##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-KSB

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

For the fiscal year ended March 25, 2001

OR

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

For the transition period from ________ to ________

Commission file number 1-11056

ADVANCED PHOTONIX, INC.®
(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0325826                          
|                                                              
|                                                              
|                                                              
|                                                              
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

1240 Avenida Acaso, Camarillo, CA 93012
(Address of principal executive offices) (Zip Code)

(805) 987-0146
(Registrants telephone number, including area code)
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $.001 Par Value
Class A Common Stock



---



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 [   ]

Total revenues for registrants fiscal year ended March 25, 2001 were
$6,805,896.

As of June 18, 2001, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $12,500,000.

As of June 18, 2001, there were 12,207,648 shares of Class A Common Stock
and 31,691 shares of Class B Common Stock outstanding.

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 any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [   ]

DOCUMENTS INCORPORATED BY REFERENCE

None









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TABLE OF CONTENTS



|           |                                                                                              |                                    |  |  |  |  |  | 
|---------- | -------------------------------------------------------------------------------------------- | ---------------------------------- |  |  |  |  |  | 
|PART I    
|           | Item 1. Business                                                                            
|           | Item 2. Properties                                                                          
|           | Item 3. Legal Proceedings                                                                   
|           | Item 4. Submission of Matters to a Vote of Security Holders                                 
|PART II   
|           | Item 5. Market for Common Equity and Related Stockholder Matters                            
|           | Item 6. Managements Discussion and Analysis or Plan of Operation                           
|           | Item 7. Financial Statements and Supplementary Data                                         
|           |                                                                                              | INDEPENDENT AUDITORS REPORT      
|           |                                                                                              | BALANCE SHEET                     
|           |                                                                                              | STATEMENTS OF OPERATIONS          
|           |                                                                                              | STATEMENTS OF SHAREHOLDERS' EQUITY
|           |                                                                                              | STATEMENTS OF CASH FLOWS          
|           |                                                                                              | NOTES TO FINANCIAL STATEMENTS     
|           | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|PART III  
|           | Item 9. Directors and Executive Officers                                                    
|           | Item 10. Executive Compensation                                                             
|           | Item 11. Security Ownership of Certain Beneficial Owners and Management                     
|           | Item 12. Certain Relationships and Related Transactions                                     
|PART IV   
|           | Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                   
|SIGNATURES



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##### Table of Contents






PART I




Item 1. Business

General

Advanced Photonix, Inc.® (hereafter referred to as the Company),
is engaged in the development and manufacture of optoelectronic semiconductor
based components, hybrid assemblies and other proprietary solid state light and
radiation detection devices, including proprietary advanced solid state silicon
photodetection devices which utilize avalanche photodiode (APD) technology.
The Company was incorporated under the laws of the State of Delaware on June
22, 1988. The Company believes that its proprietary APD technology represents a
leading-edge advancement in photodetection and imaging that will become an
increasingly important part of its business.

The Companys proprietary technology extends the capability of the traditional
APD by introducing a large surface area silicon device or large area avalanche
photodiode (LAAPD). The Company developed the LAAPD as an alternative to the
photomultiplier vacuum tube (PMT), which has been used for many years as the
primary technology for certain measurement, control and monitoring applications
in industrial, medical, military, scientific and commercial settings.

The LAAPD is an advanced photodetection device developed for the photonics
industry specifically as a replacement to the outdated PMT. Photodetection
devices sense light of varying intensity and convert the light detected to
electronic signals that cause the systems of which they are a part to respond
in pre-determined ways. The photonics industry includes other devices less
complex than the LAAPD such as PIN (positive-intrinsic-negative) photodiodes.
Currently the bulk of the Companys revenues are derived from the sale of
products based on PIN and other non-proprietary technologies, referred to as
the core business.

Products

The Company designs and manufactures optoelectronic semiconductor based
components and hybrid assemblies. The Companys most notable products include:



| |  | Customer specific assemblies for fiber-optic data and telecommunications, medical/biological diagnosis, particle measuring
and counting
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | PIN photodetectors, spectrally enhanced, single and multi-element                                                                      
| 
| |  | Photodetector hybrids                                                                                                                  
| 
| |  | Military and commercial aerospace products                                                                                             
| 
| |  | Custom optoelectronic assemblies incorporating light-emitting diodes (LEDs) and LED displays                                         
| 
| |  | FILTRODE®  patented technology integrating optical filters directly on photodiode chips                                               
| 
| |  | Avalanche photodiodes                                                                                                                  
| 
| |  | Large area avalanche photodiodes (LAAPDs  discrete, with and without amplification, and with and without thermoelectric
coolers)      

The Company supplies detectors for military and commercial aerospace and other
high reliability (Hi-Rel) applications. Hi-Rel devices are designed,
manufactured and tested to function in severe environmental conditions. The
Company has many years of experience in supplying Hi-Rel devices that demand
modern wafer fabrication techniques, a dedicated assembly area, and a
sophisticated test lab. Hi-Rel products manufactured by the Company include:



2





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##### Table of Contents





| |  | Multi-element hybrid assembly used on the U.S. Navys Rolling Airframe Missile (RAM) developed by Raytheon
|- |  | ----------------------------------------------------------------------------------------------------------
| 
| |  | Narrow and wide field of view detectors used in various TOW missile tracking systems                      
| 
| |  | LED arrays for use in thermal image displays in various night sights, commercial and military             
| 
| |  | Quadrant photodetectors used in the autocollimator for airborne navigation/FLIR PODs and Smart Bombs"   
| 
| |  | Multi-element detector arrays used in the Space Shuttle Arm control system and satellite systems          
| 
| |  | Opto assemblies for biological and blood analysis                                                         
| 
| |  | Automotive distance control                                                                               

The Companys patented FILTRODE® technology integrates optical
coatings directly on photodiode chips, replacing conventional technology that
requires a separate filter glass. In addition to offering a simpler design and
lower cost, reliability and performance are improved due to the integrated
design. Special packaging of this technology allows for unique applications
whereby both sides of the detector can be used to detect light.

The Companys small area avalanche photodiodes (SAAPDs  see description of
avalanche photodiode technology below) utilize a silicon epi-planar structure.
SAAPDs have been used for a variety of low-light level applications and are
responsive from 400 nm to 1000 nm. Typical applications include fiber optics
and free space communications, bar code readers and laser range finders.

Large Area Avalanche Photodiode Technology

The avalanche photodiode is a specialized silicon photodiode capable of
detecting very low light levels due to an internal gain phenomenon known as
avalanching. This performance characteristic is not present in the common PIN
photodiode.

The APD, developed in the late 1960s, gave promise of a solid state
replacement for the photomultiplier tube, an old and outdated vacuum tube
technology, for sensing low levels of energy. Historically, APDs have been 3mm
diameter or smaller with an internal gain of 50:1 or less. Until now, design
and manufacturing limitations have restricted the size and performance of APDs,
severely limiting their practical use.

The Company has developed and patented various attributes of the LAAPD, most
notably producing diameters up to 25 mm with internal gains of 300:1. The LAAPD
is a high speed detector capable of detecting low light levels from the DEEP UV
(ultraviolet), through the visible spectrum and into the near IR (infrared).
When coupled with a scintillator, the LAAPD can efficiently detect X-ray and
gamma-rays. The LAAPD offers capabilities well beyond those of the existing
photo-detection devices, such as the PIN photodiode, the small area APD and the
PMT. The LAAPD has higher sensitivity at wider bandwidths than the PIN
photodiode; it has a larger active area with greater sensitivity and gain than
the SAAPD; and when compared to the PMT, the LAAPDs advantages include
superior spectral bandwidth, greater sensitivity to pulses above 500 photons
especially in the visible and near IR, greater dynamic range, and a rugged,
solid-state structure suitable for operation in harsh environments. LAAPDs
also feature superior quantum efficiency in visible, near IR and UV regions to
that of the PMT. Other features that differentiate the LAAPD from the PMT
include its small package size, immunity to magnetic fields and ease of
temperature control providing stable operation over temperature gradients. In
addition to a rugged and compact design, their operation requires far less
power, making the LAAPD more advantageous in portable applications.

The Company expects, but there is no assurance, that its proprietary APD
technology, employed in the development of the LAAPD, will form the basis for
continuing the investigation and potential commercial



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##### Table of Contents



development of other lines of advanced silicon avalanche photonics products
which will have a broader range of commercial and military applications than
the PMT and PIN arrays. For example:



| |  | LAAPD arrays  the Companys patented technology in which the rear
surface of an LAAPD is segmented to create isolated pixels, each with
a separate electronic lead to be accessed in parallel fashion for
imaging applications.   
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Vacuum avalanche photodiode (VAPD)  another patented technology,
which combines a photocathode and an LAAPD in a vacuum tube,
functioning as a detector for high resolution, single photon-counting
and low light level detection.

The Company has identified target markets for its LAAPD products based on
customer evaluations and in-house tests. Evaluation detectors are sold to
original equipment manufacturers (OEMs), engineers and scientists who report
information to the Company concerning potential applications and markets, as
well as suggesting improvements and pricing objectives. It is expected, but
there is no assurance, that OEMs who can take advantage of the performance
capabilities of LAAPDs will be the source of repeat business for production
quantities. Targeted markets include:



| |  | Ranging, tracking & imaging  smart image surveillance/security
cameras, 3D collision avoidance cameras, missile guidance, threat
warning, underwater mine detection, and mapping & salvaging.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Medical imaging  detectors which image human physiology in slices and
look for pathology. Included in this category are PET scanners, CT
scanners, bone densitometers and gamma cameras.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| 
| |  | Industrial scanning/process control  industrial CT inspection,
aerospace ice inspection, drum/flat bed scanning, semiconductor wafer
defect scanning and film to video conversion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Analytical chemistry  analyzing the chemical recipe of samples,
from glucose levels in the blood to pesticides in ground water.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | Medical diagnostics  human fluids are analyzed to diagnose a medical
pathology or condition. A partial list of conditions which are
diagnosed every day using photonics technology include diabetes, lipid
metabolism disorders, myocardial infarction, gout, liver diseases,
renal diseases, pancreatitis, anemia and electrolyte disturbances. It
is expected that this list will grow dramatically in the coming years
with the explosion of methods now available to perform
immunodiagnostics. Examples of forthcoming diagnostics include those
targeting thyroid and sexually transmitted disease conditions and wide
field retinal visualization.
| 
| |  | Environmental monitoring  atmospheric meteorology LIDAR (light
detection and ranging), radiation dose monitors, airborne and liquid
particle measurement, optical air data systems, airport wind shear and
atmospheric pollution monitoring.                                                                                                                                                                                                                                                                                                                                                                                                             
| 
| |  | Scientific research  high energy physics fiber tracking, space
particle experiments and neutrino experiments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

The Companys products are primarily sold as components or assemblies to OEMs
or other component manufacturers. The Company does not manufacture any end
user products within the above or any other markets.



4





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##### Table of Contents



Raw Materials

The principal raw materials used by the Company in the manufacture of its
semiconductor chip components and assemblies are silicon wafers, chemicals and
gases used in processing wafers, gold wire, lead frames, metal and plastic
packages that house the chip and the various custom assemblies. All of these
raw materials can be obtained from several suppliers. From time to time,
particularly during periods of increased industry-wide demand, silicon wafers
and other materials have been in short supply. However, the Company has not
been materially affected by such shortages. As is typical in the industry, the
Company allows for a significant lead-time between order and delivery of raw
materials.

Research and Development

The Company undertakes both internally funded and customer funded research and
development programs when they are in support of the Companys development
objectives. Since its inception in June 1988, the Company has incurred material
amounts of research and development expenses. As the Company has completed the
initial development and commercialization of its base LAAPD technology, it has
reduced outlays for research and development. During the fiscal years ended in
2001 and 2000, research and development expenses amounted to $.5 million and
$.7 million, respectively. At present, the Company expects additional research
and development funding will be required for new projects as well as the
continuing development of new derivatives of the Companys current product line
and commercialization of these products.

Environmental Regulations

The photonics industry, similar to the semiconductor industry, is subject to
governmental regulations for the protection of the environment, including those
that relate to air and water quality, solid and hazardous waste handling and
the promotion of occupational safety.

Various federal, state and local laws and regulations require the Company to
maintain certain environmental permits. The Company believes that it has
obtained all necessary environmental permits to conduct its manufacturing
processes. Changes in the aforementioned federal and state environmental laws
and regulations or enactment or promulgation of new laws and regulations could
require increases in operating costs and delays or interruptions of operations
and may require additional capital expenditures.

Backlog and Customers

The Companys sales are made primarily pursuant to standard purchase orders for
delivery of products. However, by industry practice, orders may be canceled or
modified at any time, with the customer being responsible for all finished
goods, all costs, direct and indirect, incurred by the Company and a reasonable
allowance for anticipated profits. No assurance can be given that such amounts
will be received by the Company after cancellation. The Company had
approximately $7.2 million of backlog at the end of fiscal 2001 compared with a
backlog of approximately $5.0 million at the end of fiscal 2000. The Company
expects that approximately $4.3 million of the current backlog orders will be
filled in fiscal year 2002.

The Company currently supplies core business products in support of satellites,
aircraft and ground vehicle missile guidance and tracking systems. Increases
in military spending during fiscal 2001 increased the Companys revenues in
these markets $.5 million, or 28%, over fiscal year 2000. Sales to the military
and aerospace markets represented 34% of total revenues for fiscal year 2001,
as compared to 27% of total revenues during fiscal 2000.



5





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##### Table of Contents



The Company also supplies core business products for use in various analytical
and diagnostic medical equipment. The Companys agreement to provide
LED/detector modules to be used in microbiological testing systems resulted in
a continuation of strong revenues in the medical segment for fiscal year 2001.
Sales to the medical equipment markets represented 14% of total revenues for
fiscal year 2001; of that amount, 11% represented sales made to one customer.
In fiscal year 2000, sales to the medical equipment markets represented 20% of
total revenues, of which 14% were sales made to the same customer.

Customers normally purchase the Companys products and incorporate them in
products that they in turn sell into their own markets on an ongoing basis. As
a result, the Companys sales are dependent upon the success of its customers
products; and its future performance is dependent upon its success in finding
new customers and receiving new orders from existing customers.

Marketing

The Company markets its products in the United States and Canada through its
own technical sales staff and through independent sales representatives.
International sales, principally Western Europe, are conducted through foreign
distributors (see Note 1 to Financial Statements).

In marketing LAAPD products, the Company has recognized that it must compete
with producers of PMTs, which have dominated low light level detection markets
for many years. Even if the Company can establish that its LAAPDs are a
potential alternative to PMTs for certain commercial applications, and assuming
that testing of the LAAPDs currently being conducted by OEMs and other third
parties proves successful, the ability to successfully market its LAAPD devices
on a volume basis will be substantially dependent upon the willingness of
potential customers who currently use PMTs to incur the substantial expense and
expend the time and effort necessary for the redesign of their products to
accommodate the LAAPD devices.

Competition

The Company competes with a range of companies for the custom optoelectronic
and silicon photodetector requirements of vendors of medical instruments,
computer peripherals, a variety of industrial products and specialized military
and commercial aerospace applications. The Company believes its principal
competitors for sales of custom devices are small to medium size companies.
Because the Company specializes in custom devices requiring a high degree of
engineering expertise to meet the requirements of specific applications, it
generally does not compete to any significant degree with other large United
States, European or Far Eastern manufacturers of standard off-the-shelf
optoelectronic components or silicon photodetectors.

The Company believes that the principal competition for its silicon LAAPD
photodetection devices lies with producers of PMTs, the only product currently
available for many of the applications for which the Companys LAAPD products
are designed. There are a number of manufacturers of PMTs, most of which have
significantly greater financial, technological, marketing and personnel
resources than the Company. In addition, several companies produce solid state
detectors based on small area APD technology. Although a few additional
photodetector companies are engaged in developing APDs, the Company believes
that most of these are limited by their technology to small area APD devices.
The Company believes these small area APDs are considerably less useful than
the Companys LAAPD devices in broadening the applicability of APD technology
to imaging and the sensing of extremely low light levels. The Companys LAAPD
products have electronic signal gain of up to 300 (one photoelectron converted
to 300 photoelectrons) while typical small area APD devices have a gain of
about 50 and, therefore, are not competitive with the Companys LAAPD devices
in certain applications.



6





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##### Table of Contents



PMTs were first invented in the 1940s. It is possible that existing PMT
manufacturers or other photodetector manufacturers will begin APD development
and eventually manufacture competitive APD devices.

Proprietary Technology

The Company has been issued patents as follows:

|              |  |                                                           |  |                       
|------------- |  | --------------------------------------------------------- |  | ----------------------
|US PATENT NO. |  | DESCRIPTION                                               |  | DATE ISSUED           
|              |  |                                                           |  |                       
|6,111,299     |  | Active Large Area Avalanche Photodiode Array              |  | August 2000           
|             
|             
|             
|             
|6,005,276     |  | Solid State Photodetector with Light-Responsive Rear Face |  | December 1999         
|             
|             
|             
|             
|5,801,430     |  | Solid State Photodetector with Light-Responsive Rear Face |  | September 1998        
|             
|             
|             
|             
|5,757,057     |  | Large Area Avalanche Array                                |  | May 1998              
|             
|             
|             
|             
|5,477,075     |  | Solid State Photodetector with Light-Responsive Rear Face |  | December 1995         
|             
|             
|             
|             
|5,311,044     |  | Avalanche Photomultiplier Tube                            |  | May 1994              
|             
|             
|             
|             
|5,146,296     |  | Devices for Detecting and/or Imaging Single Photoelectron |  | September 1992        
|             
|             
|             
|             
|5,057,892     |  | Light Responsive Avalanche Diode                          |  | October 1991          
|             
|             
|             
|             
|5,021,854     |  | Silicon Avalanche Photodiode Array                        |  | June 1991             
|             
|             
|             
|             
|4,717,946     |  | Thin Line Junction Photodiode                             |  | By predecessor company
|             
|             
|             
|             
|4,782,382     |  | High Quantum Efficiency Photodiode Devices                |  | By predecessor company

Other patent submissions are currently under review by the U.S. Patent and
Trademark Office. There can be no assurance that the pending patent
applications will be issued as patents, that any issued patents will provide
the Company with significant competitive advantages, or that challenges will
not be instituted against the validity or enforceability of any patent owned by
the Company or, if instituted, that such challenges will not be successful.
The cost of litigation to uphold the validity and prevent infringement of a
patent could be substantial. If the Company is unable to obtain patents for
its proposed applications, other entities may exploit the Companys
developments in APD technology. Furthermore, there can be no assurance the
Companys APD technology will not infringe patents or other rights owned by
others, licenses to which may not be available to the Company. Based on
limited patent searches, contacts with others knowledgeable in the field of APD
technology and a review of pertinent published materials, the Company believes
its competitors hold no patents, licenses or other rights to the APD technology
which would preclude the Company from pursuing its intended operations or from
obtaining patent protection for its proposed applications.

In some cases, the Company may rely on trade secrets to protect its
innovations. There can be no assurance that trade secrets will be established,
that secrecy obligations will be honored or that others will not independently
develop similar or superior technology. To the extent that consultants, key
employees or other third parties apply technological information independently
developed by them or by others to Company projects, disputes may arise as to
the proprietary rights to such information which may not be resolved in favor
of the Company.

Employees

At June 18, 2001, the Company employed 52 full-time employees (including 3
officers), 7 engineering and development personnel, 30 operations personnel, 6
sales and marketing personnel, and 9 general administrative personnel
(including 3 officers). The Company may, from time to time, engage personnel to
perform consulting services and to perform research and development under third
party funding. In certain cases, the cost of such personnel may be included in
the direct cost of the contract rather than as payroll expense.



7





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##### Table of Contents






Item 2. Properties

The Company leases its executive offices, research, marketing and manufacturing
facility which consists of approximately 39,000 square feet in a building
complex located at 1240 Avenida Acaso, Camarillo, California. The lease
expires in February 2004. The Company believes that its existing facility is
adequate to meet its needs for the foreseeable future.




Item 3. Legal Proceedings

None




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

None




PART II




Item 5. Market for Common Equity and Related Stockholder Matters

The Companys Class A Common Stock is traded on the American Stock Exchange
(AMEX) under the symbol API.

At June 18, 2001, the Company had 68 holders of record for the Class A Common
Stock, representing approximately 9,500 holders owning shares of Class A Common
Stock in street name. On the same date, there were 6 holders of the Class B
Common Stock.

The following table sets forth high and low closing prices by quarter for
fiscal years 2001 and 2000.

|              |      |  |                             |      |             |  |             |     |             |  |      |      |      |  |      |     |      |  |  |      |  |  |  |     |  |  |  |      |  |  |  |       | 
|------------- | ---- |  | --------------------------- | ---- | ----------- |  | ----------- | --- | ----------- |  | ---- | ---- | ---- |  | ---- | --- | ---- |  |  | ---- |  |  |  | --- |  |  |  | ---- |  |  |  | ----- | 
|              |      |  | Quarterly Stock Market Data
|              |      |  |                            
|              |      |  | 1st Quarter                 |      | 2nd Quarter |  | 3rd Quarter |     | 4th Quarter
|              |      |  |                             |      |             |  |             |     |            
|              |      |  | 2001                        |      | 2000        |  | 2001        |     | 2000        |  | 2001 |      | 2000 |  | 2001 |     | 2000
|              |      |  |                             |      |             |  |             |     |             |  |      |      |      |  |      |     |     
|Common Stock1
|             
|             
|             
|             
|              | High |  |                             | 7.00 |             |  |             | .75 |             |  |      | 4.19 |      |  |      | .75 |      |  |  | 2.50 |  |  |  | .88 |  |  |  | 2.13 |  |  |  | 16.63 | 
|             
|             
|             
|             
|              | Low  |  |                             | 1.50 |             |  |             | .50 |             |  |      | 2.00 |      |  |      | .50 |      |  |  | .50  |  |  |  | .38 |  |  |  | .63  |  |  |  | .88   | 



---

1 Price ranges on the American Stock Exchange


The Company has not paid any cash dividends on its capital stock. The Company
intends to retain earnings, if any, for use in its business and does not
anticipate that any funds will be available for the payment of cash dividends
on its outstanding shares in the foreseeable future. The holders of Common
Stock will not be entitled to receive dividends in any year until the holders
of the Class A Redeemable Convertible Preferred Stock receive an annual
non-cumulative dividend preference of $.072 per share. As of June 18, 2001,
740,000 shares of Class A Redeemable Convertible Preferred Stock had been
converted into 222,000 shares of Class A Common Stock, leaving outstanding
40,000 shares of Class A Redeemable Convertible Preferred Stock. The aggregate
non-cumulative annual dividend preference of such Class A Redeemable
Convertible Preferred Stock is $2,880. There is no public market for the
Companys Class A Redeemable Convertible Preferred Stock or Class B Common
Stock; however, such stock is convertible into Class A Common Stock at the
option of the holder and upon transfer by the holder of the Class A Redeemable
Convertible Preferred Stock.



8





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##### Table of Contents






|        |                                                          
|------- | ---------------------------------------------------------
|Item 6. | Managements Discussion and Analysis or Plan of Operation

RESULTS OF OPERATIONS

Fiscal year 2001 Compared to Fiscal Year 2000

REVENUES

The Companys revenues for the fiscal year ended March 25, 2001 (2001) were
$6.8 million, an increase of $.7 million, or 11%, from revenues of $6.1 million
for the fiscal year ended March 26, 2000 (2000).

The increase in net product sales reflects higher shipments of military
aerospace products in fiscal 2001, as compared to 2000. In 2001, sales to the
military aerospace markets totaled $2.3 million, an increase of 28%, as
compared to $1.8 million during fiscal 2000. In addition, net product sales
for the year include engineering design revenues totaling $393,000, an increase
of 76% over $223,000 in engineering design revenues recognized in the prior
year. During 2001, shipments of LAAPD products (also included in net product
sales) decreased 7%, to $439,000 from the record $470,000 reported in 2000.
Sales from LAAPDs represented 6% of total product sales during 2001, as
compared to 8% in 2000. While the Company anticipates increasing volume from
sales of its proprietary LAAPD products as markets begin to implement more
sophisticated technology, it expects more rapid growth during the near term in
the sales of its commercial and core product lines, as customer acceptance of
this technology is much more widespread.

The Company expects continued increased revenues from the sales of commercial
products in fiscal year 2002 and anticipates that the rate of growth will meet
or exceed that which was reached in 2001.

COSTS AND EXPENSES

Cost of product sales remained flat at $4.3 million in 2001 as compared to
2000. Thus, due to increased revenues in 2001, cost of product sales as a
percent of net sales decreased by 7% and gross profit margin on net product
sales increased 7 percentage points to 37% as compared to 30% in 2000.
Material and labor costs, as a percentage of net sales, increased to 22% and
6%, respectively, as compared to 15% and 5% in the prior year. The increases in
material and labor costs were offset by decreased overhead rates resulting from
efficiencies associated with higher sales volume and general cost cutting
efforts. The Company expects gross profit margin as a percentage of net sales
to continue to improve in the future, as sales volume increases and the Company
continues to focus on improving manufacturing efficiencies.

Research and development (R&D) costs decreased by $127,000 (19%) to $544,000
during 2001 compared to 2000. The decrease in R&D costs is attributable to a
planned reduction in overall R&D expenditures. As the Company believes that
the primary development phase of its LAAPD technology has been completed, it
has reduced expenses for base technology research and development but continues
development of other derivatives of the current product lines. During 2001,
the Companys R&D efforts were focused on improving the current line of LAAPD
products, including the next generation of LAAPD array products, as well as
expanding into new derivatives of its core technology. As they have in the
past, R&D costs may continue to fluctuate significantly, due to the level of
activity associated with development contracts as well as the number and
complexity of new process and product development projects, the qualification
of new process developments and customer evaluation and acceptance of new
products.

Marketing and sales expense decreased by $76,000 (8%) to $928,000 in 2001. The
decrease in marketing and sales expense was due in part to the promotion of
Brock Koren from Vice President of Sales and Marketing to President and Chief
Executive Officer during fiscal 2000. As a result, executive compensation
reported as sales and marketing expense during 2000 was recorded as
administrative expense for 2001. The



9





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##### Table of Contents



resulting $129,000 decrease in sales department salary expense was partially
offset by increases in advertising and marketing expenses amounting to $51,000.
Marketing and sales expenses are expected to increase in 2002, as the Director
of Sales position was filled in April 2001. The Company has no plans to recruit
any additional sales staff during 2002, but expects to incur higher commission
expenses as a result of increased sales.

General and administrative expenses increased by $205,000 (22%) to $1,137,000
in 2001 compared to 2000. The variance in general and administrative expenses
is primarily due to a property tax reserve adjustment made in fiscal 2000, for
which no corresponding entry was necessary in 2001. Excluding the impact of
the adjustment, general and administrative expenses decreased by $33,000 in
2001 as compared to 2000, due primarily to general cost cutting efforts. The
company does not anticipate any major fluctuations and expects general and
administrative expenses to remain constant during fiscal year 2002.

Interest income for 2001 totaled $276,000, an increase of $140,000 over 2000.
The increase in interest income is primarily due to increased cash reserves
resulting from a large number of stock options exercised during the last
quarter of 2000. Although available interest rates began to drop during the
latter part of 2001, the Company was able to maintain strong cash balances
throughout the year, thus enabling it to increase interest income significantly
over the prior year.

Net income for fiscal year 2001 was $212,000, or $865,000 higher than the net
loss of ($653,000) reported for fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

At March 25, 2001, the Company had cash, cash equivalents and short-term
investments of $5.0 million, working capital of $8.0 million and an accumulated
deficit of $17.7 million. The Companys cash, cash equivalents and short-term
investments decreased $289,000, excluding $29,000 reported as
unrealized gain on short term investments, during the twelve months ended March 25, 2001.
$153,000 was obtained through the exercise of stock options and
$124,000 was obtained through operating activities (before cash provided by short-term investments).
Cash expenditures were impacted by an increase in inventory purchases of
$210,000, due to advance expenditures required for several contracts obtained
in 2001 which will ship in fiscal 2002. Prepaid acquisition costs of $430,000
represent costs incurred by the Company in connection with the examination of a
possible business combination with Jenner Biotherapies, Inc.. The investigation
is continuing and the costs incurred in connection with the potential
transaction will be expensed if a business combination is not consummated. No
prepaid acquisition costs were reported for fiscal 2000.

Capital spending during 2001 was $136,000 compared to $134,000 during 2000. The
Company anticipates that cash outlays for capital items will increase during
2002, as plans to purchase additional machinery and computer system upgrades
are scheduled throughout the upcoming fiscal year.

The Company previously maintained a revolving line of credit agreement with a
bank for the lesser of $1,000,000 or 75 percent of eligible trade accounts
receivable, as defined by the agreement, which expired during fiscal year 2000.
Based on current projections and available cash reserves, the Company does not
foresee an immediate need for borrowing and has therefore elected to forego the
costs for maintaining the line at this time. The Company believes that it
would be most efficient to establish a line when the situation warrants.

The Company is exposed to interest rate risk for marketable securities. At
March 25, 2001, the Company had $1,111,000 of short-term
investments, including $29,000 in unrealized gains (see Note 1 to
Financial Statements), with a
weighted average interest rate of 6.50%, primarily commercial paper, all of
which mature in fiscal year 2002. During 2002, the Company will continue to
utilize the best possible avenues of investment for excess liquid assets. The
Company believes that the moderate rate of inflation over the past few years
has not had a significant impact on its sales or operating results.



10





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##### Table of Contents



YEAR 2000 ISSUES

None.

FORWARD LOOKING STATEMENTS

This Annual Report includes forward looking statements that are based on
assumptions that management believes to be reasonable but are subject to
inherent uncertainties and risks including, but not limited to, unforeseen
technological obstacles which may prevent or slow the development and/or
manufacture of new products, limited (or slower than anticipated) customer
acceptance of new products which have been and are being developed by the
Company, and a decline in the general demand for optoelectronic products.




Item 7. Financial Statements and Supplementary Data

The following financial statements of Advanced Photonix, Inc. are included in
Item 7:

|                                                                                         |  |      |       | 
|---------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                         |  | Page
|                                                                                         |  |     
|INDEPENDENT AUDITORS REPORT                                                             |  |      | 12    | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|FINANCIAL STATEMENTS:                                                                   
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Balance Sheet,
March 25, 2001                                                            |  |      | 13-14 | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Statements of Operations
for the Years Ended March 25, 2001
and March 26, 2000           |  |      | 15    | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Statements of Shareholders Equity
for the Years Ended March 25, 2001 and
March 26, 2000 |  |      | 16    | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Statements of Cash Flows
for the Years Ended March 25, 2001 and
March 26, 2000           |  |      | 17-18 | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Notes to Financial Statements                                                            |  |      | 19-25 | 



11





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##### Table of Contents






INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders
      of Advanced Photonix, Inc.:

We have audited the accompanying balance sheet of Advanced Photonix, Inc. (the
Company) as of March 25, 2001 and the related statements of operations,
shareholders equity and cash flows for the years ended March 25, 2001 and
March 26, 2000. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Company at March 25, 2001 and
the results of its operations and its cash flows for the years ended March 25,
2001 and March 26, 2000 in conformity with generally accepted accounting
principles.



/s/ Farber & Hass LLP
Oxnard, California
May 15, 2001



12





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##### Table of Contents






ADVANCED PHOTONIX, INC.
BALANCE SHEET
 March 25, 2001

|                                                      |  |   |            |  
|----------------------------------------------------- |  | - | ---------- | -
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|CURRENT ASSETS:                                      
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and cash equivalents                             |  | $ | 3,907,000  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Short-term investments                                |  |   | 1,111,000  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Accounts receivable, less allowance of $6,000         |  |   | 1,167,000  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Inventories                                           |  |   | 1,727,000  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Prepaid expenses and other current assets             |  |   | 134,000    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Prepaid acquisition costs                             |  |   | 430,000    |  
|                                                      |  |   |            |  
|Total current assets                                  |  |   | 8,476,000  |  
|                                                      |  |   |            |  
|EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost         |  |   | 3,256,000  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Less accumulated depreciation and amortization        |  |   | (2,819,000 | )
|                                                      |  |   |            |  
|Equipment and leasehold improvements, net             |  |   | 437,000    |  
|                                                      |  |   |            |  
|OTHER ASSETS:                                        
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill, net of accumulated amortization of $319,000 |  |   | 516,000    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Patents, net of accumulated amortization of $37,000   |  |   | 24,000     |  
|                                                     
|                                                     
|                                                     
|                                                     
|Other                                                 |  |   | 23,000     |  
|                                                      |  |   |            |  
|Total other assets                                    |  |   | 563,000    |  
|                                                      |  |   |            |  
|TOTAL ASSETS                                          |  | $ | 9,476,000  |  
|                                                      |  |   |            |  
|                                                     
|                                                      |  |   | (Continued | )

13



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##### Table of Contents



ADVANCED PHOTONIX, INC.
BALANCE SHEET  Continued
 March 25, 2001

|                                                                                                                                                           |  |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                      
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|CURRENT LIABILITIES:                                                                                                                                      
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Accounts payable                                                                                                                                           |  | $ | 240,000     |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Accrued salaries, wages and benefits                                                                                                                       |  |   | 204,000     |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Accrued commissions                                                                                                                                        |  |   | 19,000      |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Other accrued expenses                                                                                                                                     |  |   | 60,000      |  
|                                                                                                                                                           |  |   |             |  
|Total current liabilities                                                                                                                                  |  |   | 523,000     |  
|                                                                                                                                                           |  |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                             
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Class A redeemable convertible preferred stock, $.001 par value;
780,000 shares authorized; 40,000 shares issued and outstanding                           |  |   | 32,000      |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|SHAREHOLDERS EQUITY:                                                                                                                                     
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Preferred stock, $.001 par value; 10,000,000 shares authorized;
780,000 shares designated Class A redeemable convertible;
no shares issued and outstanding |  |   |            |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Class A common stock, $.001 par value; 50,000,000
shares authorized; 12,207,648 shares issued and outstanding                                              |  |   | 12,000      |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Class B common stock, $.001 par value; 4,420,113
shares authorized; 31,691 shares issued and outstanding                                                   |  |   |            |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Additional paid-in capital                                                                                                                                 |  |   | 26,573,000  |  
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Accumulated deficit                                                                                                                                        |  |   | (17,693,000 | )
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Accumulated other comprehensive income                                                                                                                     |  |   | 29,000      |  
|                                                                                                                                                           |  |   |             |  
|Total shareholders equity                                                                                                                                 |  |   | 8,921,000   |  
|                                                                                                                                                           |  |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                 |  | $ | 9,476,000   |  
|                                                                                                                                                           |  |   |             |  

See notes to financial statements.



14





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ADVANCED PHOTONIX, INC.




STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 25, 2001 AND MARCH 26, 2000

|                                            |  |      |            |      |  |   |            |  
|------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                            |  | 2001 |            | 2000
|                                            |  |      |            |     
|SALES                                       |  | $    | 6,806,000  |      |  | $ | 6,090,000  |  
|                                           
|                                           
|                                           
|                                           
|COST OF GOODS SOLD                          |  |      | 4,262,000  |      |  |   | 4,262,000  |  
|                                            |  |      |            |      |  |   |            |  
|GROSS PROFIT                                |  |      | 2,544,000  |      |  |   | 1,828,000  |  
|                                           
|                                           
|                                           
|                                           
|RESEARCH AND DEVELOPMENT EXPENSES           |  |      | 544,000    |      |  |   | 671,000    |  
|                                           
|                                           
|                                           
|                                           
|SELLING, GENERAL AND                       
|                                           
|                                           
|                                           
|                                           
|ADMINISTRATIVE EXPENSES                     |  |      | 2,063,000  |      |  |   | 1,935,000  |  
|                                            |  |      |            |      |  |   |            |  
|INCOME (LOSS) FROM OPERATIONS               |  |      | (63,000    | )    |  |   | (778,000   | )
|                                            |  |      |            |      |  |   |            |  
|OTHER INCOME (EXPENSE):                    
|                                           
|                                           
|                                           
|                                           
|Interest income                             |  |      | 276,000    |      |  |   | 136,000    |  
|                                           
|                                           
|                                           
|                                           
|Other, net                                  |  |      | 1,000      |      |  |   | (1,000     | )
|                                            |  |      |            |      |  |   |            |  
|Other income, net                           |  |      | 277,000    |      |  |   | 135,000    |  
|                                            |  |      |            |      |  |   |            |  
|INCOME (LOSS) BEFORE PROVISION             
|                                           
|                                           
|                                           
|                                           
|FOR INCOME TAXES                            |  |      | 214,000    |      |  |   | (643,000   | )
|                                           
|                                           
|                                           
|                                           
|PROVISION FOR INCOME TAXES                  |  |      | 2,000      |      |  |   | 10,000     |  
|                                            |  |      |            |      |  |   |            |  
|NET INCOME (LOSS)                           |  | $    | 212,000    |      |  | $ | (653,000   | )
|                                            |  |      |            |      |  |   |            |  
|BASIC AND DILUTED EARNINGS (LOSS) PER SHARE |  | $    | 0.02       |      |  | $ | (0.06      | )
|                                            |  |      |            |      |  |   |            |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  |  |      | 12,204,000 |      |  |   | 11,025,000 |  
|                                            |  |      |            |      |  |   |            |  

See notes to financial statements.



15





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##### Table of Contents



ADVANCED PHOTONIX, INC.
 


STATEMENTS OF SHAREHOLDERS EQUITY

|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   |           |  
|----------------------------------------------------------------------------- | ------ | ------------ | ---------- | ------------ | ------- | ---------- | ----------- |  | ------------- |  | ------- | ----- | ------ | ----------- | ----- |  |  | - | ---------- |  |  | - | ----------- | - |  | - | ------ |  |  | - | --------- | -
|                                                                              |        | Class A      |            | Class B      |         |            |             |  |               |  |         |       |        | Accumulated
|For each of the two years in the period endedMarch 25, 2001                   |        | Common Stock |            | Common Stock |         | Additional |             |  |               |  |         | Other
|                                                                              |        |              |            |              | Paid-in |            | Accumulated |  | Comprehensive
|                                                                              | Shares |              | Amount     |              | Shares  |            | Amount      |  | Capital       |  | Deficit |       | Income |             | Total
|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       | 
|BALANCE AT MARCH 28, 1999                                                     |        |              | 10,849,260 |              |         | $          | 11,000      |  |               |  | 68,135  |       |        |             |      |  |  | $ | 22,704,000 |  |  | $ | (17,252,000 | ) |  |   |       |  |  | $ | 5,463,000 |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Conversion of Redeemable Preferred Stock                                      |        |              |            |              |         |            |             |  |               |  | 12,000  |       |        |             |       |  |  |   | 32,000     |  |  |   |            |   |  |   |       |  |  |   | 32,000    |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Conversion of Class B Common Stock                                            |        |              | 44,000     |              |         |            |            |  |               |  | (44,000 | )     |        |             |      |  |  |   |           |  |  |   |            |   |  |   |       |  |  |   |          |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Exercise of Options                                                           |        |              | 1,146,644  |              |         |            | 1,000       |  |               |  |        |       |        |             |      |  |  |   | 2,974,000  |  |  |   |            |   |  |   |       |  |  |   | 2,975,000 |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Return of Short-Swing Profit realized
by Insider, pursuant to Section 16(b) |        |              |           |              |         |            |            |  |               |  |        |       |        |             |      |  |  |   | 710,000    |  |  |   |            |   |  |   |       |  |  |   | 710,000   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net loss                                                                      |        |              |           |              |         |            |            |  |               |  |        |       |        |             |      |  |  |   |           |  |  |   | (653,000    | ) |  |   |       |  |  |   | (653,000  | )
|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   |           |  
|BALANCE AT MARCH 26, 2000                                                     |        |              | 12,039,904 |              |         | $          | 12,000      |  |               |  | 36,135  |       |        |             |      |  |  | $ | 26,420,000 |  |  | $ | (17,905,000 | ) |  |   |       |  |  |   | 8,527,000 |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Conversion of Class B Common Stock                                            |        |              | 4,444      |              |         |            |            |  |               |  | (4,444  | )     |        |             |      |  |  |   |           |  |  |   |            |   |  |   |       |  |  |   |          |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Exercise of Options                                                           |        |              | 163,300    |              |         |            |            |  |               |  |        |       |        |             |      |  |  |   | 153,000    |  |  |   |            |   |  |   |       |  |  |   | 153,000   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net Income                                                                    |        |              |           |              |         |            |            |  |               |  |        |       |        |             |      |  |  |   |           |  |  |   | 212,000     |   |  |   |       |  |  |   | 212,000   |  
|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   |           |  
|Unrealized Gain on Investments                                                |        |              |           |              |         |            |            |  |               |  |        |       |        |             |      |  |  |   |           |  |  |   |            |   |  |   | 29,000 |  |  |   | 29,000    |  
|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   |           |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net Comprehensive Income                                                      |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   | 241,000   |  
|                                                                              |        |              |            |              |         |            |             |  |               |  |         |       |        |             |       |  |  |   |            |  |  |   |             |   |  |   |        |  |  |   |           |  
|BALANCE AT MARCH 25, 2001                                                     |        |              | 12,207,648 |              |         | $          | 12,000      |  |               |  | 31,691  |       |        |             |      |  |  | $ | 26,573,000 |  |  | $ | (17,693,000 | ) |  | $ | 29,000 |  |  | $ | 8,921,000 |  

See notes to financial statements.



16





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##### Table of Contents



ADVANCED PHOTONIX, INC.




STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 25, 2001 AND MARCH 26, 2000

|                                                                                                   |                           |                                                    |                                           |          |         |          |           |          |           |          |  
|-------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------------------------------- | ----------------------------------------- | -------- | ------- | -------- | --------- | -------- | --------- | -------- | -
|                                                                                                   |                           |                                                    |                                           |          | 2001    |          | 2000     
|                                                                                                   |                           |                                                    |                                           |          |         |          |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                             
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Net income (loss)                                                                                  |                           | $                                                  | 212,000                                   |          |         | $        | (653,000  | )       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Adjustments to reconcile net income (loss)
to net cash provided by (used by) operating activities:
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Depreciation                                       |                                           |          | 223,000 |          |           |          | 121,000   |         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Amortization                                       |                                           |          | 38,000  |          |           |          | 37,000    |         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Patent valuation adjustment                        |                                           |          | 40,000  |          |           |          |          |         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Changes in operating assets and liabilities:      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Short-term investments                    |          |         | 887,000  |           |          |           | (102,000 | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Accounts receivable                       |          |         | 9,000    |           |          |           | (190,000 | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Inventories                               |          |         | (210,000 | )         |          |           | 34,000   |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Prepaid expenses and other current assets |          |         | (25,000  | )         |          |           | (20,000  | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Other assets                              |          |         |         |           |          |           | (18,000  | )
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           |                                                    | Accounts payable and accrued expenses     |          |         | (163,000 | )         |          |           | (115,000 | )
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|Net cash provided by (used by) operating activities                                                |                           |                                                    | 1,011,000                                 |          |         |          | (906,000  | )       
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|CASH FLOWS USED IN INVESTING ACTIVITIES -                                                         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Capital expenditures      |                                                    |                                           | (136,000 | )       |          |           | (134,000 | )        
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Prepaid acquisition costs |                                                    |                                           | (430,000 | )       |          |           |         |          
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|Net cash used by investing activities                                                              |                           |                                                    | (566,000                                  | )        |         |          | (134,000  | )       
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                             
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Proceeds from exercise of stock options            |                                           |          | 153,000 |          |           |          | 2,975,000 |         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | Refund of short swing profits from related party |                                           |          |        |          |           |          | 710,000   |         
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|                                                                                                   |                           | Net cash provided by financing activities          |                                           |          | 153,000 |          |           |          | 3,685,000 |         
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|NET INCREASE (DECREASE) IN                                                                        
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                           | CASH AND CASH EQUIVALENTS                          |                                           |          | 598,000 |          |           |          | 2,645,000 |         
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR                                                       |                           |                                                    | 3,309,000                                 |          |         |          | 664,000   |         
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         
|CASH AND EQUIVALENTS, END OF YEAR                                                                  |                           | $                                                  | 3,907,000                                 |          |         | $        | 3,309,000 |         
|                                                                                                   |                           |                                                    |                                           |          |         |          |           |         

(Continued)



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---



##### Table of Contents



ADVANCED PHOTONIX, INC.

STATEMENTS OF CASH FLOWS  Continued
FOR THE YEARS ENDED MARCH 25, 2001 AND MARCH 26, 2000

|                                     |                                                                           |  |      |       |      |  |   |        | 
|------------------------------------ | ------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ------ | 
|                                     |                                                                           |  | 2001 |       | 2000
|                                     |                                                                           |  |      |       |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
|                                    
|                                    
|                                    
|                                    
|                                     | INFORMATION:                                                             
|                                    
|                                    
|                                    
|                                    
|                                     | Cash paid for interest                                                    |  | $    | -0-   |      |  | $ | -0-    | 
|                                    
|                                    
|                                    
|                                    
|                                     | Cash paid for taxes                                                       |  | $    | 1,600 |      |  | $ | 10,000 | 
|                                    
|                                    
|                                    
|                                    
|                                     | NON-CASH TRANSACTION:                                                    
|                                    
|                                    
|                                    
|                                    
|                                     | Issuance of shares of common stock upon
the conversion of preferred stock |  |      | -0-   |      |  |   | 12,000 | 

See notes to financial statements.



18





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##### Table of Contents



ADVANCED PHOTONIX, INC.




NOTES TO FINANCIAL STATEMENTS



|   |                                           
|-- | ------------------------------------------
|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Business Description Advanced Photonix, Inc. (the Company), is
engaged in the development and manufacture of optoelectronic
semiconductor based components, hybrid assemblies and other proprietary
solid state light and radiation detection devices, including proprietary
advanced solid state silicon photodetection devices which utilize
Avalanche Photodiode (APD) technology.                                                                                                                                                                                                             
|
| | The Companys Large Area Avalanche Photodiode(LAAPD) technology is
still considered to be a new technology and is subject to risks inherent
in the development of products based on new technologies. These risks
include getting the invention out of the laboratory and into actual use
in the field and stepping up production from the prototype (early) stages
of manufacturing.                                                                                                                                                                                                                
|
| | Fiscal Year-End The Companys fiscal year ends on the last Sunday in
March. Fiscal years in the two-year period ended March 25, 2001, each
contain fifty-two weeks.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Operating Segment Information The Company predominantly operates in one
industry segment, light and radiation detection devices. Substantially
all of the Companys assets and employees are located at the Companys
headquarters in Camarillo, California.                                                                                                                                                                                                                                                                                                                                          
|
| | In fiscal 2001 and 2000, the Company had export sales of approximately
$1,700,000 and $992,000, respectively, to customers in North America,
Asia, Australia and Europe.                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | Fair Value of Financial Instruments Based on borrowing rates currently
available to the Company for bank loans with similar terms and
maturities, the fair value of the Companys long-term debt approximates
the carrying value. Furthermore, the carrying value of all other
financial instruments potentially subject to valuation risk (principally
consisting of cash equivalents, accounts receivable and accounts payable)
also approximates fair value.                                                                                                                                       
|
| | Cash and Cash Equivalents The Company considers all highly liquid
investments, with an original maturity of three months or less when
purchased, to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Short-Term Investments SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, requires that all debt and
marketable equity securities be classified in one of three categories:
trading, available-for-sale, or held-to-maturity. It is the Companys
intent to maintain a liquid portfolio to take advantage of investment
opportunities; therefore, all of the Companys short-term investments are
considered to be available-for-sale. The Company has classified all
investments as current assets since it has the intent and ability to
redeem them within the year.



19





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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Available-for-sale securities are recorded at market value. Unrealized
holding gains and losses, net of the related income tax effect, are
excluded from earnings and are reported as a separate component of
shareholders equity until realized. The amortized cost of debt
securities is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion are included in
interest income. At the time of sale, any realized gains or losses,
calculated by the specific identification method, are recognized as a
component of operating results.



| |                                                                      
| | ---------------------------------------------------------------------
| | Short-term investments consist of the following as of March 25, 2001:

|                           |  |      |           |       |  |               |           |         |  |            |        | 
|-------------------------- |  | ---- | --------- | ----- |  | ------------- | --------- | ------- |  | ---------- | ------ | 
|                           |  |      |           |       |  |               |           |         |  | Unrealized
|                           |  |      |           |       |  | Fair          |           | Holding
|                           |  | Cost |           | Value |  | Gain/(Losses)
|                           |  |      |           |       |  |              
|Corporate bonds and notes  |  | $    | 5,000     |       |  | $             | 5,000     |         |  | $          | -0-    | 
|                          
|                          
|                          
|                          
|Corporate commercial paper |  |      | 1,077,000 |       |  |               | 1,106,000 |         |  |            | 29,000 | 
|                           |  |      |           |       |  |               |           |         |  |            |        | 
|TOTALS                     |  | $    | 1,082,000 |       |  | $             | 1,111,000 |         |  | $          | 29,000 | 
|                           |  |      |           |       |  |               |           |         |  |            |        | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All of the Companys short-term investments as of March 25, 2001
are due within one year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Concentration of Credit Risk Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally
of cash equivalents, short-term investments and accounts receivable. The
Company maintains cash balances at a financial institution that is
insured by the Federal Deposit Insurance Corporation up to $100,000. As
of March 25, 2001, the Company had cash equivalents at a financial
institution in excess of Federally insured amounts. The Company invests
in short-term investments, primarily consisting of corporate commercial
paper with high-quality companies. Approximately 88% of the Companys
short-term investments is invested with two companies. Accounts
receivable are unsecured and the Company is at risk to the extent such
amount becomes uncollectible. The Company performs periodic credit
evaluations of its customers financial condition and generally does not
require collateral. As of March 25, 2001, two customers comprised 14%
and 14%, respectively, of accounts receivable.
|
| | Significant Customer During the fiscal year ended March 25, 2001, two
customers accounted for 10% and 11%, respectively, of the Companys net
sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Inventories Inventories, which include material, labor and
manufacturing overhead are stated at the lower of cost (first in, first
out) or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Inventories consist of the following at March 25, 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                  |  |   |           | 
|----------------- |  | - | --------- | 
|Raw material      |  | $ | 501,000   | 
|                 
|                 
|                 
|                 
|Work-in-process   |  |   | 886,000   | 
|                 
|                 
|                 
|                 
|Finished products |  |   | 340,000   | 
|                  |  |   |           | 
|Total             |  | $ | 1,727,000 | 
|                  |  |   |           | 



20





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| |                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Equipment and Leasehold Improvements Equipment and leasehold
improvements are stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives
of the assets or lease term ranging from five to eleven years.
|
| | Equipment and leasehold improvements consist of the following at March
25, 2001:                                                                                                                                                                                       

|                          |  |   |           | 
|------------------------- |  | - | --------- | 
|Machinery and equipment   |  | $ | 2,701,000 | 
|                         
|                         
|                         
|                         
|Furniture and fixtures    |  |   | 96,000    | 
|                         
|                         
|                         
|                         
|Leasehold improvements    |  |   | 258,000   | 
|                         
|                         
|                         
|                         
|Data processing equipment |  |   | 201,000   | 
|                          |  |   |           | 
|Total                     |  | $ | 3,256,000 | 
|                          |  |   |           | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Patents Patents represent costs incurred in connection with patent
applications. Such costs are amortized using the straight-line method
over the useful life of the patent once issued, or expensed immediately
if any specific application is unsuccessful. Amortization expense was
approximately $5,000 and $4,000 in fiscal 2001 and 2000, respectively.                                                  
|
| | During fiscal 2001, $40,000 in obsolete patent costs were expensed as a
component of selling, general and administrative expense in the
accompanying statement of operations.                                                                                                                                                                                                                                   
|
| | Goodwill The excess of cost over the purchase price of acquired net
assets is amortized on a straight-line basis over a 25-year period.
Amortization expense was $33,000 in fiscal 2001 and 2000. The Company
continually evaluates the recoverability of goodwill by assessing whether
the recorded value of the goodwill will be recovered through future
expected operating results.                        
|
| | Revenue Recognition Revenues from research and development cost
reimbursement-type contracts are recorded as costs are incurred based
upon the relationship between actual costs incurred, total estimated
costs, and the amount of the contract or grant award. Estimation of
costs are reviewed periodically and any anticipated losses are recognized
in the period in which they first become determinable.
|
| | The Company uses the unit of delivery method for recognizing sales and
cost of sales under production contracts. Provision for estimated
losses, if any, is made in the period in which such losses are
determined.                                                                                                                                                                                             
|
| | Advertising Expense Advertising costs are expensed as incurred.
Advertising expense was approximately $134,000 and $104,000 in fiscal
2001 and 2000, respectively.                                                                                                                                                                                                                                             
|
| | Warranties The Company typically warrants its products against defects
in material and workmanship for a period of 90 days from the date of
shipment. A provision for estimated future warranty costs is recorded
when products are shipped. Warranty costs were approximately $11,000 in
fiscal 2001 and were immaterial in fiscal 2000.                                                                      



21





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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Net Income (Loss) Per Share Net income (loss) per share calculations
are in accordance with Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share (SFAS 128). Accordingly, basic
earnings (loss) per share is computed by dividing net income (loss) by
the weighted average number of shares outstanding for each year. Diluted
earnings (loss) per share has not been presented as the impact is not
material in 2001 and was anti-dilutive in 2000.                                                                                                                                                          
|
| | Research and Development Costs The Company charges all research and
development costs, including costs associated with development contract
revenues, to expense when incurred. Manufacturing costs associated with
the development of a new fabrication process or a new product are
expensed until such times as these processes or products are proven
through final testing and initial acceptance by the customer. Costs
related to revenues on non-recurring engineering services billed to
customers are generally classified as cost of product sales.                                                                               
|
| | Pervasiveness of Estimates- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.                                                                                                                                                                 
|
| | Accounting for Stock Option Based Compensation SFAS No. 123,
Accounting for Stock Based Compensation (SFAS 123), sets forth
accounting and reporting standards for stock based employee
compensation plans. As allowed by SFAS 123, the Company continues
to measure compensation cost under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25)
and complies with the pro forma disclosure requirements of the new
standard (see Note 4).                                                                                                                                                   
|
| | New Accounting Pronouncements Interpretation 44 of the Emerging
Issues Task Force of the Financial Accounting Standards Board (FIN
44), Accounting for Certain Transactions Involving Stock
Compensation, establishes new standards for reporting certain
equity transactions under APB Opinion 25. This interpretation
requires specific accounting treatment for modifications made to
outstanding stock options and warrants. Further, the interpretation
establishes a new model, Variable Accounting, to account for
modifications to outstanding options and warrants. The Company
adopted the provisions of FIN 44 in July 2000.
|
| | Reclassifications Certain prior year amounts have been reclassified to
conform with the current year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | CAPITALIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | The Companys Certificate of Incorporation provides for two classes of
common stock, a Class A for which 50,000,000 shares are authorized for
issuance and a Class B for which 4,420,113 shares are authorized for
issuance. The par value of each class is $.001. Subject to certain
limited exceptions, shares of Class B Common Stock are automatically
converted into an equivalent number of Class A shares upon the sale or
transfer of the Class B



22





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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Common Stock by the original holder. The holder of each share of Class A
and Class B Common Stock is entitled to one vote per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | The Company has authorized 10,000,000 shares of Preferred Stock, of which
780,000 shares have been designated Class A Redeemable Convertible
Preferred Stock with a par value of $.001 per share. 40,000 shares of
Class A Redeemable Convertible Preferred Stock (Class A Preferred) were
issued and outstanding at March 25, 2001. The Class A Preferred Stock
has a liquidation preference equal to its issue price ($.80 per share)
and is convertible at any time, at the option of the holder, into .3
shares of Class B Common Stock for each share of Class A Preferred Stock
converted. The Class A Preferred Stock is subject to redemption at the
Companys option for $.80 per share at any time. The Company would be
required to pay approximately $25,000 to redeem these shares. The
holders of the Class A Preferred Stock are entitled to an annual
non-cumulative dividend preference of $.072 per share when the Companys
net earnings per share of Class A Preferred Stock equals or exceeds
$.072. The Class A Preferred stockholders do not have voting rights
except as required by applicable law.
|  
|3. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | At March 25, 2001, the Company had net operating loss carryforwards of
approximately $20.5 million for Federal income tax purposes and $3.3
million for state income tax purposes that expire at various dates
through fiscal year 2021. The tax laws related to the utilization of
loss carryforwards are complex and the amount of the Companys loss
carryforward that will ultimately be available to offset future taxable
income may be subject to annual limitations resulting from changes in the
ownership of the Companys common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at March 25, 2001 are substantially
composed of the Companys net operating loss carryforwards, for which the
Company has made a full valuation allowance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | The valuation allowance increased approximately $120,000 in the year
ended March 25, 2001, representing primarily the net taxable loss for tax
return purposes. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment.                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | The tax provision for the year ended March 25, 2001 is composed of
California franchise tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|4. | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | The Company has four stock option plans: The 1990 Incentive Stock Option
and Non-Qualified Stock Option Plan, the 1991 Directors Stock Option
Plan (The Directors Plan), the 1997 Employee Stock Option Plan and the
2000 Stock Option Plan. The Company measures compensation for these
plans under APB Opinion No. 25. No compensation cost has been recognized
as all options were granted at the fair market value or the greater of
the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



23





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| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | underlying stock at the date of grant. Had compensation expense for
these plans been determined consistent with SFAS No. 123, the Companys
net income (loss) and net income (loss) per share would be as follows:

|                                           |  |      |         |      |  |   |          |  
|------------------------------------------ |  | ---- | ------- | ---- |  | - | -------- | -
|                                           |  | 2001 |         | 2000
|                                           |  |      |         |     
|Net income (loss), as reported             |  | $    | 212,000 |      |  | $ | (653,000 | )
|                                          
|                                          
|                                          
|                                          
|Net income (loss)  pro forma              |  | $    | 139,000 |      |  | $ | (956,000 | )
|                                          
|                                          
|                                          
|                                          
|Basic income (loss) per share,
as reported |  | $    | 0.02    |      |  | $ | (0.06    | )
|                                          
|                                          
|                                          
|                                          
|Basic income (loss) per share 
pro forma  |  | $    | 0.01    |      |  | $ | (0.09    | )



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to April 3, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 2001 and 2000,
respectively: risk-free interest rates of 9.0% and 9.0%, expected
volatility of 4% and 75% and expected lives of 10 years in all periods.
No dividends were assumed in the calculations.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys various stock option plans provide for the granting of
non-qualified and incentive stock options to purchase up to 3,700,000
shares of common stock for periods not to exceed 10 years. Options
typically vest at the rate of 25% per year over four years, except for
options granted under The Directors Plan, which typically vest at the
rate of 50% per year over two years. Under these plans, the option
exercise price equals the stocks market price on the date of grant.
Options may be granted to employees, officers, directors and consultants.
The Company has also granted options, under similar terms as above,
under no specific shareholder approved plan.



| |                                                              
| | -------------------------------------------------------------
| | Stock option transactions for 2001 are summarized as follows:

|                               |  |        |       |          |  |          |      | 
|------------------------------ |  | ------ | ----- | -------- |  | -------- | ---- | 
|                               |  |        |       |          |  | Weighted
|                               |  |        |       |          |  | Average 
|                               |  | Shares |       | Exercise
|                               |  | (000)  |       | Price   
|                               |  |        |       |         
|Outstanding, beginning of year |  |        | 1,795 |          |  | $        | 2.62 | 
|                              
|                              
|                              
|                              
|Granted                        |  |        | 581   |          |  |          | 2.91 | 
|                              
|                              
|                              
|                              
|Exercised                      |  |        | (163  | )        |  |          | .94  | 
|                              
|                              
|                              
|                              
|Cancelled                      |  |        | (917  | )        |  |          | 5.29 | 
|                               |  |        |       |          |  |          |      | 
|Outstanding, end of year       |  |        | 1,296 |          |  | $        | 1.89 | 
|                               |  |        |       |          |  |          |      | 
|Exercisable, end of year       |  |        | 682   |          |  | $        | 2.55 | 
|                               |  |        |       |          |  |          |      | 



24





---



##### Table of Contents





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Information regarding stock options outstanding as of March 25, 2001 is as follows:

|              |  |        |           |                |  |                     |      |                  |  |  |           | 
|------------- |  | ------ | --------- | -------------- |  | ------------------- | ---- | ---------------- |  |  | --------- | 
|              |  |        |           |                |  | Options Outstanding
|              |  |        |           |                |  |                    
|              |  |        |           |                |  | Weighted Average    |      | Weighted Average
|Price Range   |  | Shares |           | Exercise Price |  | Remaining Life     
|              |  |        |           |                |  |                    
|$0.50 - $5.34 |  |        | 1,296,100 |                |  | $                   | 1.89 |                  |  |  | 7.4 years | 

|              |  |        |         |                |  |                     |      |                  |  |  |           | 
|------------- |  | ------ | ------- | -------------- |  | ------------------- | ---- | ---------------- |  |  | --------- | 
|              |  |        |         |                |  | Options Exercisable
|              |  |        |         |                |  |                    
|              |  |        |         |                |  | Weighted Average    |      | Weighted Average
|Price Range   |  | Shares |         | Exercise Price |  | Remaining Life     
|              |  |        |         |                |  |                    
|$0.50 - $5.34 |  |        | 682,200 |                |  | $                   | 2.55 |                  |  |  | 6.8 years | 



|   |            
|-- | -----------
|5. | COMMITMENTS



| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company leases its manufacturing and office facility and certain
office equipment under non-cancelable operating leases. Minimum future
lease payments under all non-cancelable operating leases expiring at
various dates through fiscal 2004, are as follows:

|      |  |   |           | 
|----- |  | - | --------- | 
|2002  |  | $ | 361,000   | 
|     
|     
|     
|     
|2003  |  |   | 362,000   | 
|     
|     
|     
|     
|2004  |  |   | 312,000   | 
|      |  |   |           | 
|Total |  | $ | 1,035,000 | 
|      |  |   |           | 



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Rent expense was approximately $345,000 and $361,000 is fiscal 2001 and
2000, respectively.



|   |      
|-- | -----
|6. | LEGAL



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The Company is, from time to time, subject to legal and other matters in
the normal course of its business. While the results of such matters
cannot be predicted with certainty, management does not believe that the
final outcome of any pending matters will have a material effect on the
financial position and results of operations of the Company.                                                                                                                                          
|  
|7. | EMPLOYEES RETIREMENT PLAN                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | The Company maintains a 401(k) Plan which is qualified under the Internal
Revenue Code. All full-time employees are eligible to participate in the
Plan. Employees may make voluntary contributions to the Plan which are
matched by the Company at the rate of $.50 for every $1.00 of employee
contribution, subject to certain limitations. The Company contributions
and administration costs recognized as expense were approximately $64,000
and $86,000 in fiscal 2001 and 2000, respectively.



25





---



##### Table of Contents






|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|Item 8. | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.




PART III




Item 9. Directors and Executive Officers

Set forth below is certain information relating to the directors and officers
of the Company.

|                     |  |     |    |          |  |                                      
|-------------------- |  | --- | -- | -------- |  | -------------------------------------
|Name                 |  | Age |    | Position
|                     |  |     |    |         
|Richard D. Kurtz     |  |     | 49 |          |  | Chairman of the Board                
|                    
|                    
|                    
|                    
|Brock Koren          |  |     | 37 |          |  | President and Chief Executive Officer
|                    
|                    
|                    
|                    
|M. Scott Farese      |  |     | 44 |          |  | Director                             
|                    
|                    
|                    
|                    
|Stephen P. Soltwedel |  |     | 54 |          |  | Director                             
|                    
|                    
|                    
|                    
|Susan A. Schmidt     |  |     | 35 |          |  | Chief Financial Officer & Secretary  
|                    
|                    
|                    
|                    
|Paul Sharman         |  |     | 43 |          |  | Vice President, Operations           

Richard D. Kurtz, Chairman of the Board

Mr. Kurtz became a Director of the Company in February 2000 and was elected
Chairman of the Board in July 2000. He is currently Director of Client
Services and Strategic Planning for Quantum Compliance Systems Inc. Quantum is
a privately owned software company specializing in the development and
installation of Environmental Health and Safety Management systems. Prior to
joining Quantum, Mr. Kurtz was the Vice President of Sales and Marketing for
Filtertek Inc. an ESCO Technology company for over 13 years. Mr. Kurtz
received his Bachelor of Arts in Economics from Michigan State University and
his Masters of Business Administration degree from Eastern Michigan University.

Brock Koren, President and Chief Executive Officer

Mr. Koren joined the Company in July 1998 and was promoted from Vice President,
Sales and Marketing to President and Chief Executive Officer in October 1999.
From 1992 until 1998, he was employed by Hamamatsu, a leading manufacturer of
devices for generation and measurement of infrared, visible, and ultraviolet
light, as a Regional Sales Engineer. In this capacity, he was responsible for
technical sales in Southern California, specializing in photonic products
including photomultiplier tubes. From 1989 until 1992, he was a Sales
Engineer/Account Manager for Tektronix, Inc., a $2.1 billion global
high-technology company based on a portfolio of measurement, color printing and
video and networking businesses. In addition to his position on the API Board
of Directors, Mr. Koren also serves as a Director for BioCal, a privately held
company located in Southern California, specializing in DNA Parentage testing
and DNA Souvenir. Mr. Koren received his Bachelor of Science Degree in
Electrical Engineering from California State University, Long Beach,
California.

M. Scott Farese, Director

Mr. Farese became a director of the Company in August 1998. He is currently a
Regional Sales Manager for Filtertek Inc. Mr. Farese joined Filtertek in 1991.
Filtertek, a subsidiary of ESCO Technologies, is the largest worldwide
producer of custom filtration products and fluid control devices and the
worlds largest manufacturer of custom molded filter elements.



26





---



##### Table of Contents



Stephen P. Soltwedel, Director

Mr. Soltwedel became a director of the Company in February 2000. He is
currently Vice President and Chief Financial Officer of Filtertek Inc. Mr.
Soltwedel joined Filtertek in 1972 and was elected Vice President, Secretary
and Treasurer of Filtertek Inc. and its sister corporation, Filtertek de Puerto
Rico, Inc. in 1979. Mr. Soltwedel held those positions during the time
Filtertek Inc. was a public company, until 1992, when controlling interest in
Filtertek was sold to Schawk Inc., and he was elected Vice President and Chief
Financial Officer of Filtertek Inc., a wholly owned subsidiary of ESCO
Technologies. Prior to joining Filtertek, Mr. Soltwedel was employed by the
public accounting firm of Baillies Denson Erickson & Smith in Lake Geneva, WI.
Mr. Soltwedel holds a bachelors degree in accounting from Madison Business
College.

Susan A. Schmidt, Chief Financial Officer and Secretary

Ms. Schmidt joined the Company in March 2000. From 1997 to 2000, she was
Director of Finance  Amphitheaters for SFX Entertainment, Inc. in Encino, CA.
SFX is a New York-based promoter and producer of live entertainment events.
Ms. Schmidt held financial responsibilities for two Southern California
amphitheaters operated by SFX. From 1992 to 1997 she was Controller for Revchem
Plastics, Inc., a full-line distribution company serving the reinforced
plastics industry, and Durall Plastics, Inc., Revchem Plastics Inc.s sister
manufacturing company in Rialto, CA. Previously, Ms. Schmidt held financial
management positions with Qwik Blinds, Inc. and Marriott Corporation. Ms.
Schmidt received her Bachelor of Science degree in Business
Administration  Accounting from California State University, San Bernardino.

Paul Sharman, Vice President Operations

Mr. Sharman joined API in June 1990. Mr. Sharman started in the Quality
department and has held the positions of Director of Quality and Reliability,
Director of Operations, and in March 2000, he was promoted to Vice President of
Operations. Prior to joining API, Mr. Sharman was Senior Quality Engineer for
Britax UK. He has also served two years lecturing on statistical analysis at
South Downs College UK. During that period, Mr. Sharman wrote and administered
courses in applied statistical analysis. Mr. Sharman holds an HND in Mechanical
engineering from the Rotherham College of Technology and an IQAD in Quality
Assurance from South Downs College.

Directors serve annual terms until the next annual meeting of stockholders and
until their successors are elected and qualified. Officers serve at the
pleasure of the Board of Directors.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Companys
officers and Directors and persons who own more than ten percent of a
registered class of the Companys equity securities (collectively the
Reporting Persons) to file reports of beneficial ownership and changes in
beneficial ownership of the Companys equity securities with the Securities and
Exchange Commission and to furnish the Company with copies of these reports.
Based solely on its review of the copies of the forms received by it, the
Company believes that all of its officers and directors complied with all
filing requirements applicable to them, except with respect to the late filing
of a Form 4 by M. Scott Farese to report sales of stock in June 2000 and
December 2000, both of which were reported in February 2001.




Item 10. Executive Compensation

The following table sets forth compensation paid or accrued by the Company for
services rendered to the Companys Chief Executive Officer and to each of the
other executive officers of the Company whose cash compensation exceeded
$100,000 for services rendered during the last three fiscal years.



27





---



##### Table of Contents



SUMMARY COMPENSATION TABLE

|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  |              |        |         |  |                        |   |            |  |           |         |  |  |  |   |  |  |  |       | 
|------------------------------------- |  | ----------- | ---- | --- |  | ------------------- | ------- | ------ |  | ------------ | ------ | ------ |  | ------------ | ------ | ------- |  | ---------------------- | - | ---------- |  | --------- | ------- |  |  |  | - |  |  |  | ----- | 
|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  |              |        |         |  | Long Term Compensation
|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  |              |        |         |  |                       
|                                      |  |             |      |     |  | Annual Compensation |         | Awards |  | Payouts     
|                                      |  |             |      |     |  |                     |         |        |  |             
|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  |              |        |         |  | Restricted             |   | Securities
|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  | Other Annual |        | Stock   |  | Underlying             |   | LTIP       |  | All Other
|                                      |  |             |      |     |  | Salary              |         | Bonus  |  | Compensation |        | Awards |  | Options      |        | Payouts |  | Compensation          
|Name and Principal Position           |  | Fiscal Year |      | ($) |  | ($)                 |         | ($)1   |  | ($)          |        | (#)    |  | ($)          |        | ($)2   
|                                      |  |             |      |     |  |                     |         |        |  |              |        |        |  |              |        |        
|Richard D. Kurtz                      |  |             | 2001 |     |  |                     |        |        |  |              |       |        |  |              | 10,000 |         |  |                        |  |            |  |           | 150,000 |  |  |  |  |  |  |  |      | 
|Chairman of the Board                 |  |             | 2000 |     |  |                     |        |        |  |              |       |        |  |              | 5,000  |         |  |                        |  |            |  |           | 25,000  |  |  |  |  |  |  |  |      | 
|                                      |  |             | 1999 |     |  |                     |        |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           |        |  |  |  |  |  |  |  |      | 
|                                     
|Brock Koren                           |  |             | 2001 |     |  |                     | 175,000 |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           | 50,000  |  |  |  |  |  |  |  | 9,400 | 
|President and Chief Executive Officer |  |             | 2000 |     |  |                     | 175,000 |        |  |              | 12,500 |        |  |              |       |         |  |                        |  |            |  |           | 200,000 |  |  |  |  |  |  |  | 8,600 | 
|                                      |  |             | 1999 |     |  |                     | 135,000 |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           | 100,000 |  |  |  |  |  |  |  | 5,300 | 
|                                     
|Hayden Leason                         |  |             | 2001 |     |  |                     |        |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           |        |  |  |  |  |  |  |  |      | 
|Chairman of the Board and             |  |             | 2000 |     |  |                     |        |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           |        |  |  |  |  |  |  |  |      | 
|Chief Executive Officer3              |  |             | 1999 |     |  |                     |        |        |  |              |       |        |  |              |       |         |  |                        |  |            |  |           | 1,000   |  |  |  |  |  |  |  |      | 



---

|1 |  | For independent directors, represents amounts paid by the company as directors fees.                                                                                                                                            
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| 
| 
| 
|2 |  | Represents amounts paid by the Company on behalf of the named person in connection with the Companys 401(k) Retirement Plan,
vacation pay and car allowance.                                                                    
| 
| 
| 
| 
|3 |  | Mr. Leason resigned as Chairman of the Board and Chief Executive Officer
in October 1997, was re-elected as Chairman of the Board in October 1999
and subsequently resigned as a Director and Chairman of the Board in July
2000.

Employment Agreements

The Company has an employment and termination agreement with the Chief
Executive Officer, under which the employee may receive severance pay through
the end of the term of the contract or up to twelve months. Total compensation
under this agreement in the event of employment through the full term would be
approximately $135,000 for fiscal year ending 2002.

Stock Options

The following table sets forth certain information concerning stock options
granted to the persons named in the Summary Compensation Table during the last
fiscal year and unexercised stock options held by such persons at the end of
such fiscal year.

Option Grants in Fiscal 2001
Individual Grants

|                 |  |                      |         |                    |  |             |    |            |  |   |        |  |  |  |          | 
|---------------- |  | -------------------- | ------- | ------------------ |  | ----------- | -- | ---------- |  | - | ------ |  |  |  | -------- | 
|                 |  | Number of Securities |         | % of Total Options
|                 |  | Underlying           |         | Granted to         |  | Exercise or
|                 |  | Options              |         | Employees in       |  | Base Price  |    | Expiration
|Name1            |  | Granted(#)           |         | Fiscal Year        |  | ($/Sh)      |    | Date      
|                 |  |                      |         |                    |  |             |    |           
|Hayden Leason    |  |                      |        |                    |  |             |   |            |  |   |       |  |  |  |         | 
|Richard D. Kurtz |  |                      | 150,000 |                    |  |             | 28 | %          |  | $ | 3.1875 |  |  |  | 08/25/10 | 
|Brock Koren      |  |                      | 50,000  |                    |  |             | 9  | %          |  | $ | 3.1875 |  |  |  | 08/25/10 | 



---

|1 |  | See Summary Compensation Table and Item 9 Directors and Executive Officers
for principal position.
|- |  | ------------------------------------------------------------------------------------------------------

The following tables set forth certain information concerning stock options
granted to and exercised by the persons named in the Summary Compensation Table
during the last fiscal year and unexercised stock options held by such persons
at the end of such fiscal year.



28





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Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values

|                 |                        |                    |                         |                |  |                               |  |                          
|---------------- | ---------------------- | ------------------ | ----------------------- | -------------- |  | ----------------------------- |  | -------------------------
|                 | Number of Securities   |                    | Value of Unexercised   
|                 | Underlying Unexercised |                    | In-the-Money Options at
|                 |                        | Shares Acquired on |                         |                |  | Options
at Fiscal Year End(#) |  | Fiscal Year End ($)      
|Name1            |                        | Exercise (#)       |                         | Value Realized |  | Exercisable/Unexercisable     |  | Exercisable/Unexercisable
|                 |                        |                    |                         |                |  |                               |  |                          
|Hayden Leason    |                        |                   |                         |               |  | /                           |  | /                      
|                
|                
|                
|                
|Richard D. Kurtz |                        |                   |                         |               |  | 162,500/12,500                |  | /                      
|                
|                
|                
|                
|Brock Koren      |                        |                   |                         |               |  | 115,000/210,000               |  | $4,000/$15,000           



---

| | 1 | See Summary Compensation Table and Item 9 Directors and Executive
Officers for principal position.
| | - | ------------------------------------------------------------------------------------------------------

Compensation of Directors

In October 1995, the Board of Directors eliminated the accrual or payment of
all fees including all annual fees, meeting fees and any payment for services
as the Chairman or Member of any Committee of the Board of Directors except for
reasonable travel expenses. In March 2000, the Board of Directors voted to
re-establish a directors fee in the amount of $2,500, payable to each
director, for each meeting attended. The fee is paid to each non-employee
director, with the exception of Hayden Leason, Chairman of the Board, who
voluntarily waived his fee during his tenure. In addition, all directors,
including employee directors, are reimbursed for reasonable travel expenses
incurred in connection with their attending meetings of the Board of Directors
and committees. In January 1998, the Board reinstated participation in the 1991
Special Directors Stock Option Plan, which had also been suspended in October
1995, other than initial grants for new directors. Each of the directors who is
not an employee of the Company is eligible for grants of stock options upon
their appointment to the Board of Directors and on an annual basis so long as
they remain on the Board under the 1991 Special Directors Stock Option Plan.
Directors are also eligible for discretionary stock option grants under the
Companys 2000 Stock Option Plan. Directors who are also officers of the
Company or its affiliates do not receive cash compensation in consideration for
their services as directors.




|         |                                                               
|-------- | --------------------------------------------------------------
|Item 11. | Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of March 25, 2001, certain information
concerning the holdings of each person who was known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Class A or Class B Common Stock of the Company, by each director and executive
officers and by all directors and officers as a group.

|                                |  |                      |         |                   |  |              |         |  |  |  |     |  |  |  |  | 
|------------------------------- |  | -------------------- | ------- | ----------------- |  | ------------ | ------- |  |  |  | --- |  |  |  |  | 
|                                |  | Class A Common Stock
|                                |  |                     
|                                |  |                      |         |                   |  | Shares Under
|                                |  | Shares               |         | Exercisable       |  | Percent     
|                                |  | Owned                |         | Options/Warrants1 |  | Voting2     
|                                |  |                      |         |                   |  |             
|James A. Delaney III3           |  |                      | 632,800 |                   |  |              |        |  |  |  | 5.0 | 
|                               
|                               
|                               
|                               
|Richard D. Kurtz4               |  |                      |        |                   |  |              | 162,500 |  |  |  | 1.3 | 
|                               
|                               
|                               
|                               
|Brock Koren4                    |  |                      |        |                   |  |              | 155,000 |  |  |  | 1.3 | 
|                               
|                               
|                               
|                               
|M. Scott Farese4                |  |                      |        |                   |  |              | 113,500 |  |  |  | .9  | 
|                               
|                               
|                               
|                               
|Stephen P. Soltwedel4           |  |                      |        |                   |  |              | 112,500 |  |  |  | .9  | 
|                               
|                               
|                               
|                               
|Hayden Leason                   |  |                      |        |                   |  |              |        |  |  |  |    | 
|                               
|                               
|                               
|                               
|Paul Sharman4                   |  |                      |        |                   |  |              | 38,500  |  |  |  | .3  | 
|                               
|                               
|                               
|                               
|Susan A. Schmidt4               |  |                      | 500     |                   |  |              | 20,000  |  |  |  | .1  | 
|                               
|                               
|                               
|                               
|Directors & Officers as a Group |  |                      | 500     |                   |  |              | 602,000 |  |  |  | 4.7 | 



---

| | 1 | Includes shares under options exercisable on March 25, 2001 and options which become exercisable within 60 days thereafter.
| | - | ---------------------------------------------------------------------------------------------------------------------------



29





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##### Table of Contents



|2 |  | Represents voting power assuming beneficial owner exercises all exercisable options and warrants.      
|- |  | -------------------------------------------------------------------------------------------------------
| 
| 
| 
| 
|3 |  | The address of this shareholder is 633 Ardsley Road, Winnetka, IL 60093                                
| 
| 
| 
| 
|4 |  | The address of this shareholder is c/o Advanced Photonix, Inc. 1240 Avenida Acaso, Camarillo, CA 93012.




Item 12. Certain Relationships and Related Transactions

See Item 10. Executive Compensation.




PART IV




|         |                                                                 
|-------- | ----------------------------------------------------------------
|Item 13. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|(a) |  | The following is a list of the financial statement schedules and
exhibits filed herewith.
|--- |  | -----------------------------------------------------------------------------------------



| | (1) |  | Financial Statements: No financial statements have been filed with
this Form 10-KSB other than those listed in Item 7.                                                                                                                                                                                                                   
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Financial Statement Schedules: Schedules for which provisions are
made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions,
or are disclosed in the accompanying consolidated financial statements,
or are inapplicable and, therefore, have been omitted.
|
| | (3) |  | Reports on Form 8-K: None.                                                                                                                                                                                                                                                                                                               
|
| | (4) |  | Exhibits:                                                                                                                                                                                                                                                                                                                                

|        |  |                                                                                                                                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                        
|3.1     |  | Certificate of Incorporation of the Registrant, as amended.  incorporated by reference to Exhibit 3.1 to the Registrants
Registration Statement on Form S-1, filed with the Securities and
Exchange Commission on November 23, 1990                                  
|       
|       
|       
|       
|3.1.1   |  | Amendment to Certificate of Incorporation of the Registrant,
dated October 29, 1992  incorporated by reference to the Registrants
March 31, 1996 Annual Report on Form 10-K                                                                                          
|       
|       
|       
|       
|3.1.2   |  | Amendment to Certificate of Incorporation of the Registrant,
dated September 9, 1992  incorporated by reference to the Registrants
March 31, 1996 Annual Report on Form 10-K                                                                                         
|       
|       
|       
|       
|3.2     |  | By-laws of the Registrant, as amended  incorporated by reference
to the Registrants March 31, 1996 Annual Report on Form 10-K                                                                                                                                        
|       
|       
|       
|       
|10.1*   |  | Advanced Photonix, Inc. 1991 Special Directors Stock Option Plan
 incorporated by reference to Exhibit 10.9 to the Registrants March 31, 1991 Annual Report on Form 10-K                                                                                             
|       
|       
|       
|       
|10.2*   |  | Advanced Photonix, Inc. 1990 Incentive Stock Option and
Non-Qualified Stock Option Plan  incorporated by reference to Exhibit
No. 10.11 to the Registrants Registration Statement on Form S-1,
filed with the Securities and Exchange Commission on November 23, 1990



30





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##### Table of Contents



|        |  |                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.3*   |  | Advanced Photonix, Inc. 1997 Employee Stock Option Plan 
incorporated by reference to Exhibit 10.13 to the Registrants March 30, 1997 Annual report on Form 10-K                                                        
|       
|       
|       
|       
|10.4*   |  | Amendment No. 1 to 1997 Employee Stock Option Plan of Advanced
Photonix, Inc.  incorporated by reference to Exhibit 10.14 to the
Registrants December 28, 1997 Quarterly report on Form 10-Q                            
|       
|       
|       
|       
|10.5*   |  | Advanced Photonix, Inc. 2000 Stock Option Plan  incorporated by
reference to Exhibit 10.1 to the Registrants Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on March
15, 2001    
|       
|       
|       
|       
|10.6    |  | Employment Agreement dated January 1, 2000, between Advanced
Photonix, Inc. and Brock Koren  incorporated by reference to Exhibit
10.8 to the Registrants March 26, 2000 Annual Report on Form 10-KSB                   
|       
|       
|       
|       
|10.9    |  | Lease Agreement dated February 23, 1998 between Advanced Photonix,
Inc. and High Tech No. 1, Ltd.  incorporated by reference to Exhibit
10.9 to the Registrants March 29, 1998 Annual Report on Form 10-K               
|       
|       
|       
|       
|10.10   |  | Form of Indemnification Agreement provided to Directors and
Principal Officers of Advanced Photonix, Inc.  incorporated by
reference to Exhibit 10.15 to the Registrants December 28, 1997
Quarterly report on Form 10-Q
|       
|       
|       
|       
|21      |  | List of Subsidiaries of Registrant  incorporated by reference to
Exhibit 22 to the Registrants March 31, 1993 Annual Report on Form
10-K                                                                                

* Constitutes a compensation plan or arrangement required to be filed as
part of this report.



31





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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.

|                        |     |                                                 
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|ADVANCED PHOTONIX, INC.
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|                        | By: | /s/    Brock Koren                              
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|                        |     | Brock Koren, President &
Chief Executive Officer

Date: June 20, 2001

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 in the capacities and on the dates indicated.

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|Signature                                     |  | Title                                                                              |  | Date         
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|/s/   Richard D. Kurtz
Richard D. Kurtz       |  | Chairman of the Board                                                              |  | June 20, 2001
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|/s/ Brock Koren
Brock Koren                   |  | President and Chief Executive Officer                                              |  | June 20, 2001
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|/s/ M. Scott Farese
M. Scott Farese           |  | Director                                                                           |  | June 20, 2001
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|/s/ Stephen P. Soltwedel
Stephen P. Soltwedel |  | Director                                                                           |  | June 20, 2001
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|/s/ Susan A. Schmidt
Susan A. Schmidt         |  | Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer) |  | June 20, 2001



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