<PAGE>

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


                                AMENDMENT NO. 1
                                      TO
                                  FORM 10-KSB

    (Mark One)
       [X]  Annual report under Section 13 or 15(d) of the Securities Exchange
           Act of 1934 for the fiscal year ended December 31, 2001

       [_]  Transition report under Section 13 or 15(d) of the Securities
           Exchange Act of 1934 for the transition period
           from __________________________ to __________________________________

                            APOGEE TECHNOLOGY, INC.
                (Name of Small Business Issuer in its charter)

<TABLE>
<CAPTION>
                          DELAWARE                                     04-3005815
<S>                                                            <C>
(State or other jurisdiction of incorporation or organization)
                                                               (IRS employer Identification
                                                                          No.)
   129 MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062

                (Address of principal executive offices)
                     (Zip Code)
</TABLE>

                                (781) 551-9450
               (Issuer's telephone number, including area code)

        SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

                                     NONE

        SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                    COMMON STOCK, $.01 PAR VALUE PER SHARE
                               (Title of class)

   Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [_]

   Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  [_]

   The registrant had revenues of approximately $2,181,000 in the fiscal year
ended December 31, 2001. The aggregate market value of the voting stock held by
non-affiliates of the registrant on March 15, 2002 was approximately
$25,555,200.00. As of March 15, 2002, 5,228,051 shares of Common Stock, $.01
par value per share, of the registrant were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

   The following documents (or parts thereof) are incorporated by reference
into the following parts of this Form 10-KSB: Certain information required in
Part III of this Annual Report on Form 10-KSB is incorporated from the
registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
on May 10, 2002.

   Transitional Small Business Disclosure Format:  Yes [_]  No [X]

================================================================================

<PAGE>

                                  SIGNATURES

   In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                                     <C> <C>
                                                        APOGEE TECHNOLOGY, INC

Date: April 16, 2002                                    By:                  /s/  HERBERT M. STEIN
                                                            -----------------------------------
                                                                             Name: Herbert M. Stein
                                                            Title: Chief Executive Officer and Chairman of the Board
</TABLE>

<PAGE>

   This Amendment No. 1 to Form 10-KSB is being filed solely to correct a
typographical error on the consolidated balance sheet.

                        ANNUAL REPORT ON FORM 10 - KSB
                                    ITEM 8

                         LIST OF FINANCIAL STATEMENTS
                         YEAR ENDED DECEMBER 31, 2001

                            APOGEE TECHNOLOGY, INC.
                            NORWOOD, MASSACHUSETTS

<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                 ----
<S>                                                                                              <C>
Independent Auditor's Report.................................................................... F-1
Consolidated Balance Sheet-December 31, 2001.................................................... F-2
Consolidated Statements of Operations-Years ended December 31, 2001 and 2000.................... F-3
Consolidated Statements of Stockholders' Equity (Deficit)-Years ended December 31, 2001 and 2000 F-4
Consolidated Statements of Cash Flows-Years ended December 31, 2001 and 2000.................... F-5
Notes to Consolidated Financial Statements-December 31, 2001 and 2000........................... F-6
</TABLE>

<PAGE>

                         INDEPENDENT AUDITOR'S REPORT

Board of Directors Apogee Technology, Inc.

   We have audited the accompanying consolidated balance sheet of Apogee
Technology, Inc. and Subsidiary as of December 31, 2001 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the two-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

   We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material 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 financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Apogee Technology, Inc. and Subsidiary as of December 31, 2001 and the
results of their operations and cash flows for each of the years in the
two-year period ended December 31, 2001 in conformity with U.S. generally
accepted accounting principles.

   The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company has had recurring
losses and no significant revenue stream that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 2. The viability of the Company is dependent
upon its ability to successfully further develop and market its digital
amplifier technology applications and raise sufficient funds for such purposes.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

New York, New York
February 7, 2002

                                      F-1

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                         2001
                                                                                     ------------
<S>                                                                                  <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents........................................................ $  2,387,178
   Accounts receivable, net of allowance for doubtful accounts of $5,000............      232,555
   Inventories......................................................................      420,047
   Prepaid expenses.................................................................       51,870
                                                                                     ------------
       Total current assets.........................................................    3,091,650
                                                                                     ------------
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $217,491.................      177,650
                                                                                     ------------
OTHER ASSETS
   Digital Amplifier patents, net of amortization of $68,157........................       55,451
                                                                                     ------------
                                                                                     $  3,324,751
                                                                                     ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable and accrued expenses............................................ $    529,709
   Current maturities of capital lease obligations..................................       33,128
                                                                                     ------------
       Total current liabilities....................................................      562,837
   Capitalized lease obligations net of current maturities..........................       19,976
                                                                                     ------------
       Total liabilities............................................................      582,813
                                                                                     ============
STOCKHOLDERS' EQUITY
   Common stock, $.01 par value; 20,000,000 shares authorized, 5,213,051 issued and
     outstanding....................................................................       52,130
   Additional paid-in capital.......................................................   12,799,146
   Accumulated deficit..............................................................  (10,109,338)
                                                                                     ------------
       Total stockholders' equity...................................................    2,741,938
                                                                                     ------------
                                                                                     $  3,324,751
                                                                                     ============
</TABLE>




             See accompanying notes and independent auditor's report.

                                      F-2

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                       Years Ended December 31,
                                                       -----------------------
 <S>                                                   <C>         <C>
                                                          2001         2000
                                                       ----------  -----------
 REVENUES
    License fee....................................... $1,420,000  $        --
    Royalties.........................................    250,000           --
    Consulting........................................    242,063       50,275
    Product sales.....................................    269,328           --
                                                       ----------  -----------
                                                        2,181,391       50,275
                                                       ----------  -----------
 COSTS AND EXPENSES
    Research and development..........................  1,142,364      868,672
    Selling, general and administrative...............  1,777,022    1,093,091
    Product sales.....................................    203,797           --
                                                       ----------  -----------
                                                        3,123,183    1,961,763
                                                       ----------  -----------
 LOSS BEFORE OTHER INCOME (EXPENSE)...................   (941,792)  (1,911,488)
                                                       ----------  -----------
 OTHER INCOME (EXPENSE)
    Interest expense..................................    (11,424)     (20,621)
    Interest income...................................     58,630       12,256
                                                       ----------  -----------
                                                           47,206       (8,365)
                                                       ----------  -----------
 NET LOSS............................................. $ (894,586) $(1,919,853)
                                                       ==========  ===========
 BASIC AND DILUTED LOSS PER COMMON SHARE.............. $    (0.18) $     (0.42)
                                                       ==========  ===========
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC AND
   DILUTED............................................  5,019,507    4,571,860
                                                       ==========  ===========
</TABLE>





           See accompanying notes and independent auditor's report.

                                      F-3

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<S>                        <C>       <C>      <C>       <C>        <C>         <C>           <C>
                                                                   Additional
                                                  Common Stock       Paid-in    Accumulated
                              Common Stock         Subscribed        Capital      Deficit
                           ------------------ -------------------  ----------- ------------
                            Shares   Dollars   Shares    Dollars     Dollars      Dollars        Total
                           --------- -------- --------  ---------  ----------- ------------  ------------
Balances at
 December 31, 1999........ 4,155,022 $ 41,550  165,000  $ 330,000  $ 6,287,233 $ (7,294,899) $   (636,116)
Net loss..................        --       --       --         --           --   (1,919,853)   (1,919,853)
Issuances of stock........   784,984    7,850 (165,000)  (330,000)   3,738,742           --     3,416,592
Conversion of stockholder
  debt to equity..........    41,517      415       --         --      274,753           --       275,168
Contributions by directors        --       --       --         --       61,600           --        61,600
                           --------- -------- --------  ---------  ----------- ------------  ------------
Balances at
  December 31, 2000....... 4,981,523   49,815       --         --   10,362,328   (9,214,752)    1,197,391
Net loss..................        --       --       --         --           --     (894,586)     (894,586)
Issuances of stock........   231,528    2,315       --         --    2,436,818           --     2,439,133
                           --------- -------- --------  ---------  ----------- ------------  ------------
Balances at
  December 31, 2001....... 5,213,051 $ 52,130       --  $      --  $12,799,146 $(10,109,338) $  2,741,938
                           ========= ======== ========  =========  =========== ============  ============
</TABLE>






           See accompanying notes and independent auditor's report.

                                      F-4

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                                                ------------------------
<S>                                                                             <C>          <C>
                                                                                    2001         2000
                                                                                -----------  -----------
CASH FLOWS FROM OPERATIONS
   Net loss.................................................................... $  (894,586)  (1,919,853)
   Adjustments to reconcile net loss to net cash used in operating activities:
       Accrued interest........................................................          --      (51,529)
       Depreciation and amortization...........................................     108,123       71,748
       Change in operating assets and liabilities:
          Accounts receivable..................................................    (177,831)     (14,166)
          Inventory............................................................    (420,047)          --
          Prepaid expenses.....................................................      78,101     (106,667)
          Accounts payable and accrued expenses................................     263,194      (28,411)
                                                                                -----------  -----------
              Net cash used in operating activities............................  (1,043,046)  (2,048,878)
                                                                                -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of equipment .....................................................     (81,174)    (132,806)
   Patent costs................................................................     (30,672)     (22,614)
                                                                                -----------  -----------
              Net cash used in investing activities............................    (111,846)    (155,420)
                                                                                -----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Repayments of line of credit................................................          --     (200,000)
   Proceeds from issuances of common stock.....................................   2,439,133    3,496,592
   Repayments of stockholder loans ............................................          --      (20,000)
   Other capital contributions.................................................          --       61,600
   Repayments of capital lease obligations.....................................     (28,309)      (5,277)
                                                                                -----------  -----------
              Net cash provided by financing activities........................   2,410,824    3,332,915
                                                                                -----------  -----------
INCREASE IN CASH AND CASH EQUIVALENTS..........................................   1,255,932    1,128,617
Cash and cash equivalents--beginning...........................................   1,131,246        2,629
                                                                                -----------  -----------
CASH AND CASH EQUIVALENTS--ENDING.............................................. $ 2,387,178  $ 1,131,246
                                                                                ===========  ===========
</TABLE>



           See accompanying notes and independent auditor's report.

                                      F-5

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                         NOTES TO FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2000

1.  NATURE OF OPERATIONS

   The Company is engaged in the development and design of digital amplifier
technology. The Company is presently focused on computer based audio and
entertainment media applications derived from its all-digital amplifier
circuitry design trademarked as Direct Digital Amplification (DDX).

2.  GOING CONCERN

   The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Because the Company has had recurring
losses and no continuing revenue stream, there is substantial doubt as to the
Company's ability to continue as a going concern. The Company believes that its
current working capital should be sufficient to fund its capital and
operational requirements at least through October 31, 2002. The Company plans
to raise additional capital to further commercialize its digital amplifier
(DDX) technology. The viability of the Company is dependent upon its ability to
further develop and market its DDX technology and raise sufficient funds for
such purposes. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Consolidation

   The financial statements include the accounts of Apogee Technology, Inc.
("Technology"), and its wholly owned subsidiary, DUBLA, Inc. (collectively the
"Company"). All significant intercompany transactions and accounts have been
eliminated.

  Revenue Recognition

   License fee and royalty revenues are recognized when earned in accordance
with the underlying agreements.

   Consulting revenue is recognized as services are performed.

   Revenue from product sales is recognized upon the shipment of merchandise.

   In December 1999, the United States Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial
Statements" subsequently updated by SAB 101A and SAB 101B ("SAB 101"). SAB 101
summarizes certain of the SEC's views in applying U.S. generally accepted
accounting principles to revenue recognition in financial statements. The
Company's accounting for its license agreement with ST Microelectronics NV, as
discussed in Note 9, is in accordance with SAB 101.

  Research and Development

   Costs for research and development are expensed as incurred.

  Inventories

   Inventories are stated at the lower of cost (first-in, first-out) or market.

  Property and Equipment

   Major replacements and betterments of equipment are capitalized. Cost of
normal maintenance and repairs is charged to expense as incurred. Depreciation
is provided over the estimated useful lives of the assets using accelerated
methods.

  Patents

   Costs incurred to register and obtain patents are capitalized and amortized
on a straight-line basis over five years.

                                      F-6

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000


  Use of Estimates in Financial Statements

   In preparing financial statements in conformity with generally accepted
accounting principles, management is required 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 financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

  Cash and Cash Equivalents

   The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

  New Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative
Instruments and Hedging Activities," as amended by FAS 137 and FAS 138, which
is required to be adopted in fiscal years beginning after June 15, 2000. FAS
133 requires all derivatives to be recorded on the balance sheet at fair value
and establishes new accounting procedures that will affect the timing and
manner in which hedging gains and losses are recognized in a Company's
financial statements.

   The adoption of these standards did not have a material effect on the
Company's results of operations or financial position.

   In June 2001, the Financial Accounting Standards Board approved Statement
No. 142 (FAS 142), "Goodwill and Other Intangible Assets" which is required to
be adopted in fiscal years beginning after December 15, 2001. FAS 142 changes
the accounting for goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill recorded in past
business combinations, will cease upon adoption of the statement.

   In August 2001, the Financial Accounting Standards Board approved Statement
No. 144 (FAS 144) "Impairment of Long-Lived Assets" which is required to be
adopted in fiscal years beginning after December 15, 2001. FAS 144 requires
that in cases where undiscounted expected cash flows associated with long-lived
assets are less than their carrying value, an impairment provision is
recognized in an amount by which the carrying value exceeds the estimated fair
value of such assets.

   The adoption of FAS 142 and 144 will not have a material effect on the
Company's results of operations or financial position.

4.  INVENTORIES

   The major classifications of inventories are as follows at December 31, 2001:

<TABLE>
<CAPTION>
                            Raw materials..  $27,484
                            <S>             <C>
                            Work in process   14,779
                            Finished goods.  377,784
                                            --------
                                            $420,047
</TABLE>

                                      F-7

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000


5.  PROPERTY AND EQUIPMENT

   Property and equipment at December 31, 2001 are comprised of the following:

<TABLE>
<CAPTION>
                     Equipment.................... $347,838
                     <S>                           <C>
                     Furniture and fixtures.......   27,649
                     Leasehold improvements.......   19,654
                                                    395,141
                                                   --------
                     Less accumulated depreciation  217,491
                                                   --------
                                                   $177,650
                                                   ========
</TABLE>

   The estimated useful lives of the classes of physical assets were as follows:

<TABLE>
<CAPTION>
                    Description            Depreciable Lives
                    -----------            -----------------
                    <S>                    <C>
                    Equipment.............         5 years
                    Furniture and fixtures         7 years
                    Leasehold improvements   Term of lease
</TABLE>

6.  BANK LINE OF CREDIT

   The Company had a $250,000 bank line of credit which expired in June 2001.
The line was secured by the Company's assets and was personally guaranteed by a
director of the Company.

7.  CAPITAL LEASE OBLIGATIONS

   The Company leases certain furniture and equipment under capital leases.
Future minimum lease payments for assets under capital leases at December 31,
2001 are as follows:

<TABLE>
<CAPTION>
               2002...................................  $38,643
               <S>                                     <C>
               2003...................................   17,833
               2004...................................    3,405
                                                       --------
               Total minimum lease payments...........   59,881
               Less amount representing interest......   (6,777)
                                                       --------
               Present value of minimum lease payments   53,104
               Less current maturities................  (33,128)
                                                       --------
                                                       $ 19,976
</TABLE>

   At December 31, 2001, the Company had net assets under capital leases of
$47,295 included in property and equipment in the accompanying balance sheet.

8.  STOCKHOLDERS' EQUITY

  Private Placements

   In December 2001, the Company completed a private placement of 207,828
shares of common stock at $11.50 per share. Proceeds received were $2,390,022.

                                      F-8

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000


   In November 2000, the Company completed a private placement of 277,001
shares of common stock at $10.00 per share. Proceeds received were $2,554,842
together with a conversion of $215,168 in stockholder debt.

   In June 2000, the Company completed a private placement in the amount of
$750,000 for the issuance of 250,000 shares of common stock at $3.00 per share.
Proceeds received were $690,000 together with a conversion of $60,000 in
stockholder debt.

   In January 2000, the Company completed a private placement, authorized in
September 1999, in the amount of $545,000. The Company issued 272,500 units at
$2.00 per unit. Each unit represents one share of common stock and one
five-year warrant to purchase one-fifth share of common stock at $2.50 per
share. The warrants expire five years from the date of the subscription. Total
proceeds received were $495,000 together with a conversion of $50,000 in
stockholder debt. As of December 31, 2000 and 2001, there were outstanding
222,500 warrants to purchase 44,500 shares of common stock.

  Stock Options

   The Company issued 23,700 and 75,000 shares of common stock during 2001 and
2000, respectively, for options exercised by certain employees and directors.
The shares were issued at prices ranging from $0.50 per share to $4.15 in 2001
and $0.55 to $1.25 per share in 2000. Proceeds from options amounted to $32,276
and $51,750 in 2001 and 2000, respectively.

   During 2000 the Company issued 2,000 shares of common stock to an outside
consultant at a price of $2.50 per share pursuant to the Company's 1989 stock
option plan. The 1989 plan has been replaced by the 1997 Incentive Stock Option
Plan.

  Other

   In May 2001, the shareholders approved an Amendment to the Certificate of
Incorporation increasing the number of authorized shares of the Company's
common stock from 9,000,000 shares to 20,000,000 shares.

   During 2000, the Company waived accrued interest on stockholder loans of
$61,600 and contributed it to capital.

9.  RELATED PARTY TRANSACTIONS

   The Company rents its facility from one of its stockholders for $4,400 per
month ($3,600 per month prior to October 2001) pursuant to a lease expiring in
September 2003. Rent paid to this stockholder aggregated $45,600 and $43,200
for 2001 and 2000, respectively.

10.  DEVELOPMENT AND LICENSE AGREEMENTS

    In February 2001, the Company entered into a license agreement with ST
Microelectronics NV ("ST") of the Netherlands. The agreement calls for ST to
use certain intellectual property rights owned or controlled by the Company to
commercialize and sell related products utilizing such technology. In
consideration for this license, ST paid to the Company a one-time license fee
of $1.6 million in cash and a $400,000 credit for future design services. This
agreement has no expiration date, however, either party may cancel the
agreement upon certain advance notices as defined in the agreement. $180,000 of
the $1.6 million of license fee income was initially

                                      F-9

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000

deferred as the Company was obligated to perform future consulting services
relating to the development of a portion of the products to be created using
the licensed technology and supporting services relating to the licensed
technology. During the year ended December 31, 2001, the Company fulfilled this
obligation and recognized this deferral in its entirety. The Company earned an
additional $62,063 for consulting services provided, surpassing its initial
obligation under this agreement. Total consulting revenue under this agreement
amounted to $242,063 in 2001. The Company also received royalties of $250,000
in 2001 based on certain formulas, as defined in the agreement. The $400,000
credit portion of the license fee is associated with future development
activities of the Company and will not be recognized in income before that
happens. When the $400,000 amount is recognized in income, it will
simultaneously be charged to research and development costs.

    In August 1999, the Company signed a licensing agreement with ALST, a
strategic partnership between Altec Lansing Technology, Inc. ("Altec") and
STMicroelectronics. The Company was to receive a royalty on sales of all
products incorporating the Company's DDX technology as well as consulting
income on collaborative development work. The royalty obligation under the ALST
agreement was superseded in February 2001 with the signing of the
STMicroelectronics Agreement whereby STMicroelectronics agreed to assume all
royalty obligations to the Company under the ALST agreement. During 2000, no
royalties were earned given that no shipments were made under the agreement. In
January 2002, the agreement was cancelled as ALST ceased operations. No revenue
from this agreement was earned during 2001. During 2000, the Company recognized
$50,275 in revenue from consulting fees under the ALST agreement.

11.  CUSTOMER CONCENTRATION

    During the year ended December 31, 2001, approximately 83% of the Company's
product sales were derived from four customers.

12.  STOCK OPTIONS

    In May 1997, the Company adopted an incentive stock option plan for key
employees, directors and consultants. The Company's board of directors
authorized a maximum of 300,000 shares of common stock for issuance under the
plan which in 2001 was increased to 1,050,000 shares. Pursuant to the plan, the
board may grant options to key employees, directors, or consultants at its
discretion. Options granted under the plan to less than 10% and greater than
10% stockholders are to be for 100% and 110%, respectively, of the fair value
of the common stock on the date of the grant, and expire 10 and 5 years,
respectively, from the date of the grant.

    A summary of the status of the Company's stock options as of December 31,
2001 and 2000 and changes during the years ended on that date is presented
below.

<TABLE>
<CAPTION>
                                                                      2001              2000
                                                                    Weighted          Weighted
                                                                    Average           Average
                                                                    Exercise          Exercise
                                                           Shares    Price   Shares    Price
                                                           -------  -------- -------  --------
<S>                                                        <C>      <C>      <C>      <C>
Outstanding -- beginning of year.......................... 405,500   $ 2.99  300,000   $ 0.64
Granted................................................... 485,500    12.68  212,000     5.38
Exercised................................................. (23,700)   (1.38) (77,000)   (0.74)
Expired...................................................       .        .        .        .
Cancelled................................................. (48,900)   (4.25) (29,500)   (2.15)
                                                           -------           -------
Outstanding -- end of year................................ 818,400   $ 8.71  405,500   $ 2.99
                                                           =======   ======  =======   ======
Weighted average fair value of options granted during year           $ 9.33             $3.02
                                                                     ======            ======
</TABLE>

                                     F-10

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000


    The Company granted a total of 485,500 and 212,000 in options under the
1997 Incentive Stock Options Plan during 2001 and 2000, respectively, to
certain directors, employees and a consultant. Vesting generally occurs ratably
over a five-year period beginning one year from the date of grant. During 2001,
2,500 options were granted to a consultant in lieu of payment for services
rendered. As a result, these options were fully vested at the date of grant,
and the fair market value of these options ($16,385) was charged to operations.

    The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). It applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its plans and does
not recognize compensation expense for its stock-based compensation plans other
than for options granted (as noted above).

    Pro forma information regarding earnings and per share information is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model in 2001 and 2000 with the following
weighted-average assumptions for 2001 and 2000, respectively: risk-free
interest rates ranging from 4.41% to 5.28% and 5.58% to 6.63%; no dividend
yields; volatility factors of the expected market price of the Company's common
stock of 0.77 in 2001 and 1.0 in 2000; and a weighted-average expected life of
the option of approximately 7.5 years and 10 years.

    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. Had the Company's stock
option plan been accounted for under SFAS No. 123, net loss and loss per share
would have been increased to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                 2001         2000
                                             ------------ ------------
          <S>                                <C>          <C>
          Net loss:
             As reported.................... $  (894,586) $(1,919,853)
             Pro forma...................... $(1,411,709) $(2,032,094)
          Loss per share:
             As reported, basic and diluted. $     (0.18) $     (0.42)
             Pro forma, basic and diluted... $     (0.28) $     (0.44)
</TABLE>

   The following table summarizes information about options outstanding as of
December 31, 2001:

<TABLE>
<CAPTION>
                                 Options Outstanding        Options Exercisable
 Range of Exercise Prices  -------------------------------- --------------------
<S>                        <C>         <C>         <C>      <C>         <C>
                                        Weighted
                                         Average   Weighted             Weighted
                                        Remaining  Average              Average
                             Number    Contractual Exercise   Number    Exercise
                           Outstanding    Life      Price   Exercisable  Price
                           ----------- ----------- -------- ----------- --------
      $0.50 --  9.00         290,400      4.25      $ 1.50    210,600    $ 1.05
      $5.25 -- 15.25         528,000      6.38       12.68     16,800     12.37
                             -------      ----       ----      -----      ----
Total at December 31, 2001   818,400      5.97      $ 8.71    227,400    $ 1.88
                             =======      ====      =====     =======    =====
</TABLE>

13.  LOSS PER COMMON SHARE

    Basic and diluted loss per common share are computed by dividing net loss
by the weighted average number of shares of common stock outstanding during
each year, which totaled 5,019,507 and 4,571,860 shares for 2001 and 2000,
respectively. The assumed exercise of outstanding warrants and stock options
for diluted loss per common share was not applicable because their effect was
antidilutive.

                                     F-11

<PAGE>

                    APOGEE TECHNOLOGY, INC. AND SUBSIDIARY

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

                          December 31, 2001 and 2000


14.  EMPLOYEE RETIREMENT 401(K) PLAN

   The Company sponsors a 401(k) retirement plan for the benefit of its
employees. The plan imposes no contribution requirement or liability upon the
Company. Plan participation is voluntary and unconditional to all employees
over 18 and plan contributions are discretionary to the limits allowed by the
Internal Revenue Code and are immediately 100% vested. There were no employer
contributions during 2001 and 2000.

15.  TAX LOSS CARRYFORWARDS

   The Company has federal net operating loss carryforwards at December 31,
2001, totaling approximately $10,762,000, expiring through the year 2021.

   The Company's net losses result in no current tax benefit. The deferred tax
assets arising from net operating loss carryforwards amounted to approximately
$2,168,000 at December 31, 2001, and were fully offset by a valuation allowance
as required by Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. This represents an increase of $468,000 in the valuation
allowance since December 31, 2000. The valuation allowance is based on an
assessment at December 31, 2001 that it is more likely than not that the net
operating loss carryover will not be realized in the future. However, should
the Company generate future income from licensing agreements (see Note 10) and
sales of products, resulting in taxable income, then the valuation allowance
will be adjusted accordingly.

16.  CONCENTRATION OF CREDIT RISK

   The Company maintains accounts with financial institutions. Balances usually
exceed the maximum coverage provided by the Federal Deposit Insurance
Corporation on insured depositor accounts.

   One of the Company's major customers accounted for approximately 55% of the
total accounts receivable balance at December 31, 2001.

17.  SUPPLEMENTAL CASH FLOW INFORMATION

   Interest paid during 2001 and 2000 amounted to $11,424 and $10,550,
respectively.

  Supplemental Disclosure of Noncash Financing and Investing Activities

<TABLE>
<CAPTION>
                                                             2001     2000
                                                            ------- --------
    <S>                                                     <C>     <C>
    Furniture and equipment financed through capital leases $17,760 $ 68,930
    Stockholder debt converted to equity...................       .  275,108
</TABLE>

18.  LITIGATION

   On February 19, 2002, Acoustic Technology, Inc. ("ATI") filed a complaint in
the Superior Court of Suffolk County, Massachusetts, against Mr. Tak Ping Tsui,
a former employee of ATI and a current employee of the Company, in which the
Company was also named as a defendant. The complaint alleges that the Company
interfered with ATI's noncompete agreement with Mr. Tsui and violated the
Massachusetts statutes on unfair and deceptive trade practices and trade
secrets by hiring Mr. Tsui. ATI has claimed $1,000,000 in damages from Mr. Tsui
and the Company. On February 26, 2002, the Suffolk County Superior Court
denied, without prejudice, ATI's motion for a preliminary injunction seeking to
stop the Company from continuing to employ Mr. Tsui and to require the Company
to provide information regarding Mr. Tsui's employment by the Company. The
Company intends to defend vigorously the claims against it in this matter.
Further, the Company has brought a counterclaim against ATI for unfair and
deceptive trade practices and unfair methods of competition.

                                     F-12