SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

    [x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange
        Act of 1934 for the Year Ended December 31, 1996.

    [ ] TRANSITION PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange
        Act of 1934 for the transition period from ______ to ______.

                          COMMISSION FILE NO. (0-16577)

                             CYBEROPTICS CORPORATION
             (Exact name of registrant as specified in its charter)

          Minnesota                                           41-1472057
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                           Identification No.)


        5900 Golden Hills Drive
         Minneapolis, Minnesota                                55416
(Address of principal executive offices)                      (Zip Code)


                                 (612) 542-5000
              (Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]

As of February 28, 1997, the aggregate market value of the registrant's Common
Stock, no par value, held by nonaffiliates of the registrant was $82,918,000
(based on the closing sale price of common stock as of February 28, 1997 as
quoted on the Nasdaq National Market).

As of February 28, 1997, there were 5,232,831 shares of the registrant's Common
Stock, no par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

The Responses to items 5, 6, 7 and 8 herein are incorporated by reference to
certain information in the Company's Annual Report to Shareholders for the year
ended December 31, 1996. The responses to items 10, 11, 12 and 13 herein are
incorporated by reference to certain information in the Company's Definitive
Proxy Statement for its Annual Meeting of Shareholders to be held May 8, 1997.


                                     PART I.

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

        CyberOptics Corporation (the "Company" or "CyberOptics") designs,
manufactures and markets intelligent, non-contact sensors and integrated systems
that measure the minute characteristics, dimensions and distances required for
process and quality control in the automated assembly of complex manufactured
goods. Utilizing proprietary laser and optics technology combined with advanced
software and electronics, the Company's products enable manufacturers to
increase operating efficiencies, product yields and quality by measuring the
characteristics and placement of components both during and after the
manufacturing process. The Company offers individual sensors that provide data
in one, two or three dimensions, as well as complete, non-contact three
dimensional profiling systems, that allow manufacturers to inspect product
features as small as 0.1 microns.

        The Company was founded in 1984 by Dr. Steven Case, a professor
researching and teaching optical engineering at the University of Minnesota, to
commercialize technology for non-contact three-dimensional sensing systems.
During the first year and one-half of its existence, the Company performed
primarily custom contracting work through Dr. Case. In 1985, the Company
received a $1.5 million development grant from the Defense Advanced Research
Projects Agency to develop sensor systems. The Company introduced its first
commercial product, the Point Range Sensor, in 1986 and began producing full
non-contact profiling systems used in general measurement applications, CAD-CAM
and electronics inspection in 1987. The Company continued to expand its line of
products and sensing systems for general applications through 1991.

        Since 1992, the Company has made significant investments in the
development of new technology and products designed specifically for
applications in the electronics industry. Designed primarily for applications in
the rapidly growing surface mount technology ("SMT") market, these products
measure screen printed solder paste, align electronic components and measure
electronic component lead coplanarity during automated assembly of circuit
boards. The Company's revenue has been significantly affected by the timing of
the introduction of these products and the acceptance and shipment of versions
of these products by OEM and end user customers.

        The results of the Company's operations have been particularly affected
by the market acceptance of several custom sensors manufactured for original
equipment manufacturers ("OEMs") during the past five years. Generating $3.2
million or less than 40% of revenue in 1992, these sensors contributed over
$18.5 million or almost 61% of revenue in 1995. The Company also introduced new
system products, including the CyberSentry system, during this period that
contributed to revenue growth. Overall, the Company's revenue more than tripled
from approximately $8.4 million in 1992 to a high of $30.5 million in 1995 and
its net income increased by a multiple of 14 during this period.

        The Company's operations during 1995, in which its revenue doubled and
net income tripled over the previous year, reflected the strength of global
markets in microelectronics in 1995. Operations in 1996 reflect significant
softening in that market and lower levels of capital equipment orders in the
microelectronics industry. Starting in the second fiscal quarter, the level of
orders from several of the Company's significant OEM customers slowed. The
Company's largest OEM customer, which had accounted for 30% of the Company's
revenue in 1995, placed no orders at all in the second half of 1996 as it, and
several other of the Company's customers, worked to digest the large inventory
of products they had purchased in anticipation of a more robust market in 1996.

        In response, the Company acted in July 1996 to reduce operating costs,
decreasing employee headcount by approximately 12% and taking other cost
reduction measures that resulted in a charge to earnings of $.02 per share in
the third quarter. The decreased orders, combined with the workforce reduction
costs and costs of ongoing litigation with Yamaha Motor Co., Ltd., caused the
Company to report for its third fiscal quarter its first quarterly loss in over
ten years.

         Quarterly results recovered somewhat during the fourth fiscal quarter
of 1996, although not to the record levels of 1995. Orders of custom sensor
products increased, providing early signs of some recovery in the
microelectronics industry. Overall, the Company generated revenue of over $28
million during 1996, representing a decrease from the $30.5 million generated in
1995, but still substantially more than the $15.3 million generated in 1994.
Management believes that much of the revenue growth in 1995 was a result of
timing and over ordering by OEM's in anticipation of a growth rate in the
industry that was not achieved.

        Although the Company continues to believe that long-term trends in the
microelectronics industry are positive, it is working to expand and diversify
its mix of business. Although most of the Company's development efforts are for
additional applications in the electronics industry, it is also focusing on
applications in other industries, including systems that may have application in
ball grid array ("BGA") and flip chip inspection in the semiconductor industry
and additional system level products for the general measurement market.
Management believes that, with significant cash available from a public offering
completed in 1995, the Company remains well positioned to take advantage of the
growing need for quality control, particularly in the expanding electronics
industry. The Company moved to a newly constructed 70,000 square foot production
and headquarters facility in May 1996 that provides ample room for expansion of
its operations.

PRODUCTS

        CyberOptics has developed intelligent, non-contact sensors and systems
for in-line process control and inspection as well as sensors and scanning
stations for quality control and inspection. The Company's products enable
manufacturers to increase operating efficiencies, product yields and quality in
a variety of industries. Although a majority of the Company's revenue is
generated through sales of its in-line process control products for SMT, the
Company also offers several specialized products for through-hole process
control and more generalized products for inspection and quality control.

        In addition to proprietary hardware designs that combine precision
optics, various light sources, and multiple detectors, the Company's products
incorporate high value-added software that controls the hardware, filters and
converts raw data into application specific information, and automatically
communicates this information to a host processor for ultimate use in process
control. Software represents a significant portion of the CyberOptics research
and development effort and distinguishes CyberOptics' intelligent sensors and
systems from simpler data-gathering products.

In-Line Process Control--SMT:

        CYBERSENTRY. The CyberSentry system measures the deposition of solder
paste after the first step of the SMT assembly process. Because of the small
size of the components that must be placed on each pad of solder paste and the
density of component placement on the circuit board, a significant amount of SMT
assembly problems are related to the quality of solder paste deposition.
Misplaced solder paste, excess or inadequate amounts of paste can lead to
improper connections or bridges between leads causing an entire circuit board to
malfunction.

        Introduced in a commercial format in the first quarter of 1995, the
CyberSentry system is designed to be installed in existing automated production
lines and to strike a balance between inspection of 100% of each circuit board
and the off-line measurement devices used in quality control laboratories. The
CyberSentry incorporates a sensor extended on a mechanical robot arm over the
production line that measures the height, area and volume of solder paste pads.
The CyberSentry can be retrofitted and integrated into most SMT production
lines, providing real time process control immediately after a PCB leaves the
screen printer and before component placement commences. During early 1997, the
Company introduced an improved version of the CyberSentry capable of performing
measurement tasks at a more rapid speed.

        Sales of the CyberSentry product accounted for approximately 15% and 12%
of the Company's revenue for the years ended December 31, 1996 and December 31,
1995, respectively.

        LASERALIGN. After solder paste has been inspected and measured,
extremely small surface mount components are placed on the solder pads by
component placement machines. CyberOptics' LaserAlign sensors are incorporated
into the heads of component placement machines to ensure accurate component
placement at high production speeds. Various high speed component placement
machine types utilize between one and sixteen LaserAlign sensors per machine.

        LaserAlign integrates an intelligent sensor, composed of a laser, optics
and detectors with a microprocessor and software for making specific
measurements. LaserAlign quickly and accurately aligns each component as it is
being transported by the pick-and-place arm for surface mount assembly. Using
non-contact technology, LaserAlign facilitates orientation and placement of
components at much higher speeds than can be achieved using conventional process
control systems.

        The LaserAlign sensor is sold to original equipment manufacturers for
incorporation into their component placement machines and is offered in several
different configurations to satisfy the requirements of the different machines
on which it is used. Revenue from sales the LaserAlign sensors has been a
principal contributor to the growth of the Company during the past five years
and accounted for 48%, 48% and 25% of the Company's revenue in the years ended
December 31, 1996, 1995 and 1994, respectively.

        LASER LEAD LOCATOR. Following placement of the smallest leadless
components, more sophisticated components, including microprocessor chips, are
applied to the printed circuit boards by fine pitch component placement
machines. These components have leads on all sides that are soldered to the
circuit board. Since all of these surface mount leads must make contact with the
solder paste, lead coplanarity is a critical quality factor. Misaligned, bent or
damaged leads will result in missed connections, open circuits and ultimately a
defective end product.

        The Laser Lead Locator ensures the coplanarity of component leads. The
Laser Lead Locator, which is incorporated directly into a fine pitch component
placement machines, inspects components immediately before placement on the
circuit board to identify defective or damaged leads and determines if all lead
tips lie within the same plane. Components meeting these parameters are placed
on the printed circuit board. Parts falling outside the specified tolerances are
rejected before placement, saving both time and money.

        The Laser Lead Locator, like the LaserAlign, is sold to original
equipment manufacturers for incorporation into their product offerings. Sales of
the Laser Lead Locator constituted 13%, 13% and 16% of the Company's overall
revenues during the years ended December 31, 1996, 1995 and 1994, respectively.

Process Control--Through-Hole:

        A substantial number of circuit boards are made with through-hole
technology using high speed drills to fabricate printed circuit boards. These
drills are highly automated and contain multiple drill heads that cannot be
constantly monitored by attendants. CyberOptics manufactures two process control
sensors for measuring characteristics of drill bits used in drilling holes in
printed circuit boards. The first of these, the ADM, was completed in the third
quarter of 1989 and is used to ensure that drill bits are not damaged and that
holes are drilled with the proper size. The second sensor, the LTC, was
completed in May 1990 and is used to detect broken drill bits so that all of the
preprogrammed holes in the circuit board are properly drilled. Both sensors are
sold under an exclusive arrangement to a manufacturer of drilling machines for
incorporation into its products.

Off-Line Inspection Sensors and Systems:

        The Company built its commercial business with laser sensors designed to
precisely measure, without contact, the distance to a point on an object. These
sensors have been refined and combined with software and processing capability
and are sold as both single sensors for incorporation into the equipment of
customers and as complete inspection systems for use in the quality control
laboratory and off-line process control.

        The Company's off-line sensors and systems are used in a broad array of
applications in a number of different industries. Included among such
applications is the measurement of the score in a beverage can lid, collection
of three-dimensional digital data for use in a CAD-CAM system, measurement of
the thickness of resistive inks applied in the manufacture of hybrid electronic
circuits and measurement of the bend angles of suspension arms for disc drives.

        PRS AND CYBERGAGE SENSORS. The Company offers two lines of range sensors
designed to measure distance to a point on a test object. The Point Range Sensor
("PRS"), was the Company's first commercial product and is currently offered in
seven models that provide varying resolutions and are designed for optimal
function at varying standoff distances. The CyberGage sensor is a new series of
range sensors that gather data up to 40 times faster than the PRS product line
and is sold with a video camera view port that allows the user to integrate
laser sensing and video in the same sensor. The Company believes this is the
first product available with both laser sensing and video capabilities.

        CYBERSCAN COBRA, CYBERSCAN CX3 AND CYBERSCAN LV. CyberScan stations are
complete height profiling systems capable of producing precise, two- and
three-dimensional analysis of complex surfaces. The CyberScan Cobra is a
portable and highly versatile scanning system that is roughly the size of and
shape of a large clothing iron that incorporates the PRS and proprietary
software. The CX3 and LV are stations that incorporate the Company's PRS or
CyberGage mounted over a computer-controlled mechanical table with a personal
computer and the Company's proprietary software. The CyberScan LV series of
scanning stations, which incorporate the CyberGage sensors and video cameras,
offers a unique quilting feature that allows the user to view and select test
sites over a large area of a test object.

        LASER SECTION MICROSCOPE (LSM). The LSM is a low cost instrument for
making height and registration measurement of screen printed solder paste during
the assembly of electronic circuit boards. One of the principal advantages of
the LSM is its ease of use--unskilled operators can make non-contact
measurements with only minimal training. In February 1997, the Company
introduced an updated version of the LSM, the LSM2, that has been completely
redesigned to provide a Windows interface and allow multiple fields of view.

MARKETS AND CUSTOMERS

     A majority of the Company's products are currently sold in the
microelectronics market, particularly the portion servicing manufacturers using
SMT. The value of automation is high in this market because the products
produced have high unit costs and are manufactured at speeds too high for
effective human intervention. Moreover, the trend in these industries toward
smaller devices with higher circuit densities and smaller circuit paths requires
manufacturing and testing equipment capable of extremely accurate alignment and
multidimensional measurement such as achieved using non-contact optical sensors.
Customers in these industries, moreover, also employ knowledgeable engineers who
are competent to work with computer-related equipment. The Company's Laser Lead
Locator and LaserAlign products are sold to OEMs serving this market and the
CyberSentry, LSM, CyberGage, and CyberScan systems are most often sold to
manufacturers in this market. In addition, the Company's more generalized
products, including the PRS, CyberGage and CyberScan products, are used in the
general measurement and gauging, precision plastic manufacturing and computer
aided design and manufacturing markets.

     The Company sells its products worldwide to many of the leading
manufacturers of electronics and electronic equipment. The Company does not
maintain foreign offices and therefore does not have sales originating from, or
identifiable assets in, geographies other than the United States. The following
table sets forth the percentage of the Company's total sales revenue represented
by total export sales (sales for delivery to countries other than the United
States, including sales delivered through distributors) by location during the
past three years:

                                                    Year Ended December 31,
                                                 -----------------------------
                                                 1994         1995        1996
                                                 ----         ----        ----

      Asia.................................       30%          31%          51%

      Europe...............................       26%          35%          18%

      Other(1).............................        1%           1%           1%

(1)   Includes export sales in North America, primarily export sales to Canada
      and Mexico, which were less than 1% of revenue during the three year
      period.

See Note 7 to the Company's Financial Statements contained on Page 19 of its
Annual Report to Shareholders. Substantially all of the Company's export sales
are negotiated, invoiced and paid in United States dollars. Accordingly,
although changes in exchange rates do not effect the Company's revenue and
income per unit, they can influence the willingness of customers to purchase
units. To date, the Company has not experienced any significant change in
customer buying patterns due to fluctuating exchange rates.

         Sales to three principal customers, Juki Corporation, Philips
Electronics N.V and Panasonic Corporation, leading manufacturers of component
placement machines in the Netherlands and Japan, constituted 28%, 14% and 10%,
respectively, of total sales in 1996. Although no other customer generated more
than 10% of the Company's revenues, sales to the Company's five largest OEM
customers in the aggregate constituted 59% of such sales. The loss of any of
such customers, or a substantial decrease in orders therefrom, could have a
material adverse effect on the Company's results of operations.

SALES AND MARKETING

         The Company sells its products through a combination of direct sales
staff and independent distributors. The Company maintains a direct sales staff
at its headquarters in Minneapolis, Minnesota that call on large house accounts
and that sell to OEM customers. The Company also has agreements with nine
stocking distributors in North America who focus primarily on products sold to
end-users. Most sales to international end-users of sensors and systems are made
through 15 representatives and distributors covering Western Europe and the
Pacific Rim.

         The Company markets its products through appearances at industry trade
shows, advertising in industry journals and articles published in industry and
technical journals. In addition, the Company's strategic relationships with
customers serve as highly visible references.

BACKLOG

         CyberOptics products are typically shipped two weeks to four months
after the receipt of an order. Since 1993, however, certain OEM customers have
placed orders for delivery over as many as 12 months. Product backlog was $4.4
million at December 31, 1996 of which approximately $3.4 million is deliverable
in the first quarter of 1997 and $1 million is deliverable in the second quarter
of 1997. Although the Company's business is generally not of a seasonal nature,
its sales may vary based on the capital procurement practices in the electronics
industry. Historically, the Company's quarterly revenue has been largest in the
last quarter of the year. The Company's scheduled backlog at any time may vary
significantly based on the timing of orders from OEM customers. Accordingly,
backlog may not be an accurate indicator of the Company's performance in the
future.

RESEARCH AND DEVELOPMENT

         The Company distinguishes its products primarily on the basis of its
unique technology and on the Company's ability to synthesize several different
technical disciplines to address industry needs. CyberOptics was founded by
research scientists and has retained relationships with academic institutions to
ensure that the most current information on technological developments is
obtained. In addition, the Company actively seeks ongoing strategic customer
relationships with leading product innovators in the markets it serves and
actively investigates the needs of, and seeks input from, these customers to
identify opportunities to improve the manufacturing process. The Company
provides direct interaction between its engineers and scientists and these key
accounts to ensure adoption of current technologies. In some instances, the
Company provides the outsourced research and development for these customers
through funded development contracts that provide the customer with an exclusive
selling period but allows the Company to retain technology and distribution
rights.

          CyberOptics believes that continued and timely development of new
products and enhancements to existing products is essential to maintaining its
competitive position. The Company has committed and expects to continue to
commit substantial resources to its research and development effort, which plays
a critical role in maintaining and advancing its position as a leading provider
of optical sensors and systems. CyberOptics' research and development efforts
during 1996 were directed to increasing performance of its LaserAlign and
CyberSentry products for use in process automation in electronics circuit board
assembly, redesign of its Laser Section Microscope, completion of its CyberScan
Cobra product for general measurement and gauging applications, and updating of
its CyberScan products. In addition, a significant amount of research and
development effort, funded by a customer, was expended on developing new
technology for height mapping in the flip chip manufacturing process. There can
be no assurances that such efforts, or any other research and development
efforts of the Company, will be successful in producing products that respond
effectively to technological changes or new product announcements by others.

          Research and development expenses were $5.9 million, $4.1 million and
$2.7 million for the years ended December 31, 1996, 1995 and 1994, respectively.
These amounts represented 21%, 14% and 18% of revenues, respectively. Research
and development expenses consist primarily of salaries, project materials and
other costs associated with CyberOptics' ongoing product development and
enhancement efforts.

MANUFACTURING

         Much of the Company's product manufacturing, consisting primarily of
circuit board manufacturing, component placement and soldering, lens
manufacturing and machined parts production, is contracted with outside vendors.
Company personnel inspect incoming parts, assemble sensor heads, calibrate and
perform final quality control testing of finished products. The Company believes
that its products are not suited for the large production runs that would
justify the capital investment necessary for complete internal manufacturing.

         A variety of components used in the Company's products are available
only from single sources and involve relatively long order cycles, in some cases
over one year. Although the Company has located alternative sources for most of
such components, use of those alternative components could require substantial
rework of the Company's product designs, resulting in periods during which it
could not satisfy customer orders. Further, although the Company believes it has
identified alternative assembly contractors for most of its subassemblies, an
actual change in such contractors would likely require a period of training and
test. Accordingly, an interruption in a supply relationship or the production
capacity of one or more of such contractors could result in the Company's
inability to deliver one or more products for a period of several months. To
help prevent delays in the shipment of its products, the Company maintains in
inventory, or on scheduled delivery from suppliers, what it believes to be a
sufficient amount of certain components based on forecasted demand (forecast
extends a minimum of 6 months). Currently the Company has approximately 125
remaining detectors used in its PRS that are manufactured by a single supplier
and have been discontinued by such supplier. The Company anticipates that this
supply will be adequate to satisfy customer orders until the design and
production of a replacement sensor is completed.

COMPETITION

         Although the Company believes that its products are unique, competitors
offer technologies and systems that are capable of certain of the visual
inspection and alignment functions performed by the Company's products. The
Company faces competition from a number of companies in the machine vision,
image processing and inspection systems market, some of which have greater
manufacturing and marketing capabilities, and greater financial, technological
and personnel resources. Potential competitors in these markets include Cognex
Corporation, Robotic Visions Systems, Inc., View Engineering, Inc., ICOS
Systems, GmbH and Keyence Incorporated. In addition, the Company may compete
with the internal development efforts of its current and prospective customers.
The Company believes that its sensors offer several advantages over competitive
optical sensors and vision systems in terms of speed, flexibility, cost and ease
of control. The Company's OEM products are typically very specialized in their
applications. The Company believes that its OEM products compete favorably with
other product alternatives based on the speed and accuracy of their performance,
their price and certain technological advantages.

         Although the Company believes its current products offer several
advantages in terms of price and suitability for specific applications and
although the Company has attempted to protect the proprietary nature of such
products, it is possible that any of the Company's products could be duplicated
by other companies in the same general market. There can be no assurances that
the Company would be able to compete with similar products produced by a
competitor.

EMPLOYEES

         As of December 31, 1996, the Company had 165 full-time employees
including 29 in sales and marketing and customer support, 61 in manufacturing
and production engineering, 59 in research, development and engineering and 16
in finance, administration and information services at its headquarters in
Minneapolis. To date, the Company has been successful in attracting and
retaining qualified technical personnel, although there can be no assurance that
this success will continue. None of the Company's employees are covered by
collective bargaining agreements or are members of a union.

PROPRIETARY PROTECTION

         The Company relies on the technical expertise and know-how of its
personnel and trade secret protection, as well as on patents, to maintain its
competitive position. The Company attempts to protect its intellectual property
by restricting access to its proprietary methods by a combination of technical
and internal security measures. In addition, the Company makes use of
non-disclosure agreements with customers, consultants, suppliers and employees.
Nevertheless, there can be no assurance that any of the above measures will be
adequate to protect the proprietary technology of the Company.

         The Company holds nine patents on a number of its technologies,
including those used in its Laser Lead Locator, LaserAlign and PRS. In addition,
the Company protects the proprietary nature of its software primarily through
copyright and license agreements, but also through close integration with its
hardware offerings. It is the Company's policy to protect the proprietary nature
of its new product developments whenever they are likely to become significant
sources of revenue. No guarantee can be given that the Company will be able to
obtain patent or other protection for other products.

         As the number of its products increases and the functionality of those
products expands, the Company believes that it may become increasingly subject
to attempts to duplicate its proprietary technology and to infringement claims.
In some geographic markets, it is the practice of companies to engage in "patent
flooding" by seeking patent protection for multiple functional applications that
are incremental rather than technological advances. Yamaha Motor Company, Ltd.
has filed a number of patent applications in Japan, Europe and other parts of
Asia, and received five patents in the United States that the Company believes
are based on inventions by the Company and the Company is currently seeking to
invalidate or receive an assignment of such United States patents, see "Item 3.
Legal Proceedings" below. Further, certain individuals have claimed United
States patent protection of extremely broad techniques and have notified
customers of the Company that any use of products that employ such techniques
would be infringing and require a license. Although the Company believes that
none of the products purchased by those customers employ such techniques, there
can be no assurance that third parties will not assert infringement claims
against the Company in the future or that any such assertion will not require
the Company to enter into a royalty arrangement or result in costly litigation.

GOVERNMENT REGULATION

         All of the Company's products which contain lasers are classified as
either Class I, Class II or Class IIIb Laser Products under applicable rules and
regulations of the Center for Devices and Radiological Health ("CDRH") of the
Food and Drug Administration. Such regulations generally require a
self-certification procedure pursuant to which a manufacturer must file with the
CDRH with respect to each product incorporating a laser device, periodic
reporting of sales and purchases and compliance with product labeling standards.
The Company's lasers are generally not harmful to human tissue, but could result
in injury if directed into the eyes of an individual or otherwise misused. The
Company is not aware of any incident involving injury or a claim of injury from
its laser devices and believes that its sensors and sensor systems comply with
all applicable laws for the manufacture of laser devices.

ITEM 2. PROPERTIES

         As of September 1, 1995, the Company executed a lease agreement for,
and in May 1996 moved into, a 70,000 square foot mixed office and warehouse
facility built to its specifications in Golden Valley, Minnesota. The lease,
which is on a triple net basis for a ten year term with two three year renewal
options, provides for rental payments at approximately $7.50 per square foot
initially, increasing to $8.50 per square foot (currently approximately $581,000
per year). The Company, which holds an option to lease adjoining space,
anticipates that the property will be adequate for its needs for the foreseeable
future.

         The Company has sublet its former facility, which is under lease to the
Company through October 1999, for the remaining term of the lease. The Company
charged the difference between the sublease rentals and lease payments
($160,000) to expense during 1996.

ITEM 3. LEGAL PROCEEDINGS

         In January 1996, the Company filed suit in federal court in Minnesota
against Yamaha Motor Company, Ltd. of Japan for fraud and theft of technology
related to the LaserAlign sensor and its applications. The Company is asking the
federal court to reassign or to invalidate two United States patents that Yamaha
obtained by falsely claiming to be the inventor of CyberOptics' technology, to
award CyberOptics damages for the harm Yamaha's patents have already done, and
to order Yamaha to stop filing additional patents relating to CyberOptics'
inventions. In August 1996, the court dismissed Yamaha's motion to dismiss the
suit and ordered Yamaha to respond to CyberOptic's discovery requests. In early
1997, Yamaha's appeal of the court's ruling was dismissed. Yamaha filed its
answer to CyberOptic's complaint and asserted several counterclaims in March
1997. Although CyberOptics would prefer to settle this dispute amicably, it
intends to vigorously pursue and enforce its intellectual property rights.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted during the fourth quarter of 1996.


                                    PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The information contained under the caption "Common Stock Information"
on page 20 of the Company's 1996 Annual Report to Shareholders (hereafter the
"Annual Report") is hereby incorporated by reference.

ITEM 6.  SELECTED FINANCIAL DATA

         The information under the caption "Five-Year Financial Summary" on page
20 of the Annual report is hereby incorporated by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The information contained in the Annual Report on pages 8 to 10 under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" is hereby incorporated by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following financial statements included in the Annual Report on
pages 11 to 19 are hereby incorporated by reference:

                  Consolidated Balance Sheets as of December 31, 1996 and 1995

                  Consolidated Statements of Income for the years ended December
                  31, 1996, 1995 and 1994

                  Consolidated Statements of Cash Flows for the years ended
                  December 31, 1996, 1995 and 1994

                  Consolidated Statements of Stockholders' Equity for the years
                  ended December 31, 1996, 1995 and 1994

                  Notes to the Consolidated Financial Statements

                  Report of Independent Accountants.

         The supplementary financial information set forth under the caption
Quarterly Financial Information on page 20 of the Annual Report is hereby
incorporated by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

                  NONE.

                                    PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the heading "Election of Directors--Nominees and
--Executive Officers" and "Shares Outstanding" of the Company's definitive proxy
statement for its annual meeting of shareholders to be held May 8, 1997
(hereafter, the "Proxy Statement"), is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information under the heading "Election of Directors--Compensation of
Directors," and "Executive Compensation" of the Proxy Statement is hereby
incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the heading "Shares Outstanding" of the Proxy
Statement is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the heading "Election of Directors--Compensation of
Directors," of the Proxy Statement is hereby incorporated by reference.

                                    PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)   Financial Statements:  See Item 8 to this Form 10-K.

(a)(2)   Financial Statement Schedules: Schedule II, Valuation and Qualifying
         Accounts for the years ended December 31, 1996, 1995 and 1994, and the
         report of Coopers & Lybrand L.L.P. thereon are attached as Item 14(d).

(a)(3)   LIST OF EXHIBITS

Exhibit Number    Description

         3.1      Articles of Incorporation of Company, as amended (Incorporated
                  by reference to Exhibit 3.1 of the Company's Registration
                  Statement on Form S-18 (Registration No. 33-17628C) (the
                  "Registration Statement")).

         3.2      Bylaws of the Company (Incorporated by reference to Exhibit
                  3.2 to the Registration Statement).

         4.1      Restated Stock Option Plan of the Company, as amended
                  (Incorporated by reference to Exhibit 4.1 of the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1989).

         4.2      CyberOptics Corporation Stock Option Plan for Non-Employee
                  Directors, as amended (Incorporated by reference to Exhibit
                  4.2 to the Company's Form 10-K for the year ended December 31,
                  1994).

         4.3      Form of Indemnification Agreement with Directors (Incorporated
                  by reference to Exhibit 4.2 of the Company's Form 10-K for the
                  year ended December 31, 1987).

         4.4      CyberOptics Corporation Employee Stock Purchase Plan
                  (Incorporated by reference to Exhibit 4.7 to the Company's
                  quarterly report on Form 10-Q for the quarter ended September
                  30, 1992).

         10.4     Lease Agreement between MEPC American Properties, Inc. and the
                  Company dated September 15, 1995 (Incorporated by reference to
                  Exhibit 10 of the Company's Form 10-QSB for the quarter ended
                  September 30, 1995).


         13.0     Pages 8 through 20 of the Company's 1996 Annual Report to
                  Shareholders.

         16.0     Letter regarding change in Independent Accountant
                  (Incorporated by reference to Exhibit 16.0 of the Company's
                  Form 8-K filed July 14, 1994.)

         23.1     Consent of Coopers & Lybrand L.L.P.

         27.0     Financial Data Schedule (For SEC use only)

(b)      REPORTS ON FORM 8-K

                  No reports on Form 8-K have been filed for the quarter ended
                  December 31, 1996.


(d)      FINANCIAL STATEMENT SCHEDULES:



                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
and Stockholders of
CyberOptics Corporation


Our report on the consolidated financial statements of CyberOptics Corporation
has been incorporated by reference in this Form 10-K from page 19 of the 1996
Annual Report to Stockholders of CyberOptics Corporation. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in Item 14 of Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.




                                          COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
February 6, 1997



SCHEDULE II

                             CYBEROPTICS CORPORATION

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>

                                            Balance at          Charged to                             Balance
                                           Beginning of          Costs and                            at end of
Description                                   Period             Expenses          Deductions          Period

<S>                                       <C>                 <C>               <C>                  <C>
Allowance for doubtful accounts:

   Year ended December 31, 1996           $     100,000       $       8,339     $        17,227 (1)  $  125,566

   Year ended December 31, 1995           $      50,000       $      52,283     $        (2,283)(1)  $  100,000

   Year ended December 31, 1994           $      30,000       $      73,000     $       (53,000)(1)  $   50,000

(1)  Write-off of trade accounts receivable, net of bad debt recoveries.

</TABLE>


<TABLE>
<CAPTION>

                                            Balance at          Charged to                             Balance
                                           Beginning of          Costs and                            at end of
Description                                   Period             Expenses          Deductions          Period

<S>                                       <C>                 <C>               <C>                  <C>
Reserve for Obsolete inventory:

   Year ended December 31, 1996           $     500,000       $     297,967     $     (323,121)      $  474,846

   Year ended December 31, 1995           $     140,000       $     465,694     $     (105,694)      $  500,000

   Year ended December 31, 1994           $     140,000       $     123,676     $     (123,676)      $  140,000


(2)  Write-off of obsolete inventory.



<PAGE>


</TABLE>

                                   SIGNATURES

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

                                            CYBEROPTICS CORPORATION


Dated: March 26, 1997                       By /s/ STEVEN K. CASE
                                               -----------------
                                                   Steven K. Case,
                                                   President

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

Name                              Title                      Date


/s/STEVEN K. CASE          President (Principal           March 26, 1997
Steven K. Case             Executive Officer)

/s/ALEX B. CIMOCHOWSKI     Director                       March 26, 1997
Alex B. Cimochowski

/s/GEORGE E. KLINE         Director                       March 26, 1997
George E. Kline

/s/STEVEN M. QUIST         Director                       March 26, 1997
Steven M. Quist

/s/P. JUNE MIN             Director                       March 26, 1997
P. June Min

/s/ERWIN KELEN             Director                       March 26, 1997
Erwin Kelen

/s/ JOHN D. BEAGAN         Vice President--Operations     March 26, 1997
John D. Beagan             (acting Principal Financial
                           Officer)

/s/SCOTT LARSON            Controller                     March 26, 1997
Scott Larson               (Principal Accounting
                           Officer)