`====================================================================================================

                               U.S. SECURITIES AND EXCHANGE COMMISSION
                                       Washington, D.C. 20549

                                          AMENDMENT NO.1 TO
                                             FORM 10-KSB

                             Annual Report Under Section 13 or 15(d) of
                                 the Securities Exchange Act of 1934
                             For the fiscal year ended December 31, 2000
                                   Commission file number 1-12337


                                           QC OPTICS, INC.
                                           ---------------
                           (Name of Small Business Issuer in Its Charter)


      Delaware                                                                       04-2916548
---------------------------------                                               -------------------
(State or Other Jurisdiction                                                      (I.R.S. Employer
of Incorporation or Organization)                                               Identification No.)


46 Jonspin Road, Wilmington, Massachusetts                                              01887
------------------------------------------                                              -----
(Address of Principal Executive Offices)                                              (Zip Code)

                                           (978) 657-7007
                                           --------------
                          (Issuer's Telephone Number, Including Area Code)

        Securities registered under Section 12(b) of the Exchange Act:


                                                                              Name of Each Exchange
       Title of Each Class                                                     on Which Registered
       -------------------                                                    ---------------------
Common Stock, $.01 par value per share                                      American Stock Exchange
Redeemable Warrants                                                         American Stock Exchange

                 Securities registered under Section 12(g) of the Exchange Act: None

         Indicate by check mark  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
                                 ---                             ---

         Indicate  by  check  mark if  disclosure  of  delinquent  filers  pursuant  to Item  405 of
Regulation S-B is not contained herein,  and will not 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 issuer's net sales for the fiscal year ended December 31, 2000 were $1,941,152.

         The  aggregate  market  value of the  voting  stock held by  non-affiliates  based upon the
closing price for such stock on October 5, 2001 was approximately $1,012,398. As of October 5, 2001,
2,994,888 shares of Common Stock, $.01 par value per share, and 1,075,000 Redeemable Warrants of the
registrant were issued and outstanding.

                                 Documents Incorporated By Reference

         Portions of the Definitive  Proxy Statement for the Annual Meeting of Stockholders  for the
fiscal year ended December 31, 2000, to be filed pursuant to Regulation 14A (the "Proxy Statement"),
are incorporated by reference in Part III of this Form 10-KSB.


                     Transitional Small Business Disclosure Format (check one):

                              Yes                                No X
                                 ---                               ---
====================================================================================================


                                          EXPLANATORY NOTE


         The purpose of this amendment is to include the independent public  accountants' report and
consent  of  Arthur  Andersen  LLP for the year  ended  December  31,  1999  and move the  financial
statements prior to the signature page.

         The  following  portion of Item 13 is also  hereby  amended  to  reflect  the filing of the
consent of Arthur Andersen LLP as an exhibit:

         Item 13.  Exhibits and Reports on Form 8-K.

(A)      Exhibits.

(1)      The following exhibit is filed herewith:

EXHIBIT
  NO.                        TITLE
-------                      -----

23.2              Consent of Arthur Andersen LLP.




                                           QC Optics, Inc.
                                           ===============



                                        FINANCIAL STATEMENTS
                               YEARS ENDED DECEMBER 31, 2000 AND 1999
                                                WITH
                                    INDEPENDENT AUDITORS' REPORT





                                           QC Optics, Inc.
                                           ===============

                                          Table of Contents
____________________________________________________________________________________________________

Page(s)

Independent Auditors' Reports..............................................................       F2

Balance Sheets.............................................................................       F3

Statements of Operations...................................................................       F4

Statements of Stockholders Equity..........................................................       F5

Statements of Cash Flows...................................................................       F6

Notes to Financial Statements..............................................................     F7-F16









____________________________________________________________________________________________________

                                                 F1



                                    INDEPENDENT AUDITOR'S REPORT




To the Board of Directors and
Stockholders of QC Optics, Inc.

     We have audited the balance sheet of QC Optics,  Inc. (a Delaware  Corporation)  as of December
31, 2000, and the related statements of operations, stockholders' equity and cash flows for the year
then ended.  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 audit.  The
financial  statements  of QC Optics,  Inc. as of December 31, 1999,  were audited by other  auditors
whose report dated February 23, 2000, expressed an unqualified opinion on those statements.

         We conducted our audit in  accordance  with auditing  standards  generally  accepted in the
United  States of  America.  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 audit provides a reasonable basis for our opinion.

         In our opinion,  the 2000 financial  statements  referred to above present  fairly,  in all
material respects, the financial position of QC Optics, Inc. as of December 31, 2000 and the results
of its  operations  and its  cash  flows  for the year  then  ended in  conformity  with  accounting
principles generally accepted in the United States of America.


                                                          CAYER PRESCOTT CLUNE & CHATELLIER, LLP



Providence, Rhode Island
February 22, 2001



____________________________________________________________________________________________________

                                                F2-A

                              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To QC Optics, Inc.:

We have audited the  accompanying  balance sheet of QC Optics,  Inc. (a Delaware  corporation) as of
December 31, 1999, and the related statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1999. 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
audit.

We conducted  our audit in  accordance  with  auditing  standards  generally  accepted in the United
States.  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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of QC Optics,  Inc. as of December 31, 1999 and the results of its operations
and its cash flows for the year ended December 31, 1999, in conformity  with  accounting  principles
generally accepted in the United States.




                                                                                ARTHUR ANDERSEN LLP


Boston, Massachusetts
February 23, 2000



                                                F2-B


                                                           QC OPTICS, INC.
                                                           ===============

                                                           BALANCE SHEETS
                                                     DECEMBER 31, 2000 AND 1999
____________________________________________________________________________________________________________________________________

                                                               ASSETS
                                                               ======
                                                                                                2000                   1999
                                                                                                ----                   ----
CURRENT ASSETS:
  Cash and cash equivalents.............................................................     $ 2,224,318           $ 3,844,168
  Accounts receivable, less allowance of $50,000 at December 31, 2000 and 1999..........         192,112             1,125,994
  Inventory.............................................................................       2,314,908             2,861,571
  Refundable income taxes...............................................................               0               201,494
  Prepaid expenses......................................................................          40,991                58,056
                                                                                             ---------------------------------
      TOTAL CURRENT ASSETS..............................................................       4,772,329             8,091,283
                                                                                             ---------------------------------

PROPERTY AND EQUIPMENT, NET.............................................................          82,855               125,314
                                                                                             ---------------------------------

Other assets............................................................................           3,643                 4,591
                                                                                             ---------------------------------

      TOTAL ASSETS......................................................................     $ 4,858,827           $ 8,221,188
                                                                                             =================================

                                                LIABILITIES AND STOCKHOLDERS' EQUITY
                                                ====================================

CURRENT LIABILITIES:
  Accounts payable.......................................................................    $    46,640           $   102,710
  Accrued payroll and related expenses...................................................        143,746               252,289
  Accrued commissions....................................................................          3,956                21,539
  Accrued expenses.......................................................................        228,193               478,153
  Customer deposits/Deferred revenue.....................................................         63,992                89,146
                                                                                             ---------------------------------
      TOTAL CURRENT LIABILITIES..........................................................        486,527               943,837
                                                                                             ---------------------------------
STOCKHOLDER'S EQUITY:
  Preferred stock, $.01 par value--
    Authorized 1,000,000 shares
    Issued and outstanding--no shares at December 31, 2000 and 1999.......................           -0-                   -0-
  Common stock, $.01 par value--
    Authorized - 10,000,000 shares
    Issued - 3,309,642 and 3,242,500 shares, outstanding 2,994,888 and 3,242,500
      at December 31, 2000 and 1999, respectively........................................         33,096                32,425

  Additional paid-in-capital.............................................................     10,103,860             9,902,886
  Less cost of common stock held in treasury (314,754 shares)............................       (250,000)                    0
  Accumulated deficit....................................................................     (5,514,656)           (2,657,960)
                                                                                             ---------------------------------
      TOTAL STOCKHOLDER'S EQUITY.........................................................      4,372,300             7,277,351
                                                                                             ---------------------------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........................................    $ 4,858,827           $ 8,221,188
                                                                                             =================================




             THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________________________________________________________________________________________________________

                                                                 F3


                                                           QC OPTICS, INC.
                                                           ===============

                                                      STATEMENTS OF OPERATIONS
                                               YEARS ENDED DECEMBER 31, 2000 AND 1999
____________________________________________________________________________________________________________________________________


                                                                                               2000                  1999
                                                                                               ----                  ----


Net sales...............................................................................    $ 1,941,152          $  5,350,247

Cost of sales...........................................................................      1,796,066             2,846,949
                                                                                            ---------------------------------

Gross profit............................................................................        145,086             2,503,298
                                                                                            ---------------------------------
OPERATING EXPENSES:
  Selling, general and administrative expenses..........................................      2,355,810             2,860,512
  Engineering Expenses..................................................................        816,574             1,012,512
                                                                                            ---------------------------------
      Total operating expenses..........................................................      3,172,384             3,873,024
                                                                                            ---------------------------------

      OPERATING LOSS....................................................................     (3,027,298)           (1,369,726)

Interest income.........................................................................        185,311               191,008

Interest expense........................................................................         (8,625)               (7,604)
                                                                                            ----------------------------------

      LOSS BEFORE PROVISION FOR INCOME TAXES............................................     (2,850,612)           (1,186,322)

Provision for income taxes..............................................................          6,084                15,000
                                                                                            ---------------------------------

      NET LOSS..........................................................................    $(2,856,696)         $ (1,201,322)
                                                                                            ==================================

Basic and diluted net income (loss) per common and common equivalent share..............    $     (.94)         $      (0.37)

Basic and diluted weighted average common and common equivalent shares
  outstanding...........................................................................      3,037,165             3,242,500
                                                                                           ==================================





                             THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________________________________________________________________________________________________________

                                                                 F4



                                                           QC OPTICS, INC.
                                                           ===============

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY
                                               YEARS ENDED DECEMBER 31, 2000 AND 1999
____________________________________________________________________________________________________________________________________


                                                                          Common Stock      Additional                   Total
                                                                              Held           Paid-in     Accumulated   Stockholders'
                                 Preferred Stock      Common Stock         in Treasury       Capital       Deficit       Equity
                               ----------------- ------------------- -------------------- ------------ ------------- ---------------
                               Number of          Number of            Number of
                                Shares  Par Value  Shares  Par Value    Shares   Par Value
                               -------- --------- -------- --------- ----------- ---------

BALANCE, DECEMBER 31, 1998        0      $0     3,242,500   $ 32,425                         $9,902,886   $(1,456,638)   $8,478,673

NET LOSS                                                                                                   (1,201,322)   (1,201,322)
                               -----------------------------------------------------------------------------------------------------

BALANCE, DECEMBER 31, 1999                      3,242,500     32,425                          9,902,886    (2,657,960)    7,277,351

Issuance of stock                                  67,142        671                            200,974                     201,645

Common stock acquired and held
in treasury  February 28, 2000                   (314,754)              314,754  $(250,000)                               (250,000)

NET LOSS                                                                                                   (2,856,696)   (2,856,696)
                               -----------------------------------------------------------------------------------------------------

BALANCE, DECEMBER 31, 2000        0      $0     2,994,888   $ 33,096    314,754  $(250,000) $10,103,860   $(5,514,656)   $4,372,300
                               =====================================================================================================








                              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


____________________________________________________________________________________________________________________________________

                                                                 F5


                                                            QC OPTICS, INC.
                                                            ===============

                                                       STATEMENTS OF CASH FLOWS
                                                YEARS ENDED DECEMBER 31, 2000 AND 1999
____________________________________________________________________________________________________________________________________

                                                                                               2000                  1999
                                                                                               ----                  ----
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..............................................................................   $(2,856,696)           $(1,201,322)
  Adjustments to reconcile net income to net cash used in operating activities:
    Depreciation and amortization.......................................................        42,459                 61,886
  (Increase) decrease:
    Accounts receivable.................................................................       933,882                771,570
    Inventory...........................................................................       546,663                870,563
    Prepaid expenses and other assets...................................................       219,507                 41,010
  Increase (decrease) in:
    Accounts payable....................................................................       (56,070)               (16,704)
    Accrued expenses....................................................................      (376,086)                57,637
    Customer deposits/deferred revenue..................................................       (25,154)               (43,286)
                                                                                            ---------------------------------
      NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES..................................    (1,571,495)               541,354
                                                                                            ---------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment....................................................                0             (11,075)
                                                                                            ---------------------------------
      NET CASH USED BY INVESTING ACTIVITIES.............................................                0             (11,075)
                                                                                            ---------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock................................................       201,645                      0
  Purchase of treasury stock............................................................      (250,000)                     0
                                                                                            ---------------------------------
      NET CASH USED BY FINANCING ACTIVITIES.............................................       (48,355)                     0
                                                                                            ---------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................    (1,619,850)               530,279

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................................     3,844,168              3,313,889
                                                                                            ---------------------------------

CASH AND CASH EQUIVALENTS, END OF YEAR..................................................    $2,224,318           $  3,844,168
                                                                                            =================================

Supplemental disclosures of cash flow information:
  Cash paid (refunded) for--

    Interest............................................................................    $    8,625        $         7,604
                                                                                            =================================

    Income taxes........................................................................    $ (210,337)        $    (  48,105)
                                                                                            =================================




                              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________________________________________________________________________________________________________

                                                                 F6

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

1.       DESCRIPTION OF BUSINESS

                  QC  Optics,  Inc.  (the  Company)  was  formed in 1986 and  manufactures  high-end
         critical surface  inspection  systems for sales to the semiconductor and computer hard disk
         industries.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         REVENUE RECOGNITION

                  The Company  recognizes revenue upon shipment of its products that are shipped FOB
         shipping point and those that do not require  installation  or acceptance at the customer's
         site.  During the year ended December 31, 2000 the Company changed its revenue  recognition
         method for sales requiring  installation and acceptance at the customers site in accordance
         with Staff Accounting Bulletin (SAB) No.101, "Revenue Recognition in Financial Statements."
         The new method of accounting for these sales was adopted  retroactively to January 1, 2000.
         Under this new method,  the Company now  recognizes  revenue  dependent on the terms of the
         contract,  which  may  specify  that the  sale is  final  upon  complete  installation  and
         acceptance  by the  customer.  The effect of this change in  accounting  for the year ended
         December 31, 2000 was to decrease income (and increase deferred revenue) by $52,742 or $.02
         per basic and diluted common and common equivalent shares. There is no cumulative effect of
         this  accounting  change  due to the fact that  there  were no sales  which  were not fully
         accepted as of January 1, 2000.

                  Revenues  from the sale of spare  parts are  recognized  at the time the items are
         shipped.  Revenues from service and maintenance  agreements are recognized ratably over the
         period covered by the agreement. Net sales of the Company by products,  spares, and service
         were as follows:
                                                                       2000             1999
                                                                       ----             ----
                  Products.......................................   $   482,960       $3,944,360
                  Spares and service.............................     1,458,192        1,405,887
                                                                    ----------------------------
                      Total sales................................    $1,941,152       $5,350,247
                                                                     ===========================

                  The Company's  operating  results have  historically  been subject to  significant
         quarterly and annual  fluctuations.  The Company  believes that its operating  results will
         continue  to  fluctuate  on a  quarterly  and  annual  basis due to a variety  of  factors,
         including the cyclicality of the industries  served by the Company's  inspection  products;
         patterns  of capital  spending  by  customers;  the  timing of  significant  orders;  order
         cancellations  and shipment  rescheduling;  market  acceptance of the  Company's  products;
         consolidation of customers;  unanticipated delays in design,  engineering or production, or
         in  customer  acceptance  of product  shipments;  changes in pricing by the  Company or its
         competitors;  the mix of systems sold;  the relative  proportions  of product  revenues and
         service  revenues;  the  timing  of  payment  of  sales  commissions;  changes  in  product
         development costs;  expenses  associated with acquisitions,  exchange rate fluctuations and
         the availability of components and subassemblies.


         WARRANTY COSTS

                  The Company accrues warranty costs in the period the related revenue is recognized.



                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                 F7

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         RESEARCH AND DEVELOPMENT COSTS

                  Research  and  development  costs are  expensed  as incurred  and are  included in
         engineering expenses in the accompanying statements of operations. Research and development
         costs for the years ended December 31, 2000 and 1999 amounted to approximately $394,000 and
         $443,000, respectively.

         CASH AND CASH EQUIVALENTS

                  Cash  and  cash  equivalents  include  highly  liquid  investments  with  original
         maturities  of three  months or less.  Cash  equivalents  represents  funds held in a money
         market  account.  The balances of the money  market  accounts at December 31, 2000 and 1999
         were $2,192,009 and $3,862,737, respectively.

         INVENTORY

                  Inventory  is stated  at the lower of cost  (first-in,  first-out)  or market  and
         consists of the following:
                                                                       2000            1999
                                                                       ----            ----
                  Raw materials and finished parts............     $  727,775       $1,270,450
                  Work-in-process.............................      1,201,221        1,002,563
                  Finished goods..............................        385,912          588,558
                                                                   ---------------------------
                      TOTAL...................................     $2,314,908       $2,861,571
                                                                   ===========================

                  Work-in-process and finished goods inventories  include  material,  labor and
         manufacturing overhead.

                  The inventory  components  noted above are net of an allowance of  $2,185,000  and
         $1,450,000  for old and or  obsolete  inventory  on hand at  December  31,  2000 and  1999,
         respectively.

         PROPERTY AND EQUIPMENT

                  Property  and  equipment  are stated at cost.  Maintenance  and  repair  items are
         charged to expense when incurred;  renewals and betterments are capitalized.  When property
         and equipment are retired or sold,  their costs and related  accumulated  depreciation  are
         removed from the accounts,  and any resulting gain or loss in included in income.  Property
         under capital  leases is recorded at the lower of the present  value of the future  minimum
         lease  payments  or the fair value of the  property  at the  beginning  of the lease  term.
         Leasehold improvements are depreciated over the life of the lease or useful life, whichever
         is shorter.

                  The Company provides for depreciation  using the straight-line  method to amortize
         the cost of plant and equipment over their estimated  useful lives,  which are generally as
         follows:
                                                                       Estimated
                          Asset Classification                         Useful Life
                          --------------------                         -----------
                         Furniture and fixtures                        3 - 8 years
                         Machinery and equipment                       3 - 8 years
                         Motor vehicles                                3 - 5 years

                  Accumulated  depreciation  of property and  equipment was $362,261 and $331,603 at
         December 31, 2000 and 1999, respectively.
                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                 F8

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         INCOME TAXES

                  The Company  utilizes the liability  method of accounting for income taxes, as set
         forth in Statement of Financial  Accounting Standards (SFAS) No. 109, Accounting for Income
         Taxes. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the
         temporary  differences  between the tax and financial  statement carrying amounts of assets
         and liabilities. Deferred tax assets are recognized net of any valuation allowance.


         CONCENTRATION OF CREDIT RISK/SIGNIFICANT CUSTOMERS

                  Financial  instruments that  potentially  expose the Company to a concentration of
         credit risk include accounts receivable and cash and cash equivalents.

                  The Company  sells its products  primarily  to a small  number of large  corporate
         customers in the semiconductor and computer hard disk drive industries and performs ongoing
         evaluations  of its  customers'  financial  conditions.  Concentration  of credit risk with
         respect to sales and trade receivables is significant and summarized as follows:

                                 Net sales for the                       Accounts Receivable as of
                             Years Ended December 31,                           December 31,
                             ------------------------                          ------------
                             2000               1999                      2000              1999
                             ----               ----                      ----              ----

         Company A         $157,000         $3,485,000                 $57,000          $384,000
         Company B          302,000            108,000                  13,000            27,000
         Company C          125,000            644,000                  16,000           457,000
         Company D          484,000                  0                  61,000                 0
         Company E          105,000             20,000                  26,000             2,000

                  The Company maintains its cash and cash equivalents at a bank in Massachusetts and
         mutual  funds at another  financial  institution  . Accounts at the bank are insured by the
         Federal Deposit  Insurance  Corporation up to $100,000.  Uninsured cash and cash equivalent
         balances amounted to approximately $2,192,000 and $3,863,000 at December 31, 2000 and 1999,
         respectively.

                  Net sales by region,  denominated in U.S. dollars,  were as follows,  based on the
         location to which the products were shipped or the services provided:

                                                        For the Years Ended
                                                        -------------------
                                                     2000                 1999
                                                     ----                 ----
         United States..........................    $757,477           $1,448,447
         Asia...................................     533,910            3,253,132
         Europe and Other.......................     649,765              648,668


                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                 F9


                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The  Company's   financial   instruments   consist  primarily  of  cash  and  cash
         equivalents,  accounts  receivable  and  accounts  payable.  The  carrying  amounts  of the
         Company's cash and cash equivalents,  accounts  receivable and accounts payable approximate
         fair value due to their short-term nature.


         USE 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  periods.  Actual  results  could  differ  from those
         estimates.


         NET INCOME (LOSS) PER COMMON SHARE

                  Basic  earnings per common share is computed by dividing net income  (loss) by the
         weighted  average  number of shares of common stock  outstanding  during the year.  Diluted
         earnings per common share is  calculated  the same as basic  except,  if not  antidilutive,
         stock options are included  using the treasury  stock method to the extent that the average
         share trading price exceeds the exercise price. Basic and diluted earnings per common share
         for the years ended  December 31, 2000 and 1999 were equal;  therefore,  no  reconciliation
         between basic and diluted earnings per common share is required.


         COMPREHENSIVE INCOME (LOSS)

                  Comprehensive  income  (loss) for the years ended  December 31, 2000 and 1999 were
         equal to the net income (loss) as included in the accompanying  statement of operations for
         the years ended December 31, 2000 and 1999.


         ADVERTISING COSTS

                  Advertising  expense incurred and included in selling,  general and administrative
         expenses was  approximately  $40,100 and $0 for the years ended December 31, 2000 and 1999,
         respectively.


         SEGMENT REPORTING

                  QC Optics  operates in one segment and does not analyze its operations  based upon
         separate geographical or product-line information.





                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F10

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

3.       INCOME TAXES

                  The components of the income tax provision (benefit) are as follows:

                                                        For the Years Ended
                                                     2000                1999
                                                     ----                ----
         CURRENT:
           State................................     $6,084             $15,000
                                                     ==========================

         DEFERRED:..............................     $  -0-             $   -0-
                                                     ==========================

                  The Company's effective tax rate differs from the federal statutory rate of 34% in
         2000 and 1999 due to the following:
                                                                             2000             1999
                                                                             ----             ----
         Computed tax provision (benefit) at statutory rate............   $(969,208)       $(403,349)
         INCREASE RESULTING FROM:
           State taxes.................................................       6,084           15,000
           Net operating losses not benefited..........................     778,882          394,994
           Items not deductible for income tax purposes................     190,326            8,355
                                                                          --------------------------
         TOTAL CURRENT INCOME TAX EXPENSE..............................   $   6,084        $  15,000
                                                                          ==========================

                  Deferred income taxes at December 31, 2000 and 1999 consisted of the following:

                                                                         2000               1999
                                                                         ----               ----
         DEFERRED TAX ASSETS:
           Inventories............................................   $   874,000         $  580,000
           Other reserves.........................................       138,000            222,000
           Net operating loss carryforwards.......................     1,188,000            815,000
                                                                     ------------------------------
               TOTAL GROSS DEFERRED TAX ASSETS....................     2,200,000          1,617,000
           Less:  valuation allowance.............................    (2,200,000)        (1,617,000)
                                                                     -------------------------------
               NET DEFERRED TAX ASSETS............................   $       -0-         $      -0-
                                                                     ===============================


                  Under the Tax Reform Act of 1986,  the amount of the  benefit  from net  operating
         losses may be impaired or limited in certain  circumstances,  including a cumulative  stock
         ownership  change of more than 50% over a three-year  period,  which occurred in connection
         with the  management  buyout  which was  consummated  on March 29, 1996.  As a result,  the
         Company is limited to approximately $161,000 of loss utilization per year.

                  Limitations  on the  utilization  of the Company's  net operating  losses from the
         management buyout and uncertainty surrounding the ability of the Company to generate future
         income have caused management to conclude that  realizability of the deferred tax assets as
         of December 31, 2000 and 1999 is  uncertain.  Management  has,  therefore,  provided a full
         valuation allowance against its deferred tax assets.


                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F11

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

3.       INCOME TAXES (Continued)

                  For tax reporting  purposes,  the Company has a U.S.  federal net  operating  loss
         carryforward of approximately  $3,493,000  subject to Internal Revenue Service (IRS) review
         and approval,  of which $947,000 is subject to the limitations of stock  ownership  changes
         discussed  above.  Utilization of the net operating loss  carryforward is contingent on the
         Company's  ability to generate income in the future.  The net operating loss  carryforwards
         will expire from 2001 to 2009 if not utilized.


4.       COMMITMENTS AND CONTINGENCIES

                  The Company  leases its operating  facilities  under two  noncancelable  operating
         lease  agreements.  Rent expense for the years ended December 31, 2000 and 1999 amounted to
         approximately  $237,000 and $298,000,  respectively.  Future minimum  commitments under all
         noncancelable operating leases are approximately as follows:

                                    2001.............................  $65,000
                                                                       =======

                  On  November 1, 2000 the  Company  terminated  the lease  agreement  for  property
         located in Santa Clara,  California.  The lease  agreement had one year remaining under the
         original  terms of the  agreement  dated  January 27,  1999.  The Company paid the landlord
         $8,500 in consideration for the termination of the lease.

                  On June 30, 2000 the  Company  entered  into a lease  agreement  for the  property
         located in  Wilmington,  Massachusetts.  The current lease on this property is scheduled to
         expire on May 1, 2001 in accordance  with the terms of the original lease  agreement  dated
         April 15, 1997.  This new lease is for a five year period and will commence on May 1, 2001.
         The future  minimum lease  payments to be made in  accordance  with the terms of this lease
         agreement are as follows:

                  2001.....................................................    $  144,165
                  2002.....................................................       216,247
                  2003.....................................................       216,247
                  2004.....................................................       220,370
                  2005.....................................................       230,666
                  2006.....................................................        78,261
                                                                              -----------
                      Total................................................    $1,105,956
                                                                               ==========


5.       EMPLOYEE BENEFIT PLAN

                  The  Company  sponsors a 401(k)  retirement  savings  plan (the Plan) that  covers
         substantially all of the Company's employees. Participants may make voluntary contributions
         of 1% to 16% of their annual compensation.  The Company makes matching  contributions up to
         100% of  participant  voluntary  contributions  up to a maximum  of 2%,  and an  additional
         Company contribution can be made at the Company's discretion.

                  The  Company  charged to expense  approximately  $16,600 and  $113,000  related to
         contributions  to the Plan for the years ended  December  31, 2000 and 1999,  respectively.
         Included in accrued expenses is  approximately  $5,800 and $79,000 for Company matching and
         discretionary  contributions  to the Plan for the years ended  December  31, 2000 and 1999,
         respectively.



                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F12

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

6.       STOCK OPTION PLANS

                  In June 1996, the Board of Directors approved the 1996 Stock Option Plan (the 1996
         Plan) under which employees,  including directors who are employees, may be granted options
         to purchase shares of the Company's  common stock at not less than fair market value on the
         date of grant,  as  determined  by the Board of  Directors.  The 1996 Plan also  allows for
         nonqualified  stock options to be issued to employees and  nonemployees  at prices that are
         less than fair market value.  Options granted under the 1996 Plan are exercisable for up to
         a 10-year period from the date of grant.  The Company has reserved 360,000 shares of common
         stock for  issuance  under the 1996 Plan.  To date,  all  options  have been issued with an
         exercise price at or above fair market value at the date of grant.

                  In 1999,  the  Company  granted  options  under the 1996 Plan for the  purchase of
         16,500 shares at $1.220 the estimated fair market value on the date of grant,  which become
         exercisable  over  three  years  beginning  one year from the date of grant.  In 2000,  the
         Company  granted options under the 1996 Plan for the purchase of 39,000 shares at $1.69 per
         share, the estimated fair market value on the date of grant,  which become exercisable over
         three years beginning one year from the date of grant.

                  In June 1996, the Board of Directors approved a Director Formula Stock Option Plan
         (the Formula Plan) in which options will be granted  beginning on June 18, 1996,  and every
         four years thereafter,  immediately following the Company's annual meeting of stockholders,
         options  shall be granted to eligible  nonemployee  directors.  Each  director will receive
         options to purchase  15,000 shares of common stock,  which vest and are  exercisable  in 16
         equal  installments  over a period of four years  beginning  on the first day of the fiscal
         quarter  immediately  following the grant.  The options may be exercised at the fair market
         value of the shares of common stock on the date of grant.  The Company has reserved 100,000
         shares of common stock for issuance under the Formula Plan.

                  In 2000 the Company  granted  options under the 1996 Formula Plan for the purchase
         of 15,000  shares at $1.75 per share,  the  estimated  fair market value on the date of the
         grant, which vest and are exercisable as noted above.

         PRO FORMA STOCK-BASED COMPENSATION EXPENSE

                  SFAS  No.   123,   Accounting   for   Stock-Based   Compensation,   sets  forth  a
         fair-value-based  method of recognizing  stock-based  compensation expense. As permitted by
         SFAS No. 123,  the Company has  elected to continue to apply  Accounting  Principles  Board
         Opinion No. 25 to account for its stock-based compensation plans. Had compensation cost for
         awards granted under the Company's stock-based  compensation plans been determined based on
         the fair value at the grant dates  consistent with the method set forth under SFAS No. 123,
         the effect on the Company's net loss and net loss per common and common  equivalent  shares
         would have been as follows:

                                                                         2000              1999
                                                                         ----              ----
                  Net loss:
                    As reported.....................................  $(2,856,696)      $(1,201,322)
                    Pro forma.......................................   (2,919,696)       (1,287,894)
                  Diluted net loss per common and common
                    equivalent shares-
                    As reported.....................................         (.94)             (.37)
                    Pro forma.......................................         (.96)             (.40)

                  Compensation  expense for options  granted is reflected  over the vesting  period;
         therefore, future compensation expense may increase as additional options are granted.


                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F13

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

6.       STOCK OPTION PLANS (CONTINUED)

         PRO FORMA STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

                  The fair  value of each  option  grant was  estimated  on the grant date using the
         Black-Scholes option pricing model with the following weighted-average assumptions:

                                                                         2000                1999
                                                                         ----                ----
                  Volatility........................................      42.4%               69%
                  Risk-free interest rate...........................      5.75%              5.41%
                  Expected life of options..........................   5.00 years         5.00 years
                  Dividends.........................................      none               none

                  The  Black-Scholes  option-pricing  model was developed for use in estimating  the
         fair  value  of  traded  options,   which  have  no  vesting  restrictions  and  are  fully
         transferable.  In addition,  option pricing  models require the input of highly  subjective
         assumptions, including expected stock price volatility. Because the Company's stock options
         have  characteristics  significantly  different  from those of traded  options  and because
         changes in the subjective input  assumptions can materially affect the fair value estimate,
         in management's  opinion,  the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.


         STOCK OPTION ACTIVITY

                  A summary of the Company's stock option activity is as follows:


                                                                   Year Ended December 31, 2000
                                                  ------------------------------------------------------

                                                          1996 Plan                    Formula Plan
                                                          ---------                    ------------

                                                                 Weighted                    Weighted
                                                   Number of      Average      Number of      Average
                                                    Shares    Exercise Price    Shares    Exercise Price
                                                    ------    --------------    ------    --------------

Options outstanding, beginning of year...........   241,196       $3.77         40,312         $3.49
  Granted........................................    39,000        1.69         15,000          1.75
  Exercised......................................   (49,642)       1.31              0
  Forfeited......................................   (35,734)       1.37              0
                                                    ------------------------------------------------

Options outstanding, end of year.................   194,820       $4.41         55,312         $3.02

Options exercisable..............................   153,887       $5.16         40,312         $3.42
                                                    ================================================

Options available for grant......................   165,180                     44,688
                                                    =======                     ======
Weighted-average fair value of options (whose
exercise price equals market value) granted or
repriced during the year.........................                  $.03                        $.03
                                                                   ====                        ====


                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F14

                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________


6.       STOCK OPTION PLANS (CONTINUED)

                                                                  Year Ended December 31, 1999
                                                  -----------------------------------------------------
                                                          1996 Plan                    Formula Plan
                                                          ---------                    ------------
                                                                  Weighted                   Weighted
                                                   Number of       Average      Number of    Average
                                                    Shares     Exercise Price    Shares   Exercise Price
                                                    ------     --------------    ------   --------------

Options outstanding, beginning of year...........   240,372        $3.78         45,000        $3.50
  Granted........................................    16,500         1.22              0
  Exercised......................................         0                           0
  Forfeited......................................   (15,676)        1.30         (4,688)        3.63
                                                    ------------------------------------------------

Options outstanding, end of year.................   241,196        $3.77         40,312        $3.49
                                                    ================================================

Options exercisable..............................   199,182        $4.29         32,812        $3.52
                                                    ================================================

Options available for grant......................   118,804                      59,688
                                                    ========                     ======

Weighted-average fair value of options (whose)
exercise price equals market value) granted or
repriced during the year.........................                  $ .86                       $  --
                                                                   =====                       =====


         A summary of the status of the Company's  stock options at December 31, 2000 is as follows:

                                       Number of              Number of
                      Exercise          Options                Options              Remaining
                        Price         Outstanding            Exercisable        Contractual Life
                        -----         -----------            -----------        ----------------

                                                    1996 PLAN
                     --------------------------------------------------------------------------
                       $1.688           31,250                      0                 9.5 years
                       $1.220            4,500                  1,485                   8 years
                       $1.313           36,570                 29,902            5.5 to 7 years
                       $5.100           15,000                 15,000                 5.5 years
                       $6.300          107,500                107,500                 5.5 years

                                                  FORMULA PLAN
                     --------------------------------------------------------------------------
                       $1.750           15,000                  1,875                 9.5 years
                       $3.250           15,000                 13,125                 6.5 years
                       $3.625           25,312                 25,312                 5.5 years






                                                                                         (CONTINUED)
____________________________________________________________________________________________________

                                                F15


                                           QC OPTICS, INC.
                                           ===============

                                    NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2000 and 1999
____________________________________________________________________________________________________

7.       COMMON STOCK WARRANTS

                  At December 31, 2000, there were outstanding warrants to purchase 1,075,000 shares
         of the Company's  Common Stock for $7.80 per share expiring  October 23, 2001. The warrants
         are  redeemable  by the  Company at $.20 per  redeemable  warrant on 30 days prior  written
         notice,  provided that the average  closing bid price of the Common Stock equals or exceeds
         $10.80 per share for 20 consecutive  trading days ending within 10 days prior to the notice
         of redemption. During the year ended December 31, 2000 17,500 warrants were exercised.



8.       REVOLVING LINE-OF-CREDIT

                  The Company has a revolving  line-of-credit  with  Citizens Bank  (formerly  State
         Street Bank and Trust Company). The revolving line-of-credit agreement allows for a maximum
         borrowings  of  $2,000,000  and  requires  monthly  payment of interest on the  outstanding
         balance  to  maturity  on June 30,  2001.  Borrowings  under the  revolving  line-of-credit
         agreement  are  limited to 80% of  qualifying  accounts  receivable.  Borrowings  under the
         agreement bear interest at the bank's prime rate (9.5% at December 31, 2000).  The terms of
         the loan  agreement  provide for the  maintenance  of certain  specified  financial  ratios
         including  the quick  ratio and debt to  equity,  earnings  tests  and other  negative  and
         affirmative  covenants and restricts certain  transactions without the bank's prior written
         consent. At December 31, 2000 the Company had no borrowings outstanding under the revolving
         line-of-credit  agreement and availability of  approximately  $153,000 upon compliance with
         the loan covenants.



9.       VOTING TRUST

                  On October 27, 1995, the Company and certain  management  employees of the Company
         entered  into a voting  trust  agreement  known as the QC Optics  Voting  Trust (the Voting
         Trust),  of which the  president of the Company is trustee.  The Voting Trust  continues in
         force for a period of 21 years from October 27, 1995 unless terminated  earlier as a result
         of a merger,  dissolution,  sale of all or substantially  all of the Company's  assets,  or
         liquidation.  The  Voting  Trust  represented  approximately  35% and 42% of the  Company's
         outstanding shares at December 31, 2000 and 1999, respectively.

                  In February  2000, the Company  settled  litigation  with one of the  stockholders
         participating in the Voting Trust. Under the terms of the settlement, the Company purchased
         the 314,754 shares which were owned by this  stockholder for $250,000.  These common shares
         are currently held by the Company as treasury stock.







                                                                                         (CONCLUDED)
____________________________________________________________________________________________________

                                                F16


                                             SIGNATURES

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

                                                               QC OPTICS, INC.


                                                               By:/s/ Eric T. Chase
                                                                  ----------------------------------
                                                               Eric T. Chase
Date:  October 9, 2001                                         President and Chief Executive Officer


         In  accordance  with the Exchange  Act,  this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

NAME                                     CAPACITY                                    DATE


/s/ Eric T. Chase                        President, Chief Executive Officer,         October 9, 2001
-----------------------------            and Chairman of the Board of
Eric T. Chase                            Directors (Principal Executive Officer)


/s/ John R. Freeman                      Vice President of Finance                   October 9, 2001
-----------------------------            (Principal Financial
John R. Freeman                          and Principal Accounting Officer)


/s/ Allan Berman                         Director                                    October 9, 2001
-----------------------------
Allan Berman


/s/ John M. Tarrh                        Director                                    October 9, 2001
-----------------------------
John M. Tarrh`