IMP INC, 10-K405/A, 2000-01-10

IMP INC
10-K405/A, 2000-01-10
SEMICONDUCTORS & RELATED DEVICES

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FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A Amendment 2

(Mark One)

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

For the fiscal year ended March 28, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______________ to ________________

Commission File Number 0-15858

IMP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 94-2722142
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

2830 North First Street
San Jose, California 95134
(Address of Principal Executive Offices, including Zip Code)

Registrant's telephone number, including area code: (408) 432-9100

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

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None None

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

Common Stock, $.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

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

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The aggregate market value of voting stock held by non-affiliates of the
Registrant, as of June 23, 1999 was approximately $9,681,287 (based upon the
closing price for shares of the Registrant's common stock as reported by the
Nasdaq Smallcap Market System on that date). Shares of common stock held by each
officer, director and holder of 5% or more of the outstanding common stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

On June 23, 1999, approximately 3,367,404 shares of Common Stock, $.01
par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE.

Information contained in the Registrant's Amended Annual Report on Form
10-K405/A for the year ended March 29, 1999 filed with the Securities and
Exchange Commission on July 26, 1999 has been incorporated by reference in Part
III of this form 10-K/A.

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PART I

ITEM 1. BUSINESS.

This Annual Report on Form 10-K/A, and the documents incorporated herein
by reference, contains forward-looking statements that have been made pursuant
to and in reliance on the provisions of the Private Securities Litigation Reform
Act of 1995.

Statements regarding IMP's business that are not historical facts are
"forward-looking statements" that involve risks and uncertainties, including,
but not limited to demand for the Company's products, foundry utilization, the
ability of the Company to develop new products, demand by end-users of the
products produced by the Company's customers, and the other risks detailed from
time to time in the Company's reports filed with the Securities and Exchange
Commission. Words such as "anticipates," "expects," "intends," "plan,"
"believe," "seeks," "estimates," and variations of such words and similar
expressions relating to the future operations are intended to identify
forward-looking statements.

All forward-looking statements are based on the Company's current expectations,
estimates, projections, beliefs and plans or objectives about its business and
its industry. These statements are not guarantees of future performance and are
subject to risk and uncertainty. Actual results may differ materially from those
predicted or implied in any such forward-looking statement.

Risks and uncertainties that could cause actual results to differ materially
include those set forth throughout this Form 10-K/A and in the documents
incorporated herein by reference. Particular attention should be paid to the
section below entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information relating to existing conditions, future
events or otherwise. However, readers should carefully review future reports and
documents that the Company files from time to time with the Securities and
Exchange Commission, such as its quarterly reports on Form 10-Q (particularly
"Management's Discussion and Analysis of Financial Condition and Results of
Operations") and any current reports on Form 8-K.

INTRODUCTION

IMP designs, manufactures and sells integrated circuit (IC) semiconductor
devices, also known as microchips. We focus on a specialized technology sector
called the analog IC market. We sell our analog IC technology in two basic
forms. We manufacture IC wafers for other semiconductor vendors using our own
and customer-developed processes. This has comprised the majority of IMP
revenues for the last decade. Following a downturn in our historic lines of
business in fiscal 1997, we decided to expand our activities into the market for
standard analog power-management ICs. Our goal is to provide a broad portfolio
of devices to manage the power supply needs of the portable, wireless and
internet-based systems that are driving today's computer and communications
revolution. This new product direction builds on the historical strengths of our
people, technology and manufacturing capabilities and is intended to serve a
broad base of customers in a growing market opportunity.

Our wafer production and test factory is located in San Jose, California. This
facility, as well as our design and development procedures, are certified to
meet the quality demands of the International Standards Organization
specification number ISO 9001. We operate our own wafer fabrication plant in
order to develop and control the specialized analog technologies that are
essential for the design of products offering unique technical advantages to the
customer. Also, when we run the plant at close to full capacity, we believe that
we will enjoy a cost advantage over companies that use third-party wafer foundry
suppliers.

IMP was founded as a California corporation in January 1981 under the name of
International Microelectronic Products. We reincorporated in Delaware as
International Microelectronic Products, Inc. in April 1987 and our initial
public stock offering was made that same year. In September 1993, our
Certificate of Incorporation was amended to formally change the name of the
Company to the commonly used abbreviation of IMP, Inc. IMP stock is traded on
the Nasdaq SmallCap Market under the ticker symbol of IMPX. Our main offices are
located at 2830 North First Street, San Jose, California 95134-2071. You can
contact us by telephone at 408 432-9100, by fax at 408 434-0335, and by e-mail
at [email protected].

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IMP BACKGROUND

IMP was founded to employ proprietary computer aided engineering software to
provide fast-turnaround design and prototyping, as well as volume manufacturing
services, for customer-designed application-specific IC (ASIC) devices. The
company was one of the first vendors to apply this design technology to CMOS
processes. In the early 1980's, in order to offer fast turnaround and low-cost,
companies, including IMP, had to build and operate their own wafer fabrication
and testing facilities. The Company also used this capacity to provide wafer
foundry services to semiconductor companies that did not own their own wafer
fabrication factory or that needed additional capacity. IMP has delivered
production wafers representing hundreds of millions of finished microchips to
such customers as AT&T, Adaptec, Daimler-Benz, International Rectifier, Level
One, National Semiconductor, Rockwell and Siemens.

During the 1980's, IMP engineers created some of the industry's first
standard-cell-based analog and mixed signal designs. They applied this analog
expertise to the first non-custom products sold under the IMP name in the early
1990s. These were application-specific devices, such as programmable filters,
integrated read-channels, preamplifiers, and write drivers, for applications in
disk drive and PC tape back-up mass-storage systems. Customers for these
products included Hewlett-Packard, Iomega, Seagate Technology, and the 3M
Corporation.

In early fiscal 1997 demand for IMP's wafer foundry services and mass-storage
products declined at the same time that significant additional foundry capacity
was brought on-line throughout the world. As a result the Company's sales
dropped significantly. Management took many actions to reduce costs, including
canceling non-contributing products, freezing salaries, cutting the work force
from 450 to 227 people and increasing the productivity of the remaining
personnel. However, due to the high fixed costs of operating the factory, it was
not possible to achieve profitability at such a depressed revenue level.

In 1997, the whole semiconductor industry sank into a recession. A new IMP
management team made the decision to invest in the design of standard catalog
analog products to help increase demand for its products. The specific choice of
analog power-management ICs was determined by the capabilities of the existing
equipment, by the skills of the R & D personnel and by the long-term growth
opportunities forecast for these products. In addition to matching these
capabilities, these products are sold to a broad base of users throughout the
world and are expected to reduce IMP's historical dependence on a limited base
of customers. These analog products also have the potential to increase the
profit that can be generated by each wafer.

IMP has indicated that focusing on analog products does not guarantee a return
to profitability, but is believed to be the best long-term opportunity for the
Company. The difficulty of the task was compounded and losses were increased by
the Asian economic difficulties that further reduced revenue through much of
fiscal 1999. The first new analog products resulting from this strategy began to
contribute to revenue in the third quarter of fiscal 1999.

THE ANALOG INTEGRATED CIRCUIT MARKET

Integrated circuits are called either digital or analog devices based on their
mode of operation. Circuits combining both analog and digital modes on the same
chip are known as mixed-signal devices. Mixed-signal devices are frequently
employed to translate information presented as an analog signal into digital
information and vice versa.

Digital circuits generate a succession of high and low signal levels. Each level
represents a one or a zero in binary arithmetic. Digital functions are most
efficient at storing and processing signals inside a computer. Analog circuits
process continuously varying signal levels that convey information about the
value of some linear characteristic, such as the amplitude, phase, or frequency
of voltage or current. The continuously varying signals may represent "real
world" properties such as temperature, pressure, weight, or speed.

The analog integrated circuit market comprises those devices having a purely
analog operating mode, as well as mixed-signal devices having a high degree of
analog content. Examples of analog devices include, amplifiers, comparators,
regulators and certain specialized functions used in power management
applications. Mixed-signal devices falling into the analog category, include
disk-drive read-channels, data communications interface and data conversion
devices, such as analog-to-digital (ADC) and digital-to-analog converter (DAC)
products. Mixed-signal chips with predominantly digital content, such as modems,
PC audio, and graphics display functions are usually included in the market
category of digital products.

From the 1960s through the 1980s divisions of large semiconductor companies
controlled the mainstream analog IC business. While these companies are still
dominant in terms of unit shipments today, especially in the area of circuits
for TV, radio, and other consumer products, the analog IC market is also served
by a large number of independent, specialized "high-performance" analog vendors.
Some of these smaller vendors generate higher profit margins and market
valuations than their much larger counterparts. According to World Semiconductor
Trade Statistics ("WSTS") data, in calendar 1998, the worldwide analog IC
revenue was $19.1 billion out of total integrated circuit sales of $109.1
billion. From 1997 to 1998 analog ICs increased their percent of the overall IC

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market from 16.7% of revenue to 17.5%. Industry analysts project that new
electronic systems design activity, particularly that related to supporting the
ongoing wireless and internet driven communications revolution, will support
continued growth in the market for analog ICs.

MARKETS AND APPLICATIONS

Digital signals are most efficient for manipulation of bits of data. Analog
signals best represent the values of real world parameters outside of a
computer. Analog components are therefore an essential element of every
electronic system that must operate in a real world environment, from battery
powered computers, mobile phones, pagers, hearing aids and hand-held instruments
to desktop computers, servers and mainframes to industrial equipment,
automobiles, and avionics.

A simple example of an application for analog devices is in a thermostatically
controlled electric fan. Changes in room temperature are detected using a sensor
and an amplifier and measured as an analog signal. This signal is converted with
an analog-to-digital-converter (ADC) into a digital value for a microcontroller
in the fan to determine when the motor should be turned on and at what speed.
When the decision is made, a digital-to-analog converter (DAC) then converts the
digital output of the controller back into an analog signal which is then
amplified to a high current level to drive the fan motor.

The customers for analog integrated circuits are manufacturers of electronic
equipment serving numerous and widely differing applications in instrumentation,
industrial control, data processing, military, video, medical equipment, and
voice and data communications over private and public, local area and wide-area
network systems, such as the Internet. For each application, different users may
have unique requirements for circuits with specific resolution, accuracy,
linearity, speed, power, and signal amplitude capability, which results in a
high degree of market complexity. As a result, compared to the market for
digital integrated circuits, the analog market is characterized by a wider range
of standard products used in smaller quantities by a large number of customers.
Further, many of these products have historically enjoyed longer life cycles,
less competition from foreign manufacturers, lower capital requirements as a
result of using more mature manufacturing technologies, and relatively stable
growth rates.

An established analog IC supplier may offer hundreds of different basic device
types, in numerous package variations and operating ranges, representing
thousands of part numbers serving many different end-market segments. A Morgan
Stanley Dean Witter report published in December 1998, based on WSTS statistics
and forecasts, identifies six major categories of analog circuits. They are
amplifiers, power management, data conversion, interface, consumer and other
analog circuits. With a forecast of a greater than 15% compounded annual growth
rate, power management circuits were projected to offer one of the most
promising segments of the IC business because of their use in fast growing
portable electronic systems. Power management ICs control, distribute, generate,
monitor and regulate the supply of voltage and current, and provide electrical
and thermal protection to an electronic system.

IMP PRODUCTS AND SERVICES

Our revenues derive primarily from two types of activities:

1. Wafer Foundry and Custom IC Manufacturing Services - This is the
original base of IMP's business and in fiscal 1999 still generated more
than 80% of our revenue. We process silicon wafers using our specialized
analog BiCMOS, CMOS and DMOS technologies for other semiconductor
companies that do not own their own factory or who need additional
capacity. These customers usually design the products themselves.

Processed wafers are round silicon slices that contain hundreds or
thousands of completed microchips ready to be separated and assembled
into individual packages. This activity is commonly referred to as the
"wafer foundry" business. A number of older IMP-designed and owned
products for tape-based, mass-storage systems are today essentially
custom circuits because each is sold to a single customer.

2. Power Management ICs - These are new families of standard catalog
microchips that improve the power consumption efficiency of a wide range
of electronic systems. We focus our R & D activity on low-power and
high-voltage features for handheld and portable battery-operated
communication systems, such as pagers, cell phones, and electronic
organizers. In addition to communications systems, power management
products are used in just about every piece of electronic equipment
being designed today. We introduced our first power management products
in early fiscal 1999 and they began to contribute to revenue in the
third fiscal quarter.

By following the approach outlined below, we are using our expertise in analog
processing circuit design and high-volume production to establish IMP as a
supplier of finished power-management ICs:

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1. Develop wafer-manufacturing processes that enable the production of
advanced analog devices. Our current development activities are
addressing a variety of BiCMOS, CMOS and DMOS technologies, ranging from
30 volts to several hundred volts in capability. We are using these
technologies for our own products as well as offering them to potential
new foundry customers.

2. Build a portfolio of improved industry-standard analog power-management
IC products, based on the new processes described above. To accomplish
this, we have identified opportunities for families of improved power
management devices including low-dropout voltage regulators, DC-DC
converters, electroluminescent (EL) lamp drivers and microprocessor
supervisors. Some of the products that we have introduced show
advantages to the user of a 70% reduction in power consumption.

3. Utilize our process optimization and volume manufacturing experience to
produce such standard analog circuits at competitive costs. In one case
we have produced a design that is approximately 60% smaller in die size
than the competitor. We are promoting these products as having improved
performance, competitive pricing, volume production capability and ISO
9001 certified standards of quality and reliability.

4. Identify customers that are leaders in each of our targeted markets and
work with these manufacturers to understand their current and new
applications and product needs. Based on this knowledge, we will seek to
create new standard analog circuits that offer a combination of
increased functionality, performance, and cost savings. We introduced a
number of such proprietary products in fiscal 1999.

See "Research and Development" below for a list of new products introduced
during fiscal 1999.

SALES, DISTRIBUTION AND MARKETING

We sell our products directly to OEM customers and through a worldwide network
of independent sales representatives and distribution firms. These sales
activities are managed by our own sales and applications people who are based in
our San Jose headquarters and in regional sales offices in the United States and
Singapore.

In North America, at the end of fiscal 1999, we worked with 16 independent sales
representative firms having 74 offices and one distribution company having 15
sales offices in the United States and Canada. In some cases these organizations
promote products that compete with our products. In the fiscal year ending March
28, 1999, sales through our North American distribution outlets accounted for
less than 5% of net revenues. As we proceed with our transition to sales of more
standard analog IC products, we expect that our sales through distribution firms
will account for an increasing percentage of net revenue. As is customary in the
industry, distributors are entitled to price rebates and product return
privileges if the market outlook and the prices for our products change.

Our sales to customers in the United States, Asia and Europe accounted for 88%,
6%, and 6% respectively, of our net revenues for fiscal 1999, compared to 69%,
29% and 2%, respectively, of the Company's net revenues; for fiscal 1998, and
65%, 33% and 2%, respectively, of the Company's net revenues; for fiscal 1997.
Our standard products are sold throughout the world, while our custom and
foundry products are sold primarily to North American customers.

In fiscal 1999, our largest customers were International Rectifier and Linfinity
Microelectronics, which accounted for approximately 29% and 16%, of net
revenues, respectively. No other customer accounted for more than 10% of net
revenues during fiscal 1999. In fiscal 1998, IMP's largest customer was Iomega
Corporation, which accounted for approximately 22% of net revenues.
International Rectifier accounted for approximately 14% of net revenues in
fiscal 1998. Three other customers, Level One, Colorado Memory Systems and
Linfinity, exceeded 10% of sales and accounted for a total of approximately 32%
of net revenues. In fiscal 1997, IMP's largest customer was Iomega Corporation,
accounting for approximately 39% of net revenues, International Rectifier
accounted for approximately 15% of net revenues, and Rockwell International
accounted for approximately 10% of net revenues in fiscal 1997. The
unanticipated loss of any of our major customers or the unanticipated
cancellation or rescheduling of orders by any of them could have a material
adverse impact on our business.

Outside North America, we sell our products through various channels, including
independent sales representative, distributor, and stocking
representative/distributor firms. These companies may buy and stock our products
for resale or may act as our agent in arranging for direct sales from our
factory to a customer.

Our international sales are primarily denominated in U.S. currency. As a result,
changes in exchange rates that strengthen the U.S. dollar can increase the price
in local currency of our products in foreign markets and make the Company's
products relatively more expensive than those of local manufacturers. This could
lead to a reduction in our sales or our profitability in those foreign markets.
We have not taken any measures, such as hedging currencies, to protect us
against possible changes in exchange rates.

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Our export sales are subject to some governmental restrictions, including
regulations contained in the Export Administration Act of 1979 and the Export
Administration Amendments Act of 1985. However, we have not experienced any
material difficulties to date because of these restrictions.

We typically warrant our products against defects in materials and workmanship
for a period of one year. Our warranty expense to date has been minimal.

Due to the relatively long manufacturing cycle for integrated circuits, we build
some of our inventory in advance of receiving orders from our customers. As a
consequence of inaccuracies inherent in forecasting demand for such products,
inventory imbalances periodically occur that result in surplus amounts for some
of our products and shortages of others. Such shortages can adversely affect our
relationships with our customers; surpluses can result in larger than desired
inventory levels.

Our backlog consists of distributor and OEM customer orders typically required
to be shipped no more than six months following the order date. Our customers
may generally cancel or reschedule orders to purchase products without
significant penalty. As a result, to reflect changes in their needs, our
customers frequently revise the quantities of our products to be delivered and
their delivery schedules. Since backlog can be canceled or rescheduled without
significant penalty, we do not believe our backlog is a meaningful indicator of
future revenue. In addition, our backlog includes orders from domestic
distributors. When these products are shipped to the distributor, they are not
recognized by the company as revenue until the distributor sells them to the end
customer. Such products when sold may result in revenue lower than the stated
backlog invoice amounts as a result of discounts we may authorize at the time of
sale by the distributors.

RESEARCH AND DEVELOPMENT

The success of our standard analog IC strategy will depend substantially on our
ability to define, design, develop and introduce on a timely basis new products
offering design, technology, cost, availability, quality, reliability,
performance or other features that meet or exceed those of our competitors.

Research and development in analog integrated circuits is characterized
primarily by new process development, circuit design and product and test
engineering contributions that enable new device functionality or improved
performance. Our research and development efforts are also directed at improving
and reducing the cost of existing manufacturing process technologies and
products. With respect to more established products, our research and
development efforts also include product redesign, reduction of chip size and
improvement in the yield of good die per wafer to reduce device costs.

As of March 28, 1999, we had 37 people engaged in research and development. Our
research and development efforts are dependent upon attracting and retaining
qualified analog process, design, product engineering, test and applications
engineers, of which there is a limited supply. We also use independent
contractors for certain research and development projects.

In fiscal 1997, 1998 and 1999, we spent approximately $10.3 million, $9.0
million and $9.1 million, respectively, on research and development. We expect
to continue to invest substantial funds in research and development activities.

Our research and development programs are currently focused on the development
of new power management analog IC products and enhancing and expanding our
portfolio of CMOS and BiCMOS processes with the greatest amount of resources
concentrated in the area of IC product development.

During fiscal 1999 we introduced the following new products and processes to the
market:

Electroluminescent Lamp (EL) Drivers

Electroluminescent lamps are used to back light liquid crystal displays on
pagers, cell phones, personal organizers, watches, and clocks as well as to
provide illumination for a wide variety of industrial and consumer applications.
The EL driver IC must translate a low-voltage signal, typically from a battery
supply, and raise it up to the high-voltage level required to excite the
phosphor of the lamp. IMP EL drivers offer up to 70% lower power consumption and
60% smaller die sizes than some other vendor's devices.

IMP803 High-voltage (180v), low power electroluminescent (EL) lamp driver

IMP560 Generates a 120 volt peak-to-peak AC (alternating current) drive
signal at up to 45 percent lower power consumption than earlier
solutions.

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IMP525 Power-saving circuitry and operation down to 0.9 volts to extend the
useful operating life of battery-powered portable systems.

IMP528 Features a 220-volt peak-to-peak AC drive signal derived from DC or
battery sources as low as 2 volts.

Microprocessor Supervisors

Microprocessor supervisor ICs monitor power supplies to insure the system
microprocessor or embedded microcontroller is adequately powered or has been
restarted properly after a power failure or "brownout". Improper voltages cause
unreliable operation, stop the processor, or, even worse, allow the system
controller to issue improper commands. More complex devices also integrate
functions that monitor processor operation and issue system initialization
signals when system failures or "lock-ups" are detected. Some IMP supervisors
add thermal and short-circuit protection while offering up to 70 percent lower
operating power consumption than other vendor's devices.

IMP690A Supervisor with battery backup switch; reset threshold 4.5v to 4.75v

IMP692A Supervisor with battery backup switch; reset threshold 4.25v to 4.5v

IMP802L Supervisor with battery backup switch; accuracy to +/- 2%

IMP802M Supervisor with battery backup switch; accuracy to +/- 2%

IMP805L Supervisor with battery backup switch; active-high reset

IMP705 Low-power, supervisor with watchdog timer

IMP706 Low-power, supervisor with watchdog timer

IMP707 Low-power, supervisor with active-high and low reset

IMP708 Low-power, supervisor with active-high and low reset

IMP813L Low-power, supervisor with watchdog timer

IMP809 Three-pin microcontroller supervisor with active-low reset

IMP810 Three-pin microcontroller supervisor with active-high reset

IMP811 Four-pin microprocessor supervisor with manual reset

IMP812 Four-pin microprocessor supervisor with manual reset

Ultra2 SCSI Terminators

SCSI (Small Computer Systems Interface) is an intelligent interface standard
that controls the flow of data between the central processing unit of a personal
computer (PC) and its peripherals and extends server-style data transfer rates
to the PC arena. IMP developed the 5000 Series non-linear termination family
together with Linfinity Microelectronics. The Low Voltage Differential (LVD)
devices below were added in fiscal year 1999 to round out the SCSI terminator
family introduced in 1998.

IMP5241 LVD Multimode SCSI Terminator. Active-Low disconnect

IMP5242 LVD Multimode SCSI Terminator. Active-High disconnect

New CMOS & BiCMOS Analog Processes

IMP C0810 ____________ CMOS with high-resistance polysilicon for analog

IMP C1026 ____________ BiCMOS with Schottky diode & low TC P-type poly resistors

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IMP C1027 ____________ BiCMOS with low temperature-coefficient P-type poly
resistors

IMP C1028 ____________ BiCMOS with 20 volt P-channel transistors

IMP C1029 ____________ BiCMOS Schottky diode & high-R P-type poly

IMP C1229 ____________ CMOS high-voltage with double metal, double-poly

IMP C1230 ____________ BiCMOS with low TCR P-type poly for analog

IMP C1231 ____________ BiCMOS high-voltage with double metal, double poly

There can be no assurance that we will be successful in selling the new products
introduced so far, or that we will be able to successfully complete the products
currently in development. There can also be no assurance that we will be able to
identify additional new product opportunities successfully and develop and bring
to market such new products or that we will be able to respond effectively to
new technological changes or new product announcements by others. Moreover, the
end markets for our new products, such as the computer, communications and
control markets, are subject to rapid technological change and there can be no
assurance that as such markets change our product offerings will remain current
and suitable for them.

COMPETITION

We currently compete in the markets for analog silicon foundry services,
application specific mass-storage and data communications devices, and standard
analog power-management integrated circuit products. All these sectors are
highly competitive and subject to rapid technological change.

Currently, our principal competitors in the analog silicon foundry services
market include American Microsystems Inc., a division of Japan Energy
Corporation; Austrian Micro Systems; California Micro Devices; GMT
Microelectronics; Orbit Semiconductor, a division of the DII Group; and Tower
Semiconductor, as well as internal manufacturing facilities within our
customers. To a lesser degree we compete with large Asian foundries, such as
Chartered Semiconductor of Singapore, Taiwan Semiconductor Manufacturing
Company, and UMC Group of Taiwan.

The principal competitive factors in the silicon foundry market include service,
price, manufacturing capability, quality, and manufacturing cycle time. We
believe that our competitive strengths arise from our experience in
manufacturing specialized CMOS and BiCMOS analog and high-voltage process
technologies. There can be no assurance that we will be able to compete
successfully in the future.

The market for analog ICs is also intensely competitive with the competitive
pressures expected to increase. Significant competitive factors in the analog
market for standard products include product features, performance, price, the
timing of product introductions, the emergence of new computer and communication
standards, quality and customer support. With respect to application-specific
mass-storage products such as read channels, our principal competitor is Silicon
Systems, a division of Texas Instruments. With respect to application-specific
data communications devices such as SCSI termination devices, our principal
competitors are Dallas Semiconductor, Linfinity Microelectronics and Unitrode.
We plan to continue to supply our mass-storage and SCSI devices as long as a
viable market remains for them, however we are not currently developing any new
products based on these technologies. In the focus area of power management
products, because the markets are diverse and highly fragmented, we expect to
encounter different competitors on different products. Our principal competitors
are expected to include Linear Technology Corporation and Maxim Integrated
Products, Inc. Other competitors will likely include Analog Devices Inc., Dallas
Semiconductor, Linfinity Microelectronics, Micrel, Motorola, National
Semiconductor Corporation, Semtech, Sipex, Supertex, Texas Instruments, Unitrode
Corporation and certain European and Asian manufacturers.

In addition, we have licensed technology from and to parties, which have, in
certain cases, the right to use the technology to develop products competitive
with ours.

Our principal competitors and many of our potential competitors have
substantially greater technical, manufacturing, financial and marketing
resources than we have. We also face competition from smaller highly focused
companies, although not all such companies have internal wafer manufacturing
capability.

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Due to the increasing demands for analog circuits, we expect intensified
competition from existing suppliers and from the entry of new competitors.
Increased competition could adversely affect our financial condition or results
of operations.

There can be no assurance that we will be able to compete successfully in the
future, or that competitive pressure will not adversely affect us. Competitive
pressures could reduce market acceptance of our products and result in price
reductions and increases in expenses that could have an adverse affect on our
business, financial condition or results of operations.

PATENTS AND LICENSES

We have been granted 22 United States patents, one of which is jointly owned,
and we have filed for additional United States and foreign patent applications
on our inventions. The issued patents expire at various times from 2009 to 2014.
Although patents, patent protection and patent applications may have value, we
believe that other factors such as managerial and technological experience and
creative abilities of our personnel are of more significance in our industry.

In the past we have entered into cross-licensing agreements under which we have
acquired certain products and rights to the technologies of our partners and our
customers in exchange for the transfer of similar rights to our partners and our
customers for royalties, up-front fees or for other consideration. We expect to
enter into additional arrangements in the future.

Because of technological developments in the semiconductor industry, it is
possible that certain of our designs or processes may involve infringement of
existing patents or patents that have not yet been issued. From time to time
other companies and individuals have advised us that some of our products and
technologies may violate their patent rights, mask work rights, copyrights or
trademark rights. We have signed agreements with two such parties to allow us to
use their patents in exchange for royalty payments.

We have been contacted by the Lemelson Medical Foundation and we are currently
in discussion with the Lemelson Medical Foundation to resolve claims it has made
against us regarding alleged patent violations. This foundation has filed patent
violation legal actions against 88 semiconductor companies although the Company
is currently not one of the defendants in this action. We believe that, based on
statements by the Lemelson Medical Foundation, licenses or rights under Lemelson
patents, or any future patents, can be negotiated. However, we cannot be sure
that we can negotiate rates which will allow us to compete economically in the
marketplace.

We have acquired software and licenses to software from a number of software
companies, primarily for computer-aided design of our integrated circuits.

We attempt to protect our trade secrets and other proprietary information
through agreements with our customers and suppliers, through proprietary
information agreements with our employees and through other security measures.
Although we plan to protect our rights vigorously, there can be no assurance
that our measures will be successful.

MANUFACTURING

During fiscal 1999, all of the wafers we shipped directly or that were assembled
as finished products were manufactured in our San Jose, California facility.
This wafer manufacturing facility has the capacity to produce up to 15,000 five
inch wafers per month. The maximum practical number of wafers may be less than
this at any specific time due to the number of masking levels or other critical
process steps demanded by the current product mix. We believe that our in-house
wafer fabrication facility provides us with the ability to produce competitive
products because it allows close collaboration between our design and process
engineers, provides control over wafer supply, offers the potential for lower
manufacturing costs, and accelerates product introduction schedules.

During periods of low demand, the high fixed costs associated with our wafer
fabrication factory have had a serious impact on our ability to run a profitable
operation. For example, during the last three-quarters of fiscal 1997, all of
fiscal 1998 and the first half of fiscal 1999 our operating results were
negatively impacted due to low utilization of the factory. During some of this
time, we operated the factory at less than 50% of capacity.

Because of the unique nature of our manufacturing processes, it would be
difficult for us to arrange for independent suppliers to make wafers for us in a
short period of time. If a fire, natural disaster or any other event prevents us
from operating the factory for more than a few days, our revenue and financial
condition could be severely impacted. We believe that we have sufficient
manufacturing capacity to meet our near term plans although prolonged problems
with any specific piece of equipment could cause us to miss our goals. At
periods of peak demand in the past we have subcontracted some production to
outside foundries. If this situation arises again there are a number of
foundries which, given appropriate lead times, could meet some of our needs.
However, we cannot guarantee that we will be able to meet our customers required
delivery schedules.

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<PAGE> 11

We use subcontractors for a number of very specialized processing steps where
our volume is not sufficient to justify purchasing and operating the equipment
ourselves. One example is growing special epitaxial layers of silicon on our
wafers. We purchase most of our raw materials, including silicon wafers, on a
purchase order basis from a limited number of vendors. If our subcontractors or
our vendors are unable to provide these services or materials in the future our
relationships with our customers could be seriously affected and our revenues
and financial condition could be severely damaged.

On those products where we provide finished devices to our customers, after the
wafers are fabricated and tested at our San Jose, California facility, they are
sent to contract assembly houses to be packaged. After the wafers are scribed
and the individual die are packaged, the units are returned to us for final
testing. We then ship the completed devices to distributors and customers
worldwide. In the future we may perform testing and shipping functions at
external vendors.

Our products are packaged by a limited number of third party subcontractors in
Indonesia and other Asian countries. Some of the raw materials included in these
operations are obtained from sole source suppliers. Although we seek to reduce
our dependence on sole and limited source suppliers both for assembly services
and for materials, disruption or financial, operational, production or quality
assurance difficulties at any of these sources could occur and cause us to have
severe delivery problems.

EMPLOYEES

As of March 28, 1999, IMP employed approximately 237 people, including
approximately 108 in manufacturing; 40 in manufacturing support; 37 in research
and development, including process development, circuit design, product and test
engineering; 14 in sales and marketing; and 38 in administrative, financial and
management positions.

None of our employees are represented by collective bargaining agreements, nor
have we ever experienced any work stoppage through employee initiated actions.
We believe that our employee relations are good.

Our ability to attract and retain qualified personnel is essential to our future
success. The number of skilled analog designers and other specialized engineers
qualified to meet the demands of IMP's business is particularly limited, and
competition for these people is intense. Our growth also requires the hiring or
training of middle and upper-level managers. If we are unable to hire, retain,
and motivate enough qualified technical and management people, our operations
and financial results will be adversely affected.

ENVIRONMENTAL AND SAFETY REGULATION

Federal, state, and local regulations impose a variety of safety and
environmental controls on how we store, handle, discharge and dispose of many of
the chemicals and gases that we use to manufacture our products. Our facilities
have been designed to comply with these regulations, and we believe that our
operations are managed so as to meet the requirements as closely as possible.
While we have not had any accidents or other incidents serious enough to affect
our business results, if we fail to correctly store, use and dispose of
regulated materials we could be liable for fines and other penalties.

Increasing public attention has been focused on the safety and environmental
impacts of electronic manufacturing operations. While we have not experienced
any materially adverse effects on our business to date from such regulations,
there can be no assurance that changes or new interpretations of such
regulations will not impose costly equipment, facility or other requirements.

ITEM 2. PROPERTIES

The Company's primary manufacturing activities and process technology research
and development activities are located in a 59,000 square foot building in San
Jose, California leased under agreements expiring in fiscal 2000. The Company
has the right to extend these leases for two additional six-year periods. The
Company's general administrative activities, sales and marketing and certain
engineering activities are located in a nearby 22,000 square foot building
leased under an agreement expiring in fiscal 2000. The Company's internal
circuit design research and development activities are performed in a 5,500
square foot office located in Pleasanton, California under an agreement expiring
in fiscal 2003.

ITEM 3. LEGAL PROCEEDINGS

The Company is not currently a party to any material litigation. The Company is
currently a plaintiff in a legal proceeding against a customer, JTS Corporation,
for breach of contract. The Company claims that the defendant refused to accept
delivery of product produced under a valid purchase orders and refused to accept
financial responsibility for related work in process inventory.

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<PAGE> 12

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

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

EXECUTIVE OFFICERS OF THE COMPANY

The current executive officers of the Company as of June 1, 1999 with their
respective ages and positions were:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James Phillips Ferguson............. 68 President, Chief Executive Officer and Director
George Rassam....................... 52 Vice President Finance, Administration, Chief Financial
Officer and Secretary
Barry Wiley......................... 62 Vice President, Sales and Application Engineering
Tarsaim Batra....................... 64 Vice President, Manufacturing
Moiz B. Khambaty.................... 65 Vice President, Technology
Jerry DaBell........................ 53 Senior Vice President, Design Engineering
Ron Laugesen........................ 60 Vice President, Product Engineering
</TABLE>

Mr. Ferguson joined the Company in June 1997 as President, Chief Executive
Officer and a member of the Board of Directors. He served as a consultant to the
Company from December 1996 to June 1997. From 1994 to 1996, Mr. Ferguson was CEO
of QuickLogic Corporation. From 1967 to June 1997 he was a principal in Ferguson
Associates, a firm providing domestic and international consulting services.
Recent consulting assignments included Mr. Ferguson assuming chief executive
officer or chief operating officer responsibilities with Plus Logic and Paradigm
Technologies. Mr. Ferguson's prior employment included positions at Texas
Instruments and Fairchild Semiconductor and he was founder, President and Chief
Executive Officer of General Microelectronics.

Mr. Rassam joined the Company in June 1983 as Controller. In November 1996, he
was named Chief Financial Officer and Secretary. Prior to joining IMP, Mr.
Rassam was Operations Controller at Zilog Corporation, a semiconductor
manufacturer, from 1978 to 1983. From 1973 to 1978, Mr. Rassam was employed as
Manager, Cost Accounting by AMI, Inc., a semiconductor manufacturer. Mr. Rassam
resigned his position with the Company effective June 30, 1999.

Mr. Wiley joined the Company in 1997 as Vice President of Sales and Marketing.
Prior to joining IMP, Inc. Mr. Wiley held the position of Vice President of
Sales and Marketing at Cherry Semiconductor, a semiconductor manufacturer. From
1980 to 1985 Mr. Wiley held various management positions with Unitrode
Corporation, a semiconductor manufacturer.

Dr. Batra joined the Company in November 1994 as a yield improvement consultant.
In May 1995, he was promoted to Manager, Operations Research. In November 1996,
he was promoted to Director of Manufacturing and in February 1997 he was
promoted to Vice President, Manufacturing. Prior to joining IMP, Dr. Batra's
thirty year career in the semiconductor industry encompassed various
manufacturing, engineering and research positions. He was General Manager,
Semiconductor Division of California Micro Devices from 1989 to 1994.

Dr. Khambaty joined the Company in November 1981 as Manager of Technology
Development. In October 1983 he was promoted to Director, Technology Development
and in April 1984 to Vice President, Technology. From 1978 to 1981 Dr. Khambaty
was a Sr. Staff Scientist with Gould Electronics (AMI, Inc.). From 1956 to 1978
he was employed in various engineering and managerial positions with Siemens,
Fairchild, Honeywell and the Atomic Energy Establishment of the Government of
India.

Mr. DaBell joined the Company in May 1988 as Vice President of Design
Technology. In July 1988 he was promoted to Vice President of Design
Engineering. In March 1993 he was assigned to the position of Vice President,
Business Development and in May 1997 was promoted to Senior Vice President,
Product Development. From 1973 to 1988 Mr. DaBell was employed in various design
engineering and management positions with Gould Electronics (AMI, Inc.). From
1971 to 1973 he served as an instrumentation engineer with the General Electric
Company.

Mr. Laugesen joined the Company in 1989 as ISDN Design Manager. In May 1997, he
was named as Vice President of Product and Test Engineering. Prior to joining
IMP, Mr. Laugesen was Design and Product Engineer Manager at IDT Corporation
from 1986 to 1989. From 1977 to 1986 Mr. Laugesen was employed as Telecomm
Design Manager at AMD.

Officers are elected by and serve at the discretion of the Board of Directors.

12
<PAGE> 13

PART II

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

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company was traded on the Nasdaq National Market under
the symbol "IMPX". As of April 7, 1999, the Common Stock of the Company began
trading on the Nasdaq Smallcap Market. The following tables set forth the high
and the low last reported sales price for the Common Stock as reported by the
Nasdaq National Market. All share price figures reflect the 1-for-10 reverse
split that occurred during the fiscal year.

<TABLE>
<CAPTION>
FISCAL YEAR END FISCAL YEAR END
MARCH 28, 1999 MARCH 29, 1998
------------------------- -------------------------
HIGH LOW HIGH LOW
------- ------ ------- -------
<S> <C> <C> <C> <C>
First Quarter $ 15.31 $ 9.06 $ 21.88 $ 15.94
Second Quarter $ 9.37 $ 3.12 $ 19.06 $ 13.75
Third Quarter $ 6.56 $ 1.88 $ 17.50 $ 6.25
Fourth Quarter $ 7.81 $ 3.12 $ 15.31 $ 6.88
</TABLE>

The Company intends to retain any future earnings for the use in its business
and, accordingly, does not anticipate paying any cash dividends on its common
stock in the foreseeable future.

As of June 23, 1999, there were approximately 885 shareholders of record (not
including beneficial holders of stock held in street name) of the Company's
Common Stock, which closed at $2.88 per share on the Nasdaq Smallcap Market as
of that date.

On February 8, 1999, the Company completed the sale of 527,000 shares of its
Common Stock at a purchase price of $4.50 per share for total consideration of
$2,371,500. These securities were privately sold to accredited investors, in
reliance upon Section 4(2) of the Securities Act of 1933, as amended and
Regulation D promulgated thereunder. The accredited investors represented their
intention to acquire the securities for investment only and not with a view
towards, or for sale in connection with, any distribution thereof. Appropriate
legends were affixed to the share certificates issued in this transaction. The
accredited investors also represented that they were given the opportunity to
ask questions of and receive answers from the Company relating to their
investment. The Company paid a fee of $119,000 to the placement agent and issued
the placement agent warrants to purchase 52,700 shares of Common Stock at an
exercise price of $4.50 per share. Such warrants were also issued in reliance
upon Section 4(2) of the Securities Act and Regulation D.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
-------------------------------------------------------------------
MARCH 28, MARCH 29, MARCH 30, MARCH 31, MARCH 26,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues $ 33,391 $ 40,420 $ 64,891 $ 76,827 $ 59,750
Net income (loss)(2) (7,919) (3,799) (12,367) 5,469 790
Basic net income (loss)
per share(3) (2.73) (1.35) (4.39) 1.96 .30
Diluted net income
(loss) per share(3) (2.73) (1.35) (4.39) 1.96 .30
Balance Sheet Data:
Total assets 25,961 31,949 37,271 50,733 41,301
Long term obligations excluding current portion 2,942 6,173 9,074 8,979 4,799
Stockholders' equity $ 4,985 $ 10,598 $ 14,301 $ 25,445 $ 18,463
</TABLE>

(1) The Company's fiscal year ends on the Sunday nearest March 31. Fiscal
1999, 1998, 1997 and 1995 each consisted of 52 weeks; and fiscal 1996
consisted of 53 weeks.

(2) In fiscal 1997, the Company recorded $1,862,000 in restructuring
charges.

(3) See Note 1 of Notes to Financial Statements for an explanation of the
computation of net income (loss) per share.

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

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<PAGE> 14

Except for the historical information contained herein, the matters discussed
below are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below in this
section under the sub-heading "Factors Affecting Future Results."

RESULTS OF OPERATIONS

Net revenues in fiscal 1999 declined 17% to $33.4 million, from $40.4 million in
fiscal 1998. Net revenues in fiscal 1998 decreased 38% to $40.4 million from
$64.9 million in fiscal 1997. The decline in net revenues in fiscal 1999 was
primarily due to a decrease in sales to one large customer and a general
decrease in worldwide demand for semiconductor products. The decline in net
revenues from fiscal 1997 to fiscal 1998 was primarily due to lower than
expected orders from one customer after the Company had structured its business
to concentrate on this customer and a general decline in foundry business due to
excess supply relative to demand experienced from several customers. Foundry
product sales accounted for 83% of net revenues in fiscal 1999, 67% in fiscal
1998, and 58% in fiscal 1997. The Company is attempting to shift from foundry
product sales to sales of the Company's standard products. The decrease in net
revenues of standard products from fiscal 1997 to fiscal 1998 and from fiscal
1998 to fiscal 1999 is the result of a reduction in revenue from the Company's
largest customer during this period.

Cost of revenues as a percentage of net revenues was 78% in fiscal 1999 compared
to 72% in fiscal 1998 and 83% in fiscal 1997. The increase in cost of revenues
as a percentage of net revenues in fiscal 1999 compared to fiscal 1998 was
principally the result of lower factory utilization and product pricing. The
decrease in cost of revenues as a percentage of net revenues in fiscal 1998
compared to fiscal 1997 was due to charges incurred in fiscal 1997 related to
the exiting of the gate array business.

Research and development expense in fiscal 1999 was $9.1 million, compared to
$9.0 million in fiscal 1998, and $10.3 million in fiscal 1997. The decrease from
fiscal 1997 to fiscal 1998 was due to the discontinuance of development on
secondary storage products, as well as EPAC TM products.

Selling, general and administrative expense in fiscal 1999 was $5.2 million
compared to $5.1 million in fiscal 1998, and $10.0 million in fiscal 1997. The
decline in selling, general and administrative expense in fiscal 1998, as
compared to fiscal 1997, was primarily due to accounts receivable write-offs as
compared to fiscal 1997, and lower spending due to reduced sales activity.

During the second quarter of fiscal 1997, the Company's operating results were
affected by a decline in product demand and a downturn in the market. In
response to the downturn, the Company made the decision to implement a
restructuring plan which involved discontinuing the gate array product line,
downsizing the workforce and closing a recently acquired new product design
center. The Company incurred a restructuring charge of approximately $1.9
million during the second quarter of fiscal 1997. The charge comprised:
termination costs of $998,000 associated with reductions in the workforce; a
design center equipment write-off of $587,000 due to management's decision to
close one of the Company's design center facilities; and $277,000 associated
with wafer cancellations costs and the write-off of gate array capital equipment
no longer usable.

Net interest and other expenses in fiscal 1999 were $1.0 million compared to
$0.9 million in fiscal 1998 and $1.2 million in fiscal 1997. The increase in
fiscal 1999 was primarily attributable to lower interest income from decreased
cash balances and higher expense due to higher average borrowing and higher
interest rates during the fiscal year. The decrease in fiscal 1998 compared to
fiscal 1997 was primarily attributable to lower interest rates on capitalized
leases in fiscal 1998.

14
<PAGE> 15

The Company had a net loss of $7.9 million in fiscal 1999, or $2.73 per share,
compared to a loss of $3.8 million in fiscal 1998 or $1.35 per share, and a loss
of $12.4 million in fiscal 1997, or $4.39 per share. The fiscal 1999 and 1998
net losses were primarily attributable to low factory utilization.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased to $1.6 million at March 28, 1999 from $11.8
million at March 29, 1998, and $13.3 million at March 30, 1997. The decrease
from fiscal 1998 to fiscal 1999 was primarily due to continued operating losses,
higher inventories and higher accounts receivable. The decrease from fiscal 1997
to fiscal 1998 was primarily due to investment in certain product technology
licensing rights, investment in capital equipment and operating losses.

Cash and cash equivalents used by operating activities in fiscal 1999 were $8.3
million, compared to cash and cash equivalents provided by operating activities
in fiscal 1998 of $4.8 million, and $5.8 million in fiscal 1997. The fiscal 1998
to fiscal 1999 decrease in cash and cash equivalents was due to continuing
operating losses, higher inventory levels and higher accounts receivable. The
fiscal 1997 to fiscal 1998 decrease in cash and cash equivalents was due to
continuing operating losses offset in part by spending control measures.

Cash and cash equivalents used for investing activities was $1.8 million in
fiscal 1999, approximately $700,000 in fiscal 1998, and $1.9 million in fiscal
1997, reflecting cash invested in property and equipment acquisitions.

Cash and cash equivalents used in financing activities were approximately
$37,000 in fiscal 1999. The Company received proceeds of $4.0 million from a
credit facility, repaid $3.2 million of equipment notes payable, and made
principal payments of $3.1 million on capital lease obligations. In addition,
the Company had proceeds from the sale of stock of $2.3 million. In fiscal 1998,
the Company made payments on capital lease obligations and notes payable in the
amount of $5.7 million. In fiscal 1997 the Company paid $8.4 million on notes
and capital lease obligations offset by $7.6 million in equipment financing and
$1.2 million of proceeds from stock option exercises.

Subsequent to the fiscal year-end, an agreement with The CIT Group was signed
and funded for a $9.5 million financing facility. Included in the $9.5 million
is a facility for up to $2.0 million in secured term loans and a facility which
allows the company to borrow up to $7.5 million debt financing based on accounts
receivable and inventory balances at 1.5% over prime. On June 1, 1999 the debt
balance was $4.9 million.

During the second quarter of fiscal year 2000, the Company was unable to meets
its obligations under its equipment notes payable and certain of its capital
leases. These instances of non-payment put the Company in default of these
agreements and in default of the revolving credit facility entered into in April
1999 due to a cross default clause in the revolving credit facility agreement.
The Company has renegotiated the payment terms under the equipment notes payable
amounting to $1,853,000 and capital lease obligations with an aggregate balance
of $3,999,000 as at March 28, 1999. However, the Company has been unable to
renegotiate the payment terms under one capital lease obligation amounting to
$1,185,000 as at March 28, 1999. As of December 26, 1999, the lessor has not
required acceleration of such obligation and management intends to continue to
pursue renegotiated payment terms. As such, as of December 26, 1999, the Company
remains in default of the revolving credit facility entered into subsequent to
March 28, 1999 and capital lease obligations with an aggregate total balance of
$1,529,000 as at March 28, 1999 due to cross default clauses in these
agreements. As a result, the Company may not be able to continue to draw on
unused amounts under the revolving credit facility which could significantly and
adversely impact the Company ability to continue as a going concern.

As evidenced by the instances of non-payment of certain obligations discussed
previously, the Company has minimal financial resources and operating needs are
funded principally from the collection of accounts receivable. Should the cash
flow from accounts receivable be lessened or interrupted by slow collections or
by a decrease in revenue generation, the Company could very quickly find itself
again unable to meet its obligations. In addition, our cash balance has
decreased over each of the last several quarters. As of March 28, 1999 we had
cash and cash equivalents of approximately $1.6 million. If we continue to
report operating losses and negative cash flow we will need to obtain additional
funding to remain in operation. There can be no assurance that such funding will
be available to us at reasonable rates, if at all. Management believes that
existing sources of liquidity, anticipated cash flow from operations and
borrowings under the Company's credit facilities will be adequate to satisfy its
anticipated working capital and capital equipment requirements through March 26,
2000.

If the Company is unable to successfully complete its remaining negotiations
with its creditors to reschedule the payment terms on its capital lease
obligation, or if the creditors of the remaining obligations in default under
cross default clauses exercise their rights to accelerate the payment terms,
this could significantly and adversely impact the Company's ability to continue
as a going concern.

15
<PAGE> 16

In October 1999, the Company entered into a stock purchase agreement (the
"Agreement") under which Teamasia Semiconductors (India) Ltd., ("Teamasia"), a
corporation headquartered in India involved in the manufacturing and sale of
discrete semiconductor devices purchased an aggregate of 16.7% of the Company's
common stock outstanding for consideration of $2,050,000. The transaction closed
during the quarter ending December 26, 1999. The sale of all of the shares and
therefore the receipt of all of the $2,050,000 was subject to the Company's
compliance with certain terms and conditions. The Company met such terms and
conditions and has received all of the $2,050,000. The agreement places certain
restrictions on the use of the funds received by the Company for the sale of
stock under the agreement. Under the agreement, Teamasia is also obligated to
place orders with the Company for wafer fabrication.

On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia will make an additional equity investment in the Company. After the
closing of the Phase Two Stock Purchase Agreement, Teamasia will have purchased
an aggregate total of approximately 5.5 million shares, bringing their total
equity ownership in the Company to approximately 61.9%. The Phase Two Stock
Purchase Agreement will be subject to approval by the shareholders of the
Company at a meeting which will also be the Company's annual meeting and will be
held during the first quarter of calendar 2000. If approved by the Company's
shareholders, the transaction contemplated by the Phase Two Stock Purchase
Agreement is expected to close shortly thereafter. During the period between
December 15, 1999 and the date of approval of the Phase Two Stock Purchase
Agreement, Teamasia is required to use reasonable efforts to provide the Company
with additional financing up to the amount of the purchase price upon
commercially reasonable terms, if the Company so requests. In order for the
Phase Two Stock Purchase Agreement to be approved, the Company must receive
approval of the Phase Two Stock Purchase Agreement from its shareholders and all
other required governmental approvals and must make certain amendments to its
Articles of Incorporation. Such loan, if made, shall be repaid at the closing of
the Phase Two Stock Purchase Agreement. During the period between the approval
date and the date of the closing of the Phase Two Stock Purchase Agreement, if
the Company so requests, Teamasia is required to provide the Company with
additional financing up to the amount of the purchase price upon commercially
reasonable terms. Such amount shall be repaid at the closing of the Phase Two
Stock Purchase Agreement.

If the shareholders of the Company do not approve this transaction with Teamasia
or the transaction does not close for some other reason, the Company's liquidity
could be adversely affected.

FACTORS AFFECTING FUTURE RESULTS

The Company's business, financial condition and results of operations have been,
and in the future may be, affected by a variety of factors, including those set
forth below and elsewhere in this report.

There May be a Near-term Need for A Cash Infusion into the Company

The Company has minimal financial resources and operating needs are funded
principally from the collection of accounts receivable. Should the cash flow
from accounts receivable be lessened or interrupted by slow collections or by a
decrease in revenue generation, the Company could very quickly find itself again
unable to meet its obligations. Should such a cash flow shortfall occur, the
potential sources for additional capital investment are neither in place nor
identified.

We May Continue to Report Losses and Negative Cash Flow in the Future

Although we experienced a growth in revenues in the last two quarters of fiscal
1999, we have reported operating losses and negative cash flow since the second
quarter of fiscal 1997. Unless this trend of increasing revenue continues, there
is substantial risk that we will continue to report losses and negative cash
flow in the future. Our cash balance has decreased over each of the last several
quarters. As of March 28, 1999 we had cash and cash equivalents of approximately
$1.6 million. If we do continue to report operating losses and negative cash
flow we will need to obtain additional funding to remain in operation. There can
be no assurance that such funding will be available to us at reasonable rates,
if at all.

Our Common Stock Price May Be Volatile Because Our Stock Trades on the Nasdaq
Smallcap Market

On December 11, 1998, a hearing was held before a Panel authorized by the
National Association of Securities Dealers, Inc. Board of Governors to determine
whether we would be allowed to maintain the listing of our Common Stock on the
Nasdaq National Market. The hearing addressed, among other things, our
compliance with the minimum $1 per share price requirement and the $4 million
net tangible assets requirement for stock traded on Nasdaq. The Panel concluded
that we could retain our listing on the Nasdaq National Market if we complied
with the following conditions: (i) effect a one-for-ten reverse split of our
Common Stock so that our closing bid price meets or exceeds the $1.00 per share
for a minimum of ten consecutive trading days; (ii) file with the Securities and
Exchange Commission (SEC) on or before February 16, 1999, a December 31, 1998
balance sheet, which, with pro forma

16
<PAGE> 17

adjustments for significant events and transactions after such date, shows net
tangible assets of at least $4.0 million; and (iii) file with the SEC on or
before March 31, 1999, a balance sheet as of a date 45 days prior thereto,
which, with appropriate pro forma adjustments, shows net tangible assets of at
least $6.5 million.

Effective January 13, 1999, we effected a one-for-ten reverse stock split, thus
addressing the minimum trading price per share requirement. On February 16, 1999
we filed a proforma balance sheet dated as of December 31, 1998 incorporating
the effect of a February 1999 Private Placement showing net tangible assets of
$6.1 million. We did not satisfy the final criterion of net tangible assets of
$6.5 million by March 31, 1999. As a result, on April 7, 1999 our common stock
was moved from the Nasdaq National Market to the Nasdaq SmallCap Market where it
continues to trade under the symbol "IMPX." On November 19, 1999, Nasdaq
informed the Company that, based on the net tangible assets of the Company as of
the end of the quarter ended September, 1999, the Company no longer met the
$2,000,000 net tangible assets requirement for continued listing on the Nasdaq
SmallCap Market, and requested a response from the Company. The Company provided
Nasdaq with financial statements indicating that as of the end of November, 1999
the Company's net tangible assets had increased to $2,990,000. Management
believes that the Company is now in compliance with Nasdaq's net tangible assets
requirement for continued listing on the Nasdaq SmallCap Market, and management
has no reason to believe that the Company would be unable to meet any of the
criteria for continued listing on the Nasdaq SmallCap Market into the reasonably
foreseeable future. Because of the low volume of trading on the Nasdaq SmallCap
Market, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, our securities. In addition, if
our common stock trading price remains below $5.00 per share, trading in our
common stock could also be subject to the requirements of certain rules
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a penny stock (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). The additional burdens imposed upon broker-dealers by such
requirements could discourage broker-dealers from trading in our common stock,
which could severely limit the market liquidity of our common stock and the
ability of investors to trade our common stock.

In addition, our market capitalization might decrease and stockholder value
might decrease as a result of the reverse stock split. The reverse split
increased the number of odd-lot holders of our common stock. Transaction costs
involving odd-lot amounts of common stock are generally higher on a per-share
basis than transaction costs involving even-lot amounts of common stock. Thus,
the reverse split might have the effect of increasing the transaction costs of
certain of our stockholders.

Our Success Depends on Operating Our Foundry at High Capacity.

In the near term our success depends on our ability to attract additional orders
from new and existing customers for our analog and high-voltage wafer
fabrication services. In the past, during periods of low demand, high fixed
wafer fabrication costs have had a material adverse effect on our results of
operations. For example, during the last three quarters of fiscal 1997, all of
fiscal 1998 and the first half of fiscal 1999 our operating results were
materially adversely affected by the low utilization of the Company's
manufacturing facility.

Our Success Depends on Our Development and Marketing of New Analog Products.

In the long term, our success depends on our ability to develop new analog
integrated circuit products for existing and new applications, to introduce such
products in a timely manner, and to gain customer acceptance for our products.
The development of new analog integrated circuits is highly complex and from
time to time we have experienced delays in developing and introducing new
products. Successful product development and introduction depends on a number of
factors including proper new product definition, completion of design and
testing of new products on time, achievement of acceptable manufacturing yields
and market acceptance of our and our customers' products. Moreover, successful
product design and development depends on our ability to attract, retain and
motivate qualified analog design engineers, of which there is a limited number.
There can be no assurance that we will be able to meet these challenges or
adjust to changing market conditions as quickly and cost-effectively as
necessary to compete successfully.

Due to the complexity and variety of analog circuits, the limited number of
analog circuit designers and the limited effectiveness of computer-aided design
systems in the design of analog circuits, we cannot be certain that we will be
able to continue to successfully develop and introduce new products on a timely
basis. We seek to design alternate source products that have already achieved
market acceptance from other vendors, as well as new proprietary IMP products.
However, we cannot be sure that any products we introduce will be accepted by
customers or that any product initially accepted by our customers will result in
production orders. If we fail to continue to develop, introduce and sell new
products successfully, we could experience material and adverse affects to our
long-term business and operating results.

Our Success Will be Dependent Upon Our Ability to Fabricate Higher-Margin
Products.

17
<PAGE> 18

The ability of the Company to transition from the fabrication of lower-margin
products to higher-margin products, including both those developed by the
Company and those for which it serves as a third-party foundry, is very
important for the Company's future results of operations. Rapidly changing
customer demands may result in the obsolescence of existing Company inventories.
There can be no assurances that the Company will be successful in its efforts to
keep pace with changing customer demands. In this regard, the ability of the
Company to develop higher-margin products will be materially and adversely
affected if it is unable to retain its engineering personnel due to the
Company's current business climate.

We May Not Be Able to Compete Successfully Against Current and Future
Competitors.

Many of our competitors have substantially greater technical, manufacturing,
financial and marketing resources than we do. Our international sales are
primarily denominated in U.S. currency. Consequently, changes in exchange rates
that strengthen the U.S. dollar could increase the price in local currencies of
our products in foreign markets and make our products relatively more expensive
than our competitor's products that are denominated in local currency. Due to
the current excess of supply over demand for semiconductors of all types,
including both foundry services and analog integrated circuits, we expect
continued strong competition from existing suppliers and the entry of new
competitors. Such competitive pressures could reduce the market acceptance of
our products and result in market price reductions and increases in expenses
that could adversely affect our business, financial condition or results of
operations.

If Protection of Our Trademarks and Proprietary Rights is Inadequate, Our
Business Will Be Materially Harmed.

Although we are not currently a party to any material litigation relating to
patents and other intellectual property rights, because of technological
developments in the semiconductor industry, it is possible that certain of our
designs or processes may involve infringement of existing patents. We also
cannot be sure that any of our patents will not be invalidated, circumvented or
challenged, that the rights granted thereunder will provide competitive
advantages to us or that any of our pending or future patent applications will
be issued. We have from time to time received, and may in the future receive,
communications from third parties asserting patents, maskwork rights, or
copyrights on certain of our products and technologies. The Company has been
contacted by the Lemelson Medical Foundation. This foundation has filed patent
violation legal actions against 88 semiconductor companies. The Company is
currently not one of the defendants in this action but might be added at a later
date. Although we are not currently a party to any material litigation, if a
third party were to make a valid intellectual property claim and a license were
not available on commercially reasonable terms, our operating results could be
materially and adversely affected. Litigation, which could result in substantial
cost to us and diversion of our resources, may also be necessary to enforce our
patents or other intellectual property rights or to defend us against claimed
infringement of the rights of others.

If We Cannot Manufacture Products in Sufficient Quantity or Quality, Our
Business Will Be Materially Harmed.

The fabrication of integrated circuits is a highly complex and precise process.
Minute impurities, contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failure, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on each
wafer to be nonfunctional. The majority of our costs of manufacturing are
relatively fixed, and, consequently, the number of shippable die per wafer for a
given product is critical to our results of operations. If we do not achieve
acceptable manufacturing yields or if we experience product shipment delays, our
financial condition or results of operations would be materially and adversely
affected. We have from time to time in the past experienced lower than expected
production yields, which have delayed product shipments and adversely affected
gross margins. Moreover, we cannot be sure that we will be able to maintain
acceptable manufacturing yields in the future.

We manufacture all of our wafers at the one fabrication facility in San Jose.
Given the unique nature of our processes, it would be difficult to arrange for
independent manufacturing facilities to supply such wafers in a short period of
time. Any prolonged inability to utilize our manufacturing facility as a result
of fire, natural disaster or otherwise, would have a material adverse effect on
our financial condition or results of operations. Although we believe that we
have adequate capacity to support our near term plans, we have in the past
subcontracted the fabrication of a portion of our wafer production to outside
foundries, and may need to do so again. At the present time, there are several
wafer foundries that are capable of supplying certain of our needs. However, we
cannot be sure that we will always be able to find the necessary foundry
capacity.

Our Inability to Forecast Correctly Could Adversely Affect our Relationships
With Customers and Result in Larger Than Desired Inventory Levels

18
<PAGE> 19

Due to the relatively long manufacturing cycle for integrated circuits, we build
some of our inventory before we receive orders from our customers. Because of
inaccuracies inherent in forecasting the demand for such products, inventory
imbalances periodically occur that result in surplus amounts of some of our
products and shortages of others. Such shortages can adversely affect customer
relationships; surpluses can result in larger than desired inventory levels. Our
backlog consists of distributor and OEM customer orders required to be shipped
within six months following the order date. Customers may generally cancel or
reschedule orders to purchase products without significant penalty to the
customer. As a result, to reflect changes in their needs, customers frequently
revise the quantities of our products to be delivered and their delivery
schedules. Because backlog can be canceled or rescheduled without significant
penalty, we do not believe our backlog is a meaningful indicator of future
revenue. In addition, our backlog includes our orders from domestic distributors
as to which revenues are not recognized until the products are sold by the
distributors. Such products when sold may result in revenue lower than the
stated backlog amounts as a result of discounts that we authorize at the time of
sale by the distributors.

If Our Subcontractors are Unable to Perform in a Timely Manner or We are Unable
to Obtain Materials Necessary for Our Products, Our Business will be Materially
Harmed

We depend on a number of subcontractors for certain of our manufacturing
processes, such as epitaxial deposition services. If any of these subcontractors
fails to perform these processes on a timely basis, there could be manufacturing
delays, which could materially adversely affect our results of operations.
Currently, we purchase certain materials, including silicon wafers, on a
purchase order basis from a limited number of vendors. Any interruption or
termination of supply from any of these suppliers could have a material adverse
effect on our financial condition and results of operations. Our products are
packaged by a limited group of third party subcontractors in Indonesia and other
Asian countries. Certain of the raw materials included in such products are
obtained from sole source suppliers. Although we are trying to reduce our
dependence on our sole and limited source suppliers, disruption or termination
of any of these sources could occur and such disruptions could have a material
adverse effect on our financial condition or results of operations. As is common
in the industry, independent third party subcontractors in Asia currently
assemble all of our products. In the event that any of our subcontractors were
to experience financial, operational, production or quality assurance
difficulties resulting in a reduction or interruption in our supply, our
operating results would be adversely affected until alternate subcontractors, if
any, became available.

If We Fail to Comply with Environmental and Safety Regulations, Our Business
Will Be Materially Harmed.

Federal, state, and local regulations impose a variety of safety and
environmental controls on the storage, handling, discharge and disposal of
certain chemicals and gases used in semiconductor manufacturing. Our facilities
have been designed to comply with these regulations, and we believe that our
activities are conducted in material compliance with such regulations. We cannot
be sure, however, that interpretation and enforcement of current or future
environmental regulations will not impose costly requirements upon us. If we
fail to control adequately the storage, use and disposal of regulated
substances, we could incur future liabilities.

Increasing public attention has been focused on the safety and environmental
impacts of electronic manufacturing operations. While to date we have not
experienced any materially adverse effects on our business from such
regulations, we cannot be sure that changes or new interpretations of such
regulations will not impose costly equipment, facility or other requirements.

We May be Adversely Impacted if the Software, Computer Technology and Other
Systems We Use Are Not Year 2000 Compliant.

We are currently conducting a company-wide Year 2000 readiness program (the Y2K
program). The Y2K program is addressing the issue of computer programs and
embedded computer chips being able to distinguish between the year 1900 and the
year 2000. Any of such systems and equipment, including integrated circuits,
computers and manufacturing equipment, sold or used by us, our customers and our
suppliers, that recognize a date code field of "00" as the year 1900 rather than
the year 2000 could cause such systems or equipment to malfunction prior to or
in the year 2000 and lead to significant business delays, additional expenses
and disruptions in service or operations. As a result, the systems and equipment
of all business organizations containing integrated circuits, software or
computer hardware may need to be upgraded or replaced in order to resolve the
potential impact of this misinterpretation and the resulting errors or system
failures and to make such systems, equipment and software Year 2000 compliant.

Our Y2K program is divided into four sections - (1) IMP Manufactured Products,
(2) Internal Information Technology (IT) Systems, (3) Manufacturing Systems and
Equipment, and (4) Third Party Suppliers and Customers. The Y2K program is
divided into three phases (i) inventorying potential Year 2000 items, (ii)
assessing the Year 2000 compliance of items determined to be material to IMP;
and (iii) repairing or replacing such material items. We have substantially
completed the first two phases of work required to achieve Year 2000 compliance
requirements and in Phase Three we have modified, repaired or replaced the
majority of items in our inventory. We believe we will complete substantially
all of the issues that we have identified by the end of 1999. Some items that
cannot be tested appropriately or economically may require additional work after
that time.

19
<PAGE> 20

Through March 28, 1999, we have spent less than $200,000 in costs associated
with making our systems and equipment Year 2000 compliant. Based on the
preliminary results of the assessment and the modifications completed to date,
we believe that the total cost for year 2000 compliance will not exceed
$500,000. However, we can not be certain that any assessments and updates will
be completed on a timely basis, if at all, or within estimated budgets, or that
any updates or corrections that are performed will work as anticipated in the
year 2000.

Impact on Sales of IMP Manufactured Products. We design our products both
internally and through third party design providers. Both sources of product
design rely on licenses of third party technology for certain aspects of these
designs. We have done an internal assessment of the Year 2000 compliance of
certain of our stand-alone products, and we believe that these products are
designed so that they are not dependent on embedded software or hardware that
relies on a date code field and, therefore, such products are Year 2000
compliant. We also manufacture wafers containing designs implemented by our
customers. We have no knowledge of the Year 2000 compliance of such products. To
the extent that date information is necessary for the proper functioning of our
products and our customer's products, the products rely on date information from
other manufacturer's devices resident in the networks or systems in which they
operate. Thus, any Year 2000 problems within these third party products or
systems could cause such products not to work properly and disrupt other
companies' devices and systems. Any failure of these products to be Year 2000
compliant would result in the malfunctioning of such products or of the systems
in which such products operate. Any failure of our products, our customers'
designs or any third party products on which our products rely or any third
party products which incorporate certain of our licensed designs or technologies
to be Year 2000 compliant could result in a substantial decline in our revenues
or could result in substantial unexpected expenses associated with product
returns, warranty claims and claims for consequential damages and would
materially adversely affect our business, results of operations and financial
condition.

Internal Information Technology (IT) System. With respect to our internal IT
computer systems, we are now in Phase Three of the Y2K program. We have
evaluated and have replaced or have tested operating systems for the critical
computers used for our management information systems. Many applications
programs have been modified and we are working to modify the rest of our
applications programs by the end of 1999. We are also in Phase Three of our Y2K
program for our non-IT systems, such as personal computers. Where necessary we
plan to upgrade or replace critical non-compliant systems by the end of 1999.

Manufacturing Systems and Equipment. We rely on a number of embedded programs,
computer systems and applications to operate and monitor the design, control and
manufacturing aspects of our business. These include automated design software
and fabrication, test and physical plant equipment with embedded hardware and/or
software. With respect to such items, we are now in Phase Three of the Y2K
program.

We have evaluated and have replaced or have tested modifications for the
majority of such systems. We believe that we will complete the remaining
critical corrective actions, including testing, by the end of 1999.

Third Party Suppliers and Customers. We have contacted the majority of our key
suppliers and contract manufacturers to assess the possible effects of their
Year 2000 readiness on our business. Although many of these suppliers and
contract manufacturers have notified us that they have been addressing the
problem, some of them have not provided specific assurance regarding the Year
2000 compliance of their systems and software. Our reliance on suppliers and
contract manufacturers and, therefore, on the proper functioning of their
information systems and software, means that failure of such key suppliers and
contract manufacturers to address Year 2000 issues could have a material impact
on our operations and financial results.

In addition to our suppliers and contract manufacturers, we rely on a large
variety of business enterprises such as customers, creditors, financial
organizations, and domestic and international governmental entities for the
accurate exchange of data. Any disruption in the computer systems of any of
these third parties could materially and adversely affect us.

Summary. We have not yet completed detailed contingency plans for the Year 2000
issues, but, based on the results of the continuing assessment of our internal
systems and the audit of our third party suppliers and customers, we will
evaluate the need for and implement contingency plans.

Many of our products, systems, suppliers and customers address markets that are
vulnerable to technological issues involving the Year 2000, therefore
substantially all of our revenues may be at risk. Despite our efforts to address
the Year 2000 impact on our products, internal systems and business operations,
the Year 2000 issue may result in a material disruption of our business or have
a material adverse effect on our business, financial condition or results of
operations.

RECENT ACCOUNTING PRONOUNCEMENTS

20
<PAGE> 21

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 establishes a new model for
accounting for derivatives and hedging activities that is effective for the
Company's fiscal year 2002. The impact of the implementation of SFAS 133 on the
financial statements of the Company is not anticipated to be significant as the
Company does not currently purchase derivative securities.

In March 1998, the Accounting Standards Executive Committee ("AcSEC"), released
Statement of Position 98-1, "Accounting for Costs of Computer Software Developed
or Obtained for Internal use" ("SOP 98-1"). SOP 98-1 required certain costs of
computer software developed or obtained for internal use to be capitalized,
provided that those costs are not research and development. SOP 98-1 is
effective for the Company's fiscal year 2000, but the impact of the adoption of
SOP 98-1 on the Company's financial statements is not expected to be
significant.

In April 1998, AcSEC released Statement of Position 98-5, "Accounting for Costs
of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires the costs of start-up
activities to be expensed as incurred. Start-up activities are defined as those
one-time activities related to opening a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, initiating a new process in an existing facility, or
commencing some new operation. SOP 98-5 is effective for the Company's fiscal
year 2000, but the impact of the adoption of SOP 98-5 on the Company's financial
statements is not expected to be significant.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has various debt instruments outstanding that mature by 2002.
Certain of these instruments have interest rates that are based on associated
rates that may fluctuate over time based on economic changes in the environment,
such as the Prime Rate. The Company is subject to interest rate risk, and could
be subjected to increased interest payments if market interest rates fluctuate.
The Company estimates that a ten percent increase in interest rates would cause
interest expense to increase by an immaterial amount.

Due to its international sales, the Company is exposed to risks associated with
foreign exchange rate fluctuations. Those exposures may change over time as
business practices evolve and could have a material adverse effect on the
Company's operating results and financial condition. All of the Company's sales
are denominated in U.S. dollars. An increase in the value of the U.S. dollar
relative to foreign currencies could make the Company's products more expensive,
reducing the demand for the Company's products. A decline in the demand of the
Company's product could have a material adverse effect on the Company's
operating results and financial position.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to financial statements and financial statement schedules.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial statements:

Report of Independent Accountants...................................................................... 22
Balance sheets as of March 28, 1999 and March 29, 1998................................................. 23
Statements of operations for each of the three years in the period ended March 28, 1999................ 25
Statement of stockholders' equity for each of the three years in the period March 28, 1999............. 26
Statements of cash flows for each of the three years in the period ended March 28, 1999................ 27
Notes to financial statements.......................................................................... 29

Financial statement schedule for each of the three years in the period ended March 28, 1999:

Report of Independent Accountants on Financial Statement Schedule...................................... 41
II - Valuation and Qualifying Accounts................................................................. 42
</TABLE>

21
<PAGE> 22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of IMP, Inc.

In our opinion, the accompanying balance sheets and related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of IMP, Inc. at March 28, 1999 and
March 29, 1998, and the results of its operations and its cash flows for each of
the three years in the period ended March 28, 1999, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has failed to make the scheduled payments due
under certain of its notes payable and capital lease obligations due to ongoing
liquidity deficiencies that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 10. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

PRICEWATERHOUSECOOPERS LLP

San Jose, California
June 12, 1999, except for Note 10 which is as of December 31, 1999

22
<PAGE> 23

IMP, Inc.

BALANCE SHEETS
(In thousands, except per share data)

<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,606 $ 11,819
Accounts receivable, net of allowances
for doubtful accounts and returns of $2,529 and $2,715 9,191 5,357
Inventories 6,076 3,064
Other current assets 693 950
-------- --------
Total current assets 17,566 21,190
-------- --------
Leasehold improvements and machinery and equipment:
Leasehold improvements 9,072 7,883
Machinery and equipment 82,299 81,048
-------- --------
91,371 88,931
Less accumulated depreciation and amortization (83,470) (78,547)
-------- --------
Net leasehold improvements and
machinery and equipment 7,901 10,384
-------- --------
Deposits and other long term assets 494 375
-------- --------
$ 25,961 $ 31,949
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

23
<PAGE> 24

IMP, Inc.

BALANCE SHEETS (continued)
(In thousands, except per share data)

<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1999 1998
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of debt $ 5,212 $ 3,348
Current portion of capital lease obligations 3,216 3,582
Trade accounts payable 6,756 6,018
Accrued payroll and related expenses 1,322 1,954
Other current liabilities 1,528 276
-------- --------
Total current liabilities 18,034 15,178
-------- --------
Long term portion of debt 594 1,669
-------- --------
Long term portion of capital lease obligations 2,348 4,504
-------- --------

Commitments & contingencies (Note 5 and 8)

Stockholders' equity:
Convertible preferred stock, $0.001 par
value; 5,000 shares authorized; no shares
issued and outstanding -- --
Common stock, $0.01 par value; 50,000
shares authorized; 3,569 and 3,034 shares
issued and outstanding 35 30
Additional paid in capital 72,671 70,370
Accumulated deficit (63,824) (55,905)
Treasury stock; at cost, 203 shares (3,897) (3,897)
-------- --------
Total stockholders' equity 4,985 10,598
======== ========
$ 25,961 $ 31,949
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

24
<PAGE> 25

IMP, Inc.

STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
MARCH 28, MARCH 29, MARCH 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net revenues $ 33,391 $ 40,420 $ 64,891
Cost of revenues 25,886 29,194 53,889
-------- -------- --------
Gross profit 7,505 11,226 11,002
-------- -------- --------
Operating expenses:
Research and development 9,141 8,959 10,286
Selling, general and administrative 5,243 5,142 10,000
Restructuring charges -- -- 1,862
-------- -------- --------
Total operating expenses 14,384 14,101 22,148
-------- -------- --------
Loss from operations (6,879) (2,875) (11,146)
Interest and other expense, net (1,040) (924) (1,221)
-------- -------- --------
Net loss $ (7,919) $ (3,799) $(12,367)
======== ======== ========

Net loss per common share:

Basic and diluted $ (2.73) $ (1.35) $ (4.39)
======== ======== ========

Shares used in per share computation:
Basic and diluted 2,901 2,823 2,815
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

25
<PAGE> 26

IMP, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID IN ACCUMULATED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY
-------- -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 2,913 29 69,052 (39,739) (3,897) 25,445

Issuance of common stock under incentive stock
option plan 110 1 1,222 -- -- 1,223

Issuance of shares in conjunction with warrants
exercised 5 -- -- -- -- --

Net loss -- -- -- (12,367) -- (12,367)
-------- -------- -------- -------- -------- --------
Balance, March 30, 1997 3,028 30 70,274 (52,106) (3,897) 14,301

Issuance of common stock under incentive
stock option plan and employee stock purchase
plan 6 -- 96 -- -- 96

Net loss -- -- -- (3,799) -- (3,799)
-------- -------- -------- -------- -------- --------
Balance, March 29, 1998 3,034 30 70,370 (55,905) (3,897) 10,598

Issuance of common stock under incentive stock
option plan and employee stock purchase plan 8 -- 53 -- -- 53

Issuance of common stock and warrants in
conjunction with equity financing 527 5 2,248 -- -- 2,253

Net loss -- -- -- (7,919) -- (7,919)
-------- -------- -------- -------- -------- --------
Balance, March 28, 1999 3,569 $ 35 $ 72,671 $(63,824) $ (3,897) $ 4,985
======== ======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

26
<PAGE> 27

IMP, Inc.

STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
MARCH 28, MARCH 29, MARCH 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,919) $ (3,799) $(12,367)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 4,923 6,262 7,789
Increase (decrease) from changes in:
Accounts receivable (3,834) 755 7,546
Inventories (3,012) 242 6,996
Other current assets 257 (191) (268)
Long term assets (119) (300) --
Trade accounts payable 738 1,907 (2,064)
Accrued payroll and related expenses (632) 391 (577)
Other current liabilities 1,252 (474) (1,271)
-------- -------- --------
Net cash provided by (used in) operating activities (8,346) 4,793 5,784
-------- -------- --------
</TABLE>

The accompanying notes are an integral part of these financial statements.

27
<PAGE> 28

IMP, Inc.

STATEMENTS OF CASH FLOWS (continued)
(In thousands)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
MARCH 28, MARCH 29, MARCH 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from investing activities:
Net cash used for investing activities
for purchases of capital equipment (1,830) (688) (1,893)
-------- -------- --------
Cash flows from financing activities:
Principal proceeds from credit facility 3,953 -- --
Principal payments on equipment notes payable (3,164) (1,740) (4,383)
Principal payments under capital lease obligations (3,132) (3,948) (4,032)
Proceeds from long term financing agreement -- -- 7,569
Proceeds from issuance of common stock 2,253 -- --
Proceeds from exercise of options to purchase common stock 53 96 1,223
-------- -------- --------
Net cash provided by (used for) financing activities (37) (5,592) 377
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (10,213) (1,487) 4,268
Cash and cash equivalents at beginning of period 11,819 13,306 9,038
-------- -------- --------
Cash and cash equivalents at end of period $ 1,606 $ 11,819 $ 13,306
======== ======== ========
Supplemental information:
Cash paid during the year for interest $ 1,205 $ 1,504 $ 1,521
======== ======== ========
Acquisition of equipment under capital lease obligations $ 610 $ 2,245 $ 2,440
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

28
<PAGE> 29

IMP, Inc.

NOTES TO FINANCIAL STATEMENTS

Years ended March 28, 1999, March 29, 1998,

and March 30, 1997

Note 1 - The Company and its significant accounting policies

IMP, Inc. (the "Company") develops and manufactures analog CMOS integrated
circuit solutions for communications, computer and control applications.

Fiscal year - The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal 1999, 1998 and 1997 each consisted of 52 weeks.

Basis of presentation - 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.

Cash and cash equivalents - The Company considers all highly liquid financial
instruments purchased with an original maturity of three months or less to be
cash equivalents. The fair market value of these highly liquid instruments
approximates cost at March 28, 1999 and March 29, 1998.

Fair Value of Financial Instruments - Carrying amounts of certain of the
Company's financial instruments including cash and cash equivalents, accounts
receivable, the credit facility, accounts payable and other accrued liabilities
approximate fair value due to their short maturities. Based on borrowing rates
currently available to the Company for loans with similar terms, the carrying
values of the note payable and capital lease obligations approximate fair value.

Inventories - Inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in first-out basis) or market.

Inventories consist of the following:

<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1999 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $1,103 $1,111
Work-in-process 4,120 1,650
Finished goods 853 303
------ ------
$6,076 $3,064
====== ======
</TABLE>

Leasehold improvements and machinery and equipment - Leasehold improvements and
machinery and equipment are stated at cost and are amortized using the
straight-line method over the shorter of the period of the lease or the
estimated useful lives of the assets. The estimated useful life of machinery and
equipment is five years. Machinery and equipment at March 28, 1999 and March 29,
1998 includes $46.5 million and $45.9 million, respectively, of assets under
lease that have been capitalized. Accumulated depreciation for such machinery
and equipment approximated $42.2 million and $38.3 million, respectively.

Net revenues - Component revenues are recognized as products are shipped except
for sales through distributors, which are recognized on a sell-through basis.
Design revenues are recognized under design and engineering contracts as defined
development phases are completed by the Company and accepted by the customers.

Stock based compensation - Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), establishes a fair value
method of accounting for stock-based employee compensation plans. The Company
has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and to comply with the pro forma
disclosure requirements of SFAS 123.

Net loss per share - Basic net loss per share is computed by dividing net loss
by the weighted average number or common shares outstanding during the period.
Diluted net loss per share is computed using the weighted average number of
common and potential

29
<PAGE> 30

common shares outstanding during the period, except when anti-dilutive. In
computing dilutive net loss per share, the average stock price for the period is
used in determining the number of shares assumed to be purchased from the
exercise of stock options.

Net loss per share computations are in accordance with Statement of Accounting
Standards No. 128, "Earnings per Share."

Options to purchase 262,000, 234,000 and 122,000 shares of common stock were
outstanding at March 28 1999, March 29, 1998 and March 30, 1997, respectively,
but were not included in the computation of diluted net loss per share as the
Company was in a loss situation and to do so would have been anti-dilutive.

Concentration of credit risk - The Company performs credit evaluations of its
customers and maintains reserves for losses. At March 28, 1999 customers
individually representing more than 10% of the Company's 1999 net revenues also
accounted for 39% of accounts receivable. At March 29, 1998, customers
individually representing more than 10% of the Company's 1998 net revenues also
accounted for 42% of accounts receivable. The Company's products are primarily
sold to resellers.

During fiscal 1999, 1998, and 1997, sales to certain customers individually
represented more than 10% of the Company's net revenues as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Iomega * 22% 39%
International Rectifier 29% 14% 15%
Level One * 11% *
CMS * 11% *
Linfinity 16% 10% *
Rockwell * * 10%
</TABLE>

* less than 10% of net revenues

Reverse stock split - Effective January 13, 1999, the Company effected a
one-for-ten reverse stock split of its common stock. All shares and per share
amounts in this report have been retroactively restated to reflect such reverse
split.

Recent accounting pronouncement - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133").
SFAS 133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS 133 requires that all derivatives be
recognized at fair value in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
SFAS 133 will be effective for fiscal years beginning after June 15, 2000. The
Company will adopt SFAS 133 as required in fiscal 2002. Due to the fact that the
Company does not purchase derivative instruments, there will likely be no impact
to the Company's financial statements from the adoption of SFAS 133.

In March 1998, the Accounting Standards Executive Committee ("AcSEC"), released
Statement of Position 98-1, "Accounting for Costs of Computer Software Developed
or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 required certain costs of
computer software developed or obtained for internal use to be capitalized,
provided that those costs are not research and development. SOP 98-1 is
effective for the Company's fiscal year 2000, but the impact of the adoption of
SOP 98-1 on the Company's financial statements is not expected to be
significant.

Note 2 - Restructuring

30
<PAGE> 31

The Company incurred a $1,862,000 restructuring charge during the second quarter
of fiscal 1997. The charge was comprised of employee termination costs of
$998,000 associated with reductions in the workforce; a design center equipment
write-off of $587,000 due to management's decision to close one of their design
center facilities; and $277,000 associated with wafer cancellation costs and
gate array capital equipment no longer usable.

Note 3 - Debt

Notes payable consist of the following:

<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1999 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Credit facility $ 3,953 0
Bank equipment term loan 0 $ 2,064
Equipment notes payable 1,853 2,953
------- -------
Total notes payable 5,806 5,017
Less current portion (5,212) (3,348)
------- -------
Long term portion of notes payable $ 594 $ 1,669
======= =======
</TABLE>

Credit Facility - On November 4, 1998, the Company entered into a secured credit
facility agreement with Pacific Business Funding. The credit facility allows the
Company to borrow up to 80% of eligible accounts receivable. The annual interest
rate is 18%.

The credit facility is collateralized by the Company's assets. As of March 28,
1999, the Company has drawn a balance of $3.95 million against the credit
facility. On April 30, 1999, the Company entered into a revolving credit
facility with The CIT Group, and the Company used the proceeds to settle the
outstanding balance of the Pacific Business Funding facility. (Note 9).

Equipment notes payable - In fiscal 1995, the Company fully utilized a $3.0
million borrowing facility with an asset-based lender allowing the Company to
finance 100% of the cost of collateralized equipment. In May 1996, the facility
was increased to $5.0 million that the Company fully utilized. The Company used
the additional proceeds to purchase equipment. The note accrues interest at
9.98% and requires 60 equal monthly principal payments that began in June 1996.
The note does not contain any restrictive or financial covenants.

Maturities of loans and notes payable - The aggregate maturities of notes
payable at March 28, 1999 are as follows (in thousands):

Fiscal year ending March 28, 1999:

<TABLE>
<S> <C>
2000 $5,212
2001 594
------
Total $5,806
======
</TABLE>

Note 4 - Stockholders' equity

Employee stock purchase plan - In December 1986, the Company adopted a qualified
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
which was effective on June 10, 1987, upon the completion of the Company's
initial public offering of its common stock. During fiscal 1999, 8000 shares at
an aggregate price of approximately $53,000 were issued. During fiscal year
1998, 5,600 shares at an aggregate price of approximately $96,000 were issued.
During Fiscal 1997, no shares were issued under the plan.

Shares are purchased by participants at 85% of the lower of the fair market
value at the date of entry into the plan or at the end of the offering period
through payroll deductions (up to 15% of participants base compensation).

Stock option plan - The Company has an option plan which provides for the
issuance of incentive stock options and non-statutory stock options to
employees, officers and directors to purchase common stock at a price not less
than 85% (100% for incentive stock options) of the fair market value of the
stock on the grant date. To date all options have been granted at 100% of fair
market value. The plan was most recently restated in August 1994 and renamed the
Stock Option Plan which terminates in 2005. In May 1998, the Company's Board of
Directors authorized (and shareholders subsequently approved) an additional
50,000 shares to be reserved for issuance under the plan. These additional
options have not been registered and therefore were not available for grant at
year end. The Stock Option Plan provides for a total of 611,700 shares of the
stock to be issued. Options granted under the plan generally vest ratably over
four years and expire five to ten years from the date of grant. The Board of
Directors has the right to determine the terms of each option including allowing
optionees to exercise their options early, subject to a right to repurchase
unvested shares.

31
<PAGE> 32

Warrants - In January 1999, in connection with the private offering of 527,000
shares of common stock, the Company issued a warrant to purchase 52,700 shares
at an exercise price of $4.50 per share. The warrant was exercisable immediately
following the closing date of the offering and will expire in January 2004.
Using the Black-Scholes pricing model, the Company determined that the fair
value of the warrants was $156,000 at the date of the grant. This amount is
included as additional paid-in capital.

In September 1997, substantially all stock options with exercise prices in
excess of $1.44 with the exception of directors and officers, and in February
1998, substantially all stock options with exercise prices in excess of $1.16,
were cancelled and replaced with new options with an exercise price of $1.44 and
$1.16, respectively.

The Board of Directors may grant the right to surrender unexercised options for
an amount equal to the difference between the fair market value of the number of
shares vested at the surrender date and the aggregate option price vested for
such shares. The Company has not granted any such stock appreciation rights.

Summary of option activity - The following table summarizes the Company's stock
option activity and related weighted average exercise price within each category
for each of the years ended March 28, 1999, March 29, 1998, and March 30, 1997,
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding 234 $13.00 123 29.60 189 $20.10
Options granted 58 5.16 356 13.10 62 35.00
Options canceled (30) 15.46 (244) 21.50 (18) 59.60
Options exercised 0 -- (1) 12.50 (110) 10.90
------ ------ ------ ------ ------ ------
Options outstanding
at end of fiscal year 262 $10.97 234 $13.00 123 $29.60
====== ====== ====== ====== ====== ======
Options exercisable
at end of fiscal year 113 $13.09 53 15.50 23 $36.00
====== ====== ====== ====== ====== ======
</TABLE>

At March 28, 1999, 20,000 shares were available for grant.

Option groups outstanding at March 28, 1999 and related weighted average
exercise price and remaining contractual life information are as follows:

<TABLE>
<CAPTION>
OPTION WITH OUTSTANDING EXERCISABLE REMAINING
EXERCISE PRICES ------------------------- ------------------------ LIFE
RANGING FROM: SHARES PRICE SHARES PRICE (YEARS)
- ------------------ ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
$2.20 -$5.00 55 $ 4.93 1 5.00 9
6.60 -11.30 5 8.66 3 8.44 7
11.60 -14.40 193 11.91 101 11.90 9
15.00 -59.40 9 29.45 8 29.83 5
--- ------- --- ----- -
262 $ 10.97 113 13.09 9
=== ======= === ===== =
</TABLE>

Fair value of stock options and employee purchase rights

The fair value of options granted in fiscal 1999, 1998 and 1997 was estimated
using the Black-Scholes model with the following assumptions:

<TABLE>
<CAPTION>
STOCK OPTION PLAN EMPLOYEE STOCK PURCHASE PLAN
-------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Expected life (in years) 6 4 4 .5 .5 --
Risk-free interest rate 5.35% 6.2% 6.0% 4.5% 5.4% --
Volatility 135% 85% 82% 135% 75% --
Dividend yield 0% 0% 0% 0% 0% --
</TABLE>

The weighted average fair value of Employee Stock Purchase Plan shares granted
during fiscal 1999 and 1998 was $4.57 and $7.30 per share, respectively. The
weighted average estimated fair value of shares granted under the Stock Option
Plan during fiscal 1999, 1998 and 1997 was $4.72, $14.20 and $22.00,
respectively.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Had the Company
recorded compensation costs based on the estimated grant date fair value, as
defined by SFAS 123, for awards granted under its stock option plan and employee
stock purchase plan, the Company's net loss per share would have been increased
to the pro forma amounts below for the years ended March 29, 1998, March 30,
1997, and March 31, 1996.

32
<PAGE> 33

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Pro forma net loss $ (8,706) $ (4,494) $(12,800)
Pro forma basic and diluted loss per share $ (3.00) $ (1.59) $ (4.55)
</TABLE>

The effects on pro forma disclosures of applying SFAS No. 123 are not likely to
be representative of the effects on pro forma disclosures of future years.
Because SFAS No. 123 is applicable only to options granted subsequent to March
31, 1995, the pro forma effect will not be fully reflected until fiscal 2001.

Note 5 - Litigation

The Company is currently a plaintiff in one legal proceeding in which the JTS
Corporation is the defendant. This action is the only current litigation to
which the company is a party.

The company has been contacted by the Lemelson Medical Foundation. This
foundation owns a number of artificial vision and other patents and has filed
patent violation legal actions against eighty-eight semiconductor companies. The
company is currently not one of the defendants in this action but might be added
at a later date.

During 1998 final Superior Court approval of a settlement was obtained in a
class-action legal action, sometimes referred to as Shockley, et al., v.
Carrington, et al. The company and its officers and directors were defendants in
this action. Settlement was within the coverage provided by the Company's
Directors and Officers insurance.

Note 6 - Income taxes

No provision for federal or state income taxes has been recorded for fiscal
years 1999, 1998 and 1997. The Company's provisions are computed by applying the
estimated annual tax rate to income, taking into account net operating loss
carry forwards and alternative minimum taxes. At March 28, 1999 the Company had
net operating loss carryforwards for federal and state income tax purposes of
approximately $60.3 million and $24.7 million which may be utilized to reduce
future taxable income. These amounts expire at various dates, beginning in 2000
through 2019. Such carryforwards may be limited in certain circumstances,
including but not limited to, cumulative stock ownership changes of more than 50
percent over a three year period. Deferred tax assets (liabilities) are
comprised of the following (in thousands):

<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1999 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards, tax-effected $ 22,014 $ 19,309
Currently non-deductible expenses 5,101 6,111
Investment and R&D tax credit 2,669 3,005
Other 506 178
-------- --------
Total 30,290 28,603
Valuation allowance (30,290) (28,603)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
</TABLE>

Management has recorded a full valuation allowance against all of its deferred
tax assets on the basis that sufficient uncertainty exists regarding the
realizability of the assets. These factors include losses generated in prior
years and the lack of carryback capacity to realize deferred tax assets.

Note 7 - Geographic information

The Company is engaged in the design, development, manufacture and marketing of
integrated circuits. Revenue has been allocated to countries on the basis of the
location in which billings were mailed. Revenue allocated to countries for 1999,
1998 and 1997 are as follows (in millions, except the percentage):

<TABLE>
<CAPTION>
MARCH 28, 1999 MARCH 29, 1998 MARCH 28, 1997
-------------------- -------------------- --------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
United States $ 29.4 88% $ 27.8 69% $ 42.0 65%
Asia 2.1 6% 11.8 29% 21.4 33%
Rest of the World 1.9 6% 0.9 2% 1.5 2%
</TABLE>

Note 8 - Leasing arrangements and commitments

The Company leases certain machinery and equipment under long-term lease
agreements which are reported as capital leases. The terms of the leases range
from four to five years, with purchase options at the end of the respective
lease terms. Such purchase options require payment of approximately $1.1 million
over the next 12 months. The Company intends to exercise options requiring
minimal payments and to higher other equipment. The Company leases its San Jose
facility under a non-cancelable operating lease which expires in December 1999,
with options to extend the lease for two additional six-year periods. The
Company also leases a facility in

33
<PAGE> 34

Pleasanton under a non-cancelable operating lease which expires in February
2003, with an option to extend the lease for one five-year term. The leases
require the Company to pay taxes, insurance and maintenance expenses. Rental
expense is recorded using the straight-line method and totaled $1,360,000,
$1,472,000 and $1,450,000 in fiscal 1999, 1998, and 1997 respectively. Future
minimum lease payments, including capitalized purchase options, at March 29,
1999 are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING MARCH LEASES LEASES
- ------------------------ ------- ---------
<S> <C> <C>
2000 $ 3,767 $ 1,117
2001 1,633 139
2002 888 139
2003 -- 127
------- -------
Total minimum payments 6,288 $ 1,522
======= =======
Less imputed interest (724)
-------
Present value of payments under capital leases 5,564
Less current portion (3,216)
-------
Long-term lease obligations $ 2,348
=======
</TABLE>

Note 9 - Subsequent event, revolving credit facility

On April 30, 1999, the Company entered into a revolving credit facility, which
includes term loans, with The CIT Group. The maximum and minimum amount of the
borrowing is $9.5 million and $2.5 million, respectively. $7.5 million of the
facility allows the Company to borrow up to 80% of eligible accounts receivable
and 25% of the Company's inventory of raw materials. Up to $1.0 million of the
$7.5 million may be based on the raw material inventory. $2.0 million of the
facility is for term loans relating to equipment. The facility is for a minimum
period to April 30, 2002. The interest rate for the revolving credit facility is
prime rate plus 1.5%, and the term loans is prime rate plus 2%. At March 31,
2000, if the Company's net income is greater than $1.0 million, the interest
rates are decreased by 0.5% from March 31, 2000 onward. If the Company has a net
loss, the interest rate will be increased by 0.5% from March 31, 2000 onward.
The facility is collateralized by inventory, equipment and fixtures, and other
assets, excluding all assets under lease from other financiers.

Note 10 - Subsequent event, non-payment of liabilities and Team Asia investments

During the months of August, September, and October 1999, the Company failed to
make the scheduled payments due under its equipment notes payable (see Note 3)
and substantially all of its capital lease obligations (see Note 8). These
instances of non-payment put the Company in default of these agreements and in
default of the revolving credit facility entered into on April 30, 1999 (see
Note 9) due to a cross default clause in the revolving credit facility
agreement.

The Company has renegotiated the payment terms under the equipment notes payable
amounting to $1,853,000 and capital lease obligations amounting to $3,999,000 as
at March 28, 1999. However, the Company has been unable to renegotiate the
payment terms under one capital lease obligation amounting to $1,185,000 as at
March 28, 1999. As of December 26, 1999, the lessor has not required
acceleration of such capital lease obligation and management intends to continue
to pursue renegotiated payment terms. As such, as of December 26, 1999 the
Company remains in default of the revolving credit facility entered into
subsequent to March 28, 1999 and capital lease obligations with an aggregate
balance of $1,529,000 as at March 28, 1999 due to cross default clauses in these
agreements.

34
<PAGE> 35

by the shareholders of the Company at a meeting which will also be the Company's
annual meeting and will be held during the first quarter of calendar 2000. If
approved by the Company's shareholders, the transaction contemplated by the
Phase Two Stock Purchase Agreement is expected to close shortly thereafter.
During the period between December 15, 1999 and the date of approval of the
Phase Two Stock Purchase Agreement, Teamasia is required to use reasonable
efforts to provide the Company with additional financing up to the amount of the
purchase price upon commercially reasonable terms, if the Company so requests.
In order for the Phase Two Stock Purchase Agreement to be approved, the Company
must receive approval of the Phase Two Stock Purchase Agreement from its
shareholders and all other required governmental approvals and must make certain
amendments to its Articles of Incorporation. Such loan, if made, shall be repaid
at the closing of the Phase Two Stock Purchase Agreement. During the period
between the approval date and the date of the closing of the Phase Two Stock
Purchase Agreement, if the Company so requests, Teamasia is required to provide
the Company with additional financing up to the amount of the purchase price
upon commercially reasonable terms. Such amount shall be repaid at the closing
of the Phase Two Stock Purchase Agreement.

If the shareholders of the Company do not approve this transaction with Teamasia
or the transaction does not close for some other reason, the Company's liquidity
could be adversely affected.

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

Not applicable.

35
<PAGE> 36

PART III

ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT

(1) Identification of Directors:

Incorporated by reference from the section entitled "Identification of
Directors" filed in the Registrant's Amended Annual Report on Form 10-K405/A for
the year ended March 29, 1999 filed with the Securities and Exchange Commission
on July 26, 1999.

(2) Identification of Executive Officers:

See Part 1, Item 4, "Executive Officers of the Company"

(3) Information with respect to compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated by reference from the information under the
caption "Section 16(a) Information" in the Registrant's Amended Annual Report on
Form 10-K405/A for the year ended March 29, 1999 filed with the Securities and
Exchange Commission on July 26, 1999.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the section entitled "Executive Compensation"
filed in the Registrant's Amended Annual Report on Form 10-K405/A for the year
ended March 29, 1999 filed with the Securities and Exchange Commission on July
26, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference from the section entitled "Share Ownership" filed in
the Registrant's Amended Annual Report on Form 10-K405/A for the year ended
March 29, 1999 filed with the Securities and Exchange Commission on July 26,
1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

36
<PAGE> 37

PART IV

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

(a) 1. Financial Statements

The following financial statements are included in Item 8 of this Annual
Report on Form 10-K/A:

- Report of Independent Accountants

- Balance sheets as of March 28, 1999 and March 29, 1998

- Statements of operations for each of the three years in the
period ended March 28, 1999

- Statement of stockholder's equity for each of the three
years in the period ended March 28, 1999

- Statements of cash flows for each of the three years in the
period ended March 28, 1999

- Notes to financial statements

(a) 2. Financial statement schedules for each of the three years in the
period ended March 28, 1999:

Report of Independent Accountants on Financial Statement Schedule II -
Valuation and Qualifying Accounts

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

(a) 3. Listing of Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(8) Certificate of Amendment to Restated Certificate of
Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981
between the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983
between the Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984
between the Company and Orchard Investment Company No. 701.
10.29(1) Form of Indemnification Agreement executed by the Company
and its officers and directors.
10.40(2)+ Letter Agreement dated October 19, 1987 between the Company
and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe
Limited.
10.48(6) Supply Agreement between the Company and IMP Europe
Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary
Shares in IMP Europe Limited dated as of July 3, 1990,
between the Company and Dialogue Semiconductor Limited.
10.50(7)* License Agreement dated as of September 12, 1991, between
the Company and Asahi Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by
and between the Company and Asahi Chemical Industry Co.,
Ltd.
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the
Company and South African Micro-Electronic Systems Pty
Limited.
10.54(8) First Amendment dated March 11, 1994 to Real Property Lease
Agreement dated August 26, 1981 between the Company and
Orchard Investments Company No. 701.
</TABLE>

37
<PAGE> 38

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.55(8) First Amendment dated December 21, 1987, Second Amendment
dated March 15, 1989, Third Amendment dated November
25,1991, Fourth Amendment dated December 13, 1993 and Fifth
Amendment dated March 11, 1994 to the Real Estate Lease
Agreement dated July 6, 1983 between the Company and
Orchard Investment Company No. 701.
10.56(9) Loan Modification Agreement dated September 19, 1995 by and
between the Company and Silicon Valley Bank.
10.57(9)+ Letter Agreement dated February 13, 1995 between the
Company and David Laws.
10.58(9) Real Property Sublease Agreement dated November 9, 1992 by
and between the Company and AT&T Resource Management
Corporation, and Master Lease dated September 23, 1986 by
and between AT&T Resource Management Corporation and
American Telephone and Telegraph Company.
10.60(3)+ 1996 Employee Stock Purchase Plan.
10.61(4)+ IMP, Inc. Stock Option Plan (as amended and restated
through May 14, 1997).
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27.1 Financial Data Schedule.
</TABLE>

+ Indicates, as required by Item 14(a)(3), a management contract or
compensation plan required to be filed as an exhibit.

* "*" on such exhibits indicates that portions have been omitted for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.

(1) Incorporated by reference from an identically numbered exhibit filed with
the Company's Registration Statement on Form S-1 (File No. 33-13600)
declared effective by the Securities and Exchange Commission on June 10,
1987.

(2) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 27, 1988
filed with the Securities and Exchange Commission on June 25, 1988.

(3) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-14997), as filed with the
Securities and Exchange Commission on October 29, 1996.

(4) Incorporated by reference to exhibit number 99.1 filed with the Company's
Registration Statement on Form S-8 (File No. 333-36723) as filed with the
Securities and Exchange Commission on September 30, 1997.

(5) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 26, 1989
filed with the Securities and Exchange Commission on June 26, 1989.

(6) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 31, 1991
filed with the Securities and Exchange Commission on July 1, 1991.

(7) Incorporated by reference from an identically numbered exhibit filed with
the Company's Annual Report on Form 10-K for the year ended March 29, 1992
filed with the Securities and Exchange Commission on June 29, 1992, as
amended by Amendment to Application or Report on Form 8 filed with the
Securities and Exchange Commission on September 16, 1992.

(8) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Amendment to the Annual Report on Form 10-K for
the year ended March 27, 1994 filed with the Securities and Exchange
Commission on July 6, 1994.

(9) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Annual Report on Form 10-K for the year ended
March 26, 1995 filed with the Securities and Exchange Commission on June
26, 1995.

(b) Reports on Form 8-K

The Company filed a report on Form 8-K on February 16, 1999 in connection
with the sale of common stock.

38
<PAGE> 39

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, in San Jose, California on
this 7th day of January, 2000.

IMP, INC.

By: /s/ ZVI GRINFAS
-------------------------------
Zvi Grinfas
President and CEO

39
<PAGE> 40

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Zvi Grinfas or Tarsaim Batra, or either of them,
with the power of substitution, his attorney-in-fact and agents, to sign any and
all amendments to this Annual Report on Form 10-K/A, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or his substitute or substitutes may do or cause
to be done by virtue thereof.

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

<TABLE>
<S> <C> <C>
/s/ ZVI GRINFAS President and
- --------------------------------- Chief Executive Officer January 7, 2000
Zvi Grinfas

/s/ Alicia Fahlbusch Controller January 7, 2000
- ---------------------------------

/s/ Zvi Grinfas Director January 7, 2000
- ---------------------------------
Zvi Grinfas

/s/ Peter D. Olson Director January 7, 2000
- ---------------------------------
Peter D. Olson

/s/ Bernard V. Vonderschmitt Director January 7, 2000
- ---------------------------------
Bernard V. Vonderschmitt
</TABLE>

40
<PAGE> 41

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of IMP, Inc.

Our audits of the financial statements referred to in our report dated June 12,
1999, except for Note 10 which is as of December 31, 1999, appearing in this
Annual Report on Form 10-K/A also included an audit of the Financial Statement
Schedule listed in Item 14(a)(2) of this Form 10-K/A. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
June 12, 1999

41
<PAGE> 42

SCHEDULE II

IMP, Inc.
Valuation and Qualifying Accounts
(in thousands)

<TABLE>
<CAPTION>
BALANCE AT THE CHARGED TO BALANCE AT
BEGINNING OF COSTS AND DEDUCTIONS THE END OF
THE PERIOD EXPENSES* WRITE-OFFS PERIOD
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Provisions for returns,
allowance and doubtful
accounts and returns:

Year ended March 30, 1997 $ 655 $ 3,388 $ 2,002 $ 2,041
Year ended March 29, 1998 $ 2,041 $ 674 $ 0 $ 2,715
Year ended March 28, 1999 $ 2,715 $ (186) $ 0 $ 2,529
</TABLE>

* Includes amounts charged directly to revenues

42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(8) Certificate of Amendment to Restated Certificate of
Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981
between the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983
between the Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984
between the Company and Orchard Investment Company No. 701.
10.29(1) Form of Indemnification Agreement executed by the Company
and its officers and directors.
10.40(2)+ Letter Agreement dated October 19, 1987 between the Company
and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe
Limited.
10.48(6) Supply Agreement between the Company and IMP Europe
Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary
Shares in IMP Europe Limited dated as of July 3, 1990,
between the Company and Dialogue Semiconductor Limited.
10.50(7)* License Agreement dated as of September 12, 1991, between
the Company and Asahi Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by
and between the Company and Asahi Chemical Industry Co.,
Ltd.
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the
Company and South African Micro-Electronic Systems Pty
Limited.
10.54(8) First Amendment dated March 11, 1994 to Real Property Lease
Agreement dated August 26, 1981 between the Company and
Orchard Investments Company No. 701.
</TABLE>

43
<PAGE> 44

+ Indicates, as required by Item 14(a)(3), a management contract or
compensation plan required to be filed as an exhibit.

* "*" on such exhibits indicates that portions have been omitted for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.

(b) Reports on Form 8-K

The Company filed a report on Form 8-K on February 16, 1999 in connection
with the sale of common stock.

<PAGE> 1

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-89008, No. 33-65578 and No. 33-6727511) of IMP,
Inc. of our report dated June 12, 1999, except for Note 10 which is as of
December 31, 1999, appearing in this Annual Report on Form 10-K/A. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears in the Form 10-K/A.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
January 7, 1999

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> MAR-28-1999
<CASH> 1,606
<SECURITIES> 0
<RECEIVABLES> 9,191
<ALLOWANCES> 2,529
<INVENTORY> 6,076
<CURRENT-ASSETS> 17,566
<PP&E> 91,371
<DEPRECIATION> (82,299)
<TOTAL-ASSETS> 25,961
<CURRENT-LIABILITIES> 18,034
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 72,671
<TOTAL-LIABILITY-AND-EQUITY> 25,961
<SALES> 33,391
<TOTAL-REVENUES> 33,391
<CGS> 25,886
<TOTAL-COSTS> 25,886
<OTHER-EXPENSES> 14,384
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,040
<INCOME-PRETAX> (7,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,919)
<EPS-BASIC> (2.73)
<EPS-DILUTED> (2.73)

</TABLE>