UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549 FORM 10-Q  (Mark One)xQUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES          EXCHANGE ACT OF
1934 For the quarterly
period ended March 31, 2001 OR oTRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 For the transition
period from  to Commission File Number 000-30637  AUGUST TECHNOLOGY CORPORATION(Exact name of Registrant as specified in its
charter) Minnesota
  41-1729485(State or other jurisdiction of
  (I.R.S. Employerincorporation or organization)
  Identification No.)4900 West 78th StreetBloomington, MN
  55435(Address of principal executive offices)
  (Zip Code)(952) 820-0080(Registrant's telephone number, including
  area code)
 N/A(Former name, former address, and former fiscal year,
if changed since last report.) 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.    
YesxNoo As of May 8, 2001, there were 12,677,837 shares of common stock
outstanding.   AUGUST TECHNOLOGY CORPORATIONTABLE OF CONTENTS



DescriptionPART I
  
  FINANCIAL INFORMATIONItem 1.
  
  Financial StatementsBalance
  Sheets as of March 31, 2001 andDecember
  31, 2000 (unaudited)Statements of Operations for the three months
  endedMarch 31, 2001 and
  2000 (unaudited)Statements of Cash Flows for the three months
  endedMarch 31, 2001 and
  2000 (unaudited)Notes to Financial Statements (unaudited)Item 2.
  
  Management's
  Discussion and Analysis of Financial Conditionand
  Results of OperationsItem 3.
  
  Qualitative and
  Quantitative Disclosures about Market Risk.PART II
  
  OTHER INFORMATIONItem 5.
  
  Other InformationItem 6.
  
  Exhibits and
  Reports on Form 8-KSIGNATURES

PART I       FINANCIAL INFORMATION

Item 1. 
Financial Statements

AUGUST TECHNOLOGY CORPORATIONBALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)



March 31,2001
  December 31,2000ASSETSCurrent assets:Cash and cash equivalents
  $7,123
  $3,103Short-term investments
  21,876
  23,604Accounts receivable, less allowance for doubtfulaccounts of $320 and
  $255, respectively
  5,536
  6,880Inventories
  8,556
  8,256Prepaid expenses and other current assets
  1,237
  1,081Total current assets
  44,328
  42,924Property and equipment, net
  2,914
  2,226Long-term investments
  1,996
  2,486Other assets
  227
  261Total assets
  $49,465
  $47,897LIABILITIES AND
  SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable
  $3,098
  $2,768Accrued compensation
  1,125
  1,240Accrued liabilities
  930
  606Accrued income taxes
  658
  846Customer deposits
  572
  592Total current
  liabilities
  6,383
  6,052Other non-current liabilities
  160
  160Total liabilities
  6,543
  6,212Shareholders' equity:Common stock, $.01 par value, 42,000,000 sharesauthorized, 12,650,227 and 12,633,058
  shares issuedand outstanding, respectively
  127
  126Undesignated capital stock, 3,000,000 shares authorized,no shares issued or outstanding
  -
  -Additional paid-in capital
  39,869
  39,809Deferred compensation related to stock options
  (278)
  (305)Retained earnings
  3,204
  2,055Total shareholders' equity
  42,922
  41,685Total liabilities and shareholders' equity
  $49,465
  $47,897See accompanying notes to financial
statements.

AUGUST TECHNOLOGY
CORPORATIONSTATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended March 31,2001
  2000Net
  revenues
  $10,904
  $4,503Cost
  of revenues
  4,271
  1,884Gross profit
  6,633
  2,619Selling,
  general and administrative expenses
  3,177
  1,843Research
  and development expenses
  2,164
  1,186Operating income (loss)
  1,292
  (410)Interest
  income
  476
  -Interest
  expense
  -
  (41)Income
  (loss) before provision for income taxes
  1,768
  (451)Provision
  for income taxes
  619
  -Net
  income (loss)
  $1,149
  $(451)Per
  share amounts:Basic net income (loss) per share
  $0.09
  $(0.05)Diluted net income (loss) per share
  $0.09
  $(0.05)See accompanying notes to financial statements.

AUGUST TECHNOLOGY CORPORATIONSTATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three months ended March 31,2001
  2000Cash flows from operating activities:Net income (loss)
  $1,149
  $(451)Adjustments to reconcile net income (loss) to net cash provided by
  (used in) operating activities:Depreciation and amortization
  182
  56Provision for doubtful accounts
  65
  26Amortization of deferred compensation related to stock options
  24
  21Changes in operating assets and liabilities:Accounts receivable
  1,279
  (231)Inventories
  (300)
  (791)Prepaid expenses and other current assets
  (113)
  (197)Accounts payable
  330
  755Accrued compensation
  (115)
  (79)Accrued liabilities
  324
  (1)Accrued income taxes
  (157)
  (55)Customer deposits
  (20)
  281Net cash provided by (used in) operating
  activities
  2,648
  (666)Cash flows from investing activities:Proceeds from maturities of securities held to maturity
  11,466
  -Purchases of securities held to maturity
  (9,248)
  -Purchases of property and equipment
  (870)
  (432)Net cash provided by (used in) investing
  activities
  1,348
  (432)Cash flows from financing activities:Proceeds from issuances of common stock
  24
  3Proceeds from short-term debt, net
  -
  768Checks issued in excess of bank balance
  -
  327Net cash provided by financing activities
  24
  1,098Net increase in cash and cash equivalents
  4,020
  -Cash and cash equivalents at beginning of
  period
  3,103
  -Cash and cash equivalents at end of period
  $7,123
  $-Supplemental cash flow information:Cash paid for interest
  $-
  $41Cash paid for income taxes
  $777
  $80Non-cash transactions:The Company recorded additional paid-in capital related to thetax benefit of stock options exercised
  $31
  $-See accompanying notes to financial
statements.

AUGUST TECHNOLOGY CORPORATIONNOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(In thousands, except share and per share amounts)
(Unaudited)

Note 1
 Basis of Presentation

The
accompanying unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, have been condensed or omitted pursuant to such rules
and regulations.  In the opinion of the
management of August Technology Corporation (the Company), the financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position at
March 31, 2001, and the operating results and cash flows for the three months
ended March 31, 2001 and 2000.  The
results of operations of the interim periods are not necessarily indicative of
the results of operations that may be expected for any other period or for the
year as a whole.  These financial
statements and notes hereto should be read in conjunction with the audited
financial statements and notes thereto included in the Companys Annual Report
on Form 10-K for the year ended December 31, 2000, filed with the Securities
and Exchange Commission on March 16, 2001.

Note 2  Accounts Receivable

Accounts
receivable consisted of the following:

March 31,
  December 31,2001
  2000Billed receivables
  $5,513
  $6,269Unbilled receivables
  343
  8665,856
  7,135Allowance for doubtful accounts
  (320)
  (255)Accounts receivable, net
  $5,536
  $6,880Note 3  Inventories

Inventories
consisted of the following:

March 31,
  December 31,2001
  2000Raw materials
  $3,519
  $3,386Work in process
  782
  1,020Finished goods
  4,255
  3,850Inventories
  $8,556
  $8,256Note 4  Shareholders Equity

Changes
in shareholders equity during the three months ended March 31, 2001 were as
follows:

Shareholders' equity balance at December
  31, 2000
  $41,685Issuances of common stock in conjunction withexercises of employee stock options
  24Tax benefit from stock options exercised
  31Issuance of stock options to a nonemployee
  9Amortization of deferred compensation related to stock options
  24Net income
  1,149Shareholders' equity balance at March 31,
  2001
  $42,922

Note 5  Net Income
(Loss) Per Share

The
following information presents the Companys computation of basic and diluted
net income (loss) per share for the periods presented in the statements of
operations.

Three Months Ended March 31,2001
  2000Net income (loss)
  $1,149
  $(451)Weighted average common shares:Basic
  12,640,177
  9,164,761Effect of dilutive stock options and warrants
  649,448
  -Diluted
  13,289,625
  9,164,761Net income (loss) per share:Basic
  $0.09
  $(0.05)Diluted
  $0.09
  $(0.05)The
total weighted average number of stock options and warrants excluded from the
calculation of potentially dilutive securities either due to the exercise price
exceeding the average market price or the inclusion of such securities in a
calculation of net loss per share would have been anti-dilutive for the three
months ended March 31, 2001 and 2000 were 327,256 and 1,198,426, respectively.

Note 6  New Accounting Pronouncement

SFAS
No. 133; Accounting for Derivative
Instruments and Hedging Activities became effective for the Company
in January 2001.  SFAS No. 133
requires all derivatives to be recognized as assets or liabilities on the
balance sheet and measured at fair value on a mark-to-market basis.  This applies whether the derivatives are
stand–alone instruments, such as forward currency exchange contracts and
interest rate swaps or collars, or embedded derivatives, such as call options
contained in convertible debt investments. 
Along with the derivatives, the underlying hedged items are also to be
marked to market on an ongoing basis. 
These market value adjustments are to be included either in net income
(loss) in the statement of operations or in other comprehensive income (and
accumulated in shareholders' equity), depending on the nature of the
transaction.  The adoption of SFAS
No. 133 did not have an effect on the results of operations or financial
position of the Company.

Note 7  Subsequent Events

On
April 19, 2001, the shareholders approved an increase in the number of shares
available for issuance under the 1997 Stock Option Plan from 2,250,000 shares
to 2,650,000 shares.

Item 2.  Management's Discussion and Analysis of
Financial Condition and Results of          Operations

Overview

August Technology Corporation (the Company)
is a worldwide leader in the research, design, development, manufacture,
marketing, sales, distribution and service of automated micro defect inspection
systems used in the manufacture of semiconductor devices as well as the
emerging markets for microelectronic devices including optoelectronics,
photonics, micro electro-mechanical structures (MEMS) or other micro machines, micro
LCDs, printheads, data storage, disk drives and other similar devices.  The Companys NSX series, which incorporates
the Companys proprietary software, automated materials handling capabilities
and expertise in machine vision technology automates one of the few remaining
manually performed tasks in semiconductor and microelectronic
manufacturing.  Typically, manufacturers
rely on people using microscopes to detect defects in sample lots which is an
inefficient and error-prone inspection process.  The Companys systems automate the inspection process, allowing
manufacturers to inspect 100% of their wafers or die, as well as providing
powerful information that manufacturers can use to increase yield and
productivity.  The Company has sold
these systems worldwide to major semiconductor manufacturers, as well as
manufacturing companies serving the microelectronic markets.

The following discussion of the Companys
financial condition and results of operations should be read in conjunction
with the audited financial statements of the Company and the notes thereto
included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2000, filed with the Securities and Exchange Commission on March
16, 2001.

Results of Operations

Three months ended March 31, 2001 compared to
the three months ended March 31, 2000

Net Revenues.Net revenues increased $6.4
million, or 142.1%, to $10.9 million for the three months ended March 31, 2001,
from $4.5 million for the same period in 2000.  The increase in net revenues was due primarily to the continued
growth in sales of systems within the NSX series, which increased 145% over the
same period in 2000.

Gross Profit.Gross profit increased to $6.6
million, or 60.8% of net revenues, for the three months ended March 31, 2001,
from $2.6 million, or 58.1% of net revenues, for the same period in
2000.  The increase in gross margin
percentage was primarily due to the growth in sales of NSX systems, which have
a higher gross margin than the Companys other products, and a stronger mix of
higher margin system sales within the NSX series during the three months ended
March 31, 2001.

Selling, General and
Administrative.Selling, general and administrative expenses
are primarily comprised of salaries, related employee benefits and travel.
Selling, general and administrative expenses increased $1.3 million, or 72.4%,
to $3.2 million, or 29.1% of net revenues, for the three months ended
March 31, 2001, from $1.8 million, or 40.9% of net revenues, for the same period
in 2000.  The increase in expense
dollars was primarily due to the hiring of additional sales and field service
personnel and higher travel costs resulting from the Companys international
growth.

Research and
Development.Research and development expenses consist
primarily of salaries and related expenses of employees engaged in research,
design and development activities.  They
also include consulting fees, prototype equipment expenses and the cost of
related supplies. Research and development expenses increased $1.0 million, or
82.4%, to $2.2 million, or 19.8% of net revenues, for the three months
ended March 31, 2001, from $1.2 million, or 26.3% of net revenues, for the same
period in 2000.  The increase in research
and development expense dollars was primarily due to the hiring of additional
engineers, and the development of product prototypes as the Company continued
to advance the development of new products.

Interest Income.Interest income for the three
months ended March 31, 2001 was $476,000, as compared to none for the same
period in 2000.  The interest income
earned during the three months ended March 31, 2001 was the result of investing
the net proceeds received from the Companys initial public offering in June
2000.

Income Taxes.The provision for income taxes
for the three months ended March 31, 2001 was $619,000, or an effective tax
rate of 35.0%, as compared to none for the same period in 2000.  The Company did not record a benefit from
income taxes related to the net loss during the three months ended March 31,
2000 due to uncertainty, at that time, as to whether it was more likely than
not that the deferred tax assets related to the net loss during the period
would be recovered.  Management determined
during the second quarter of 2000 that the deferred tax assets would be
recovered and, as a result, recognized the tax benefits during the period.

Cost Management Program. 
Due to an overall slowdown in the semiconductor industry, the Company
adopted a cost management program in March 2001 that included material cost
reductions, a reduction in temporary and contract staff, a decrease in
discretionary spending and overtime, and a 10% executive pay cut.  In April 2001, the Company announced a work
force reduction affecting approximately 9% of the Companys employees.

Liquidity and Capital
Resources

Cash and Cash
Equivalents and Working Capital

As
of March 31, 2001 the Company had cash and cash equivalents of $7.1 million, as
compared to $3.1 million at December 31, 2000. 
The increase in cash and cash equivalents was primarily due to cash flow
generated from operating activities and the reinvestment of maturities of
short-term investments in cash equivalents.

As
of March 31, 2001 the Companys working capital increased $1.0 million to $37.9
million, from $36.9 million at December 31, 2000.  The improvement in working capital was primarily due to the cash
that was generated from operating activities, partially offset by the decrease
in short-term investments.  The Company
believes that existing working capital, anticipated cash flows from operations
and its line of credit will be adequate to satisfy projected operating and
capital requirements through the foreseeable future.  However, to the extent the Company grows more rapidly than
expected, the Company may need additional cash to finance its operating and
investing activities.



Cash
Flows

During the three months ended March 31, 2001,
net cash provided by operating activities was $2.6 million, which resulted
primarily from decreased accounts receivable and increased accounts payable and
other accrued liabilities, partially offset by increased inventory.  Net cash provided by investing activities
was $1.3 million, primarily due to $11.5 million of proceeds from maturities of
investments, partially offset by $9.2 million of purchased investments and
$870,000 for additions to property and equipment.  Net cash provided by financing activities was $24,000 from the
proceeds received from exercises of employee stock options.

During the three months ended March 31, 2000,
net cash used in operating activities was $666,000, which resulted primarily
from increased accounts receivable and inventories, partially offset by
increased accounts payable and customer deposits.  Net cash used in investing activities was $432,000 for additions
to property and equipment.  Net cash
provided by financing activities was $1.1 million primarily from $768,000 of
increased borrowings under the Companys line of credit and $327,000 from
checks issued in excess of the Companys bank balance.

Fluctuations in
Quarterly Results of Operations

The Companys operating results have
historically been subject to significant quarterly and annual fluctuations. The
Company anticipates that factors affecting future operating results will include
the timing of significant orders, the timing of new product announcements and
releases by the Company or its competitors, patterns of capital spending by
customers, market acceptance of new or enhanced versions of products and
pricing changes. In addition, the timing and level of the Companys research
and development expenditures could cause quarterly results to fluctuate. A
substantial portion of the Companys annual revenues comes from sales to a
relatively small number of customers. The Companys revenues and operating
results for a period may be affected by the timing of orders received or orders
shipped during a period.

Impact of Accounting
Standards

Statement of Financial Accounting Standards
(SFAS) No. 133; Accounting for Derivative Instruments and Hedging Activities
became effective for the Company in January 2001.  SFAS No. 133 requires all derivatives to be recognized as assets
or liabilities on the balance sheet and measured at fair value on a
mark-to-market basis.  This applies
whether the derivatives are stand–alone instruments, such as forward
currency exchange contracts and interest rate swaps or collars, or embedded
derivatives, such as call options contained in convertible debt
investments.  Along with the derivatives,
the underlying hedged items are also to be marked to market on an ongoing
basis.  These market value adjustments
are to be included either in net income (loss) in the statement of operations
or in other comprehensive income (and accumulated in shareholders' equity),
depending on the nature of the transaction. 
The adoption of SFAS No. 133 did not have an effect on the results
of operations or financial position of the Company.

Cautionary Factors
That May Affect Future Results

Certain
statements made in this Quarterly Report on Form 10-Q, as well as oral
statements made by the Company from time to time, which are prefaced with words
such as expects, anticipates, believes, projects, intends, plans
and similar words and other statements of similar sense, are forward-looking
statements.  The Companys
forward-looking statements generally relate to its growth strategies, financial
results, product development activities and sales efforts.  These forward-looking statements, like any
other forward-looking statements, involve risks and uncertainties known and
unknown, and may be affected by inaccurate assumptions, including, among
others, those discussed in the Cautionary Statements section of the Companys
Annual Report on Form 10-K for the year ended December 31, 2000, as filed with
the Securities and Exchange Commission on March 16, 2001.  These risks and uncertainties could cause
actual results to differ materially from those projected or anticipated.  The Company disclaims any obligation to
subsequently revise forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

Item 3.  Qualitative and Quantitative Disclosures
about Market Risk



Market Risk

We are exposed to market risk primarily from
changes in interest rates and credit risk. 
We are not exposed to market risk from fluctuations in foreign currency
exchange rates because all sales are made in U.S. dollars.

Interest Rate Risk

We
are exposed to interest rate risk primarily from investments in cash
equivalents and short-term and long-term marketable debt securities (the
Investment Portfolio).  The entire
Investment Portfolio is classified as held to maturity and, accordingly, is
recorded on the balance sheet at cost, with the amortization of any purchase
discounts or premiums recorded in interest income.  The entire Investment Portfolio is denominated in U.S.
dollars.  We do not use derivative
financial instruments in the Investment Portfolio.

Credit Risk

Financial
instruments, which potentially subject us to credit risk, consist principally
of securities in the Investment Portfolio and trade receivables.  We limit credit risk related to the
Investment Portfolio by placing all investments with high credit quality
issuers and limit the amount of investment with any one issuer.  As of March 31, 2001, 93% of the Investment
Portfolio consisted of government securities and corporate commercial paper and
bonds with maturities of one year or less. 
We limit credit risk associated with trade receivables by performing
ongoing credit evaluations and believe that there is no additional risk beyond
amounts provided for collection losses to be inherent in trade receivables.

PART II  OTHER INFORMATION



Item 5.Other Information

In accordance with Rule 10b5-1 under the
Securities Exchange Act of 1934, Mark Harless, Chief Engineer and a director
and founder of the Company, and Thomas Verburgt, Chief Technology Officer and a
director and founder of the Company, have adopted trading plans to provide for
an orderly disposition, for estate planning purposes, of a portion of their
holdings of the Companys Common Stock. 
Each of Mr. Harless and Mr. Verburgt developed their plans separately,
and the plans do not attempt to coordinate sales by Mr. Harless and Mr.
Verburgt in any way.  Mr. Harlesss plan
provides for the sale of up to 200,000 shares (up to 50,000 shares each
quarter) over a term of one year, subject to a price limit.  Mr. Verburgts plan provides for the sale of
up to 120,000 shares (up to 30,000 shares each quarter) over a term of one
year, subject to certain price limits. 
As of April 30, 2001, Mr. Harless beneficially owned 1,867,315 shares
(14.7%) of the Companys Common Stock and Mr. Verburgt beneficially owned
1,114,075 shares (8.8%) of the Companys Common Stock.

Item
6.Exhibits and Reports on Form 8-K

(a)
  Exhibits:None.(b)
  Reports on Form 8-K:None.SIGNATURES



Pursuant to the
requirements 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.



AUGUST TECHNOLOGY CORPORATIONDate: May 9, 2001
  By: /s/ JEFF L. ODELLJeff L. ODellPresident and Chief Executive Officer(Principal Executive Officer)Date: May 9, 2001
  
  By: /s/ THOMAS C. VELINThomas C. VelinChief Financial Officer(Principal Financial and Accounting Officer)