UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 
 FORM 10–Q (Mark One)xQuarterly report pursuant to Section 13
  or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 or  ̈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 0-26778 
 APPLIED  MICROSYSTEMS  CORPORATION(Exact name of registrant as specified in
its charter)    Washington
  91–1074996)(State
  of  incorporation)
  (I.R.S.
  Employer Identification Number5020 148th Avenue N.E., Redmond, Washington  98052-5172(425) 882-2000(Address
  of principal executive offices, including zip code; registrants telephone
  number, including area code)
   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. 
YesxNo ̈ Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date. Common stock, $.01 par value: 7,063,921
shares outstanding as of May 4, 2001.   APPLIED MICROSYSTEMS CORPORATION

FORM 10-Q

QUARTER ENDED MARCH 31, 2001

INDEX

PART I: FINANCIAL INFORMATIONItem 1. Financial
  Statements:Consolidated Balance
  Sheets as of March 31, 2001 and December 31, 2000Consolidated
  Statements of Operations for the three months ended March 31, 2001 and 2000Consolidated
  Statements of Cash Flows for the three months ended March 31, 2001 and 2000Notes to
  Consolidated Financial StatementsItem
  2. Managements Discussion and Analysis of Financial Condition and Results of
  OperationsItem
  3. Quantitative and Qualitative Disclosures About Market RiskPART II: OTHER INFORMATIONItem 6.
  Exhibits and Reports on Form 8-KSignaturesPART I
- FINANCIAL INFORMATION



Item 1.Financial Statements

APPLIED MICROSYSTEMS
CORPORATION

CONSOLIDATED BALANCE SHEETS




March 31,
  December 31,2001
  2000(unaudited)(in thousands)ASSETSCurrent assets:Cash and cash equivalents
  $3,882
  $7,956Securities available-for-sale
  2,461
  2,526Accounts receivable, net
  9,140
  5,729Inventories
  2,397
  2,358Prepaid and other current assets
  452
  314Total current assets
  18,332
  18,883Property
  and equipment, net
  2,058
  2,109Other
  assets
  431
  461Total assets
  $20,821
  $21,453LIABILITIES AND
  SHAREHOLDERS' EQUITYCurrent
  liabilities:Accounts payable
  $2,555
  $2,954Accrued payroll
  1,697
  1,993Other accrued expenses
  929
  1,029Deferred revenue
  4,578
  4,654Total current liabilities
  9,759
  10,630Capital
  lease obligation, less current portion
  209
  Shareholders'
  equity:Preferred stock, par value $0.01
  
  Common stock, par value $0.01
  26,547
  26,360Accumulated other comprehensive
  loss
  (1,296)
  (879)Accumulated deficit
  (14,398)
  (14,658)Total shareholders' equity
  10,853
  10,823Total liabilities and
  shareholders' equity
  $20,821
  $21,453See accompanying
  notes.APPLIED
MICROSYSTEMS CORPORATION



CONSOLIDATED
STATEMENTS OF OPERATIONS(UNAUDITED)






Three Months Ended March 31,2001
  (Restated)2000(in
  thousands, except per-share amounts)Net
  sales
  $10,114
  $7,683Cost
  of sales
  2,807
  2,104Gross
  profit
  7,307
  5,579Operating
  expenses:Sales, general and administrative
  3,884
  4,492Research and development
  3,264
  3,081Total
  operating expenses
  7,148
  7,573Income
  (loss) from operations
  159
  (1,994)Interest
  income and other, net
  101
  183Income (loss) before cumulative effect of
  change in accounting principle
  260
  (1,811)Cumulative
  effect of change in accounting principle
  
  (1,110)Net income (loss)
  $260
  $(2,921)Per-share amounts:Basic income (loss) per share before
  cumulative effect of change in accounting principle
  $0.04
  $(0.27)Cumulative
  effect of change in accounting principle
  
  (0.16)Basic income (loss)
  per share
  $0.04
  $(0.43)Shares used in basic
  per-share calculation
  6,990
  6,858Diluted income (loss) per share before
  cumulative effect of change in accounting principle
  $0.04
  $(0.27)Cumulative
  effect of change in accounting principle
  
  (0.16)Diluted income (loss)
  per share
  $0.04
  $(0.43)Shares used in diluted
  per-share calculation
  7,277
  6,858See
  accompanying notes.APPLIED MICROSYSTEMS CORPORATION



CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)






Three Months Ended March 31,2001
  (Restated)2000(in thousands)Operating
  activitiesNet
  income (loss)
  $260
  $(2,921)Adjustments to reconcile net income (loss)
  to net cash used in operating activities:Depreciation and amortization
  282
  260Cumulative effect of change in
  accounting principle
  
  1,110Net change in operating accounts:Accounts receivable
  (3,628)
  (1,215)Inventories
  (284)
  (275)Prepaid and other current assets
  (136)
  (62)Other assets
  4
  (1)Accounts payable and accrued
  expenses
  (686)
  95Deferred revenue
  (11)
  (52)Net cash used in operating
  activities
  (4,199)
  (3,061)Investing activitiesPurchases of securities available-for-sale
  (1,460)
  (1,764)Maturities of securities
  available-for-sale
  1,525
  5,465Additions to property and equipment
  (48)
  (198)Net cash provided by
  investing activities
  17
  3,503Financing activitiesSale of common stock to employees
  151
  60Stock options exercised
  36
  258Net cash provided by
  financing activities
  187
  318Effects
  of foreign exchange rate changes on cash
  (79)
  (67)Net
  increase (decrease) in cash and cash equivalents
  (4,074)
  693Cash
  and cash equivalents at beginning of period
  7,956
  5,682Cash
  and cash equivalents at end of period
  $3,882
  $6,375Supplemental disclosure of non-cash activities:During the first quarter of 2001, the
  Company obtained equipment under a five-year capital lease obligation of
  $250,000.See accompanying
  notes.APPLIED MICROSYSTEMS
  CORPORATIONNOTES TO CONSOLIDATED
  FINANCIAL STATEMENTS(UNAUDITED)

1.Basis of Presentation

The accompanying unaudited consolidated
financial statements have been prepared by Applied Microsystems Corporation
(Applied or the Company) in accordance with generally accepted accounting
principles for interim financial information and according to the rules and
regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) considered
necessary for a fair presentation have been included.  The balance sheet at December 31, 2000 has been derived from the
audited financial statements included in the Companys Form 10-K for the year
then ended.  The results of operations
for the three-month period ended March 31, 2001, are not necessarily indicative
of results to be expected for the entire year ending December 31, 2001 or for
any other fiscal period.  For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K for the year ended December 31,
2000.

2.Computation of Loss Per Share

Basic
loss per share is computed using the weighted-average number of common shares
outstanding during the period.  Diluted
loss per share is computed using the weighted-average number of common shares
and dilutive common stock equivalent shares outstanding during the period.  Common stock equivalent shares are excluded
from the computation of diluted loss per share if their effect is antidilutive;
therefore, due to a net loss recorded in the three months ended March 31, 2000,
basic and diluted loss per share are determined excluding common stock
equivalents for that period.

3.Comprehensive Loss

As defined by applicable accounting
and reporting standards, Applied's comprehensive
loss is comprised of net loss and the effects of current-period translation
adjustments, which are recorded directly to equity.  During the first quarter of 2001, comprehensive loss amounted to
$157,000, compared to comprehensive loss of $3.2 million for the first quarter
of 2000.

4.Inventories

Inventories
consist of the following:


March
  31,
  December 31,2001
  2000(in thousands)Finished
  goods
  $397
  $794Work
  in process
  292
  72Purchased
  parts
  1,708
  1,492$2,397
  $2,3585.Cumulative Effect of Change in Accounting Principle

In
the fourth quarter of 2000, the Company implemented the Securities and Exchange
Commissions Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements.  SAB 101 provides
guidance related to revenue recognition based upon interpretations and
practices followed by the SEC.  As a
result of the Companys assessment of these new guidelines, Applied changed its
revenue recognition practices for sales in Japan to reflect revenues upon the
earlier of customer inspection and acceptance or, in the absence of
notification of inspection and acceptance, upon receipt of payment.  Applied adopted SAB 101 under the cumulative
catch-up method of accounting, which is the manner prescribed under applicable
accounting and reporting rules.  Under
these rules, the cumulative effect of a change in accounting principle is
recognized as an additional item on the Companys statement of operations in
the first quarter of the year in which the change is made.

Applieds
adoption of this new standard resulted in a $1.1 million cumulative adjustment
increasing the Companys Q1 2000 net loss. 
Revenues and expenses in each of the 2000 quarters were likewise
restated as if the new accounting principle had been adopted since January 1,
2000.  Deferred revenue at January 1,
2000 included $1,406,000 related to goods that were shipped and previously recognized
as revenue but do not meet the new criteria for revenue recognition.  During the first quarter of 2000, $855,000
of the amount deferred was recognized as revenue.

6.Recent Accounting Pronouncements

In
March 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS) 133, Accounting for Derivative Instruments and Hedging
Activities.  SFAS 133 requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value.  Gains or losses
resulting from changes in the fair values of those derivatives would be
accounted for in current earnings unless specific hedge criteria are met.  The key criterion for hedge accounting is
that the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows.  Applied
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting, if any. 
SFAS 133 is effective for the Companys consolidated financial
statements for the year ending December 31, 2001.  No hedging activities were in effect during the first three
months of 2001, nor at any time during 2000; therefore, the adoption of this
Statement is not expected to have a material effect on the Companys
operations.

7.Reclassifications

Certain prior-period amounts have been
reclassified to conform to the current-period presentation.

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

Overview

Applied
Microsystems Corporation is a leader and innovator in software development tools
and technologies. Applieds products and services help customers bring products
to market faster by providing innovative tools to develop, debug, and test
products faster, more reliably, and at a lower cost.  For more than 20 years, the Company has targeted its products to
meet the needs of embedded systems markets and has developed significant
experience and expertise in high-end microprocessors, real-time systems, and
software analysis technology  three key competencies that position the Company
to meet the needs of software developers. 
Applied develops, markets and supports a comprehensive suite of software
and hardware-enhanced development and test tools for the development of complex
embedded microprocessor-based applications. 
The embedded systems market has in recent years expanded from its
traditional base of industrial automation, medical devices, and avionic
applications to include a number of rapidly growing market segments such as
Internet devices, high-speed networking, wireless technologies, game consoles,
and set top boxes.

Results of Operations



(dollars in thousands)
  Three Months Ended
  March 31,2001
  Change From Prior Period
  Three Months Ended
  March 31,2000Net sales
  $10,114
  $2,431
  $7,68332%

The
Company earns revenue on the sale of hardware and software products.  The Company also earns revenue on the sale
of services, including hardware and software support, installation, training,
and professional engineering services. 
As further described under Cumulative effect of change in accounting
principle, in the fourth quarter of 2000 the Company adopted the Securities
and Exchange Commissions Staff Accounting Bulletin No. 101 (SAB 101),
Revenue Recognition in Financial Statements, effective retroactive to January
1, 2000.

Applieds
first-quarter 2001 revenues represented its third highest quarterly revenue
figure in the Companys history  in addition, the Company has reported
quarterly revenues greater than $10 million on only three prior occasions.  The 32% increase in net sales in the first
quarter, as compared to the first quarter of 2000, was due primarily to
increased sales of Applieds new game development solutions.  Total game development revenues were $4.5
million in the first quarter of 2001, compared to $790,000 in the first quarter
of 2000.  First-quarter 2001 game
development revenues were comprised primarily of initial shipments of game
development tools for Microsofts Xbox video gaming system, as well as non-recurring
engineering fees for Xbox game tools development.  The significant increase in quarterly revenues was a direct
result of Applieds development initiatives that began in early 1999 to extend
the Companys technology to meet the needs of game developers.  These initiatives led to agreements with
Nintendo and Microsoft to develop and manufacture game development tools for
Nintendos GameCube and Microsofts Xbox video console systems.  Applied continues to invest in other
development initiatives to further leverage its technology into high-growth
markets.

Revenues
for Applieds leading software analysis product, CodeTEST, increased nearly 30%
in the quarter ended March 31, 2001, compared to the first quarter of
2000.  Applieds total software analysis
tools revenues were $1.8 million in the first quarter of 2001, compared to $1.5
in the first quarter of 2000.  The
increase in software analysis tools revenues in 2001, compared to 2000, was due
in part to the timing of license orders from a third-party developer of
integrated development environments.

The
Companys sales have historically been derived primarily from sales of
hardware-enhanced debug, test, and performance solutions.  Sales of these run control products
decreased in the first quarter of 2001, as compared to the first quarter of
2000, due in part to a planned shift in distribution channels, as well as
generally soft demand from telecommunications customers.  Run control revenues were $3.4 million in
the three months ended March 31, 2001, compared to $4.9 million in the three months
ended March 31, 2000.

The
Company's net sales also include product support revenues, which are included
within the aforementioned major categories of Applieds products.  These support revenues totaled approximately
$0.9 million in the first quarter of 2001, compared to approximately $1.1
million in the first quarter of 2000. 
The decline in support revenues was due primary to a decrease in run
control product sales, for which support contracts are often sold.

International
sales were 28% of net sales in the first quarter of 2001, as compared to 39% of
net sales in the first quarter of 2000. 
In comparison to the comparable period in 2000, international sales
decreased 16% in the three months ended March 31, 2001.  The decrease in international revenues
resulted primarily from lower sales reported in Japan, including the effect of
foreign currency fluctuations.

Applieds
sales through its foreign subsidiaries are generally denominated in local
currencies; as a result, fluctuations in currency exchange rates can have a
significant effect on the Company's reported net sales.  The Company is unable to predict currency
exchange rate fluctuations and anticipates that such fluctuations will continue
to affect its net sales to varying degrees in the future.  The Company expects international sales to
continue to account for a significant percentage of its net sales.



(dollars in thousands)
  Three Months EndedMarch
  31, 2001
  Percentage of Net Sales
  Three Months EndedMarch
  31,2000
  Percentage of Net SalesCost of sales
  $2,807
  28%
  $2,104
  27%Gross Profit
  $7,307
  72%
  $5,579
  73%

Applied
maintained a gross profit percentage in the first quarter of 2001 that was
comparable to the first quarter of 2000 due in large part to increased
throughput in the Companys manufacturing operations that resulted from initial
production and shipment of game development tools for Microsofts Xbox.  In addition, increased software revenues in
the first quarter of 2001 also supported a consistent overall gross profit
percentage; however, the overall gross profit percentage on run control
products in the first quarter of 2001 decreased in comparison to the first
quarter of 2000 due primarily to product and geographic mix within the run
control product line.

The
Company expects its gross profit percentage to fluctuate based upon its product
and service mix, potential changes in material and labor costs, geographic mix,
foreign currency fluctuations, product and patent license royalties, and
variances in volume and related absorption of overhead costs.  Absent the benefit of increased throughput
in the Companys manufacturing operations on overhead absorption rates, the
sales of game development kits would result in lower margins than the Company
has historically maintained, thus adding to the potential for future
fluctuations in gross profit percentages.



(dollars in thousands)
  Three Months EndedMarch
  31,2001
  Change From Prior Period
  Three Months Ended
  March 31,2000Sales, general and
  administrative expenses
  $3,884
  $(608)
  $4,492(14%)

Despite
a significant increase in revenues in the first quarter of 2001, Applieds
total operating expenses of $7.1 million in the first quarter of 2001
represented the lowest expenditure level since the second quarter of 1998.  The Companys total operating expenses have
fluctuated within a narrow range of $7.1 to $7.7 million per quarter over the
past eleven quarters.  Over that same period
of time, Applieds management team has shifted operating resources to pursue
opportunities in high-growth markets through developing new products and
expanding Applieds existing technology. 
That shift is reflected in the overall decrease in sales, general and
administrative expenses, with a similar increase in research and development
expenses.  In December 2000, the Company
announced it had adopted a profit improvement plan that included a modest
reduction in personnel to lower the Companys overall expense run rate and
better position the Company for improved operating results.

The
14% decrease in sales, general and administrative expenses in the first quarter
was primarily due to lower personnel-related expenditures as compared to the
first quarter of 2000, which reflects lower headcount levels in 2001.  Sales of game development tools, which have
lower sales-related expenses than Applieds other hardware and software
products, also contributed to lower expense levels.  The Company expects its sales and marketing expenditures to
increase in the future as it introduces and markets new products and services
and incurs higher selling expenses to increase net sales.

When
incurred, minor foreign exchange gains and losses are included in sales,
general and administrative expenses. In order to mitigate certain intercompany
risks associated with exchange rate fluctuations, the Company may choose to
hedge a portion of its foreign exchange risk as it relates to the debt the
Companys foreign subsidiaries owe to the Company.  No such hedging activities were in effect during the first quarter
of 2001, nor in the prior two years. 
Although the Company may engage in exchange-rate hedging activities with
respect to certain exchange-rate risks, there can be no assurance that it will
do so or that any such activities will successfully protect the Company against
such risks.

(dollars in thousands)
  Three Months Ended
  March 31,
  2001
  Change From Prior Period
  Three Months Ended
  March 31,2000Research and
  development expenses
  $3,264
  $183
  $3,0816%

The
increase in research and development expenses in the first quarter of 2001, as
compared to the first quarter of 2000, was primarily attributable to increased
compensation-related expenses.  These
increased expenses were a result of the Companys investment in strategic new
initiatives, such as the games development tools now offered by the Company,
and enhancements to Applieds line of software analysis tools.

The
Company believes that its continued investment in focused research and
development activities is critical to Applieds future success, and that the
Companys engineering resources represent a competitive advantage.  Therefore, the Company intends to continue
to make substantial investments in product development.   Research and development expenses may also
fluctuate to the extent that Applieds engineering resources are utilized to
fulfill the needs of customers under contractual research and development
arrangements.  In such cases,
engineering costs are charged to costs of goods sold.

(dollars in thousands)
  Three Months EndedMarch
  31,2001
  Change From Prior Period
  Three Months EndedMarch
  31,2000Interest income
  and other, net
  $101
  $(82)
  $183(45%)

The
Companys interest income and other, net, decreased from the prior years
period due to a decrease in the Companys cash available for short-term
investments.



(dollars in thousands)
  Three MonthsEndedMarch
  31,2001
  Change From Prior Period
  Three Months Ended
  March 31,2000Cumulative Effect
  of Change in Accounting Principle
  $
  $(1,110)
  $(1,110)(100%)



Applied
implemented SAB 101 in the fourth quarter of 2000, effective retroactive to
January 1, 2000.  SAB 101 provides
guidance related to revenue recognition policies based on interpretations and
practices followed by the SEC.  As a
result of the Companys assessment of these new guidelines, Applied changed its
revenue recognition practices for sales in Japan to reflect revenues upon the
earlier of customer inspection and acceptance or, in the absence of
notification of inspection and acceptance, upon receipt of payment.  Applied adopted SAB 101 under the cumulative
catch-up method of accounting, which is the manner prescribed under applicable
accounting and reporting rules.  Under
these rules, the cumulative effect of a change in accounting principle is
recognized as an additional item on the Companys statement of operations in
the first quarter of the year in which the change is made.  Applieds adoption of this new standard
resulted in a $1.1 million cumulative adjustment increasing the Companys first
quarter 2000 net loss.  Revenues and
expenses in each of the 2000 quarters were likewise adjusted as if the new
accounting principle had been adopted since January 1, 2000.

Income
Taxes

Applicable
accounting standards require that the Company calculate an estimated annual
effective tax rate and apply such tax rate to the pre-tax income (loss) of
interim periods.  Deferred income taxes
reflect the net tax effects of temporary differences between the tax basis of
assets and liabilities and the corresponding financial statement amounts.  Due to the uncertainty of the Companys
ability to utilize its net deferred tax assets, including its net operating
losses and research and development credits, a valuation allowance has been
established for financial reporting purposes equal to the amount of the net
deferred tax assets.  Accordingly, no
income tax provision or benefit is recorded for the three-month periods ended
March 31, 2001 and 2000.

Liquidity
and Capital Resources

As of March 31, 2001, the Company
had $6.3 million in cash, cash equivalents, and short-term investments,
compared to $10.5 million as of December 31, 2000.  The Company requires capital primarily for the financing of
inventories and accounts receivable, sales and marketing efforts, product
development activities, and capital equipment purchases.  Applied used cash of $4.2 million for
operating activities in the first three months of 2001, compared to using $3.1
million for operating activities in the first three months of the prior
year.  The Company purchased $48,000 in
property and equipment in the first three months of 2001, compared to
purchasing $198,000 in the first three months of 2000.

The Company believes that its
existing working capital, together with amounts anticipated from operations,
will provide the Company with sufficient funds to finance its operations for at
least the next 12 months.  The Company's
future capital requirements will depend on a number of factors, including costs
associated with sales and marketing programs, product development efforts, the
success of the commercial introduction of new Applied products, and the
potential use of funds for strategic purposes. 
To the extent additional funds are required, the Company may sell
additional equity, debt or convertible securities, or obtain credit facilities;
however, there can be no assurance that the Company will be able to obtain such
funds or on terms that are acceptable.

Certain
Factors That May Affect Future Results of Operations

This report contains
forward-looking statements reflecting managements current forecast of certain
aspects of the Companys future.  Such
statements are based on current information which management has assessed but
which by its nature is dynamic and subject to rapid and even abrupt
changes.  Forward-looking statements
include statements regarding the Companys intent to pursue new market and
product opportunities, estimates of future operating trends, and optimism about
continuing improved operating performance.

The Companys actual results could
differ materially from those stated or implied by such forward-looking
statements due to risks and uncertainties associated with the Companys
business which include, but are not limited to, the Companys recent operating
losses, dependence on industries characterized by rapidly changing technology,
manufacturing and product ship schedules, customer design starts utilizing
environments served by Applied, relationships with semiconductor manufacturers,
Applieds focus on a few key markets, relationships with a few key game console
developers for sale of game development tools, competition, dependence on key
personnel, management of expected growth, intellectual property rights and the
potential for corresponding litigation, the potential for product liability,
uncertainties surrounding international operations, potential fluctuations in
quarterly operating results, and potential continued volatility of stock
price.  The forward-looking statements
should be considered in the context of these and other risk factors disclosed
in the Companys most recent filings with the Securities and Exchange
Commission and the Companys 2000 Annual Report on Form 10-K.

Item 3.Quantitative and Qualitative Disclosures
About Market Risk

Applied
develops products in the United States and sells primarily in North America,
Asia and Europe.  As a result, financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets.  Since the Companys products are generally
initially priced in U.S. Dollars and translated to local currency amounts, a
strengthening of the dollar could make the Companys products less competitive
in foreign markets.

The
Company is exposed to market risk related to changes in interest rates, which
could adversely affect the value of the Company's short-term investments.  Applied maintains a short-term investment
portfolio consisting of interest bearing securities with an average maturity of
less than one year.  These securities
are classified as available-for-sale securities.  These interest-bearing securities are subject to interest rate
risk and will fall in value if market interest rates increase.  If market interest rates were to increase
immediately and uniformly by 10% from levels at March 31, 2001, the fair value
of the portfolio would decline by an immaterial amount.  The Company does not expect its operating
results or cash flows to be affected to any significant degree by a sudden
change in market interest rates.

PART II - OTHER INFORMATION

Item 6.Exhibits and Reports on Form 8-K

(A)       Exhibits

None

(B)        Report on Form 8-K

The
registrant did not file any reports on Form 8-K during the quarter ended March
31, 2001.

SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

APPLIED MICROSYSTEMS CORPORATION(Registrant)Date
  :     May 11, 2001
  By:
  /s/  Robert C. BatemanRobert C. BatemanVice President,
  Chief Financial Officer,Secretary and
  Treasurer(Principal
  Financial and Accounting Officerand Duly
  Authorized Signing Officer)