SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                     ______________________________________


                                    FORM 10-K

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)

                   For the fiscal year ended December 31, 1997

                           Commission File No. 0-20097

                       Advanced Machine Vision Corporation
             (Exact name of registrant as specified in its charter)

              California                                  33-0256103
    (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                   Identification No.)

          2067 Commerce Drive
            Medford, Oregon                                97504
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (541) 776-7700


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

Securities registered pursuant to Section 12(g) of the Act:
                                              Class A Common Stock, no par value
                                              Class A Warrants
                                              Class B Warrants
                                              Preferred Share Purchase Rights

                        _________________________________


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|

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of March 20, 1998, was  approximately  $20,583,000.  (All officers
and directors of the registrant are considered affiliates;  Class B Common Stock
is assumed to be equal in value to Class A Common Stock.)

On March 10, 1998, the registrant had 10,636,384  shares of Class A Common Stock
and  76,835  shares  of Class B  Common  Stock,  all no par  value,  issued  and
outstanding.

                          See Page 22 for Exhibit Index

<PAGE>


                                     Part I
                                     ======

Item 1. Business
================================================================================

History
=======

From inception in 1987 until early 1990,  Advanced Machine Vision  Corporation's
("AMV" or the "Company") predecessor company, Applied Laser Systems ("ALS"), was
principally  engaged in research and development and  organizational  activities
and its revenues were insignificant. Beginning in early 1990, ALS engaged in the
business of  designing,  developing,  manufacturing  and  marketing  laser diode
devices  incorporating  its Visible  Laser  Module,  a device which  generates a
directed  bright red spot of light for  pointing  out  details  on  presentation
boards,  movie and television  screens,  slides or other surfaces from up to 300
feet away, and laser aimers, devices which can be mounted on pistols, rifles and
other  weapons to enhance  shooting  accuracy by  directing a bright red spot of
light onto a target.

In March 1992, ALS completed its initial public offering,  the proceeds of which
were used to repay bridge financing and other loans, and for working capital.

In February 1994, the Company acquired all of the issued and outstanding capital
stock of Simco/Ramic Corporation,  now SRC VISION, Inc. ("SRC") for $8.1 million
in cash. During late 1993 and early 1994, AMV entered a number of other proposed
acquisition  transactions.  In Spring 1994, a new management  team was hired for
AMV. By  September  1994,  AMV  terminated  the other  acquisition  transactions
resulting in  significant  losses in 1994.  Following  these  terminations,  the
Company restructured to concentrate on its SRC-based vision systems business. In
October 1995,  the Company sold the ALS  operation for cash. In March 1996,  the
Company acquired Netherlands-based Pulsarr Holding BV ("Pulsarr"),  and, in July
1996, the Company acquired the assets and operations of Ventek, Inc. ("Ventek"),
both of which are also  engaged in  designing  and  marketing  automated  vision
systems.  In May 1997,  the Company sold Pulsarr after  receiving an unsolicited
offer for Pulsarr. The current operating subsidiaries of AMV are SRC and Ventek.

Business
========

The Company

The Company designs,  develops,  manufactures and markets machine vision systems
that process  images not  discernible  to the human eye.  These systems  combine
technologies in four key areas (lighting,  cameras,  processors and software) to
improve quality,  enhance yield, reduce production costs and increase throughput
in a variety of markets and applications where human vision is inadequate due to
fatigue,  visual acuity or speed.  Where needed,  AMV employs highly specialized
mechanical  technologies to help customers integrate machine vision systems into
their production processes. The Company's products currently serve two principal
markets,  the processing industry and the wood panel (i.e.,  plywood) production
industry.  Applications  include quality control in the processing of food, pulp
wood,  tobacco,  and plastics for recycling,  and quality  control and automated
process control in wood panel production.

Since its founding in 1964,  SRC has evolved from a  single-product  company (an
optical  device to measure  length and diameter of freshly cut logs) serving the
timber  industry,  into a provider  of machine  vision  systems  for a number of
processing industries. In 1984, SRC released its first machine vision product, a
fully  automated  defect removal system for the french fry processing  industry,
designed to improve  productivity and quality.  The system utilized  proprietary
material  conveying  systems,  light  sources,  linear array CCD cameras,  image
processing  software,  and standard bus based  electronics  to detect  defective
french fries and  efficiently  remove them from a rapidly moving product stream.
SRC built upon its  experience in potato  processing to develop  machine  vision
systems for other food  processing  customers.  These new  systems  increasingly
possessed more sophisticated  capabilities,  such as fully automated sorting and
continuous high volume product analysis.

From 1984 through the present,  SRC has continued to advance and refine its core
technologies  to  increase  the speed and  improve  the  accuracy of its machine
vision products. Over 22 patents have resulted from these ongoing efforts. Early
SRC systems for the food  processing  industry  benefited from  state-of-the-art
microprocessors  which have been replaced with more powerful  microprocessors as
they became available over time. When full color recognition  systems were first
introduced  in 1987,  SRC  responded to the need for color signal  processing by
developing a  three-color  image  processing  system.  SRC then  invented a high
resolution  "RGB" (red green blue) or "true color" camera  because  commercially
available  cameras  lacked the  ability to detect the  precise  color of objects
being  viewed.  The true color camera  significantly  increased  the accuracy of
SRC's color processing machine vision systems. SRC used the experience it gained
developing  the true  color  camera to  develop a high  resolution  panchromatic
camera,  so that customers who require only black and white image processing can
achieve the same level of precision made possible by SRC's true color camera.

SRC has further increased the visual discrimination  capabilities of its machine
vision systems with  lighting,  spectral  analysis and mechanical  technologies.
Since  1989,  SRC has  developed  specialty  lamps  that take  advantage  of the
different  reflective  properties of items being processed on a single conveyer.
SRC began adding to its spectral  characterization  capability  in 1992.  During
this period, SRC developed several mechanical technologies, including high-speed
ejection modules,  high-speed  material handling,  air-assist  stabilization and
high-speed  video  motion  analysis to  facilitate  processing  on a  high-speed
conveyer.  SRC continued to make significant  technological  advances until 1993
when  previous  management  reduced  expenditures  on research  and  development
resulting in a technology gap.

Following the  acquisition of SRC in 1994,  the Company  embarked upon a plan to
revitalize its growth potential  through  significantly  increased  research and
development efforts and a reassessment of marketing goals. At the same time, the
Company  established a new management  team  dedicated to  identifying  untapped
markets for machine vision systems. New management targeted marketing efforts at
niche markets in non-food processing  industries such as plastics for recycling,
pulp wood and  tobacco,  which have  resulted  in higher  average per unit sales
prices.  For a discussion of the Company's  current  technology and research and
development  expenditures,   see  "Technology,   Engineering  and  Research  and
Development" below.

Ventek was founded in 1991 by three  engineers  who were an integral part of the
design and  development of the  "Infrascan"  scanner.  In the early 1970's,  the
Infrascan became the industry  standard for detecting defects in wood veneer and
it remained the standard  until 1994,  when Ventek  introduced  its "New Vision"
system.  Ventek's experience in wood panel production  complements the Company's
lighting,  camera, processing and software capabilities.  The addition of Ventek
in July 1996 gave the Company its first machine vision system application in the
wood panel production  industry.  The Company believes that an enhanced level of
precision will be achieved by incorporating  SRC's  high-speed  line-scan camera
into Ventek's  veneer  scanning  systems,  thereby  increasing  their ability to
separate  the  product  into  various  grades,  as well as to detect  and remove
defects.  This improved grading  capability is expected to increase the yield of
high margin grades by correctly  identifying them and minimizing waste, enabling
customers to increase  margins on the product  produced from any given amount of
raw inputs.

Industry Background

Machine Vision: Like human vision,  machine vision requires sensing elements and
image processors.  The camera and lighting  components of machine vision systems
are capable of sensing  images beyond the region of the  electromagnetic  energy
spectrum  called  "visible  light."  Machine vision systems  working outside the
visible  light range can often  provide  significantly  enhanced  discrimination
capabilities  beyond that detectable to the human eye. For example,  in plastics
recycling, this capability allows machine vision systems to discriminate between
two different types of plastics,  PVC and PET, both of which are the same color.
Under the right kind of non-visible light, the different  reflective  properties
of these two plastics make them easily  distinguishable  to a high-speed camera.
In addition,  machine vision systems are capable of clearly viewing and reacting
to objects  moving at speeds of up to 1,200 feet per minute.  The  processor and
software  components of machine vision systems are capable of rapidly processing
and analyzing  signals with a high level of uniformity.  Because  machine vision
systems do not fatigue,  they are often  preferable for  high-speed,  repetitive
scanning or viewing of objects over  indefinite  periods of time, as required in
many production processes.

Quality  Control:  Processing  applications  typically  combine a computer-based
conveyor  system with a machine  vision system.  The conveyor  presents a moving
stream of raw product to a high-speed  inspection  camera.  Data gathered by the
camera is processed by the computer using specially  developed software with the
goal of  identifying  the location on the  conveyor of  defective  items for the
express purpose of rejecting such defective  material.  Processors of food, pulp
wood,  tobacco and recycled  plastics  products must process large quantities of
raw product through different stages,  including defect detection and sorting to
remove defective pieces and inspect for quality.  In the agricultural  area, the
frequency  and  severity  of  defects  in the raw  product  is highly  variable,
depending upon a variety of factors affecting crops.

Historically,  defect  detection,  removal and quality control in the industries
addressed  by the  Company  have been labor  intensive  and  dependent  upon and
limited by the variability of the work force. These functions are performed by a
work force that is frequently  unskilled  and subject to a high  turnover  rate.
Large numbers of individual workers stand along a conveyor and visually identify
and manually remove  defective  pieces from the stream of moving product.  These
manual methods cause inconsistent  defect removal, as well as limited throughput
that varies based upon the number and abilities of the workers.  Manual  methods
also usually cause excessive  amounts of good product to be discarded along with
defective product.  The industry has sought to replace these manual methods with
automated systems that achieve higher yield and better quality at reduced costs.

Automated Process Control:  Many types of manufacturing  and processing  require
machine vision systems because of the increasing demands for speed and accuracy.
In  high-volume  manufacturing  processes,  the demand for production of quality
products has driven the need for 100% inspection.  The identification of defects
in a  continuous  stream of  plywood  veneer for wood  panel  production  is the
Company's  first such  application.  However,  while machine vision systems have
been  successfully  used to identify and remove defects in panel  production and
other  industries,  human  eyes and hands  are  typically  still  used to repair
defects,  grade and sort various  types of products.  Other  companies,  such as
Cognex  Corporation,  have and are addressing  this need, but must combine their
pattern  recognition  software and computer  hardware  with lighting and cameras
provided by other entities.  The Company  believes that its ability to adapt its
proprietary  lighting and cameras gives it an advantage over companies that must
rely on outside suppliers for these key components.

AMV Solutions

The Company  seeks to provide its  customers  with a  competitive  advantage  by
reducing  high labor  costs,  increasing  yields and  throughput  and  improving
quality control.  The Company's  machine vision systems are capable of automated
defect  detection  and removal and  real-time  quality  analysis.  These machine
vision  systems use advanced  optical  inspection  technology to help  customers
recover more of the good product  (higher yield) and remove a higher  percentage
of  defective  product  (quality  control)  than the manual  sorting  and defect
removal  methods  historically  used  by  food  processors.  In the  wood  panel
production  industry,  increasing the number of decisions made by machine vision
systems can also result in increased throughput and higher yield with fewer line
workers.  Machine vision systems of the type produced by AMV can add significant
value in  environments  where raw product is highly  variable by  improving  the
uniformity of finished product.

Machine vision  technology used for inspection and control of processes  (beyond
defect removal) throughout manufacturing can eliminate adding value to defective
products,  thereby  reducing the finished  product  scrap rate.  Machine  vision
systems  can be used for  automated  process  control  to add value and  improve
efficiency  in highly  repetitive  processes,  such as grading  and  statistical
collection,  that require  speed,  accuracy and rapid  throughput.  In addition,
machine  vision systems are capable of providing  real-time  feedback that could
enable  manufacturers to rapidly alter or modify  production  specifications  to
achieve a high level of  consistent  quality not  previously  achievable.  Thus,
automated process control applications present an opportunity for AMV to achieve
higher margins,  while achieving  substantial cost savings for customers through
the reduction of direct labor and improved product quality.

Strategy

The Company seeks to establish  itself as the  technological  leader and premier
provider of machine vision systems in the markets it serves by adapting its core
competencies  in camera,  lighting,  processing  and  software to meet  customer
needs.  The Company  believes that the 1996 acquisition of Ventek and continuous
development of vision systems apart from mechanical  product handling  equipment
can  increase  gross  margins and enable the Company to enter new higher  margin
markets. Important elements of the Company's growth strategy include:

   * Leverage   Expertise   in  Lighting,   Camera,   Processing   and  Software
     Technologies:  The Company  believes its core  competitive  strength is its
     breadth  and  depth of  expertise  in  optical,  lighting,  processing  and
     software technologies. The Company and its predecessors have developed this
     expertise over a period of years,  and the Company  continues to expand its
     capabilities  through  research  and  development.  AMV seeks to expand the
     applications  for its  technology and to capitalize on its ability to apply
     its technology to develop new products and product enhancements.

   * Identify and Target Key  Niche  Markets:  The Company will seek to identify
     well-defined,  niche  markets with the  potential of higher per unit profit
     margins.  The Company  believes that it will achieve  higher  margins where
     customers   require  the  full  range  of  its  machine   vision   systems'
     capabilities in automated process control as well as in quality control. In
     order to gain increased  acceptance and market  penetration for its machine
     vision   systems,   AMV  will  continue  to  focus  on  forming   strategic
     relationships  with leading  companies in its target  markets.  The Company
     believes this method of strategic market  penetration to be very effective.
     The Company believes that its previous relationship with Union Carbide, and
     current  relationships  with  VTT  and  CAE  Machinery,   Ltd.  and  others
     demonstrate recognition of the technical advantages of its systems.

   * Customize  Technology  to Meet Customer Needs:  AMV designs its products to
     be adaptable to individual  customer  requirements.  AMV believes that this
     flexibility,  particularly in lighting and camera capabilities,  gives it a
     competitive advantage in being able to respond rapidly to changing needs in
     existing and new markets. AMV adapts, customizes and integrates its machine
     vision  systems  to solve  customers'  particular  problems  and  therefore
     satisfy customers' needs.

   * Expand  Sales  and  Distribution:  The Company  intends to expand sales and
     distribution  by  implementing a regional sales and service office concept.
     The Company is currently building upon its  Eindhoven-based  European sales
     and service center. An additional office in another geographic  location is
     planned within 18 months.  These regional sales and services  offices would
     oversee  and direct the  efforts of  representatives  for AMV.  The Company
     plans to strategically  locate these regional sales and service offices and
     to  equip  them,  financing  permitting,   with  demonstration  systems  to
     facilitate  customers'  testing  their  products on systems  similar to the
     equipment that they would order from AMV.

   * Aggressively Pursue Use of Trial Units at Customer Sites:  The Company will
     seek to place  increased  numbers of trial  units at  potential  customers'
     sites.  AMV's  experience  with trial units has been  successful  because a
     company  which has a trial unit  machine  vision  system  installed  in its
     facility  will  frequently  decide to retain and purchase  the unit.  Trial
     units provide  potential  customers  with the  opportunity  to experience a
     reduction in their  production cost prior to making the capital  commitment
     involved in purchasing one or more of the Company's machine vision systems.

   * Evaluate  and Pursue New Vision Related Products:  The Company will seek to
     identify  technologies and capabilities  that enhance its product offerings
     and market applications through joint ventures, acquisitions,  partnerships
     or other business relationships.

Products

AMV currently offers the following products:

       Product                   Industry                Applications
-------------------------------------------------------------------------------
   VHS OPTISORT(TM)         Food processing,        Potato Chips, French
                            Plastics recycling      Fries, Whole Potatoes,
                                                    Vegetables, Polyethyl
                                                    Teraphthalate Green/Clear
-------------------------------------------------------------------------------
   KROMA-SORT(R)            Food processing,        Vegetables, Plastic Flake
                            Plastics
-------------------------------------------------------------------------------
   SPECTRA-SORT(TM)         Food processing,        Potato Products, Cereals,
                            Plastics recycling      Vegetables
-------------------------------------------------------------------------------
   Length & Defect          Food processing         French Fries
   Analyzer(TM)
-------------------------------------------------------------------------------
   Pulp Wood Sorter         Forest industry         Wood Chips
-------------------------------------------------------------------------------
   Tobacco Sorter II        Tobacco                 Tobacco, Dry Food Products
-------------------------------------------------------------------------------
   "New Vision" Veneer      Plywood Veneer          Softwood Veneer Production
   Scanning System
-------------------------------------------------------------------------------

AMV's machine vision systems utilize lighting,  camera and software  components,
and housing and structural  components made principally of stainless steel. They
are modular in design,  which  provides  flexibility in  configuration  to allow
adaptability to products of many types of industries.  The mechanical  design of
these systems is extremely sturdy and conforms to various  industry  regulations
and standards.

Defect  Detection  and Removal:  The  technology  used in AMV's  machine  vision
systems is capable of viewing,  discriminating  between usable versus  defective
pieces in periods ranging from 20 to 60 milliseconds  (thousandths of a second),
and removing the defect while the product is traveling at speeds of 500 to 1,200
feet per minute.  Initially, the product stream is mono-layered (arranged into a
single  layer)  by a  vibrating  infeed  conveyor  belt,  and fed  onto the main
conveyor by a steep infeed chute. The chute  accelerates the product to separate
product  units in the flow  direction.  Mono-layering  and creating a sufficient
space  between  each piece of product  inspected,  such as  individual  raisins,
facilitate  rapid,  accurate  analysis by AMV's image  processing  hardware  and
software.

Once separated,  product is moved through the system by the high-speed main belt
conveyor.  Customers  select the belt color to provide a sharp contrast with the
product  being  sorted.  Lighting is selected to maximize the  difference in the
images  reflected  by  acceptable  and  defective  pieces of  product.  Intense,
specially  conditioned  fluorescent,  or  exotic  gas  discharge-produced  light
illuminates the product beneath AMV's high-speed  line-scan  camera.  High-speed
imaging in the camera module stores and compares light levels  reflected by each
piece of product. Levels that fall within discrimination windows selected by the
operator are considered defects.

During the scanning and  analysis,  the system  processor  monitors the conveyor
belt position of each  defective  piece and tracks it through the short distance
to the downstream end of the main  conveyor.  The distance  between the point at
which the camera  detects  the moving  product and the point at which the jet of
air expels  the  defective  piece  ranges  from two to 25  inches.  Just as each
defective  piece is leaving  the main  conveyor,  a short jet of air is released
from one or more of the finely tuned  ejectors.  This jet of air rapidly changes
the paths of the  defective  pieces  downward so that they miss the main outfeed
chute.  Accepts are unaffected,  pass across the gap to be gently decelerated on
the outfeed chute, and then travel on to downstream processing equipment.

AMV's  machine  vision  systems  allow the customer to establish  basic  sorting
criteria  prior to running the system and are easily  fine-tuned  for day-to-day
changes in product characteristics and light levels.

Markets, Customers and Applications

To further its growth strategy,  the Company is actively  pursuing  expansion in
both its current  markets and by identifying and entering into new niche markets
(i.e.,  markets that are well defined and have the  potential  for higher profit
margins and in which there is little competition). At the same time, AMV engages
in continuous  modifications  of its lighting,  camera,  processing and software
technologies to adapt them for new  applications.  Until  recently,  the Company
marketed its machine  vision  systems  primarily for quality  control in sorting
applications.  However,  the Company believes that many additional  applications
for its  machine  vision  systems  exist  in both  food  and  non-food  markets,
particularly in the area of automated process control.  The Company believes its
ability  to  respond  to  customers'  needs in  niche  markets  by  customizing,
developing and  integrating its core technology will allow it to penetrate these
markets.

Food: The Company's largest market is the food processing industry.  Within food
processing,  the largest  market  segments for the Company's  products have been
potatoes (principally french fries), vegetables and snack foods. The Company has
also penetrated fruits,  cereals and confections,  as well as a variety of other
market segments.  Customers in the food industry  include McCains,  Lamb Weston,
Del Monte Foods, PepsiCo, Inc. (Frito-Lay, Inc.) and Hershey Chocolate USA.

AMV's systems are used by fruit and vegetable  processors where  field-harvested
products are cleaned, graded, automatically sorted, blanched and processed prior
to freezing,  canning or packaging for sale to institutional and retail markets.
Principal  fruit and  vegetable  market  segments  for the  Company  are  potato
products,  green beans, peas, corn, carrots,  onions,  raisins and peaches.  The
Company's  prospects for sales in the vegetable and fruit industry  benefit from
its proprietary  color automated defect removal systems,  since defect detection
in most fruit and vegetable segments requires color analysis.  In contrast,  the
potato  industry  has been able to achieve  effective  detection of good and bad
product using black and white optical scanning technology.

Snack  food  processors  use  AMV's  machine  vision  systems  in a  variety  of
applications.  Candy  manufacturers  scan  product to remove  partially  wrapped
pieces.  Potato  chip  manufacturers  use AMV's  vision  capabilities  to ensure
consistent color and quality.

Tobacco:   AMV's  machine  vision  systems  provide  tobacco  companies  sorting
capability to remove impurities and foreign matter from a stream of raw tobacco.
AMV has sold  systems  to  leading U. S. and  international  tobacco  companies,
particularly  in Japan and  Indonesia.  AMV believes  market  growth for tobacco
systems   shows  great   promise  based  upon  the  high  degree  of  acceptance
demonstrated by its customers and the significant size of the worldwide  tobacco
processing  market. The Company has entered into an agreement with COMAS S.p.A.,
a manufacturer and seller of tobacco  processing  machinery  systems  worldwide,
whereby COMAS represents AMV on a non-exclusive  basis in all areas of the world
outside of North America and Japan.

Plywood Veneer:  The Company has targeted the need for detecting and eliminating
defects (edge cuts,  knots and dark color) from the peeled ribbon of veneer used
in wood panel production for the plywood market. Since its introduction in 1994,
the Company's New Vision veneer  scanning  system has gained wide  acceptance in
the North American  plywood  industry.  The Company  believes that it has placed
systems in approximately  75% of the North American  softwood veneer  production
lines, but has not yet penetrated foreign markets to any significant extent with
only six systems sold outside of North America.

The New Vision veneer scanning  machine vision system allows  identification  of
open voids, wane and closed defects in a fast-moving  stream of wood veneer used
in plywood production just after a log is peeled.  After defect  identification,
the New Vision instructs a clipper  (manufactured by another company) to cut the
veneer  immediately  before and after the  defect.  The New Vision  reduces  the
amount  of  good  wood  attached  to the  defect  and  ensures  complete  defect
identification  at  the  beginning  of the  plywood  production  process,  which
decreases  the  number of  downgraded  panels,  increases  dryer  efficiency  by
eliminating  material that ultimately becomes dry waste and reduces  re-clipping
of previously  undetected defects. The savings provided by the New Vision system
in the form of higher portions of good wood recovered create  significant  added
value for customers.  Major  customers  include  Georgia-Pacific,  International
Paper and Columbia Forest Products.

The Company believes that its market share in green veneer scanning reflects the
level of confidence  that customers have for the  reliability and performance of
its  products.  However,  green veneer  scanning,  or initial  inspection of the
veneer  represents only one point in the wood vertical panel production  market.
There are approximately  eight other potential defect detection  applications in
both the green and dry (i.e.,  after the veneer has been dried before lay-up and
lamination)  veneer processing.  In addition,  the Company believes that further
market potential exists in grading and matching of hardwood and  furniture-grade
veneers.  Thus,  existing and  potential new customers who process wood at other
steps in the multi-step panel production  process are an untapped market for the
Company's  machine vision  systems.  The Company will seek to leverage  Ventek's
brand name  recognition in green veneer  scanning to reach customers at multiple
points in the vertical market for wood panel production so that existing and new
customers  can  benefit  from the  full  range  of the  Company's  technological
capabilities.

Forest  Products:  The pulp wood industry is beginning to recognize the benefits
of using machine vision to separate  contaminants  in pulp wood.  Heavy duty AMV
machine  vision  systems,  such as the Pulp Wood Sorter,  have been developed to
sort bark,  rot and other  undesirable  wood parts from high  quality wood chips
used in making  paper.  The sorter is able to identify  bark,  rot and trash and
automatically remove unwanted material from a fast-moving,  continuous stream of
wood chips.  As a result,  high value chips can be  economically  recovered from
lower  quality and formerly  unusable  limbs and small trees.  After sorting for
bark and darker  content,  the wood chips  command a higher market price because
they require less chemical  processing  in the  manufacture  of paper  products.
Customers in the forest products  industry include VTT and CAE Machinery,  Ltd.,
the Company's exclusive distributor of the Pulp Wood Sorter in North America.

Based upon  interest  from  major  pulp  producers,  AMV  believes  that a large
potential market for this process exists worldwide. Other potential applications
for  AMV  machine  vision  systems  for the  forest  products  industry  include
inspection and grading for finished lumber and reclamation of wood yard wastes.

Plastics  Recycling:  Because  different  types  of  plastics  used in  consumer
products have different characteristics,  they must be separated prior to use in
recycled  products.  AMV's  proprietary  lighting and camera  technologies  take
advantage  of  different  reflective  properties  of these  plastics  to  enable
producers of recycled plastics to accurately  separate  valuable  materials that
could otherwise be wasted.  Plastics used in recycled  plastics products include
PET (polyethyl  teraphthalate) used for transparent soda bottles, NHDPE (natural
high-density  polyethylene)  used for translucent  milk and other fluid bottles,
and colored HDPE used for a variety of opaque,  colored  bottles,  such as those
used for motor oil and  dishwashing  detergent.  Another  type of  plastic,  PVC
(polyvinyl chloride),  has melting  characteristics  different from PET or HDPE.
AMV has  developed  technologies  that (i) separate  plastics by melting  point,
which is  necessary  to ensure  purity of the  recycled  material and to prevent
costly  shut-downs  of equipment  used by recyclers in the  processes,  and (ii)
separate  plastics by color,  which is vital to the  remarketing of the recycled
material. Customers in the plastics recycling market include Union Carbide, Inc.
and Wellman Industries.

Worldwide  demand for plastics  drives the need for AMV's machine vision systems
in the recycling  business.  Key factors that may impact the demand for recycled
plastics are the cost for virgin  plastics  and  recycling  regulations.  If the
price of petroleum  products and virgin  plastics  increases in the future,  the
demand for recycled  plastics may increase.  Management  of worldwide  petroleum
supplies (e.g.,  foreign country production cutbacks) may also lead to increased
U. S. and foreign government regulations regarding the use of recycled plastics.
If  the  demand  for  recycled  plastics  products  increases  due to  price  or
regulations,  demand for the Company's  machine vision sorting  systems may also
rise. However,  there can be no assurance that the use of recycled plastics will
reach a level that would create an opportunity for the Company to increase sales
of systems to that market.

Technology, Engineering and Research and Development

Technology

Lighting:  AMV has developed a number of proprietary  technologies that form the
foundation  of its vision  systems,  particularly  in the areas of lighting  and
cameras.  The performance of machine vision systems is analogous to human vision
insofar as the ability to see is only as good as the lighting and optics permit.
However,  machine  vision  performance  can  be  optimized  through  the  use of
specialized  lighting to improve the contrast  between one part of an object and
another part of the same object, with the two parts having differing  reflection
properties.  AMV has developed  proprietary  lighting  technology to enhance the
contrast discrimination for objects that have nearly identical visual properties
in the visible light range. AMV's proprietary  lighting systems are manufactured
in-house.

Optimizing the performance of a machine vision system requires an  understanding
of the spectral  characteristics  of the object being analyzed.  This means that
the reflective  properties of the object must be  characterized as a function of
the  varying  color  of  light  (i.e.  wavelength  of  light)  by  which  it  is
illuminated.  This process of  characterizing  the reflection of the object as a
function of the wavelength of light is called spectral analysis or spectroscopy.

AMV's  spectroscopy  laboratory  is fully  equipped  to measure  the  reflective
properties of customer  products with lighting that ranges from ultraviolet (UV)
to infrared (IR). This ability to determine the spectral  characteristics  of an
object allows AMV to eliminate trial and error approaches to lighting and camera
configurations and, therefore,  ensures optimal visual discrimination capability
of AMV vision  systems.  To better  serve its  customers,  AMV has  developed  a
portable  spectrometer  that can be taken into the field for applications  where
measurements  must be made on location due to the mutability or perishability of
the customer's product.

Cameras:  Machine vision systems that have full color perception  capability are
limited by the camera's  ability to represent true color.  True color means that
the color seen by both the human observer and the machine vision system's camera
must result in the same  interpretation.  The  Company's  full color cameras use
three   fundamental   colors:   red,  green  and  blue  (RGB).  The  best  color
representation  can be  achieved  when  each of the R, G, and B sensor  elements
(i.e. pixels) are optically  coincident.  This means that when the RGB camera is
looking at a specific point on an object, all three (RGB) sensor arrays (charged
couple devices,  or "CCD's") have  corresponding  R, G & B pixels looking at the
same spot. Color accuracy and, therefore,  performance depends on the ability of
its  camera to  accurately  align the RGB CCD's.  SRC has a  patented  alignment
process for building its commercial full color line-scan cameras.

Processing:  An accurate  interpretation  of images  created using  lighting and
cameras depends on the image processing  capabilities of the rest of the machine
vision  system.   Real-time  image  processing  is  accomplished  by  high-speed
electronic signal  processors  (hardware) and detection  algorithms  (software).
Successive    generations    of   AMV   vision    systems    have   grown   from
pan-chromatic/gray-scale  systems to full color vision.  The current  generation
product under  development makes extensive use of DSP (digital signal processor)
chips  that  allow  commonality  within the  machine  with very high  throughput
performance and highly flexible functional expansion capability.

Software:   High-speed  vision  requires  efficient  software  algorithms.   AMV
maintains  a software  group that  develops  specialized  proprietary  detection
algorithms to achieve  real-time  signal  processing.  Multiple  generations  of
detection  algorithms have resulted in continual  refinement of image processing
capability. This in-house software resource is also responsible for the creation
of  user-friendly  Graphics User Interfaces (GUI) that make AMV products easy to
learn, use and maintain. This enables workers in a customer's production process
to achieve the benefits of AMV's systems  without  extensive and  time-consuming
training.

Research and Development

The Company anticipates  research and development  expenditures will continue to
increase in the future.  Some of the more  significant  research and development
projects   undertaken   in   recent   years   were   the   development   of   an
application-specific  tobacco machine vision system for sorting,  and processing
enhancements  for  existing and new systems.  Further  research and  development
efforts are expected to flow from these activities.

AMV's  research  and  development   group  conducts  new  product  research  and
development,  provides  support  engineering  for released  products and project
engineering for custom systems.  The R&D group includes  electronic,  mechanical
and software engineers,  mathematicians and technical support personnel. Ongoing
development  activities include improvements to current products and development
of new products. The Company provides engineering support for products in all of
its locations.

AMV's research and development expenses, of which greater than 95% relate to new
products or new applications, have been as follows:


     Fiscal year ended December 31, 1995............................$ 1,987,000
     Fiscal year ended December 31, 1996............................$ 4,038,000
     Fiscal year ended December 31, 1997............................$ 3,950,000

Marketing and Sales

A principal  AMV  marketing  strategy is to determine  which new niche market or
application  to  pursue,  and to form a  strategic  relationship  with a leading
company in that market.  AMV's  objective in such an alliance is (i) to interest
the leader in purchasing AMV's machine vision systems, which may lead to further
sales to other companies in the field that follow industry  trends,  and (ii) to
obtain the benefit of direct customer input and participation during the product
design  phase of adapting the AMV system to the new market or  application.  AMV
has identified  new niche market  opportunities  for  application of its machine
vision technology initially in each of its food, pulp wood, tobacco and plastics
for recycling markets.

Focused Customer Strategy:  In recent years, the Company has established certain
contractual and non-contractual relationships with existing customers, potential
customers,  distributors  and  others.  The  purpose  of this  focused  customer
strategy  is to  access  such  customers'  knowledge  and  contacts  within  the
applicable industries to identify customer needs and expand sales. Relationships
entered into since 1994 include the following:

  Name and/or                   Potential
Type of Company    Industry    Application    Description of Relationship
---------------    --------    -----------    ---------------------------

1. Union Carbide   Plastics    Recycling      Processing of post-consumer
                   recycling   whole bottles  colored HDPE (high density
                               and plastic    polyethylene, used for translucent
                               flakes         milk and other fluid bottles) to
                                              create PRISMA (TM) standard
                                              plastics (PRISMA (TM) is a set of
                                              color standards that allows for
                                              manufacture of consistently
                                              colored HDPE containers which
                                              require certain portions of post-
                                              consumer material).

2. Excel (meat     Food        Meat sorting   Non-exclusive relationship with a
   processor)                                 large U. S. meat processor
                                              resulting in a USDA-approved meat
                                              sorting system.

3. COMAS, S.p.A.   Tobacco     Tobacco        COMAS contributes market access as
   (manufacturer               sorting        well as extensive product handling
   of tobacco                                 experience for improving AMV
   processing                                 sorter designs to accelerate
   equipment)                                 market penetration with better
                                              performing machines.

4. VTT (agency     Pulp wood   Wood chip      Exclusive arrangement with VTT on
   of the                      sorting        the Massahake wood chip upgrading
   government                                 process. The Massahake process
   of Finland)                                allows for efficient utilization
                                              of trees that are taken from the
                                              forest.

5. CAE Machinery,  Pulp wood   Wood chip      AMV seeks to capitalize on the
   Ltd. (major                                reputation of CAE in the techno-
   supplier to                                logically conservative forest
   the North                                  products industry in North America
   American                                   to speed the adoption of machine
   wood products                              vision sorting technology by that
                                              industry.

6. Columbia        Wood        Further        Agreement to mutually explore
   Forest          veneer      automation     further automation of hardwood
   Products                    of veneer      plywood manufacturing processes.
                               processing

The Company  believes that adapting  current AMV machine  vision systems for new
applications  through strategic  relationships  such as these will contribute to
base business growth and accelerate entry into new niche markets.

Sales and  Distribution:  AMV has a direct sales force of twelve  employees.  It
also markets its products through representatives pursuant to various agreements
covering different  geographical areas. Prior to September 30, 1996, AMV offered
its  products for sale  outside the United  States and Canada  through Ham & Hak
Engineering BV and its Foodectronics subsidiary. Sales to Foodectronics amounted
to  approximately  2.9% and 6.4% of AMV total sales in the twelve  months  ended
December 31, 1996 and 1995,  respectively.  On September 30, 1996, SRC and Ham &
Hak terminated their ten-year exclusive distribution contract. In June 1997, the
Company  established SRC VISION BV in Eindhoven,  The Netherlands,  as its sales
and service center in Europe.

Marketing  Through  Trial  Units:  AMV  occasionally   enters  into  Site  Lease
Agreements with potential  customers that provide for a trial period  (generally
from two to four  months)  for the  customer  to test a  system.  The  potential
customer pays a monthly  rental fee for the trial units,  which is then credited
against the purchase  price when the customer  purchases the system.  Due to the
near 100% success rate in customer  sales  resulting from the use of these trial
units as a marketing tool, the Company intends to seek to increase the placement
of trial units in new potential customer sites.

International  Sales:  International  sales  (i.e.,  sales  outside  the  United
States) for the years ended December 31, 1997,  1996 and 1995 accounted for 33%,
53% and 26% of net sales,  respectively.  International sales as a percentage of
net sales in 1996 were  greater  because of the  acquisition  of Pulsarr in 1996
which was sold in May 1997. Foreign sales are denominated in U. S. dollars,  or,
in the case of Pulsarr, primarily Dutch guilders.

Backlog

AMV's  backlog for its products  was  approximately  $4,206,000  at December 31,
1997,  as compared to $7,578,000 at December 31, 1996.  Excluding  Pulsarr,  the
Company's  backlog at  December  31,  1996 was  $5,462,000.  Shipment of all the
backlog orders is scheduled to take place within nine months.  Backlog  includes
only those orders for which a purchase  order has been  received and for which a
delivery  schedule  has been  established  by AMV.  However,  such orders can be
subject  to  cancellation  by the  customer.  Because  of the  timing of orders,
customer changes in delivery  schedule,  cancellation of orders and trial period
programs that are not included in backlog, backlog as of any particular date may
not be representative of AMV's actual sales for any succeeding fiscal period.

Manufacturing and Supplies

The Company  manufactures,  assembles and ships its products from its facilities
in Medford and Eugene,  Oregon.  The Company's Medford facility has a vertically
integrated  manufacturing  process,  beginning with sheets and bars of stainless
steel that are cut and configured,  then welded to the Company's  specifications
for its components and machines.  The Medford  operation  also  manufactures  or
assembles many of the components and subassemblies used in its machines, such as
the processing  unit, air jet expulsion  component,  frames and related systems.
Additionally,  all  proprietary  components are  manufactured by AMV in Medford,
such as its  RGB Cyclops(TM)  color  cameras  used for  optical  scanning in the
KROMA-SORT(R) systems, and various lights and lamps developed by the Company for
certain of the systems.  The  Company's  Ventek  (Eugene)  operation  integrates
hardware  components  manufactured by outside  suppliers.  The Company's machine
vision systems incorporate its proprietary software and algorithms. Basic system
assembly  is  relatively   consistent   among  product  models  using  similarly
fabricated  parts for the machine  structure.  Most systems are customized as to
number of cameras, lighting configurations and certain other features.

The Company  has a  computerized  manufacturing  inventory  control  system that
integrates  and monitors  purchasing,  inventory  control and  production.  Each
vision system is tested prior to delivery to a customer.  The Company's  quality
control   process   tests  for   reliability   and   conformance   with  product
specifications.

The  Company is  dependent  on outside  unaffiliated  suppliers  for some of the
components and parts used in its vision automation systems. Most major parts and
components are available from multiple sources;  however, the prisms required in
RGB  Cyclops(TM)  color  cameras are  obtained  from a single  source  supplier.
Although  such supplier has not indicated any intention to limit or reduce sales
of parts to the Company, if it were to do so, the Company's business, results of
operations and financial  condition could be adversely  affected.  Historically,
AMV has generally been able to obtain parts and  components for its systems,  as
needed,  either from its  then-current  suppliers or  replacement  vendors.  AMV
believes  that it will  continue to be able to obtain  required  components  and
parts from various suppliers, although there can be no assurance that it will be
able to do so.

Warranty and Customer Service

AMV generally provides a one-year limited warranty on its products.  Since 1993,
there have not been any claims  under AMV's  warranty  program  that  materially
affected AMV's operations. AMV also provides telephone customer support services
and offers annual service agreements.

In addition, for certain custom-designed  systems, the Company contracts to meet
certain performance  specifications for specific  applications.  The Company has
incurred  higher  warranty  expenses  related  to new  products,  especially  on
products  that  have not yet been  proven  to be  commercially  viable,  than it
typically incurs with established  products.  There can be no assurance that the
Company will not incur  substantial  warranty  expenses in the future related to
new products as well as established  products,  which may have an adverse effect
on its results of operations and customer relationships.

Competition

The vision automation system industry is subject to intense competition. Some of
AMV's  major  competitors  are  substantially  larger  in size and have  greater
financial  resources than AMV. Some of its  competitors  sell machines which are
less expensive than AMV's.  In some instances,  a potential  customer may select
the less  expensive  alternative  even  though the AMV system  provides  greater
sorting capability.  Currently, Key Technology,  Pulsarr, Elbicon, Sortex, Allen
International, Morvue Electronics and Coe International are believed to be AMV's
direct  competitors.  There may be other  competitors  of AMV in addition to the
ones listed above.  AMV competes with its  competitors  on the basis of quality,
technology, systems solutions and price. There can be no assurance that AMV will
continue  to  successfully   differentiate   its  products  from  those  of  its
competitors.

Patents and Trademarks

AMV has been issued or assigned  approximately 22 United States patents, and has
applied  for  seven  other  United  States  patents  relating  to its  products,
including various inspection and detection systems and a cutter knife system. In
addition,  AMV has obtained or has applied for patent  protection for certain of
these  systems in selected  foreign  countries.  AMV believes  that two of these
patents, a system for stabilizing  articles on a conveyor and an RGB camera, are
important to its business.  These two patents expire in March 2011 and September
2008,  respectively.  Other  than  the two  patents  described  in the  previous
sentence,  AMV does not consider any of the present  patents  significant to its
current operations. These patents expire at various times over a six-year period
commencing in April 2005. Additionally, SRC has seven registered trademarks: VHS
OPTISORT(TM),  KROMA-SORT(R),  SPECTRA-SORT(TM), Length and Defect Analyzer(TM),
Pulp Wood Sorter, Quadra-View(R) and ODSS II(TM).

The Company  also  attempts to protect its trade  secrets and other  proprietary
information  through  proprietary  information  agreements  with  employees  and
consultants  and other security  measures.  There can be no assurance that these
measures will be successful in protecting the Company's  proprietary rights. The
laws  of  certain  countries  in  which  the  Company's  products  are or may be
manufactured  or sold may not protect the  Company's  products and  intellectual
property rights to the same extent as the laws of the United States.

There can be no assurance  that third  parties will not assert  infringement  of
other claims against the Company with respect to existing or future  products or
that licenses will be available on reasonable  terms, or at all, with respect to
Company   patents  or  any   third-party   technology.   Litigation  to  prevent
infringement  of Company patents or to determine the validity of any third-party
claims could result in significant expense to the Company and divert the efforts
of the  Company's  technical  and  management  personnel,  whether  or not  such
litigation is  determined  in favor of the Company.  The Company is not aware of
any threatened or pending patent actions.

As a  result  of the  1992  settlement  of a  lawsuit  alleging  certain  patent
infringements, SRC entered into a royalty agreement pursuant to which SRC agreed
to pay  royalties of 7% of certain  vision  system sales  through the earlier of
June  30,  2003,  and  the  date  at  which  aggregate  royalty  payments  equal
$1,600,000. The final royalty payment was made in July 1996.

Employees

At December 31, 1997, the Company had 165 full-time  employees,  including 67 in
manufacturing,  42 in engineering,  research and  development,  35 in marketing,
sales and  service and 21 in general  administration  and  finance.  None of the
Company's  employees is represented by a labor union. The Company  considers its
employee relations to be excellent.


Item 2. Properties
================================================================================

The principal  executive  office of AMV and the principal  executive  office and
manufacturing  facilities of SRC (a total of  approximately  82,000 square feet)
are located on an approximately 6.4 acre parcel of land in Medford,  Oregon. SRC
owns the land and building, subject to a deed of trust securing an approximately
$2.7 million loan made by Western Bank (the Western Bank Loan). The Western Bank
Loan bears  interest at Western Bank's prime rate plus 3.5% (9.5% as of December
31, 1997). The loan is due February 15, 2003.

Ventek occupies 12,000 square feet of a building located in Eugene, Oregon which
also  houses a  principal  supplier  of  mechanical  components  for its  vision
systems. The space is leased on a month-to-month basis.


Item 3. Legal Proceedings
================================================================================

The  information  required  by this item is  incorporated  by  reference  to the
Company's 1997 Annual Report to stockholders.


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

None.

<PAGE>

                                     Part II
                                     =======


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

The  information  required  by this item is  incorporated  by  reference  to the
Company's 1997 Annual Report to stockholders.


Item 6. Selected Financial Data
================================================================================

The selected  financial data for the Company presented below is derived from and
is qualified  by the  Company's  audited  financial  statements  included in the
Company's  1997 Annual  Report,  which  financial  statements are included in an
exhibit to this Form 10-K and should be read in conjunction  with such financial
statements  and the related  notes  thereto.  Until early 1990,  the Company was
principally  engaged in research and development and  organizational  activities
relating to its laser  operations.  In October 1995,  the Company sold its laser
operations,  which  accounted for all sales and related  expenses in fiscal year
1993,  all sales and a portion of expenses for the three  months ended  December
31, 1993, and a portion of 1994 sales and related expenses. The laser operations
have been treated as a discontinued  business in the selected financial data and
in the financial  statements  included in the Company's 1997 Annual Report.  All
costs  incurred  by the  Company  prior to October 1, 1993  related to its laser
operations  and  are  netted  against  sales  and  included  in  the  loss  from
discontinued  operations  line.  Around  October 1, 1993, AMV conceived of a new
business strategy whereby AMV would restructure its  organizational  and capital
structure to become a parent company of various  operating  subsidiaries  (i.e.,
the platform company concept).  Expenses incurred after October 1, 1993 relating
to the platform  Company  activities are included in their applicable line items
in the selected financial data below as they relate to continuing operations.

In February  1994,  the  Company  acquired  SRC. In March and July of 1996,  the
Company acquired Pulsarr and Ventek, respectively. In May 1997, the Company sold
Pulsarr.  Purchased  entity  operations  account  for a  large  portion  of  the
fluctuation in amounts  between  fiscal years 1997,  1996 and 1995. In May 1994,
the Company  changed its fiscal  year-end from  September 30 to December 31. The
quarter  ended  December 31, 1993,  is excluded from any full fiscal year and is
shown separately below. Selected financial data should be read in light of these
facts and in  conjunction  with the  financial  statements,  notes to  financial
statements and other financial information included in the Company's 1997 Annual
Report.

<TABLE>
<CAPTION>
                                                                                               Three            Year
                                                Year Ended December 31,                        Months           Ended
                             ----------------------------------------------------------        Ended          Sept. 30,
                                  1997           1996           1995            1994           1993             1993
                             ------------   ------------    ------------   ------------     ------------    ------------
<S>                          <C>            <C>             <C>            <C>              <C>             <C>
Net sales                    $ 31,974,000   $ 29,938,000    $ 19,394,000   $ 11,922,000     $         --    $         --
Cost of sales                  16,042,000     15,794,000      11,194,000      8,537,000               --              --
                             ------------   ------------    ------------   ------------     ------------    ------------
Gross profit                   15,932,000     14,144,000       8,200,000      3,385,000               --              --
Operating expenses             12,914,000     12,882,000       7,546,000      8,897,000          241,000              --
Charge for acquired
   in-process technology               --      4,915,000              --             --               --              --
Charge for royalty expense             --        647,000              --             --               --              --
Gain on sale of Pulsarr         4,989,000             --              --             --               --              --
Interest and other
   (expense) - net               (892,000)      (960,000)        461,000        (37,000)        (964,000)             --
                              -----------   ------------    ------------   ------------     ------------    ------------

Income (loss) from
   continuing operations        7,115,000     (5,260,000)      1,115,000     (5,549,000)      (1,205,000)             --
Loss from discontinued
   operations                          --             --        (173,000)    (2,248,000)        (326,000)     (3,461,000)
Provision for income taxes         99,000             --              --             --               --              --
                             ------------   ------------    ------------   ------------     ------------    ------------
Net income (loss)            $  7,016,000   $ (5,260,000)   $    942,000   $ (7,797,000)    $ (1,531,000)   $ (3,461,000)
                             ============   ============    ============   ============     ============    ============
Basic earnings (loss)
   per share:
   Continuing operations     $       0.64   $      (0.49)   $       0.12   $      (0.57)    $     (0.20)    $         --
   Discontinued operations            --              --           (0.02)         (0.23)          (0.05)           (0.91)
                             ------------   ------------    ------------   ------------     -----------     ------------
      Total                  $       0.64   $      (0.49)   $       0.10   $      (0.80)    $     (0.25)    $      (0.91)
                             ============   ============    ============   ============     ===========     ============
Diluted earnings (loss)
   per share:
   Continuing operations     $       0.49   $      (0.49)   $       0.11   $      (0.57)    $     (0.20)    $         --
   Discontinued operations             --             --           (0.02)         (0.23)          (0.05)           (0.91)
                             ------------   ------------    ------------   ------------     -----------     ------------
      Total                  $       0.49   $      (0.49)   $       0.09   $      (0.80)    $     (0.25)    $      (0.91)
                             ============   ============    ============   ============     ===========     =============
Weighted average number of
   common stock outstanding    11,202,000     10,704,000       9,451,000      9,703,000        6,114,000       3,793,000

Balance Sheet Data:
Current assets               $ 14,075,000   $ 15,411,000    $ 10,391,000   $  7,766,000     $  6,787,000    $         --
Current liabilities             4,942,000      9,498,000       3,501,000      3,181,000          810,000              --
Working capital                 9,133,000      5,913,000       6,890,000      4,585,000        5,977,000              --
Net assets relating to
   discontinued operations             --             --              --        393,000        1,036,000       3,445,000
Total assets                   25,235,000     30,938,000      17,628,000     14,876,000        6,815,000       3,445,000
Long term debt                  8,342,000     14,940,000       4,875,000      2,737,000               --              --
Total shareholders' equity     11,951,000      6,500,000       9,252,000      8,958,000        5,996,000       3,445,000
</TABLE>


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

Introduction

With the  exception of certain  cautionary  statements  and risk factors  listed
below, the information required by this item is incorporated by reference to the
Company's 1997 Annual Report to stockholders.

Cautionary Statements and Risk Factors

The Company may, from time to time, make forward-looking statements that involve
risks and uncertainties.  Factors associated with the forward-looking statements
which could cause actual results to differ  materially  from those stated appear
below. Readers should carefully consider the following cautionary statements and
risk factors.

History of Losses;  Negative Cash Flow:  Prior to 1995 and in 1996,  the Company
experienced losses and negative operating cash flow. The Company believes it may
operate at a negative cash flow for certain periods in the future due to (i) the
need to fund  certain  development  projects,  (ii) cash  required  to enter new
market areas,  (iii) irregular  bookings by customers due to the relatively high
per-unit  cost  of the  Company's  products  which  may  cause  fluctuations  in
quarterly or yearly  revenues,  (iv) cash  required  for the  repayment of debt,
especially $3.25 million due in July 1999, and (v) possible cash needed to fully
integrate  SRC's  and  Ventek's   operations.   If  the  Company  is  unable  to
consistently generate sustained positive cash flow from operations,  the Company
must rely on debt or equity financing.

Although the Company  achieved  profitability  in 1995 and 1997, there can be no
assurance as to the  Company's  profitability  on a quarterly or annual basis in
the future. Furthermore,  the non-recurring expenses in early 1996 resulted in a
significant loss for the 1996 year.

Uncertain Ability to Manage Growth and Integrate Acquired Businesses: As part of
its business strategy,  the Company intends to pursue rapid growth. In March and
July 1996,  the Company  acquired  Pulsarr and Ventek which had sales in 1995 of
approximately $11.4 million and $4.4 million, respectively, and would have added
approximately  80% to the Company's 1995 sales on a proforma basis.  Pulsarr was
subsequently  sold in May 1997. A growth  strategy  involving the integration of
new  entities,   such  as  Ventek,  will  require  the  establishment  of  sales
representatives  and distribution  relationships,  expanded customer service and
support,   increased   personnel   throughout  the  Company  and  the  continued
implementation  and  improvement  of the  Company's  operational,  financial and
management  information systems.  There is no assurance that the Company will be
able to attract  qualified  personnel or to accomplish other measures  necessary
for its  successful  integration  of Ventek or other  acquired  entities  or for
internal  growth,   or  that  the  Company  can  successfully   manage  expanded
operations.  As the  Company  expands,  it may  from  time  to  time  experience
constraints that will adversely affect its ability to satisfy customer demand in
a timely fashion.  Failure to manage growth  effectively  could adversely affect
the Company's financial condition and results of operations.

Rapid Technological Change;  Product Development:  The markets for the Company's
machine  vision  products  are  characterized  by rapidly  changing  technology,
evolving  industry   standards  and  frequent  new  product   introductions  and
enhancements.  For example,  the Company believes that the 1995  introduction by
Key  Technology,  Inc.  of its new line of vision  sorting  equipment  adversely
affected bookings in late 1995 and 1996. Sales of products such as those offered
by the Company  depend in part on the continuing  development  and deployment of
emerging  technology and new services and applications based on such technology.
The Company's  success will depend to a  significant  extent upon its ability to
enhance  its  existing  products  and  develop  new  products  that gain  market
acceptance.  There can be no assurance  that the Company will be  successful  in
selecting,  developing and  manufacturing new products or enhancing its existing
products on a timely or  cost-effective  basis or that products or  technologies
developed by others will not render the  Company's  products  noncompetitive  or
obsolete.  Moreover,  the Company may encounter technical problems in connection
with its product  development  that could result in the delayed  introduction of
new  products  or product  enhancements.  Failure to develop or  introduce  on a
timely basis new products or product enhancements that achieve market acceptance
would materially and adversely affect the Company's business,  operating results
and financial condition.

Market  Acceptance of New Products:  The Company's future operating results will
depend upon its ability to  successfully  introduce and market,  on a timely and
cost-effective basis, new products and enhancements to existing products.  There
can be no  assurance  that  new  products  or  enhancements,  if  developed  and
manufactured,  will achieve market  acceptance.  The Company is currently in the
initial prototype stage of development on a new high-speed  software and digital
signal   processing   technology   designed  to  significantly   improve  system
performance.  There  can be no  assurance  that a market  for this  system  will
develop  (i.e.,  that a need for the system will exist,  that the system will be
favored over other  products on the market,  etc.) or, if a market does develop,
that the  Company  will be able,  financially  or  operationally,  to market and
support the system successfully.

Dependence on Certain Markets and Expansion Into New Markets: The future success
and growth of the Company is  dependent  upon  continuing  sales in domestic and
international food processing markets as well as successful penetration of other
existing  and  potential  markets.  A  substantial   portion  of  the  Company's
historical sales has been in the potato and other vegetable  processing markets.
Reductions in capital equipment expenditures by such processors due to commodity
surpluses,  product price fluctuations,  changing consumer  preferences or other
factors could have an adverse effect on the Company's results of operations. The
Company  also  intends  to expand the  marketing  of its  processing  systems in
additional  food  markets such as meat and granular  food  products,  as well as
non-food markets such as plastics,  wood products and tobacco, and to expand its
sales  activities in foreign markets.  In the case of Ventek,  the wood products
market  served is narrow and  cyclical,  and  saturation  of that market and the
potential  inability to identify and develop new markets could adversely  affect
Ventek's  growth  rate.   There  can  be  no  assurance  that  the  Company  can
successfully penetrate additional food and non-food markets or expand further in
foreign markets.

Lengthy Sales Cycle:  The sales cycle in the marketing and sale of the Company's
machine vision systems,  especially in new markets or in a new  application,  is
lengthy and can be as long as three years. Even in existing markets,  due to the
$150,000  to  $600,000  price  range for each  system and  possibly  significant
ancillary costs required for a customer to install the system, the purchase of a
machine  vision system can  constitute a substantial  capital  investment  for a
customer  (which  may need more than one  machine  for its  particular  proposed
application)  requiring lengthy consideration and evaluation.  In particular,  a
potential customer must develop a high degree of assurance that the product will
meet its needs,  successfully  interface with the customer's own  manufacturing,
production or processing system,  and have minimal warranty,  safety and service
problems.  Accordingly,  the time lag from  initiation  of marketing  efforts to
final sales can be lengthy.

Competition:  The markets for the Company's products are highly  competitive.  A
major  competitor  of the Company  introduced  several years ago a new flat-belt
optical  sorter  product which has increased  the  competition  that the Company
faces. In the case of Ventek, the wood industry continues to develop alternative
products to plywood  (e.g.,  oriented  strand board) which do not require vision
systems  for  quality  control.  Some of the  Company's  competitors,  including
Pulsarr which was sold in May 1997 to a company  significantly  larger than AMV,
may  have  substantially  greater  financial,  technical,  marketing  and  other
resources  than the  Company.  Important  competitive  factors in the  Company's
markets include price, performance,  reliability,  customer support and service.
Although  the Company  believes  that it  currently  competes  effectively  with
respect to these  factors,  there can be no  assurance  that the Company will be
able to continue to compete effectively in the future.

Dependence Upon Certain Suppliers: Certain key components and subassemblies used
in the Company's  products are currently obtained from sole sources or a limited
group  of  suppliers,  and the  Company  does  not  have  any  long-term  supply
agreements to ensure an uninterrupted  supply of these components.  Although the
Company seeks to reduce  dependence  on sole or limited  source  suppliers,  the
inability to obtain sufficient sole or limited source components as required, or
to develop  alternative  sources if and as  required,  could result in delays or
reductions in product  shipments which could materially and adversely affect the
Company's results of operations and damage customer relationships.  The purchase
of certain of the components used in the Company's  products  require an 8 to 12
week lead time for delivery. An unanticipated  shortage of such components could
delay  the  Company's  ability  to timely  manufacture  units,  damage  customer
relations,  and have a material  adverse effect on the Company.  In addition,  a
significant  increase  in the  price  of one or  more  of  these  components  or
subassemblies could adversely affect the Company's results of operations.

Dependence Upon Significant Customers and Distribution Channel: The Company sold
equipment to an unaffiliated  customer  totaling 14% of sales in 1997 and to two
unaffiliated  customers  totaling 13% and 12% of sales in 1996. Sales to another
two unaffiliated  customers totaled 19% and 16% of sales in 1995. Ventek's sales
have been to a relatively small number of multi-location  plywood manufacturers.
The  Company  usually  receives  orders of from one to  several  machine  vision
systems,  but occasionally  receives larger orders. While the Company strives to
create long-term relationships with its customers and distributors, there can be
no  assurance  that they will  continue  ordering  additional  systems  from the
Company. The Company may continue to be dependent on a small number of customers
and  distributors,  the loss of  which  would  adversely  affect  the  Company's
business.

Risk of International  Sales: Due to its export sales, the Company is subject to
the risks of conducting business  internationally,  including unexpected changes
in regulatory requirements;  fluctuations in the value of the U. S. dollar which
could increase the sales prices in local currencies of the Company's products in
international  markets;  delays in obtaining export licenses,  tariffs and other
barriers  and  restrictions;  and the  burdens  of  complying  with a variety of
international  laws.  For  example,  the  possibility  of  sales  to  Indonesian
customers  will be adversely  affected by the recent  currency  devaluation.  In
addition,  the laws of certain  foreign  countries may not protect the Company's
intellectual  property  rights to the same  extent as do the laws of the  United
States.

Fluctuations  in  Quarterly  Operating  Results;  Seasonality:  The  Company has
experienced  and  may in  the  future  experience  significant  fluctuations  in
revenues and  operating  results from quarter to quarter as a result of a number
of factors, many of which are outside the control of the Company.  These factors
include the timing of significant  orders and shipments,  product mix, delays in
shipment,  capital spending patterns of customers,  competition and pricing, new
product introductions by the Company or its competitors,  the timing of research
and  development  expenditures,  expansion of marketing and support  operations,
changes  in  material   costs,   production   or  quality   problems,   currency
fluctuations,  disruptions in sources of supply,  regulatory changes and general
economic conditions. These factors are difficult to forecast, and these or other
factors  could have a material  adverse  effect on the  Company's  business  and
operating results.  Moreover,  due to the relatively fixed nature of many of the
Company's costs, including personnel and facilities costs, the Company would not
be  able to  reduce  costs  in any  quarter  to  compensate  for any  unexpected
shortfall  in net  sales,  and such a  shortfall  would  have a  proportionately
greater  impact on the  Company's  results of operations  for that quarter.  For
example, a significant portion of the Company's quarterly net sales depends upon
sales of a relatively small number of high-priced systems.  Thus, changes in the
number of such  high-priced  systems  shipped in any given  quarter  can produce
substantial  fluctuations  in net sales,  gross  profits,  and net  income  from
quarter to quarter.  In  addition,  in the event the  Company's  machine  vision
systems'  average selling price  increases,  of which there can be no assurance,
the addition or cancellation of sales may exacerbate  quarterly  fluctuations in
revenues and operating results.

The Company's operating results may also be affected by certain seasonal trends.
For  example,  the Company may  experience  lower sales and order  levels in the
first  quarter  when  compared  with the  preceding  fourth  quarter  due to the
seasonality  of  certain  harvested  food  items  and the  timing  of  annual or
semi-annual  plant  shut-downs  during which systems are installed.  The Company
expects  these  seasonal  patterns to continue,  though their impact on revenues
will decline as the Company continues to expand its presence in non-agricultural
and other markets which are less seasonal.

Risks  Associated With Possible  Acquisitions:  The Company may pursue strategic
acquisitions  or joint  ventures  in  addition  to the  acquisitions  of Pulsarr
(subsequently  divested in May 1997) and Ventek as part of its growth  strategy.
While the Company has no understandings,  commitments or agreements with respect
to any further  acquisition,  the Company anticipates that one or more potential
opportunities  may  become  available  in the  future.  Acquisitions  and  joint
ventures  would require  investment of operational  and financial  resources and
could  require  integration  of  dissimilar  operations,   assimilation  of  new
employees,  diversion of management resources, increases in administrative costs
and additional costs associated with debt or equity  financing.  There can be no
assurance that any  acquisition or joint venture by the Company will not have an
adverse  effect on the  Company's  results of  operations  or will not result in
dilution to existing shareholders. If additional attractive opportunities become
available,  the  Company  may decide to pursue  them  actively.  There can be no
assurance  that the  Company  will  complete  any future  acquisitions  or joint
ventures or that such a future  transaction  will not  materially  and adversely
affect the Company.

Dependence  Upon Key Personnel:  The Company's  success depends to a significant
extent upon the continuing contributions of its key management, technical, sales
and  marketing  and other key  personnel.  Except  for  William  J.  Young,  the
Company's  President and Chief Executive  Officer,  Alan R. Steel, the Company's
Chief  Financial  Officer,  Dr. James Ewan,  SRC's President and Chief Executive
Officer,  and the four former  stockholders of Ventek, the Company does not have
long-term  employment  agreements or other  arrangements  with such  individuals
which would  encourage  them to remain with the Company.  The  Company's  future
success also depends upon its ability to attract and retain  additional  skilled
personnel.  Competition  for such employees is intense.  The loss of any current
key  employees or the inability to attract and retain  additional  key personnel
could have a material  adverse  effect on the  Company's  business and operating
results.  There can be no assurance  that the Company will be able to retain its
existing personnel or attract such additional skilled employees in the future.

Intellectual Property: The Company's competitive position may be affected by its
ability to protect its proprietary technology. Although the Company has a number
of United States and foreign  patents,  there can be no assurance  that any such
patents will provide  meaningful  protection  for its product  innovations.  The
Company may experience  additional  intellectual property risks in international
markets where it may lack patent protection.

Product Liability and Other Legal Claims:  From time to time, the Company may be
involved  in  litigation  arising  out of the  normal  course  of its  business,
including  product  liability  and other legal  claims.  While the Company has a
general liability  insurance policy which includes product liability coverage up
to an  aggregate  amount  of $10  million,  there can be no  assurance  that the
Company will be able to maintain product liability insurance on acceptable terms
or that its insurance will provide adequate coverage against potential claims in
the  future.  There can be no  assurance  that  third  parties  will not  assert
infringement claims against the Company, that any such assertion of infringement
will  not  result  in  litigation  or that the  Company  would  prevail  in such
litigation. Furthermore,  litigation, regardless of its outcome, could result in
substantial  cost to and  diversion of effort by the Company.  Any  infringement
claims or litigation  against the Company could  materially and adversely affect
the  Company's  business,  operating  results  and  financial  condition.  If  a
substantial  product  liability  or other legal claim  against the Company  were
sustained that was not covered by insurance, there could be an adverse effect on
the Company's financial condition and marketability of the affected products.

Warranty Exposure and Performance Specifications: The Company generally provides
a  one-year  limited  warranty  on  its  products.  In  addition,   for  certain
custom-designed  systems,  the Company  contracts  to meet  certain  performance
specifications for a specific application. In the past, the Company has incurred
higher warranty  expenses  related to new products than it typically incurs with
established products.  There can be no assurance that the Company will not incur
substantial  warranty  expenses in the future with respect to new  products,  as
well  as  established  products,  or with  respect  to its  obligations  to meet
performance  specifications,  which may have an adverse effect on its results of
operations and customer relationships.

Possible  Need  for  Additional  Financing:  The  Company  may  seek  additional
financing; however, there can be no assurance the Company will be able to obtain
any  additional  financing  on terms  satisfactory  to the  Company,  if at all.
Potential increases in the number of outstanding shares of the Company's Class A
Common Stock due to convertible debt,  warrants and stock options, a substantial
loss in 1996 and debt incurred for the  acquisition  of Ventek due in 1999,  may
limit the Company's ability to negotiate additional debt or equity financing.

Shareholder  Rights Plan: In February  1998,  the  Company's  Board of Directors
declared a dividend distribution of one Preferred Share Purchase Right ("Right")
on each  outstanding  share of its common stock.  The Rights will be attached to
the Company's  common stock and will trade separately and be exercisable only in
the event that a person or group acquires or announces the intent to acquire 20%
or more of AMV's common stock.  Each Right will entitle  shareholders to buy one
one-hundredth of a share of a new series of junior participating preferred stock
at an exercise price of $15. The Rights expire on February 26, 2008.

The Rights  Plan is  intended  to protect  the  Company's  shareholders  against
abusive  takeover  tactics and to ensure that each shareholder is treated fairly
in any transaction  involving an acquisition of control of the Company,  such as
partial or two-tiered  tender offers that do not treat all  shareholders  fairly
and  equally.  The Rights do not affect any  takeover  proposal  which the Board
believes is in the best interests of the Company's shareholders.

Pursuant  to the Rights  Plan,  if the  Company is acquired in a merger or other
business  combination  transaction  after a person or group has  acquired 20% or
more of the  Company's  outstanding  common  stock,  each Right will entitle its
holder  (other  than  such  person  or  group)  to  purchase,   at  the  Right's
then-current  exercise price, a number of the acquiring  company's common shares
having a market  value of twice such price.  In  addition,  if a person or group
acquires 20% or more of AMV's outstanding  common stock, each Right will entitle
its  holder  (other  than such  person or group)  to  purchase,  at the  Right's
then-current exercise price, a number of its common shares having a market value
of twice such price.

Following an acquisition by a person or group of beneficial  ownership of 20% or
more of the Company's  common stock and before an  acquisition of 50% or more of
the common  stock,  AMV's Board of Directors may exchange the Rights (other than
Rights owned by such person or group), in whole or in part, at an exchange ratio
of one share of common stock (or one  one-hundredth of a share of the new series
of junior  participating  preferred  stock) per Right.  Before a person or group
acquires beneficial  ownership of 20% or more of the Company's common stock, the
Rights  are  redeemable  for  $.0001  per  Right at the  option  of the Board of
Directors.

While the  Company is not aware of any  current  intent to acquire a  sufficient
number of shares of the Company's  common stock to trigger  distribution  of the
Rights,  existence of the Rights could discourage offers for the Company's stock
that may exceed the  current  market  price of the stock,  but that the Board of
Directors deems inadequate.


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

The  information  required  by this item is  incorporated  by  reference  to the
Company's 1997 Annual Report to stockholders.


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

None.

<PAGE>

                                    Part III
                                    ========


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

The  information  required  by this item is  incorporated  by  reference  to the
Company's  Proxy  Statement  to  be  filed  with  the  Securities  and  Exchange
Commission before April 30, 1998.


Item 11. Executive Compensation
================================================================================

The  information  required  by this item is  incorporated  by  reference  to the
Company's  Proxy  Statement  to  be  filed  with  the  Securities  and  Exchange
Commission before April 30, 1998.


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

The  information  required  by this item is  incorporated  by  reference  to the
Company's  Proxy  Statement  to  be  filed  with  the  Securities  and  Exchange
Commission before April 30, 1998.


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

The  information  required  by this item is  incorporated  by  reference  to the
Company's  Proxy  Statement  to  be  filed  with  the  Securities  and  Exchange
Commission before April 30, 1998.

<PAGE>
                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DATED:  March 9, 1998                        ADVANCED MACHINE VISION CORPORATION


                                             By:  /s/ William J. Young
                                                ------------------------
                                                  William J. Young
                                                  Chief Executive Officer
                                                  and President

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

        Signature                      Title                          Date
        ---------                      -----                          ----


/s/ William J. Young          Chairman of the Board of
--------------------------    Directors, Chief Executive
    William J. Young          Officer and President,
                              Principal Executive Officer          March 9, 1998


/s/ Alan R. Steel             Chief Financial Officer,
--------------------------    Principal Financial and
    Alan R. Steel             Accounting Officer                  March 13, 1998


/s/ Haig S. Bagerdjian        Director                            March 11, 1998
--------------------------
    Haig S. Bagerdjian


/s/ Vikram Dutt               Director                            March 10, 1998
--------------------------
    Vikram Dutt


/s/ James Ewan                Director                             March 2, 1998
--------------------------
    James Ewan


/s/ Robert M. Loeffler        Director                             March 9, 1998
--------------------------
    Robert M. Loeffler


/s/ Jack Nelson               Director                            March 23, 1998
--------------------------
    Jack Nelson


/s/ Rodger A. Van Voorhis
--------------------------    Director                            March 30, 1998
    Rodger A. Van Voorhis
<PAGE>

                                     Part IV
                                     =======


Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K
================================================================================

(a)  The following documents are filed as part of this report:

    1,2.          Financial Statements and Schedules.

                  The financial  statements and schedules of the Company are set
                  forth in the  "Index to  Financial  Statements  and  Financial
                  Statement Schedules" on page F-1.

    3.            Exhibits. The following exhibits are filed as a part of this
                  report:

  Exhibit
   Number         Description
 --------         -----------

    3.1           Restated Articles of Incorporation of the Company as amended
                  to date. (12)

    3.2           Restated and Amended By-Laws of the Company. (5)

    4.1           Form of Warrant Agreement (including forms of Class A and
                  Class B Warrant Certificates). (1)

    4.2           Form of Underwriter's Unit Purchase Option. (1)

    4.3           Form of Class C Warrant Agreement (including form of Class C
                  Warrant Certificate). (1)

    4.4           Form of Class D Warrant Agreement. (1)

    4.5           Form of Class F Warrant Agreement. (5)

    4.6           Form of Class G Warrant Agreement. (6)

    4.7           Form of Class H Warrant Agreement. (7)

    4.8           Form of Class I Warrant Agreement. (9)

    4.9           Form of Laidlaw Warrant Agreement. (5)

    4.10          Form of stock option agreement. (8)

    4.11          Form of 1997 Restricted Stock Plan and restricted stock
                  agreement. (10)

    4.12          Rights Agreement dated February 27, 1998 between the Company
                  and American Stock Transfer and Trust Company (16)

   10.1           Stock Option Plan and form of option agreements. (1)

   10.2           Form of Indemnity Agreement between the Company and each of
                  its officers and directors. (1)

   10.3           Settlement Agreement and License Agreement dated July 27,
                  1992, between Key Technology, Inc. and SRC VISION, Inc. (2)

   10.4           Employment Agreement between Alan R. Steel and the Company
                  dated January 1, 1998. (17)

   10.5           Employment Agreement between William J. Young and the Company
                  dated January 1, 1998. (17)

   10.6           Employment Agreement between William J. Young and SRC VISION,
                  Inc. dated January 1, 1998. (17)

   10.7           Employment Agreement between James Ewan and SRC VISION, Inc.
                  dated January 1, 1998. (17)

   10.8           Asset Purchase Agreement between Applied Laser Systems, Inc.
                  and Coherent, Inc. dated September 22, 1995. (3)

   10.9           Stock Purchase Agreement dated March 1, 1996, (without
                  exhibits) between Meijn Beheer BV and ARC Netherlands BV, a
                  wholly-owned subsidiary of the Company. (4)

   10.10          Stock Purchase Agreement dated March 1, 1996, between
                  J. C. Scholt and ARC Netherlands BV, a wholly-owned subsidiary
                  of the Company. (4)

   10.11          Convertible  Note dated March 1, 1996,  issued in  connection
                  with that certain Stock Purchase Agreement dated March 1,
                  1996, between J. C. Scholt and ARC Netherlands BV (4)

   10.12          Subscription Agreement dated January 18, 1996, between the
                  Company and Swiss American Securities, Inc. as agent for
                  Credit Suisse, related to the private placement of 1,400,000
                  shares of the Company's Class A Common Stock. (4)

   10.13          Subscription  Agreement dated April 9, 1996, between the
                  Company and Swiss American Securities, Inc., as agent for
                  Credit Suisse, related to the private placement of $3,400,000
                  of convertible secured notes. (6)

   10.14          Convertible Secured Note dated April 17, 1996, between the
                  Company and Ilverton International, Inc. (11)

   10.15          Asset Purchase Agreement dated July 24, 1996, by and among
                  AMV, Ventek and the shareholders of Ventek. (9)

   10.16          $1,000,000 Note dated July 24, 1996, between AMV and Ventek.
                  (9)

   10.17          $2,250,000 Convertible Note dated July 24, 1996, between AMV
                  and Ventek. (9)

   10.18          $1,125,000 Note dated July 24, 1996, between AMV and Ventek.
                  (9)

   10.19          Stock Appreciation Rights Agreement dated July 24, 1996
                  between AMV and Ventek. (9)

   10.20          Form of Employment Agreement dated July 24, 1996 between each
                  of the four stockholders of Ventek. (9)

   10.21          Pledge and Security Agreement dated July 24, 1996, by and
                  among AMV, AMV Subsidiary, Inc., Ventek and Solin and
                  Associates, P.C. (9)

   10.22          1997 SRC VISION, Inc. Stock Option Plan and forms of stock
                  option agreements. (15)

   10.23          Plan of Merger between ARC Capital and AMV to effect an
                  amendment to the Company's Articles of Incorporation to change
                  the Company's name from ARC Capital to Advanced Machine Vision
                  Corporation. (12)

   10.24          Share Purchase Agreement dated April 29, 1997 between Barco NV
                  and ARC Netherlands BV. (13)

   10.25          Settlement Agreement dated August 12, 1997. (14)

   10.26          1997 Nonqualified Stock Option Plan and form of option
                  agreement. (14)

   13             Annual Report to Security Holders.

   23             Consent of Independent Public Accountants.

   27             Financial Data Schedule.


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


  (1)      Previously filed as an exhibit to Form S-1 (File No. 33-45126).

  (2)      Filed with the SEC on May 18, 1994, as an exhibit to the Company's
           Post Effective Amendment No. 5 to Form S-1 (File No. 33-45126).

  (3)      Filed with the SEC on October 5, 1995, as an exhibit to the Company's
           Form 8-K dated October 2, 1995.

  (4)      Filed with the SEC on March 6, 1996, as an Exhibit to the Company's
           Form 8-K dated March 1, 1996.

  (5)      Previously filed as an exhibit to Form S-3 (File No. 333-10847).

  (6)      Filed with the SEC on April 14, 1996, as an exhibit to the Company's
           Form 10-K for the year ended December 31, 1995.

  (7)      Filed with the SEC on May 14, 1996, as an exhibit to the Company's
           Form 10-Q for the quarter ended March 31, 1996.

  (8)      Filed with the SEC as an exhibit to form S-1 (File No. 33-45126).

  (9)      Filed with the SEC on July 30, 1996, as an exhibit to the Company's
           Form 8-K dated July 24, 1996.

  (10)     Filed with the SEC on January 22, 1997, as an exhibit to the
           Company's Form 8-K dated January 9, 1997.

  (11)     Filed with the SEC on May 14, 1996, as an exhibit to the Company's
           Form 10-Q for the quarter ended March 31, 1996.

  (12)     Filed with the SEC on May 14, 1997 as an exhibit to the Company's
           Form 10-Q for the quarter ended March 31, 1997.

  (13)     Filed with the SEC on May 9, 1997 as an exhibit to the Company's
           Form 8-K regarding the sale of Pulsarr.

  (14)     Filed with the SEC on October 30, 1997 as an exhibit to the Company's
           Form 10-Q for the quarter ended September 30, 1997.

  (15)     Filed with the SEC on March 31, 1997 as an exhibit to the Company's
           Form 10-K for the year ended December 31, 1996.

  (16)     Filed with the SEC on February 20, 1998 as an exhibit to the
           Company's Form 8-A.

  (17)     Filed  with  the  SEC on  February  27,  1998  as an  exhibit  to the
           Company's Form 8-K regarding implementation of a stock rights program
           and employment contracts.

(b)  Reports on Form 8-K:

           On  February  27,  1998,   a  Form  8-K  was  filed   regarding   the
           implementation of a stock rights program and employment contracts.