility and inter-changeability of handlers between test heads is
required. Our docking hardware enables semiconductor manufacturers to
achieve cost savings by improving ATE utilization, improving the accuracy
and integrity of test results, and reducing the need to repair or replace
expensive ATE interface products.

Our docking hardware products are distinguished from those offered by
competing ATE manufacturers by our ability to make multiple competing
brands of test heads compatible with multiple brands of probers and
handlers used by a semiconductor manufacturer by only changing interface
boards. This is called "plug-compatibility." Plug-compatibility reduces
the changeover time required to undock a test head from one handler and
dock it to another handler between production lots or when changing the IC
type being tested. This enables increased flexibility and utilization of
test heads, probers and handlers purchased from various manufacturers. We
believe that because we do not compete with ATE manufacturers in the sale
of probers, handlers or testers, ATE manufacturers are willing to provide
us with the information that is integral to the design of plug-compatible
products. Our docking hardware products range in price from approximately
$2,000 to $12,000.

Temperature Management Products
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Our temperature management products enable a manufacturer to test a
semiconductor wafer or IC over the extreme and variable temperature conditions
that can occur in the actual use of the electronic device containing the ICs.
Temperature management products must test ICs over a variety of temperature
ranges, rapidly shifting between temperature levels, without removing the wafer
or IC from its testing environment. Our temperature management products
control and quickly change test temperatures, within a range of temperatures
specified by the customer.

ThermoChuck Products: Our ThermoChuck precision vacuum platform assemblies
contain heating and cooling elements and associated equipment such as
temperature controllers, compressors, heaters and dehumidifiers, for quickly
changing and stabilizing the temperature of semiconductor wafers prior to their
dicing and packaging. Such temperatures can range from as low as -65 degrees
Celsius to a high of +400 degrees Celsius. They are incorporated into wafer
prober equipment for laboratory analysis and for in-line production testing of
semiconductor wafers. The ThermoChuck product line was recently redesigned,
and an innovative manufacturing process for the product line was developed. We
believe this new design and manufacturing process will improve the reliability
and performance of ThermoChuck products. Specifically, new ThermoChuck
products stay flatter, remain more level and maintain more uniform temperatures
during testing than our previous design. In addition, the new manufacturing
process is expected to reduce production costs for these products. We expect
to be able to market the redesigned ThermoChuck products during 2000. Our
ThermoChuck products range in price from approximately $14,000 to $55,000.

ThermoStream* Products: Our ThermoStream stand-alone temperature management
systems use a temperature-controlled air stream to rapidly change and stabilize
the temperature of packaged ICs and printed circuit boards. ThermoStreams
provide a source of heated and cooled air which can be directed over the
component or device under test. ThermoStream products contain heating
elements, refrigeration systems, air dryers, and sophisticated computer
controls. These systems are capable of controlling temperatures to within 1.0
degree Celsius over a -80 degrees Celsius to +225 degrees Celsius range.
Traditionally, our customers used ThermoStream products primarily in
engineering, quality assurance and short-run manufacturing environments,
however, these products are being used increasingly in longer-run production
applications. Our ThermoStream products range in price from approximately
$4,200 to $36,000.

* "ThermoStream" is a registered trademark of inTEST Corporation.

Other temperature management products: We also manufacture ancillary
temperature management products including temperature-controlled contact
probes, temperature-controlled enclosures, and precision temperature platforms.

Tester Interface Products
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We custom design our tester interface products for each application to
ensure a secure electrical connection between the tester and the probe card on
the prober or the test socket on the handler. Our designs optimize the
integrity of the transmitted signal which increases the accuracy of the test
data, so our tester interface products can be used with high speed, high
frequency, digital or mixed signal interfaces used in testing more complex ICs.
Because our tester interface products enable the tester to provide more
reliable yield data, our interfaces may also reduce IC production costs. We
offer over 200 different types of tester interface products that range in price
from $6,000 to $46,000.

MARKETING, SALES AND CUSTOMER SUPPORT
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We market and sell our products in all markets where semiconductors or ATE
are manufactured. North American and European semiconductor manufacturers have
located most of their back-end factories in Southeast Asia. The front-end
wafer fabrication plants of U.S. semiconductor manufacturers are primarily in
the U.S. Likewise, European, Taiwanese, South Korean and Japanese
semiconductor manufacturers generally have located their wafer fabrication
plants in their respective countries.

Manipulator Products, Docking Hardware and Tester Interface Products: In North
America, we sell to semiconductor manufacturers principally through
independent, commissioned sales representatives. Sales to ATE manufacturers
are handled by our account managers. North American sales representatives also
coordinate product installation and support with our technical staff and
participate in trade shows. Technical support is provided to North American
customers and independent sales representatives by employees based in New
Jersey, California, Texas, Arizona, and Oregon.

In Europe and Japan, we sell to semiconductor and ATE manufacturers
through our account managers. In China, Hong Kong, Malaysia, the Philippines,
South Korea, Taiwan and Thailand, we sell through independent sales
representatives. International sales representatives are responsible for
sales, installation, support and trade show participation in their geographic
market areas.

Our account managers are responsible for a portfolio of customer accounts
and for managing certain independent sales representatives. In addition, our
account managers are responsible for applications engineering, custom product
design, pricing, quotations, proposals and transaction negotiations.

Temperature Management Products: In the U.S., we sell to semiconductor
manufacturers through thirteen independent sales representative organizations,
except in New England and upstate New York where we sell directly through our
sales staff. Sales to ATE manufacturers are handled by our direct sales force.

We are represented in over 30 countries by 21 distributors. Typically,
we sell our products overseas through distributors, except in some countries
(India, Israel, Italy and South Korea) where we sell directly to the customer.
Almost all of our international distributors have represented us for between
five and fifteen years. We visit our distributors regularly and have trained
them to sell and service all of our temperature management products.

Post-merger Integration: We believe one of the benefits that may result from
the merger of inTEST and Temptronic is the opportunity to combine our sales and
distribution efforts. In the several weeks since the merger occurred, we have
started the process of cross-training our sales forces, and will continue
integrating our sales and marketing teams over the balance of the year.

CUSTOMERS
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We market all of our products to semiconductor manufacturers and ATE
manufacturers. In the case of temperature management products, we also market
our products to independent testers of semiconductors, manufacturers of
electronic products, and semiconductor research facilities. Our products are
used by our customers principally in production testing, although our
ThermoStream products have been used largely in engineering development and
quality assurance. We believe we sell to most major semiconductor
manufacturers in the world.

During 1999, sales to two customers exceeded 10% of our consolidated net
revenues (not including the net revenues of Temptronic): Teradyne - 14% and
Lucent Technologies - 11%. On a post-merger, pooled basis (that is, including
the net revenues of Temptronic), no one customer accounted for more than 10%
of our net revenues in 1999.

Our largest customers include:

Semiconductor Manufacturers ATE Manufacturers
--------------------------- -----------------
Hewlett Packard Analog Devices
Lucent Technologies LTX
Motorola Teradyne
ST Microelectronics Cascade Microtech*
Texas Instruments Electroglas*
Tokyo Seimitsu*

* Sales consist primarily of temperature management products.

MANUFACTURING AND SUPPLY
- ------------------------

Our principal manufacturing operations consist of assembly and testing at
our facilities in New Jersey, Massachusetts, California, the U.K., and
Singapore. By maintaining manufacturing facilities and technical support in
geographic markets where our customers are located, we believe that we are able
to respond more quickly and effectively to our customers' needs. We have
recently expanded our manufacturing facilities in California, and will be
moving our headquarters, manufacturing and warehouse facility in New Jersey in
the third quarter of this year to a larger facility located within half-a-mile
of our current facility.

We assemble most of our products from a combination of standard components
and custom parts which have been fabricated to our specifications by either
third party manufacturers or our own fabrication operations in New Jersey and
California. The manufacturing of ThermoStreams also involves a plating
operation which is currently performed in our Massachusetts facility. Our
practice is to use the highest quality raw materials and components in our
products. The primary raw materials used in fabricated parts are all widely
available. Substantially all components are purchased from multiple suppliers.
Although certain raw materials and components are purchased from single
suppliers, we believe that all materials and components are available in
adequate amounts from other sources.

We seek to control the quality of raw materials, fabricated parts and
components by conducting incoming inspections using sophisticated measurement
equipment. This includes testing with coordinate measuring machines in New
Jersey, Massachusetts, the U.K. and Singapore, to ensure that products with
critical dimensions meet our specifications. Our inspection standards have
been designed to comply with applicable MIL specifications and ANSI standards.
We have retained a consultant to prepare a quality manual and assist in our
application for ISO 9001 certification.

ENGINEERING AND PRODUCT DEVELOPMENT
- -----------------------------------

Our success is dependent on our ability to provide our customers with
products and solutions that are well engineered, and to design those products
and solutions before, or at least no later than, our competitors. As of
December 31, 1999, inTEST (exclusive of Temptronic) employed a total of 25
engineers who are engaged full time in engineering and product development.
Our practice in most cases has been to assign engineers to work with specific
customers rather than on specific products, thereby enabling us to develop the
relationships and free exchange of information that is most conducive to
successful product development and enhancement.

We have not historically maintained a separate research and development
department or group. Rather, since most of our products are customized, we
consider substantially all our engineering activities to be engineering and
product development. Temptronic has historically taken a different approach
and, as of December 31, 1999, employed 16 engineers and technicians for new
product research and development in Newton, Massachusetts. The principal focus
of Temptronic's research and development activities during the past several
years has been on the design and manufacturing process for the redesigned
ThermoChuck.

inTEST (exclusive of Temptronic) spent approximately $3.2 million on
engineering and product development in 1999, $1.9 million in 1998, and $1.7
million in 1997.

PATENTS AND OTHER PROPRIETARY RIGHTS
- ------------------------------------

As of December 31, 1999, inTEST (exclusive of Temptronic) held 14 U.S.
patents and 68 foreign patents and had pending 3 U.S. patent applications and
more than 38 foreign applications that cover various aspects of our technology.
Our policy is to protect our technology by filing patent applications for the
technologies that we consider important to our business. Our U.S. issued
patents will expire at various times beginning in 2002 and extending through
2014. We cannot assure you that the U.S. Patent and Trademark Office will
issue additional patents on our pending and future applications. Furthermore,
any patents now or hereafter owned by us may not be afforded protection against
competitors that develop similar technology or products. There are no pending
lawsuits or claims against us regarding infringement of any existing patents or
other intellectual property rights of others.

We also rely on trade secrets and unpatentable know-how to protect our
proprietary rights. It is our practice to require, as a condition of permanent
employment, that all of our employees agree to assign to us all rights to
inventions or other discoveries relating to our business made while employed by
us. In addition, all employees agree not to disclose any information about us
which is private or confidential.

COMPETITION
- -----------

Our competitors include independent manufacturers, ATE manufacturers and,
to a lesser extent, semiconductor manufacturers' in-house ATE interface groups.
We compete on the basis of product performance, functionality, reliability,
customer service, applications support, price and timely product delivery. We
believe that our long-term relationships with the industry's leading
semiconductor manufacturers and other customers, and our commitment to and
reputation for providing high quality products are important elements in our
ability to compete effectively in all our markets.

The independent manufacturers of docking hardware and manipulators that
compete with us include Reid-Ashman Manufacturing and Microhandling GmbH, each
of which manufactures docking hardware and manipulators. The manufacturers of
ATE that compete with us in the sale of docking hardware and universal
manipulators include Credence Systems, LTX, Schlumberger and Teradyne. Some
manufacturers of ATE are both our competitors and our customers. Our principal
competitors for temperature management products are ERS Elektronik GmbH,
Thermonics, Inc. and Trio Tech International. The independent manufacturers of
tester interface products that compete with us include Cerprobe Corporation,
Synergetix, a division of IDI, and Xandex Corporation. ATE manufacturers that
compete with us in the sale of tester interface products include Credence
Systems, Electroglas, LTX and Teradyne. In addition, while we do not know the
precise number of competitors that sell related ATE interface products, we
believe there are at least 20 manufacturers of interface boards and at least
five manufacturers of high performance test sockets.

BACKLOG
- -------

At December 31, 1999, our backlog of unfilled orders for all products
(exclusive of Temptronic's backlog) was approximately $9.5 million compared
with approximately $3.4 million at December 31, 1998. Our backlog includes
customer purchase orders which we have accepted, substantially all of which we
expect to deliver in the current fiscal year. While backlog is calculated on
the basis of firm purchase orders, a customer may cancel an order or accelerate
or postpone currently scheduled delivery dates. As a result, our backlog at a
particular date is not necessarily indicative of sales for any future period.

EMPLOYEES
- ---------

At December 31, 1999, inTEST (exclusive of Temptronic) employed a total of
164 full time employees, including 64 in customer service and support, 80 in
manufacturing operations and 20 in administration. We also had 5 temporary
employees, primarily in manufacturing jobs. Substantially all of our key
employees are highly skilled and trained technical personnel. None of our
employees is represented by a labor union, and we have never experienced a work
stoppage. We believe that our relationship with our employees is very good.

Item 2: Properties

At December 31, 1999, we leased nine facilities worldwide. We expanded
our Singapore and U.K. facilities during 1999, our Sunnyvale, California
facility and Japan facilities during the first quarter of 2000, and we plan
to move to larger facilities in Cherry Hill, NJ in the second quarter of 2000.
The following chart provides information regarding each of the facilities we
occupied at December 31, 1999, the facilities occupied by Temptronic at
December 31, 1999, and the facilities which we have occupied or signed
leases for in the first quarter of 2000. We believe that additional space
to meet our current and foreseeable future needs is readily available.

Lease Approximate
Location Expiration Square Footage Principal Uses
- -------- ---------- -------------- --------------

Cherry Hill, NJ(1) 9/2010 80,000 Future headquarters, design, manufacturing,
service and sales - manipulators and
docking hardware.

Cherry Hill, NJ(2) 5/2003 28,630 Headquarters, design, manufacturing, service
and sales - manipulators and docking
hardware.

Cherry Hill, NJ(2) 2/2003 11,082 Warehouse storage space.

Cherry Hill, NJ 8/2004 11,000 Machine shop.

Newton, MA(3) 8/2001 44,000 Design, manufacturing, service and sales -
temperature management products.

Sunnyvale, CA 12/2004 18,255 Design, manufacturing, service and sales -
tester interface products.

Sunnyvale, CA 12/2001 1,109 Machine shop.

Sunnyvale, CA 8/2001 1,900 Storage area. 67% is occupied by subtenant.

San Diego, CA(3) 5/2002 1,604 Design, manufacturing, service and sales -
temperature management products.

Thame, UK 12/2005 4,600 Design, manufacturing, service and sales -
manipulators and docking hardware.

Surrey, UK(3) 12/2001 1,200 Service and sales - temperature management
products.

Singapore 4/2001 3,077 Design, manufacturing, service and sales -
manipulators, docking hardware and certain
tester interface products, including
sockets and interface boards.
Upon
Kichijoji, Japan(4) notice 1,200 Design, service and sales - manipulators,
docking hardware and certain tester
interface products, including sockets and
interface boards.

Tokyo, Japan(5) 3/2002 1,932 Design, service and sales - manipulators,
docking hardware and certain tester
interface products, including sockets and
interface boards.

- -------
(1) Lease to commence September 2000.
(2) These leases will be terminated upon occupancy of the new headquarters.
(3) Facility occupied by Temptronic.
(4) Lease terminated March 2000.
(5) Lease commenced March 2000.

Item 3: Legal Proceedings

On April 16, 1999, inTEST and its subsidiary, inTEST IP Corp., which
holds title to all Company intellectual property, filed suit in the
Federal District Court in Wilmington, DE against Reid-Ashman Manufacturing,
Inc., the defendant, for infringement of a United States patent held by
inTEST. The patent is referred to as the 815 Patent. The invention
disclosed and claimed in the 815 Patent is directed to a system for
positioning and docking a heavy electronic test head of a test system
with respect to an electronic device handler. The system is used in the
automatic testing of IC's and other electronic devices. inTEST sells
products covered by the 815 Patent worldwide.

As alleged in the complaint, the defendant began manufacturing,
offering to sell, and selling products as early as 1991 that, without
license, infringed upon claims of the 815 Patent. The complaint asks
the court to enjoin the defendant from further acts of infringement,
including the acts of manufacturing, using, offering for sale, selling
and importing positioner systems that embody the invention claimed in
the 815 Patent. The complaint also asks the Court to award inTEST
damages, including lost profits. Alleging that the defendant's
infringement is and has been deliberate, willful, and wanton, with
knowledge of inTEST's patent rights, the complaint asks the Court to
award increased damages up to three times the amount assessed. The
complaint also seeks an award of interest, costs and reasonable
attorney fees.

The presiding judge has attempted to facilitate a settlement
through mediation. Discovery has begun in parallel with the mediation
process. The Court granted the defendant's motion for partial summary
judgment, ruling that damages for infringement of claims 3 through 9 of
the 815 Patent can only be obtained for products that infringe after the
date when the reexamination proceedings were completed. The parties
continue to negotiate in an effort to settle the litigation. To date,
however, the negotiations have been unsuccessful. All legal fees
incurred in connection with this matter have been expensed.

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

No matters were submitted to a vote during the fourth quarter of 1999.

During the first quarter of 2000, a Special Meeting of Shareholders
was held on March 9, 2000 for the purpose of considering and voting upon
the proposal to approve the merger agreement among inTEST, Temptronic
Corporation and one of our wholly-owned subsidiaries.

The number of votes cast for or against as well as the number of
abstentions and broker non-votes for the above proposal were as follows:

For Against Abstentions Broker Non-Votes
--------- ------- ----------- ----------------

5,445,958 450 200 0

Part II:
- -------

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

(a) Our common stock trades on the Nasdaq National Market system under
the symbol "INTT".

The table below sets forth the high and low prices of our common
stock, as reported in published financial sources during the periods
indicated. Sales prices have been rounded to the nearest full cent:

High Low
------ -----

Fiscal Year Ended December 31, 1998:
First Quarter $10.25 $6.25
Second Quarter 9.50 6.00
Third Quarter 6.50 3.75
Fourth Quarter 9.63 4.00

Fiscal Year Ended December 31, 1999:
First Quarter $ 8.25 $5.25
Second Quarter 8.00 3.63
Third Quarter 11.25 6.50
Fourth Quarter 20.38 6.63

As of March 22, 2000, there were approximately 1,000 holders of record
of the Company's common stock.

We have not paid dividends on our common stock since our initial public
offering, and we do not plan to pay cash dividends in the foreseeable
future. Our current policy is to retain any future earnings for
reinvestment in the operation and expansion of our business, including
possible acquisitions of other business, technologies or products.
Payment of any future dividends will be at the discretion of our
board of directors. In addition, our current credit agreement prohibits
us from paying cash dividends without the lender's prior consent.

(b) Use of Proceeds from Offering:

On June 17, 1997, the Commission declared inTEST's registration
statement on Form S-1 covering the offering of 2,275,000 shares
of inTEST's common stock, Commission file number 333-26457,
effective. The offering closed on June 20, 1997, managed by Janney
Montgomery Scott Inc. and Needham & Company, Inc. as representatives
of the several underwriters named in the registration statement.

Of the 2,275,000 shares sold under the offering, 1,820,000 shares
were sold by inTEST and 455,000 were sold by certain selling
stockholders. In addition, the underwriters exercised an over-
allotment option to purchase an additional 341,250 shares of inTEST's
common stock from the selling shareholders. The total purchase price
to the public for the shares offered and sold by inTEST and the
selling shareholders was $13,650,000 and $5,971,875, respectively.

The amount of expenses incurred for inTEST's account in connection
with the offering were as follows:

Underwriting discounts and commissions $1,023,750
Finders fees None
Expenses paid to or for the Underwriters 16,650
Other expenses 954,758
----------
Total expenses $1,995,158
==========

All of the foregoing expenses were direct or indirect payments to persons
other than (i) directors, officers or their associates; (ii) persons
owning ten percent (10%) or more of inTEST's common stock; or (iii)
affiliates of inTEST.

The net proceeds of the offering to inTEST (after deducting the foregoing
expenses) was $11,654,842. From the effective date of the registration
statement, the net proceeds have been used for the following
purposes through December 31, 1999:

Construction of plant, building and facilities $ -
Purchase and installation of machinery and equipment 1,655,822
Purchase of real estate -
Acquisition of businesses 4,825,000
Repayment of indebtedness 388,098
Working capital 599,725
Temporary investments, including cash & cash equivalents 3,585,432
Other purposes (for which at least $100,000 has been used) including:
Payment of final S corporation distribution 600,765
-----------
Total $11,654,842
===========

In connection with the termination of inTEST's status as an S
corporation, we used approximately $601,000 of the net proceeds to pay a
portion of the $4.3 million final distribution of previously taxed but
undistributed earnings of inTEST.

All of the foregoing payments with the exception of the final S
corporation distribution were direct or indirect payments to persons other
than (i) directors, officers or their associates; (ii) persons owning ten
percent (10%) or more of inTEST's common stock; or (iii) affiliates
of inTEST.

Item 6: Selected Financial Data

The following table contains certain selected consolidated financial
data of inTEST and is qualified by the more detailed Consolidated Financial
Statements and Notes thereto included elsewhere in this Annual Report on
Form 10-K and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and the other financial information included in this Annual Report on
Form 10-K.

Years Ended December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
(in thousands, except per share data)

Consolidated Statement of Earnings Data:

Net revenues. . . . . . . . . . . . . . . . $34,496 $19,075 $20,746 $18,582 $14,442
Gross margin. . . . . . . . . . . . . . . . 18,891 10,673 12,938 11,827 9,251
Operating income. . . . . . . . . . . . . . 6,322 2,518 6,187 5,616 4,037
Net earnings. . . . . . . . . . . . . . . . 4,094 1,927 4,332 4,646 3,252
Earnings per share (1997 and 1996 information
is pro forma):
Basic. . . . . . . . . . . . . . . . . .63 .31 .74 .83
Diluted. . . . . . . . . . . . . . . . .62 .31 .73 .83
Weighted average shares outstanding (1997
and 1996 information is pro forma):
Basic. . . . . . . . . . . . . . . . . 6,536 6,170 5,068 4,091
Diluted. . . . . . . . . . . . . . . . 6,626 6,186 5,092 4,091

As of December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . $12,018 $ 8,468 $12,035 $ 3,692 $ 1,919
Working capital . . . . . . . . . . . . . . 16,978 13,312 14,655 4,377 4,201
Total assets. . . . . . . . . . . . . . . . 31,260 23,218 19,945 7,716 6,352
Long term debt. . . . . . . . . . . . . . . - - - 155 -
Total stockholders' equity. . . . . . . . . 25,386 21,226 16,557 4,587 4,048

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

The following discussion relates to the results of operations and
financial condition of inTEST Corporation on a historical basis and,
thus, does not reflect the performance of Temptronic Corporation or the
merged entities on a pooled basis.

Overview
- --------

Our revenues are substantially dependent upon the demand for ATE by
semiconductor manufacturers and, therefore, fluctuate generally in
response to the cyclicality in the semiconductor manufacturing
industry. During the past several years, the demand for ATE by the
semiconductor industry exhibited a high degree of cyclicality. In
1996, we experienced sequential quarterly declines in orders for and
sales of our products. We believe this was due to a reduced level of
semiconductor manufacturing activity and corresponding cutbacks in
semiconductor manufacturers' capital budgets. 1997 marked a turnaround
in the semiconductor industry, which was evidenced by renewal in demand
for ATE and related equipment, which resulted in sequential quarterly
increases in orders for and sales of our products. 1998, like 1996,
was another year of sequential quarterly declines in orders for and
sales of our products, but to a more significant degree than in 1996.
In 1998, we believe worldwide demand for ICs fell dramatically due to
excess inventory of older IC designs, and slower transition to new IC
designs resulting from softening demand for end user products. In
addition, the economic downturns in many world economies, especially
those in Southeast Asia and Japan, exacerbated the semiconductor
industry downturn. The combination of these conditions contributed to
a reduced demand for products manufactured by semiconductor
manufacturers, which in turn significantly reduced their need for new
or additional ATE equipment.

1999, like 1997, marked a turnaround in the semiconductor industry
and we experienced significant increases in the level of orders for our
products ("bookings"). Bookings were $42.1 million for 1999 compared
with $17.4 million for 1998. As a result of the increased booking
activity, our backlog increased from $3.4 million at December 31, 1998
to $9.5 million at December 31, 1999. During 1999, we experienced
significant quarterly increases in our net revenues, which grew from
$4.8 million for the quarter ended March 31, 1999 to a record $13.1
million for the quarter ended December 31, 1999. We believe the
increases in our bookings, net revenues and backlog reflect the
increased demand for ATE by semiconductor manufacturers resulting from
increased worldwide demand for ICs combined with back end ATE capacity
constraints caused by the significantly reduced capital spending during
1998. While bookings and backlog are calculated on the basis of firm
orders, no assurance can be given that customers will purchase the
equipment subject to such orders. As a result, our bookings for any
period and backlog at any particular date are not necessarily
indicative of actual sales for any succeeding period.

Certain portions of our business are less dependent upon the
capital expenditure budgets of semiconductor manufacturers and so are
less subject to fluctuation. For example, some of our tester interface
products are consumable, and sales depend upon operating expenditures
of our semiconductor manufacturer customers. Also, semiconductor
manufacturers may purchase our products for the purpose of upgrading,
or to improve the utilization, performance and efficiency of, existing
ATE. Such upgrades tend to be counter cyclical to sales of new ATE.

Results of Operations
- ---------------------

1999 Compared to 1998

Net Revenues. Net revenues were a record $34.5 million for 1999 compared
to $19.1 million for 1998, an increase of $15.4 million or 81%. The
significant increase in net revenues over the comparable prior period is the
result of the aforementioned turnaround in the demand for ATE in 1999
compared to 1998. Net revenues for 1999 excluding the net revenues of inTEST
Sunnyvale (formerly, TestDesign Corporation) which was acquired on August 3,
1998 increased $8.7 million or 49% over 1998.

Gross Margin. Gross margin decreased to 55% for 1999 from 56% in 1998.
The reduction in gross margin was primarily the result of the additional
fixed costs of manufacturing of inTEST Sunnyvale as well as the higher
component material costs of the inTEST Sunnyvale products as compared with
our traditional products. In addition, the fixed costs of our new domestic
fabrication operation and our manufacturing operations in Singapore, both of
which commenced late in the third quarter of 1999, had a negative impact on
the gross margin as these operations were not fully functional until late in
the fourth quarter of 1999.

Selling Expense. Selling expense was $4.9 million for 1999 compared to
$3.3 million for 1998, an increase of $1.5 million or 46%. The increase was
attributable to several factors including the salary expense of new sales and
marketing staff, increased expenditures for travel, increased commission
expenses for external sales representatives resulting from the higher sales
levels, increased advertising costs and higher levels of freight expenses.

Engineering and Product Development Expense. Engineering and product
development expense was $3.2 million for 1999 compared to $1.9 million for
1998, an increase of $1.3 million or 66%. The increase was attributable, in
large part, to the additional salary expense of inTEST Sunnyvale engineering
and technical staff coupled with an increase in the number of engineering and
technical staff. To a lesser extent, increased costs of materials used in
product development and travel expenses to facilitate collaboration among our
several offices contributed to the overall increase in this expense category.

General and Administrative Expense. General and administrative expense
was $4.5 million for 1999 compared to $2.9 million for 1998, an increase of
$1.6 million or 56%. The increase was primarily attributable to increases in
administrative salary expense due to both staffing additions (including the
staff of inTEST Sunnyvale) and salary and incentive compensation increases
for existing staff, legal costs related to both our patent infringement suit
and to maintain existing patents and file for new patents worldwide and the
amortization of goodwill resulting from the acquisition of inTEST Sunnyvale.

Income Tax Expense. Income tax expense increased to $2.6 million for
1999 from $1.1 million for 1998, an increase of $1.5 million. Our effective
tax rate was 39% for 1999 compared to 36% for 1998. The increase in the
effective tax rate is primarily the result of goodwill amortization related
to the acquisition of inTEST Sunnyvale, which is not deductible for tax
purposes, and a higher effective tax rate in Japan, caused by certain
recurring expenses which are not deductible for tax purposes which was
compounded by the reduced profitability of our Japanese operations in 1999
compared to 1998.

1998 Compared to 1997

Net Revenues. Net revenues were $19.1 million for 1998 compared to $20.7
million for 1997, a decrease of $1.7 million or 8%. The decline in net
revenues from the prior year is the result of the aforementioned severe
downturn that the ATE industry experienced during 1998 offset, in part, by
the net revenues of inTEST Sunnyvale from its acquisition in August 1998
through year end.

Gross Margin. Gross margin declined to 56% for 1998 from 62% in
1997. The reduction in gross margin was primarily the result of the
additional fixed costs of manufacturing of inTEST Sunnyvale which were
impacted unfavorably by the significantly reduced revenue levels during
the year. In addition, material costs as a percentage of sales
increased over the comparable prior period due to an increase in the
level of sales of certain products with a greater component material
cost in 1998 compared to 1997.

Selling Expense. Selling expense was $3.3 million for 1998
compared to $2.8 million for 1997, an increase of $557,000 or 20%. The
increase was attributable to several factors including the additional
salary and commission expenses of inTEST Sunnyvale and increased
travel expenses incurred in connection with inTEST's sales activities,
higher levels of warranty expenses and increased advertising
expenditures.

Engineering and Product Development Expense. Engineering and
product development expense was $1.9 million for 1998 compared to $1.7
million for 1997, an increase of $197,000 or 11%. The increase was
primarily attributable to the additional salary expense of inTEST
Sunnyvale coupled with a growth in the number of engineering and
technical staff offset in part by reductions in spending on product
development materials and travel expenses in 1998 as compared to 1997.

General and Administrative Expense. General and administrative
expense was $2.9 million in 1998 compared to $2.2 million in 1997, an
increase of $650,000 or 29%. The increase was primarily attributable
to the additional salary and other administrative costs of inTEST
Sunnyvale. Also contributing to the increase in 1998 were the
amortization of goodwill resulting from the acquisition, additional
administrative staff, increases in professional fees, and the increase
in amortization of certain prepaid expenses.

Income Tax Expense. Income tax expense decreased to $1.1 million
for 1998 from $2.1 million in 1997, a decrease of $991,000 or 47%. Our
effective tax rate was 36% for 1998 compared to 32% in 1997. The
increase in the effective tax rate was caused by the accrual of federal
income tax on our earnings due to the change of tax status from an S
corporation to a C corporation in June 1997, offset in part by the
implementation of tax favorable corporate structures and a lower
percentage of earnings attributable to inTEST's Japanese subsidiary in
1998 as compared to 1997.

Liquidity and Capital Resources
- -------------------------------

Net cash provided from operations for 1999 was $4.9 million.
Accounts receivable increased $3.2 million from $3.3 million at
December 31, 1998 to $6.5 million at December 31, 1999 due to the
significant increase in sales activity during 1999. Inventories
increased $1.3 million also as a result of the increased sales activity
as we made purchases for future product shipments. Refundable domestic
and foreign income taxes decreased $664,000 due to a refund of excess
Federal taxes paid during 1998. Other current assets increased
$399,000, primarily as a result of increases in prepaid expenses.
Accounts payable increased $1.6 million due to the higher production
levels during 1999. Accrued expenses increased $920,000 primarily as a
result of the increased sales activity and staffing additions and their
related expense accruals. Domestic and foreign income taxes payable
increased $1.8 million as a result of the accrual of income taxes on
earnings during 1999.

Purchases of machinery and equipment were $1.4 million for 1999,
which consisted primarily of improvements to our facilities in the
United States and, to a lesser extent, the UK and Singapore. During
the third quarter of 1999 we increased our domestic fabrication
capacity through the addition of a machining operation in Cherry Hill
and acquired machinery for this operation at a cost of approximately

$600,000. During 1999, we acquired additional production equipment and
computer equipment for our domestic operations at a cost of
approximately $210,000 and made leasehold improvements to existing
facilities and furnished these improvements at a cost of approximately
$90,000. We completed a renovation of our UK manufacturing facility
during the third quarter of 1999 and spent approximately $70,000 on
leasehold improvements and $150,000 on a new coordinate measuring
machine for this facility. During the fourth quarter of 1999, we spent
approximately $200,000 on leasehold improvements for a new facility for
our inTEST Sunnyvale operation, which relocated during the first
quarter of 2000. We estimate that we will spend a total of $400,000 to
complete this new facility. We commenced manufacturing operations at
our Singapore facility late in the third quarter of 1999 and invested
approximately $40,000 for new manufacturing equipment related to this
operation.

On March 9, 2000, we completed our merger with Temptronic
Corporation. We estimate the costs incurred by both inTEST and
Temptronic in connection with the merger to be approximately $2.5
million, including fees paid to investment bankers, professional fees,
printing, escrow and other miscellaneous costs. We will expense these
costs at the end of the first quarter of 2000. We are beginning to
assess ways to cross-train our personnel and promote collaborative
product development. Such efforts may temporarily increase operating
costs or distract us from customary day-to-day business.

At December 31, 1999, we had $12.0 million of existing cash and
cash equivalents and a $1.5 million unused line of credit. We believe
that these sources of liquidity plus the anticipated net cash provided
from operations will be sufficient to satisfy our cash requirements,
including those of Temptronic, for the foreseeable future. However,
future acquisitions may require additional equity or debt financing to
meet working capital requirements or capital expenditure needs. We do
not anticipate paying dividends in the foreseeable future.

Year 2000
- ---------

We rely on our telephone and computer systems, software and other
systems in operating and monitoring all aspects of our business. We
also rely heavily on the systems of our suppliers. Both inTEST's and
Temptronic's efforts to be prepared for the Year 2000 appear to have
been successful, but if problems were to develop with our systems or
with those of our suppliers and other vendors, we might be unable to
engage in normal business activities for a period of time or times
after January 1, 2000. Any such disruption could cause our business to
suffer.

International Operations
- ------------------------

Net revenues generated by inTEST's foreign subsidiaries were 23% of
consolidated net revenues in 1999, 34% in 1998 and 34% in 1997. Export
sales from our U.S. manufacturing facilities totaled $8.3 million, or
24% of consolidated net revenues in 1999, $4.4 million, or 23% in 1998
and $2.0 million or 10% in 1997. We anticipate that net revenues
generated by our foreign subsidiaries or from export sales will
continue to account for a significant portion of consolidated net
revenues in the foreseeable future. The net revenues generated by our
foreign subsidiaries will continue to be subject to certain risks,
including changes in regulatory requirements, tariffs and other
barriers, political and economic instability, an outbreak of
hostilities, foreign currency exchange rate fluctuations, potentially
adverse tax consequences and the possibility of difficulty in accounts
receivable collection. We cannot predict whether quotas, duties, taxes
or other charges or restrictions will be implemented by the United
States or any other country upon the importation or exportation of our
products in the future. Any of these factors or the adoption of
restrictive policies could have a material adverse effect on our
business, financial condition or results of operations.

Net revenues denominated in foreign currencies were 15% in 1999,
24% in 1998 and 27% in 1997. Although we seek to operate our business
such that a significant portion of our product costs are denominated in
the same currency that the associated sales are made in, there can be
no assurance that we will not be adversely affected in the future due
to our exposure to foreign operations. Net revenues denominated in
currencies other than U.S. dollars expose us to currency fluctuations,
which can adversely affect results of operations.

The portion of our consolidated net revenues that were derived from
sales to the Asia-Pacific region were 16% in 1999, 25% in 1998 and 28%
in 1997. Countries in the Asia-Pacific region, including Japan, have
experienced economic instability resulting in weaknesses in their
currency, banking and equity markets. Although the past economic
instability in the Asia-Pacific region has not had a material adverse
effect on our order backlog, balance sheet, or results of operations to
date, there can be no assurance that continued economic instability
will not in the future have a material adverse effect on demand for our
products and our consolidated results of operations.

Cautionary Statement Regarding Forward Looking Statements
- ---------------------------------------------------------

This Report contains certain statements of a forward-looking
nature relating to future events, such as statements regarding our
plans and strategies or future financial performance. Such statements
can be identified by the use of forward-looking terminology such as
"believe", "expect", "may", "will", "should" or "anticipate" or the
negative thereof or other variations thereon or comparable terminology,
or by discussions of strategy that involve risks and uncertainties.
Investors and prospective investors are cautioned that such statements
are only projections and that actual events or results may differ
materially from those expressed in any such forward-looking statements.
In addition to the factors described in this Report, our actual
consolidated quarterly or annual operating results have been affected
in the past, or could be affected in the future, by additional factors,
including, without limitation: changes in business conditions and the
economy, generally; our ability to obtain patent protection, and
enforce our patent rights, for existing and developing proprietary
technologies; our ability to integrate businesses, technologies or
products which we may acquire, successfully; the effect of the loss of,
or reduction in orders from, a major customer; and competition from
other manufacturers of docking hardware, test head manipulators, tester
interfaces and related ATE interface products.

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to currency exchange rate risk in the normal course
of its business. The Company employs risk management strategies including the
use of forward exchange rate contracts to manage this exposure. The Company's
objective in managing currency exchange risk is to minimize the impact of
significant currency exchange rate fluctuations primarily in the Japanese Yen.
The Company's Japanese operations expose its earnings to changes in currency
exchange rates because its Japanese subsidiary makes its sales in Japanese Yen
and purchases its sales inventory in U.S. dollars. Forward exchange rate
contracts are used to establish a fixed conversion rate between the Japanese
Yen and the U.S. dollar so that the level of the Company's gross margin from
sales in Japan is not negatively impacted from significant movements in the
Japanese Yen to U.S. dollar exchange rate. The Company purchases forward
exchange rate contracts on a monthly basis in the amounts necessary to pay the
U.S. dollar denominated obligations of its Japanese subsidiary. As of December
31, 1999, there were no forward exchange rate contracts outstanding.

It is inTEST's policy to enter into forward exchange rate contracts only
to the extent necessary to achieve the desired objectives of management in
limiting inTEST's exposure to significant fluctuations in currency exchange
rates. inTEST does not hedge all of its currency exchange rate risk exposures
in a manner that would completely eliminate the impact of changes in currency
exchange rates on its net income. inTEST does not expect that its results of
operations or liquidity will be materially affected by these risk management
activities.

The notional amounts of inTEST's forward exchange rate contracts are used
only to satisfy current payments to material vendors to be exchanged and are
not a measure of inTEST's credit risk or its future cash requirements.
Exchange risk related to forward exchange rate contracts is limited to movement
in the exchange rates that would provide a more favorable exchange rate than
that locked in the forward contract and forward contract amounts purchased in
excess of the amount needed by inTEST to satisfy its obligations. inTEST
manages that rate risk by limiting the size of the forward contracts purchased
to the known amount of obligations due and not purchasing forward contracts
with settlement dates beyond 30 days. We believe that the risk of loss due to
exchange rate fluctuations is remote and that any losses would not be material
to its financial condition or results of operations.

Item 8: Financial Statements and Supplementary Data

Consolidated financial statements are set forth in this report
beginning at page F-1

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

None

Part III:
- --------

Item 10: Directors and Executive Officers

The information required by this item will be filed not later than
April 29, 2000 by an amendment to this report or incorporation by
reference to the proxy statement for our 2000 Annual Meeting of
Stockholders.

Item 11: Executive Compensation

Item 12: Security Ownership of Certain Beneficial Owners and Management

Item 13: Certain Relationships and Related Transactions

Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The documents filed as part of this Annual Report on Form 10-K are:

(i) The Company's consolidated financial statements and notes
thereto as well as the applicable report of the independent
certified public accountants are included in Part II, Item 8
of this Annual Report on Form 10-K.

(ii) The following consolidated financial statement schedule should
be read in conjunction with the consolidated financial
statements set forth in Part II, Item 8 of this Annual Report
on Form 10-K:

Schedule II - Valuation and Qualifying Accounts

(iii) The exhibits required by Item 601 of Regulation S-K are
included under Item 14(c) of this Annual Report on Form 10-K.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the fourth quarter of 1999.

Exhibit Number Description of Exhibit

3.1 Certificate of Incorporation.

3.2 Bylaws of the Company

10.1 Amended and Restated Loan Agreement, dated June 30,
1996, between inTEST Corporation and PNC Bank,
National Association. (Amended effective June 30,
1999 pursuant to a letter dated July 8, 1999 which
is filed as Exhibit 10.6 to this Report)

10.2 Lease Agreement, dated February 11, 1996, between
First Industrial L.P. (formerly Cherry Hill Industrial
Sites, Inc.) and the Company.

10.3 Lease, dated August 5, 1996, between KIP Properties
and the Company.

10.4 1997 Stock Plan.

10.5 Consulting Agreement, dated April 1, 1997, between
the Company and Stuart F. Daniels, Ph.D.

10.6 Letter dated July 8, 1999, amending the loan agreement
filed as Exhibit 10.1 to this report.

10.7 Lease, dated September 28, 1999, between Earl E. and Mitsue
Jio and inTEST Sunnyvale, a wholly owned subsidiary of
inTEST Corporation, a Delaware Corporation signed October
27, 1999.

21 Subsidiaries of the Company.

23 Consent of KPMG LLP.

24 Financial Data Schedule.

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.

inTEST Corporation

By: /s/ Robert E. Matthiessen
--------------------------------------
Robert E. Matthiessen
President and Chief Executive Officer

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

/s/ Robert E. Matthiessen March 30, 2000
- ------------------------------------------- ----------------
Robert E. Matthiessen, President,
Chief Executive Officer and Director
(principal executive officer)

/s/ Hugh T. Regan, Jr. March 30, 2000
- ------------------------------------------- ----------------
Hugh T. Regan, Jr., Treasurer, Chief
Financial Officer and Secretary
(principal financial officer)

/s/ Douglas W. Smith March 30, 2000
- ------------------------------------------- ----------------
Douglas W. Smith, Executive Vice President,
Chief Operating Officer and Director

/s/ Daniel J. Graham March 30, 2000
- ------------------------------------------- ----------------
Daniel J. Graham, Vice Chairman, Senior
Vice President

/s/ Alyn R. Holt March 30, 2000
- ------------------------------------------- ----------------
Alyn R. Holt, Chairman

/s/ Richard O. Endres March 30, 2000
- ------------------------------------------- ----------------
Richard O. Endres, Director

/s/ Stuart F. Daniels March 30, 2000
- ------------------------------------------- ----------------
Stuart F. Daniels, Ph.D., Director

/s/ Gregory W. Slayton March 30, 2000
- ------------------------------------------- ----------------
Gregory W. Slayton, Director

/s/ William M. Stone March 30, 2000
- ------------------------------------------- ----------------
William M. Stone, Director

/s/ James Greed, Jr. March 30, 2000
- ------------------------------------------- ----------------
James Greed, Jr., Director

Index to Exhibits

3.1 Certificate of Incorporation.*

3.2 Bylaws of the Company.*

10.1 Amended and Restated Loan Agreement, dated June 30, 1996,
between inTEST Corporation and PNC Bank, National
Association.* (Amended effective June 30, 1999 pursuant to
a letter dated July 8, 1999 which is filed as Exhibit
10.6 to this Report)

10.2 Lease, dated February 11, 1996, between First Industrial
L.P. (formerly Cherry Hill Industrial Sites, Inc.) and the
Company.*

10.3 Lease, dated August 5, 1996, between KIP Properties and
the Company.*

10.4 1997 Stock Plan.**

10.5 Consulting Agreement, dated April 1, 1997, between the
Company and Stuart F. Daniels, Ph.D.*

10.6 Letter dated July 8, 1999, amending the loan agreement
filed as Exhibit 10.1 to this Report.

10.7 Lease, dated September 28, 1999, between Earl E. and Mitsue
Jio and inTEST Sunnyvale, a wholly owned subsidiary of inTEST
Corporation, a Delaware Corporation signed October 27, 1999.

21 Subsidiaries of the Company.

23 Consent of KPMG LLP.

27 Financial Data Schedule.

* Previously filed by the Company as an exhibit to the Company's
Registration Statement on Form S-1, Registration Statement No.
333-26457.

** Previously filed by the Company as an exhibit to the Company's
Registration Statement on Form S-8, Registration Statement No.
333-44059.

inTEST CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

Page

CONSOLIDATED FINANCIAL STATEMENTS:

Independent Auditors' Report F- 1

Consolidated Balance Sheets as of December 31, 1999 and 1998 F- 2

Consolidated Statements of Earnings for the years ended
December 31, 1999, 1998 and 1997 F- 3

Consolidated Statements of Comprehensive Earnings for the
years ended December 31, 1999, 1998 and 1997 F- 4

Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997 F- 5

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F- 6

Notes to Consolidated Financial Statements F- 7

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE:

Schedule II - Valuation and Qualifying Accounts F-26

Independent Auditors' Report

The Board of Directors and Stockholders
inTEST Corporation

We have audited the accompanying consolidated balance sheets of inTEST
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of earnings, comprehensive earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1999. In connection with our audits of the consolidated financial
statements, we also have audited the consolidated financial statement schedule
of valuation and qualifying accounts as of and for the three years ended
December 31, 1999. These consolidated financial statements and consolidated
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and consolidated financial statement schedule based on our
audits.

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

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

KPMG LLP

Philadelphia, Pennsylvania
February 23, 2000

F - 1

inTEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

December 31,
----------------------
1999 1998
-------- --------

ASSETS
Current assets:
Cash and cash equivalents $ 12,018 $ 8,468
Trade accounts and notes receivable, net of allowance for
doubtful accounts of $185 and $168, respectively 6,473 3,275
Inventories 3,826 2,521
Deferred tax asset 359 245
Refundable domestic and foreign income taxes - 658
Other current assets 536 137
-------- --------
Total current assets 23,212 15,304
-------- --------
Machinery and equipment:
Machinery and equipment 2,844 1,690
Leasehold improvements 424 223
-------- --------
3,268 1,913
Less: accumulated depreciation (1,483) (1,078)
-------- --------
Net machinery and equipment 1,785 835
-------- --------
Other assets 218 195
Goodwill, net of accumulated amortization of $780
and $301, respectively 6,405 6,884
-------- --------

Total assets $ 31,620 $ 23,218
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,480 $ 969
Accrued expenses 1,946 1,023
Domestic and foreign income taxes payable 1,808 -
-------- --------
Total current liabilities 6,234 1,992
-------- --------
Commitments

Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $0.01 par value; 20,000,000 shares authorized;
6,536,034 issued and outstanding 65 65
Additional paid-in capital 16,647 16,647
Retained earnings 8,664 4,570
Accumulated other comprehensive earnings (expense) 10 (56)
-------- --------
Total stockholders' equity 25,386 21,226
-------- --------

Total liabilities and stockholders' equity $ 31,620 $ 23,218
======== ========

See accompanying Notes to Consolidated Financial Statements.

F - 2

inTEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)

Years Ended December 31,
-------------------------------
1999 1998 1997
------- ------- -------

Net revenues $34,496 $19,075 $20,746
Cost of revenues 15,605 8,402 7,808
------- ------- -------

Gross margin 18,891 10,673 12,938
------- ------- -------
Operating expenses:
Selling expense 4,869 3,346 2,789
Engineering and product development expense 3,209 1,934 1,737
General and administrative expense 4,491 2,875 2,225
------- ------- -------

Total operating expenses 12,569 8,155 6,751
------- ------- -------

Operating income 6,322 2,518 6,187
------- ------- -------

Other income (expense):
Interest income 348 455 349
Interest expense (17) (3) (15)
Other 76 56 (74)
------- ------- -------

Total other income 407 508 260
------- ------- -------

Earnings before income taxes and minority interest 6,729 3,026 6,447

Income tax expense 2,635 1,099 2,090
------- ------- -------

Earnings before minority interest 4,094 1,927 4,357
Minority interest - - (25)
------- ------- -------

Net earnings $ 4,094 $ 1,927 $ 4,332
======= ======= =======

Pro forma information (unaudited)(Note 3)
Pro forma earnings before income taxes $ 6,407
Pro forma income taxes 2,680
Pro forma net earnings 3,726

Earnings per share (1997 information is pro forma):
Basic $ 0.63 $ 0.31 $ 0.74
Diluted 0.62 0.31 0.73

Weighted average shares outstanding (1997 information
is pro forma):
Basic 6,536,034 6,169,596 5,068,349
Diluted 6,626,118 6,186,460 5,092,490

See accompanying Notes to Consolidated Financial Statements.

F - 3

inTEST CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands, except share data)

Years Ended December 31,
-------------------------------
1999 1998 1997
------- ------- -------

Net earnings $ 4,094 $ 1,927 $ 4,332

Foreign currency translation adjustments 66 70 (153)
------- ------- -------

Comprehensive earnings $ 4,160 $ 1,997 $ 4,179
======= ======= =======

See accompanying Notes to Consolidated Financial Statements.

F - 4

inTEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)

Accumulated
Common Stock Additional Other Total
------------------- Paid-In Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Earnings(Expense) Equity
--------- ------- ---------- -------- ---------------- -------------

Balance, January 1, 1997 3,790,591 $ 38 $ 689 $ 3,833 $ 27 $ 4,587
Dividends-$1.46 per share - - - (5,522) - (5,522)
Net earnings - - - 4,332 - 4,332
Acquisition of minority interest 300,443 3 1,655 - - 1,658
Issuance of common stock in
connection with Offering, net 1,820,000 18 11,637 - - 11,655
Other comprehensive expense - - - - (153) (153)
--------- ------- -------- -------- ------ --------

Balance, December 31, 1997 5,911,034 59 13,981 2,643 (126) 16,557

Net earnings - - - 1,927 - 1,927
Issuance of common stock in
connection with Acquisition 625,000 6 2,666 - - 2,672
Other comprehensive earnings - - - - 70 70
--------- ------- -------- -------- ------ --------

Balance, December 31, 1998 6,536,034 65 16,647 4,570 (56) 21,226

Net earnings - - - 4,094 - 4,094
Other comprehensive earnings - - - - 66 66
--------- ------- -------- -------- ------ --------

Balance, December 31, 1999 6,536,034 $ 65 $ 16,647 $ 8,664 $ 10 $ 25,386
========= ======= ======== ======== ====== ========

See accompanying Notes to Consolidated Financial Statements.

F - 5

inTEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)

Years Ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 4,094 $ 1,927 $ 4,332
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 408 239 168
Amortization of goodwill 479 252 49
Deferred taxes (114) (79) (165)
Foreign exchange (gain) loss (49) (41) 62
Allowance for doubtful accounts, net 16 (32) 49
Minority interest - - 25
Changes in assets and liabilities, net of effects of Acquisition:
Trade accounts and notes receivable (3,162) 1,747 (2,226)
Inventories (1,308) 10 (352)
Refundable domestic and state income taxes 664 (658) -
Other current assets (399) 32 (71)
Accounts payable 1,559 (257) 535
Domestic and foreign income taxes payable 1,808 (1,333) 845
Dividends payable - - (973)
Accrued expenses 920 (244) 331
------- ------- -------
Net cash provided by operating activities 4,916 1,563 2,609
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business, net of cash acquired - (4,629) -
Purchase of machinery and equipment (1,357) (261) (70)
Other long-term asset (4) (42) (54)
------- ------- -------
Net cash used in investing activities (1,361) (4,932) (124)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - - (5,541)
Net principal debt repayments - (215) (189)
Net proceeds from offering - - 11,655
------- ------- -------
Net cash provided by (used in) financing activities - (215) 5,925
------- ------- -------
Effects of exchange rates on cash (5) 17 (67)
------- ------- -------
Net cash provided by (used in) all activities 3,550 (3,567) 8,343
Cash and cash equivalents at beginning of period 8,468 12,035 3,692
------- ------- -------
Cash and cash equivalents at end of period $12,018 $ 8,468 $12,035
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Details of Acquisition:
Fair value of assets acquired, net of cash acquired $ 2,003
Liabilities assumed (549)
Common stock issued (2,672)
Goodwill resulting from Acquisition 5,847
-------
Net cash paid for Acquisition $ 4,629
=======
Cash payments made for:
Domestic and foreign income taxes $ 297 $ 3,210 $ 1,366
Interest 17 3 14

See accompanying Notes to Consolidated Financial Statements.

F - 6

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(1) NATURE OF OPERATIONS

inTEST Corporation (the "Company") designs, manufactures and markets
docking hardware, test head manipulators and tester interfaces used by
semiconductor manufacturers during the testing of wafers and packaged
devices. The Company also designs and markets related automatic test
equipment interface products.

The consolidated entity is comprised of inTEST Corporation (parent) and
eight 100% owned subsidiaries: inTEST Limited (Thame, UK), inTEST
Kabushiki Kaisha (Kichijoji, Japan), inTEST PTE, Limited (Singapore),
inTEST Sunnyvale Corp. (Delaware) (acquired in the third quarter of 1998
- see Note 4), Temptronic Corporation (Delaware)(established December
1999 for proposed merger with Temptronic Corporation - see Note 17),
inTEST Investments, Inc. (a Delaware holding company), inTEST IP Corp.
(a Delaware holding company) and inTEST Licensing Corp. (a Delaware
holding company).

The Company manufactures its products in the U.S., the U.K. and
Singapore (where the Company commenced manufacturing during September
1999). Marketing and support activities are conducted worldwide from
the Company's facilities in the U.S., U.K., Japan and Singapore.

On June 20, 1997, the Company completed an initial public offering of
2.275 million common shares through which the Company issued 1.82 million
new shares of common stock (the "Offering"). Simultaneous with the
closing of the Offering, the Company acquired the 21% minority interests
in each of its three foreign subsidiaries in exchange for an aggregate of
300,443 shares of the Company's common stock (the "Exchange"). Prior to
the Offering the Company owned 79% of each of the three foreign
subsidiaries.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated upon consolidation. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Reclassification
----------------

Certain prior year amounts have been reclassified to conform with the
current year presentation.

Cash and Cash Equivalents
-------------------------

Short-term investments, which have maturities of three months or less
when purchased, are considered to be cash equivalents and are carried at
cost, which approximates market value.

F - 7

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Notes Receivable
----------------

Notes receivable are due from trade customers in Japan, and have original
maturities of less than four months. The notes are non-interest bearing.
Notes receivable were $141 and $524 at December 31, 1999 and 1998,
respectively.

Credit Risks
------------

The Company grants credit to customers and generally requires no
collateral. To minimize its risk, the Company performs ongoing credit
evaluations of its customers financial condition. Bad debt expense
(recoveries) were $16, $(5) and $61 for the years ended December 31,
1999, 1998, and 1997, respectively.

Inventories
-----------

Inventories are stated at the lower of cost or market. Cost is
determined under the first-in first-out (FIFO) method.

Machinery and Equipment
-----------------------

Machinery and equipment are stated at cost. Depreciation is based upon
the estimated useful life of the assets using the straight line method.
The estimated useful lives range from three to seven years. Leasehold
improvements are recorded at cost and amortized over the shorter of the
lease term or the estimated useful life of the asset. Total depreciation
expense was $408, $239 and $168 for the years ended December 31, 1999,
1998 and 1997, respectively. Expenditures for maintenance and repairs
are charged to operations as incurred.

Intangibles
-----------

Goodwill resulting from the acquisition of the minority interests in the
Company's three foreign subsidiaries and the acquisition of TestDesign
(as described in Note 4) is amortized on a straight line basis over 15
years. Total amortization expense for the years ended December 31, 1999,
1998 and 1997 was $479, $252 and $49, respectively. When events or
circumstances so indicate, the Company assesses the potential impairment
of its intangible assets and other long-lived assets based on
anticipated undiscounted cash flows from operations. Such events and
circumstances include a sale of all or a significant part of the opera-
tions associated with the long-lived asset, or a significant decline in
the operating performance of the asset. If an impairment is indicated,
the amount of impairment charge would be calculated by comparing the
anticipated discounted future cash flows to the carrying value of the
long-lived asset. At December 31, 1999, no impairment was indicated.

F - 8

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
------------

Just prior to the closing of the Offering (as described in Note 1),
the Company terminated its status as an S corporation for Federal tax
purposes and in the state of New Jersey. As an S corporation, any
Federal and certain New Jersey state income tax liabilities were those
of the former S corporation stockholders, not of the Company. All tax
liabilities on income earned subsequent to the revocation of the S
corporation election are liabilities of the Company. The Company is
taxed in foreign countries and for activity in certain states. The
Company accounts for income taxes in accordance with the Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income
Taxes.

Net Earnings Per Common Share
-----------------------------

Net earnings per common share is computed in accordance with SFAS No.
128, Earnings per Share. Basic earnings per share is computed by
dividing net earnings by the weighted average number of common shares
outstanding during each year. Diluted earnings per share is computed by
dividing net earnings by the weighted average number of common shares
and common share equivalents outstanding during each year. Common share
equivalents represent stock options using the treasury stock method.

A reconciliation of weighted average shares outstanding - basic to
weighted average shares outstanding - diluted appears below:

Years Ended December 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------

Weighted average shares outstanding-basic 6,536,034 6,169,596 5,068,349
Potentially dilutive securities:
Employee stock options 90,084 16,864 24,141
--------- --------- ---------
Weighted average shares outstanding-diluted 6,626,118 6,186,460 5,092,490
========= ========= =========

As discussed in Note 3, pro forma earnings per share information for the
year ended December 31, 1997 includes certain adjustments to reflect
results as if (i) the Company had been taxed as a C corporation for all
of 1997 and (ii) the acquisition of the minority interests in the
Company's three foreign subsidiaries had occurred on January 1, 1996.

Revenue Recognition
-------------------

Revenue from sales of products are recognized upon shipment to customers.

F - 9

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Engineering and Product Development
-----------------------------------

Engineering and product developments costs, which consist primarily of
salary and related benefit costs of the Company's technical staff, as
well as product development costs, are expensed as incurred.

Product Warranties
------------------

The Company generally provides product warranties and records estimated
warranty expense at the time of sale based upon historical claims
experience. Warranty expense for the years ended December 31, 1999,
1998 and 1997 was $300, $202 and $147, respectively.

Stock Based Compensation
------------------------

SFAS No. 123, Accounting for Stock-Based Compensation, was adopted by the
Company effective with adoption of its 1997 Stock Plan. As permitted by
SFAS No. 123, the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
("APB 25"), in accounting for its stock option plans. Under APB 25, the
Company does not recognize compensation expense on the issuance of its
stock options because the option terms are fixed and the exercise price
equals the market price of the underlying stock on the grant date.

Foreign Currency
----------------

The accounts of the foreign subsidiaries are translated in accordance
with the SFAS No. 52, Foreign Currency Translation, which requires that
assets and liabilities of international operations be translated using
the exchange rate in effect at the balance sheet date. The results of
operations are translated using an average exchange rate for the period.
The effects of rate fluctuations in translating assets and liabilities of
international operations into U.S. dollars are accumulated and reflected
as other comprehensive earnings or expense in the consolidated statements
of stockholders' equity. Transaction gains or losses are included in net
earnings.

Financial Instruments
---------------------

The Company's financial instruments, principally accounts and notes
receivable and accounts payable, are carried at cost which approximates
fair value, due to the short maturities of the accounts.

F - 10

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements
-----------------------------

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This Statement requires
that certain costs related to the development or purchase of internal
software be capitalized and amortized over the estimated useful life of
the software. This Statement also requires that costs related to the
preliminary project stage and the post implementation/operation stage of
an internal use computer software development project be expensed as
incurred. The Company adopted this Statement in the first quarter
of 1999, as required. The adoption of this Statement did not have a
material affect on the results of operations, financial condition
or long-term liquidity of the Company.

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities,
which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company plans to
adopt this Statement in the first quarter of 2001, as required. The
adoption of this Statement is not expected to have a material effect
on the results of operations, financial condition or long-term
liquidity of the Company.

(3) PRO FORMA STATEMENT OF EARNINGS INFORMATION (Unaudited)

The Company terminated its status as an S corporation just prior to the
closing of the Offering, described in Note 1, and is subject to Federal
and additional state income taxes for periods after such termination.

Accordingly, for informational purposes, the following pro forma
information for the year ended December 31, 1997 is presented to show
pro forma earnings on an after-tax basis, assuming the Company had been
taxed as a C corporation since January 1, 1997. The difference between
the Federal statutory income tax rate and the pro forma income tax rate
is as follows:

1997
----

Federal statutory tax rate 34%
State income taxes, net of Federal benefit 4
Foreign income taxes 4
Non-deductible goodwill amortization 1
Research credits (1)
--
Pro forma income tax rate 42%
==

F - 11

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(3) PRO FORMA STATEMENT OF EARNINGS INFORMATION (Unaudited)(Continued)

Set forth below are pro forma results of the Company's operations for the
year ended December 31, 1997. These pro forma results reflect
adjustments for:

(i) the aforementioned change in method of computing taxes; and

(ii) the amortization of goodwill resulting from the acquisition of
minority interests in the Company's three foreign subsidiaries, net
of the elimination of the minority interests charge reflected in
the historical financial statements, as if the Exchange (as
described in Note 1) had occurred on January 1, 1997. The goodwill
resulting from the Exchange, which totaled $1.3 million, is being
amortized over 15 years.

1997
--------

Pro forma earnings before income taxes $ 6,407
Pro forma income taxes 2,680
Pro forma net earnings 3,726
Pro forma net earnings per common share - basic $ 0.74
Pro forma weighted average common shares outstanding -
basic 5,068,349
Pro forma net earnings per common share - diluted $ 0.73
Pro forma weighted average common and common share
equivalents outstanding - diluted 5,092,490

Pro forma net earnings per common share - basic was calculated by
dividing pro forma net earnings by the pro forma weighted average number
of common shares outstanding during the period calculated as if the
Exchange had occurred on January 1, 1997.

Pro forma net earnings per common share - diluted was calculated by
dividing pro forma net earnings by the pro forma weighted average number
of common shares and common share equivalents outstanding during the
period calculated as if the Exchange had occurred on January 1, 1997.

(4) ACQUISITION

On August 3, 1998, the Company acquired all of the outstanding capital
stock of TestDesign Corporation ("TestDesign"), a privately held
California corporation (the "Acquisition"). Subsequent to the
Acquisition, the Company changed the name of TestDesign to inTEST
Sunnyvale Corp. TestDesign is engaged in the design and manufacture of
tester interfaces used by the semiconductor industry. The purchase price
was $4.4 million in cash and 625,000 shares of the Company's common stock
(subject to certain adjustments). An escrow (held by a third party
escrow agent) of $1.0 million of the cash portion of the purchase price

F - 12

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(4) ACQUISITION (Continued)

was established at closing. If the Company is entitled to indemnifica-
tion pursuant to the terms of its agreement with the Seller, such claims
will be paid first from any funds held in escrow. The escrowed funds
will remain in escrow until July 31, 2000, unless any indemnity claims
are then pending, in which case an amount equal to the amount of such
pending claims will be retained in escrow until resolution of the claims.
Although the Company's common stock had a market price of $4.75 per share
on the closing date of the transaction, all of the 625,000 shares issued
in connection with the Acquisition are subject to legal restrictions on
transfer and have been valued at a 10% discount to the market price of
the shares. In addition, the Company incurred transaction costs of
approximately $425 in completing the Acquisition. The following is an
allocation of the purchase price:

Cash payment $ 4,400
Transaction costs 425
625,000 common shares at $4.28 2,672
-------
7,497
Estimated fair value of identifiable assets
acquired net of liabilities assumed 1,650
-------
Goodwill to be amortized over 15 years $ 5,847
=======

The Acquisition has been accounted for as a purchase and the results
of operations of the acquired business have been included in the
Company's consolidated financial statements since the date of the
Acquisition. The following unaudited pro forma information presents
a summary of consolidated results of operations for the Company and
TestDesign as if the Acquisition had occurred on January 1, 1997 (the
1997 amounts also reflect the pro forma adjustments described in Note 3):

Years Ended December 31,
-------------------------
1998 1997
-------- --------

Pro forma net revenues $ 23,335 $ 29,689
Pro forma earnings before income taxes 2,892 6,440
Pro forma income taxes 1,081 2,698
Pro forma net earnings 1,811 3,742

Pro forma net earnings per common share - basic $ 0.28 $ 0.66
Pro forma weighted average common shares
outstanding - basic 6,536,034 5,693,349

Pro forma net earnings per common share - diluted $ 0.28 $ 0.65
Pro forma weighted average common shares and common
share equivalents outstanding - diluted 6,552,898 5,717,490

F - 13

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(5) SEGMENT INFORMATION

The various products the Company designs, manufactures and markets, which
include docking hardware, test head manipulators and tester interfaces,
are considered by management to be a single product segment. Included in
this segment are products the Company designs and markets that are
manufactured by third parties, which include high performance test
sockets and interface boards. The Company operates its business
worldwide and divides the world into three geographic segments:
North America, Asia-Pacific and Europe. The North America segment
includes the Company's manufacturing, design and service facilities
in New Jersey, and California; the Asia-Pacific segment includes the
Company's manufacturing, design and service facilities in Singapore
and the Company's design and service facilities in Japan; and the
Europe segment includes the Company's manufacturing, design and service
facility in the UK. Each segment sells Company designed and manufactured
products, while products produced by third party manufacturers are
primarily distributed by the Company's Asia-Pacific segment. All three
segments sell to semiconductor manufacturers and automatic test equipment
manufacturers. The North America segment sells through Company account
managers and independent sales representatives; the Asia-Pacific segment
sells through Company account managers and independent sales represen-
tatives; and the Europe segment sells through Company account managers.

Intercompany pricing between segments is either a multiple of cost for
component parts used in manufacturing or a percentage discount from list
price for finished goods sold to non-manufacturing segments.

Years Ended December 31,
-------------------------------
1999 1998 1997
------- ------- -------

Net revenues from unaffiliated customers:
North America $26,548 $12,637 $13,608
Asia - Pacific 5,465 4,727 5,743
Europe 2,483 1,711 1,395
------- ------- -------
$34,496 $19,075 $20,746
======= ======= =======

Affiliate sales or transfer from:
North America $ 1,600 $ 943 $ 768
Asia - Pacific - - -
Europe 951 378 500
------- ------- -------
$ 2,551 $ 1,321 $ 1,268
======= ======= =======

Depreciation/amortization:
North America $ 831 $ 414 $ 127
Asia - Pacific 19 53 69
Europe 36 24 28
------- ------- -------
$ 886 $ 491 $ 224
======= ======= =======

F - 14

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(5) SEGMENT INFORMATION (Continued)

Years Ended December 31,
-------------------------------
1999 1998 1997
------- ------- -------

Operating income:
North America $ 4,746 $ 1,705 $ 5,067
Asia - Pacific 333 299 651
Europe 1,243 514 469
------- ------- -------
$ 6,322 $ 2,518 $ 6,187
======= ======= =======

Earnings before income taxes and
minority interest:
North America $ 5,022 $ 2,100 $ 5,356
Asia - Pacific 442 379 606
Europe 1,265 547 485
------- ------- -------
$ 6,729 $ 3,026 $ 6,447
======= ======= =======

Income tax expense:
North America $ 2,000 $ 747 $ 1,517
Asia - Pacific 339 263 463
Europe 296 89 110
------- ------- -------
$ 2,635 $ 1,099 $ 2,090
======= ======= =======

Net earnings:
North America $ 3,022 $ 1,353 $ 3,839
Asia - Pacific 103 116 131
Europe 969 458 362
------- ------- -------
$ 4,094 $ 1,927 $ 4,332
======= ======= =======

Identifiable assets:
North America $27,036 $20,226 $16,177
Asia - Pacific 2,595 1,706 2,679
Europe 1,989 1,286 1,089
------- ------- -------
$31,620 $23,218 $19,945
======= ======= =======

Substantially all interest income is generated by the North America
segment. Export sales from the Company's domestic manufacturing
facilities (New Jersey and California) totaled $8.3 million, $4.4
million and $2.0 million during the years ended December 31, 1999,
1998 and 1997, respectively. During the years ended December 31, 1999,
1998 and 1997 the Company had sales to Japan of $2.8 million, $2.9
million and $4.3 million, respectively.

F - 15

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(6) MAJOR CUSTOMERS

The Company's customers are in the semiconductor industry. During 1999,
1998 and 1997 the Company had sales to certain customers which exceeded
10% of the Company's consolidated revenues. Those sales were as follows:

Customer 1999 1998 1997
---------------------------------------------------------------------------------

A (North America, Asia-Pacific, Europe) 14% 9% 5%
B (North America, Asia-Pacific) 11 16 11
C (North America, Asia-Pacific, Europe) 9 11 7
D (North America, Asia-Pacific) 8 13 5
D (North America, Asia-Pacific, Europe) 3 7 11
-- -- --
Total 45% 56% 39%
== == ==

Additionally, at December 31, 1999, these five customers accounted for
33% of trade receivables.

(7) INVENTORIES

Inventories held at December 31, were comprised of the following:

1999 1998
------ ------

Raw materials $2,014 $1,097
Work in process 1,789 1,305
Finished goods 377 339
Reserve for obsolete inventory (354) (220)
------ ------
$3,826 $2,521
====== ======

(8) LINE OF CREDIT

The Company has a $1.5 million line of credit. Borrowings under this
line of credit are principally used for working capital purposes.
Borrowings on the line of credit bear interest at prime rate, which is
payable monthly on any outstanding balance. The Company is required to
maintain a $50 compensating balance at the bank which granted the line of
credit. The credit line expires on June 28, 2000. At December 31, 1999,
there were no borrowings outstanding.

F - 16

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(9) STOCK OPTION PLAN

The 1997 Stock Plan (the "Plan") provides for the granting of either
incentive stock options or non-qualified stock options to purchase shares
of the Company's common stock and for other stock-based awards to key
employees and directors responsible for the direction and management of
the Company and to non-employee consultants. The Plan consists of two
parts: the Non-Qualified Plan (administered by the Board of Directors
of the Company) and the Key Employee Plan (administered by the
Compensation Committee of the Board of Directors of the Company). The
Company has reserved 500,000 shares of common stock for issuance upon
exercise of options or stock awards under the Plan.

No option may be granted with an exercise period in excess of ten years
from date of grant. Generally, incentive stock options will be granted
with an exercise price equal to the fair market value on the date of
grant; the exercise price of non-qualified stock options will be
determined by either the Board of Directors or the Compensation Committee
of the Board of Directors.

Had compensation costs for the Company's stock-based compensation plans
been determined consistent with SFAS No. 123, the Company's net earnings
and net earnings per share for the years ended December 31, 1999, 1998
and 1997, would have been reduced to the unaudited pro forma amounts
indicated below:

1999 1998 1997
------- ------- -------

Net earnings:
As reported (pro forma for 1997) $ 4,094 $ 1,927 $ 3,726
Pro forma $ 3,960 $ 1,790 $ 3,643

Net earnings per share - basic:
As reported (pro forma for 1997) $ 0.63 $ 0.31 $ 0.74
Pro forma $ 0.61 $ 0.29 $ 0.72

Net earnings per share - diluted:
As reported (pro forma for 1997) $ 0.62 $ 0.31 $ 0.73
Pro forma $ 0.60 $ 0.29 $ 0.72

The fair value for stock options granted in 1998 and 1997 was estimated
at the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions for 1998 and 1997:

1998 1997
------- -------

Risk-free interest rate 5.65% 5.67%
Dividend yield 0.00% 0.00%
Expected common stock market price
volatility factor 0.82 0.65
Weighted average expected life of
stock options 5 years 5 years

The per share weighted average fair value of stock options issued by
the Company in 1998 and 1997 was $3.92 and $4.61, respectively. The
Company did not issue stock options during 1999.

F - 17

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(9) STOCK OPTION PLAN (Continued)

The options which have been issued vest 20% one year from date of grant
and 20% in each of the succeeding four years.

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

The following table summarizes the stock option activity for the periods
ended December 31, 1997, 1998 and 1999:

Weighted
Average
Number Exercise
of Shares Price
--------- --------

Options outstanding, January 1, 1997 - -
Granted 160,000 $7.72
Exercised - -
Canceled (9,000) 7.50
------- -----
Options outstanding, December 31, 1997 151,000 $7.73
(none exercisable) ======= =====

Granted 150,000 $4.25
Exercised - -
Canceled (10,000) 6.00
------- -----
Options outstanding, December 31, 1998 291,000 $5.10
(28,200 exercisable) ======= =====

Granted - -
Exercised - -
Canceled (3,000) $6.00
------- -----
Options outstanding, December 31, 1999 288,000 $5.09
(85,200 exercisable) ======= =====

On June 30, 1998, the Company modified 141,000 options originally
exercisable at $7.50 per share and 10,000 options originally exercisable
at $11.00 per share to reduce the exercise price of such options to $6.00
per share.

F - 18

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(9) STOCK OPTION PLAN (Continued)

The following table summarizes information about stock options
outstanding at December 31, 1999:

Weighted Weighted
Average Average
Weighted Exercise Exercise
Range of Number Average Price of Number Price of
Exercise Outstanding Maximum Remaining Outstanding Exercisable Exercisable
Prices at 12/31/99 Life Life Options at 12/31/99 Options
-------- ----------- -------- --------- ----------- ----------- -----------

$ 6.00 138,000 10 years 7.5 years $ 6.00 55,200 $ 6.00

$ 4.25 150,000 10 years 8.6 years $ 4.25 30,000 $ 4.25

(10) COMMITMENTS

The Company leases its offices, warehouse facilities, automobiles and
certain equipment under noncancellable operating leases which expire at
various dates through 2005. Total rental expense for the years ended
December 31, 1999, 1998 and 1997 was $655, $536 and $442, respectively.
The aggregate minimum rental commitments under the noncancellable
operating leases in effect at December 31, 1999, are as follows:

2000 $ 756
2001 717
2002 656
2003 510
2004 375
Thereafter 35

(11) INCOME TAXES

As discussed in Notes 2 and 3, prior to the Offering the Company had
elected S corporation status for Federal and State of New Jersey tax
purposes, and therefore, was not directly subject to Federal and certain
New Jersey income taxes. Immediately prior to the Offering, the Company
terminated its status as an S corporation and is now subject to Federal
and additional state income taxes. In addition, the Company is taxed in
foreign countries and for activity in certain states. The cumulative
amount of undistributed earnings of foreign subsidiaries for which U.S.
income taxes have not been provided was approximately $3.0 million at
December 31, 1999. As of December 31, 1999, the Company had repatriated
a portion of the earnings of its foreign subsidiaries. The estimated
tax effect of distributing such earnings is expected to be offset by
available foreign tax credits.

F - 19

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(11) INCOME TAXES (Continued)

Earnings before income taxes were as follows:

Years Ended December 31,
--------------------------
1999 1998 1997
------ ------ ------

Domestic $5,022 $2,100 $5,356
Foreign 1,707 926 1,091
------ ------ ------
$6,729 $3,026 $6,447
====== ====== ======

Income tax expense was as follows:

Years Ended December 31,
--------------------------
1999 1998 1997
------ ------ ------

Current:
Domestic - Federal $1,882 $ 772 $1,379
Domestic - state 215 54 303
Foreign 652 352 573
------ ------ ------
2,749 1,178 2,255
------ ------ ------
Deferred:
Domestic - Federal (100) (54) (147)
Domestic - state (14) (25) (18)
------ ------ ------
(114) (79) (165)
------ ------ ------
Income tax expense $2,635 $1,099 $2,090
====== ====== ======

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of December 31, 1999 and 1998:

F - 20

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(11) INCOME TAXES (Continued)

1999 1998
----- -----

Deferred Tax Assets:
Accrued vacation pay $ 104 $ 91
Allowance for doubtful accounts 67 60
Inventories (principally due to obsolescence reserve) 219 107
Accrued warranty 44 17
Accrued bonuses 13 -
Capital loss carryforward 90 90
Other - (5)
----- -----
537 360
Valuation allowance (90) (90)
----- -----
Deferred tax assets 447 270
----- -----
Deferred Tax Liabilities:
Accrued royalty income (65) (25)
Other (23) -
----- -----
Deferred tax liabilities (88) (25)
----- -----
Net deferred tax asset $ 359 $ 245
===== =====

Based on the Company's history of prior operating earnings, and its
expectation of the future, management believes that taxable income will
more likely than not be sufficient to realize the net deferred tax assets
of $359 at December 31, 1999. A valuation allowance of $90 was
established in 1998 to offset the domestic capital loss carryforward.

An analysis of the effective tax rate on earnings and a reconciliation
from the expected statutory rate are as follows:

Years Ended December 31,
---------------------------
1999 1998 1997
------ ------ -------

Expected income tax provision at U.S.
Statutory rate $2,288 $1,029 $2,192
State taxes, net of Federal benefit 133 19 188
Increase (decrease) in tax from:
Non-deductible goodwill 163 86 17
Foreign income tax rate differences 58 12 219
Tax exempt interest (40) (80) -
S corporation earnings not subject to
Federal taxation - - (549)
Other 33 33 23
------ ------ -------
Income tax expense $2,635 $1,099 $2,090
====== ====== =======

F - 21

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(12) EMPLOYEE BENEFIT PLANS

In 1996, the Company instituted a defined contribution 401(k) plan for
its employees who work in the U.S. All permanent employees of inTEST
Corporation and inTEST Sunnyvale who are at least 18 years of age
and have completed six months of service with the Company are eligible to
participate in the plan. Under the plan, the Company matches employee
contributions dollar for dollar up to 10% of the employee's annual
compensation up to $5. In addition, the Company may match employee
contributions dollar for dollar for amounts exceeding 10% up to 15% of
the employee's annual compensation to a maximum of $5. Employer
contributions vest over a six-year period. The Company contributed $221,
$157 and $129 to the plan for the years ended December 31, 1999, 1998 and
1997, respectively.

inTEST Sunnyvale (formerly TestDesign) adopted a defined contribution
401(k) plan for its employees in July 1994. All permanent employees
who are at least 18 years of age and have completed six months of service
with inTEST Sunnyvale are eligible to participate in the plan. Under
the plan, inTEST Sunnyvale matched employee contributions equal to 25%
of an employee's contributions up to 5% of gross salary. Matching
contributions for the plan were $6 from the date of the Acquisition
through December 31, 1998. In addition, the plan allowed inTEST Sunnyvale
to make discretionary matching contributions up to 6.5% of an employee's
gross salary for the year based upon inTEST Sunnyvale's profitability.
There were no discretionary matching contributions made from the date of
the Acquisition through December 31, 1998. Effective October 1, 1998,
all inTEST Sunnyvale permanent employees who were at least 18 years of
age and had completed six months of service were offered enrollment in
the Company's 401(k) plan, and employee contributions and employer
matching contributions into the inTEST Sunnyvale plan ceased. The
Company is currently in the process of terminating the inTEST Sunnyvale
plan at which time the former participants will have the option of
rolling their assets into the Company's plan.

(13) ACCRUED EXPENSES

Accrued expenses consists of the following:

December 31,
--------------------
1999 1998
------ ------

Accrued commissions $ 611 $ 206
Accrued vacation 290 236
Accrued bonuses 256 -
Accrued professional fees 179 78
Accrued wages 153 106
Accrued warranty 115 45
Accrued directors fees 105 109
Customer deposits 101 100
Accrued shareholder relations 40 42
Accrued other 96 101
------ ------
$1,946 $1,023
====== ======

F-22

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(14) RELATED PARTY TRANSACTIONS

The Company paid consulting fees to one individual who is a member of the
Board of Directors of the parent company which totaled $67, $56 and $17
during the years ended December 31, 1999, 1998 and 1997, respectively.

During 1998, in connection with the acquisition of TestDesign, the
Company repaid $215 on a note due to a firm ("PRIM") controlled by
Douglas W. Smith, Executive Vice President and Chief Operating Officer of
the Company. This note, which did not bear interest or have a maturity
date, evidenced borrowings that TestDesign had made from PRIM prior to
the acquisition. In addition, subject to the terms of a consulting
agreement between TestDesign and Gregory W. Slayton, a current board
member of the Company, the Company paid directly to Mr. Slayton, on
behalf of TestDesign, $170 in cash and 31,250 shares of the Company's
common stock. These payments are included in the merger consideration
and are accounted for as described in Note 4.

The Company's foreign subsidiaries paid directors' fees to several
individuals who are members of management of the parent company which
totaled $119, $104 and $177 during the years ended December 31, 1999,
1998 and 1997, respectively.

At December 31, 1999 and 1998 there were $48 and $49 of foreign
directors' fees payable to members of management of the parent company.

(15) LEGAL PROCEEDINGS

On November 18, 1998, the Company and its subsidiary, inTEST IP Corp.
(which holds title to all Company intellectual property), filed suit
against a competitor for infringement of a United States patent held by
the Company (the "815 Patent").

The invention disclosed and claimed in the 815 Patent is directed to a
system for positioning and docking a heavy electronic test head of a test
system with respect to an electronic device handler. The system is used
in the automatic testing of integrated circuits and other electronic
devices. The Company sells products covered by the 815 Patent worldwide.

As alleged in the complaint, the competitor began manufacturing, offering
to sell, and selling products as early as 1991 that, without license,
infringe claims of the 815 Patent. The parties have been discussing
possible settlement of the dispute since the Company first became aware
of the defendants' infringement in 1991. Discussions were abated at the
end of 1995 so that the United States Patent and Trademark Office (the
"PTO") could reexamine the 815 Patent. On April 7, 1998, the PTO
completed the reexamination and affirmed the patentability of the nine
claims in the patent with minor, technical, clarifying changes.
Thereafter, the parties resumed settlement negotiations, however, to date
such negotiations have been unsuccessful.

F - 23

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(15) LEGAL PROCEEDINGS (Continued)

The complaint asks the court to enjoin the competitor from further acts
of infringement, including the acts of manufacturing, using, offering for
sale, selling and importing positioner systems that embody the patented
invention claimed in the 815 Patent. The complaint also asks the court
to award the Company damages against the competitor, including the
Company's lost profits. Alleging that the competitor's infringement is
and has been deliberate, willful, and wanton, with knowledge of the
Company's patent rights, the complaint asks the court to award increased
damages up to three times the amount assessed. The complaint also seeks
an award of interest, costs and reasonable attorney fees.

All legal fees incurred in connection with this matter have been
expensed. In the opinion of management, the ultimate disposition of this
matter will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.

(16) QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

The following tables present certain unaudited consolidated quarterly
financial information for each of the eight quarters ended December 31,
1999. In the opinion of the Company's management, this quarterly
information has been prepared on the same basis as the Consolidated
Financial Statements and includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the information
for the periods presented. The results of operations for any quarter are
not necessarily indicative of results for the full year or for any future
period.

The Company's business is not seasonal; therefore year-over-year
quarterly comparisons of the Company's results of operations may not be
as meaningful as the sequential quarterly comparisons set forth below
which tend to reflect the cyclical activity of the semiconductor industry
as a whole. Quarterly fluctuations in expenses either are related
directly to sales activity and volume, or tend to be a function of
personnel costs and the timing of expenses incurred throughout the year.

Quarters Ended
---------------------------------------------
3/31/99 6/30/99 9/30/99 12/31/99 Total
--------- --------- --------- --------- ---------

Net revenues $ 4,810 $ 6,485 $ 10,097 $ 13,104 $ 34,496
Gross margin 2,532 3,506 5,543 7,310 18,891
Earnings before income taxes 297 850 2,242 3,340 6,729
Income tax 125 357 901 1,252 2,635
Net earnings 172 493 1,341 2,088 4,094
Net earnings per common share - basic $ 0.03 $ 0.07 $ 0.21 $ 0.32 $ 0.63
Weighted average common shares
outstanding - basic 6,536,034 6,536,034 6,536,034 6,536,034 6,536,034
Net earnings per common share - diluted $ 0.03 $ 0.07 $ 0.20 $ 0.31 $ 0.62
Weighted average common shares and common
share equivalents outstanding-diluted 6,602,317 6,591,785 6,626,342 6,683,137 6,626,118
Other comprehensive earnings (expense) $ (75) $ (11) $ 168 $ (16) $ 66

F - 24

inTEST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

(16) QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

Quarters Ended
---------------------------------------------
3/31/98 6/30/98 9/30/98 12/31/98 Total
--------- --------- --------- --------- ---------

Net revenues $ 5,626 $ 5,163 $ 4,449 $ 3,837 $ 19,075
Gross margin 3,426 3,029 2,331 1,887 10,673
Earnings (loss) before income tax expense 1,822 1,458 360 (614) 3,026
Income taxes 668 550 133 (252) 1,099
Net earnings (loss) 1,154 908 227 (362) 1,927
Net earnings(loss) per common share-basic $ 0.20 $ 0.15 $ 0.04 $(0.06) $ 0.31
Weighted average common shares
outstanding-basic 5,911,034 5,911,034 6,311,849 6,536,034 6,169,596
Net earnings(loss) per common share-diluted $ 0.19 $ 0.15 $ 0.04 $(0.06) $ 0.31
Weighted average common shares and common
share equivalents outstanding-diluted 5,924,949 5,918,809 6,317,578 6,536,034 6,186,460
Other comprehensive earnings (expense) $ (42) $ (19) $ 19 $ 112 $ 70

(17) SUBSEQUENT EVENT

On December 16, 1999, the Board of Directors of the Company authorized
a merger with Temptronic Corporation, a Massachusetts corporation
("Temptronic"). Each issued and outstanding common share of Temptronic
will be exchanged for 0.925 shares of the Company's common stock. Upon
closing of the proposed merger, which must be ratified by the
shareholders of both the Company and Temptronic, Temptronic will be
merged into a wholly-owned subsidiary of the Company. On January 4,
2000, the Company, Temptronic and the Company's wholly-owned subsidiary
(into which Temptronic will be merged) entered into an Agreement and
Plan of Merger and Reorganization. On February 3, 2000, a joint
proxy statement/prospectus for the proposed merger was filed with the
Securities and Exchange Commission and shortly thereafter mailed to
all shareholders of the Company and Temptronic to vote on the
proposed merger. Should the proposed merger be approved by a majority
of the shareholders of both the Company and Temptronic, the Company
will issue approximately 2.2 million shares of its common stock to
Temptronic shareholders. Special shareholder meetings of both the
Company and Temptronic have been scheduled for March 9, 2000 to vote
on the proposed merger.

F - 25

inTEST CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Balance Additions
at Acquisition -------------------- Balance at
Beginning of Other End of
of Period TestDesign Expense Deductions Period
--------- ----------- ------- ---------- ----------

Year Ended December 31, 1999
Allowance for doubtful accounts $168 $ - $ 16 $ (1) $185
Inventory obsolescence reserve 220 - 193 59 354
Warranty reserve 45 - 300 230 115

Year Ended December 31, 1998
Allowance for doubtful accounts 144 54 (5) 25 168
Inventory obsolescence reserve 119 38 193 130 220
Warranty reserve 25 20 202 202 45

Year Ended December 31, 1997
Allowance for doubtful accounts 96 - 61 13 144
Inventory obsolescence reserve - - 178 59 119
Warranty reserve 25 - 147 147 25

F - 26