SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



(Check One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended  September 30, 2001
                                ------------------

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________________ to ________________

Commission file number  0-16577
                        -------


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

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

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

                                 (763) 542-5000
                                 --------------
                           (Issuer's telephone number)

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 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

At November 12, 2001, 8,081,039 shares of the issuer's Common Stock, no par
value, were outstanding.

<PAGE>


PART I.  FINANCIAL INFORMATION


ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                             CYBEROPTICS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                  SEPT. 30, 2001    DEC. 31, 2000
                                                                      (UNAUDITED)
--------------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>
ASSETS
Cash and cash equivalents                                                $16,404          $13,097
Marketable securities                                                      3,789            6,650
Accounts receivable, net                                                   3,677           12,470
Inventories                                                                9,723            9,497
Income taxes receivable                                                    2,243              -
Other current assets                                                       1,736            1,710
--------------------------------------------------------------------------------------------------
                    Total current assets                                  37,572           43,424
Marketable securities                                                     11,230            8,538
Equipment and leasehold improvements, net                                  3,774            3,944
Intangible and other assets, net                                          11,948           12,911
--------------------------------------------------------------------------------------------------
                    Total assets                                         $64,524          $68,817
==================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                          $1,775           $3,433
Income taxes payable                                                         -                345
Accrued expenses                                                           2,642            5,111
--------------------------------------------------------------------------------------------------
                    Total current liabilities                              4,417            8,889

Deferred Tax Liabilities                                                     145              145

Commitments and contingencies

Stockholders' equity:
      Preferred stock, no par value, 5,000 shares
        authorized, none outstanding                                         -                -
      Common stock, no par value, 25,000 shares
        authorized, 8,070 and 7,952 shares issued
        and outstanding, respectively                                     40,737           39,714
      Retained earnings                                                   19,127           20,118
      Accumulated other comprehensive income (loss)                           98              (49)
--------------------------------------------------------------------------------------------------
                    Total stockholders' equity                            59,962           59,783
--------------------------------------------------------------------------------------------------
                    Total liabilities and stockholders' equity           $64,524          $68,817
==================================================================================================

</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.



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                                                                          PAGE 2
<PAGE>


                             CYBEROPTICS CORPORATION
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED SEPT. 30,
                                                                 2001          2000
-------------------------------------------------------------------------------------
<S>                                                             <C>          <C>
Revenues                                                        $6,189       $16,277
Cost of revenues                                                 3,691         6,021
-------------------------------------------------------------------------------------
     Gross margin                                                2,498        10,256
Research and development expenses                                2,023         2,036
Selling, general and administrative expenses                     3,924         3,808
Non-recurring charges                                              169           -
Amortization of goodwill and other intangibles                     592           450
-------------------------------------------------------------------------------------
     Income (loss) from operations                              (4,210)        3,962
Interest income                                                    311           375
-------------------------------------------------------------------------------------
     Income (loss) before income taxes                          (3,899)        4,337
Provision (benefit) for income taxes                            (1,950)        1,523
-------------------------------------------------------------------------------------
     Net income (loss)                                         $(1,949)       $2,814
=====================================================================================
Net income per share - Basic                                    $(0.24)        $0.36
Net income per share - Diluted                                  $(0.24)        $0.33
=====================================================================================
Weighted average shares outstanding - Basic                      8,052         7,890
Weighted average shares outstanding - Diluted                    8,052         8,576

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

                                                            NINE MONTHS ENDED SEPT. 30,
                                                                2001           2000
-------------------------------------------------------------------------------------
Revenues                                                       $34,160       $44,470
Cost of revenues                                                15,791        16,534
-------------------------------------------------------------------------------------
     Gross margin                                               18,369        27,936
Research and development expenses                                6,473         6,927
Selling, general and administrative expenses                    12,952        10,916
Non-recurring charges                                              419           -
Amortization of goodwill and other intangibles                   1,759         1,310
-------------------------------------------------------------------------------------
     Income (loss) from operations                              (3,234)        8,783
Interest income and other                                        1,103           938
-------------------------------------------------------------------------------------
     Income (loss) before income taxes and cumulative
       effect of change in accounting principle                 (2,131)        9,721
Provision (benefit) for income taxes                            (1,140)        3,601
-------------------------------------------------------------------------------------
     Income (loss) before cumulative effect of
       change in accounting principle                             (991)        6,120
Cumulative effect of change in accounting
  principle, net of tax                                            -            (135)
-------------------------------------------------------------------------------------
     Net income (loss)                                           $(991)       $5,985
=====================================================================================
Net income (loss) per share - Basic                             ($0.12)        $0.78
Net income (loss) per share - Diluted                           ($0.12)        $0.71
=====================================================================================
Weighted average shares outstanding - Basic                      8,000         7,716
Weighted average shares outstanding - Diluted                    8,000         8,429
=====================================================================================

</TABLE>


SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.



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                                                                          PAGE 3


<PAGE>


                             CYBEROPTICS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED SEPT. 30,
                                                                      2001        2000
----------------------------------------------------------------------------------------
<S>                                                                   <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net income (loss)                                             $(991)     $5,985
        Adjustments to reconcile net income (loss) to
          net cash provided by operating
          activities:
          Depreciation and amortization                               3,239       2,477
          Provision for losses on inventories                           536         516
          Provision for doubtful accounts                                (2)         10
          Stock compensation expense                                     30          30
          Changes in operating assets and liabilities
            excluding impact of acquisitions:
               Accounts receivable                                    8,795      (4,185)
               Inventories                                             (761)     (3,512)
               Other current assets                                     612        (328)
               Accounts payable / receivable                         (1,658)      1,085
               Income taxes payable                                  (2,588)      1,067
               Accrued expenses                                      (2,469)      1,540
----------------------------------------------------------------------------------------
                 Net cash provided
                   by operating activities                            4,743       4,685

CASH FLOWS FROM INVESTING ACTIVITIES:
        Maturities of marketable securities                          52,195       6,328
        Purchases of marketable securities                          (51,850)    (11,367)
        Purchases of businesses and technology, net of
             cash acquired                                           (1,264)        (54)
        Additions to equipment and leasehold improvements            (1,177)     (1,880)
        Additions to patents                                           (157)       (212)
----------------------------------------------------------------------------------------
                 Net cash used in
                  investing activities                               (2,253)     (7,185)

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from exercise of stock options                         446       3,535
        Proceeds from issuance of common stock
          under Employee Stock Purchase Plan                            371         464
----------------------------------------------------------------------------------------
             Net cash provided by financing
               activities                                               817       3,999

Increase in cash and cash equivalents                                 3,307       1,499
Cash and cash equivalents - beginning
        of period                                                    13,097      10,196
----------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                           $16,404     $11,695
========================================================================================

</TABLE>


SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.


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                                                                          PAGE 4
<PAGE>


                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2001


1.       INTERIM REPORTING:

The interim consolidated financial statements presented herein as of September
30, 2001, and for the nine and three month periods ended September 30, 2001 and
2000, are unaudited; however, in the opinion of management, the interim
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, except for the cumulative effect of a change in
accounting principle recorded in the first quarter of 2000, necessary for a fair
presentation of financial position, results of operations and cash flows for the
periods presented.

As previously reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, the results of operations for the nine month period
ended September 30, 2000 includes a $135,000 net-of-tax charge to earnings for
the cumulative effect of adopting changes to the Company's revenue recognition
policies as required by the Securities and Exchange Commission's Staff
Accounting Bulletin (SAB) N0. 101, effective January 1, 2000.

The results of operations for the nine and three month periods ended September
30, 2001, do not necessarily indicate the results to be expected for the full
year. The December 31, 2000, consolidated balance sheet data was derived from
audited consolidated financial statements, but does not include all disclosures
required by generally accepted accounting principles. These unaudited interim
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto, contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.


2.       PRO-FORMA INFORMATION:

The following table presents unaudited pro forma consolidated results of
operations as if the acquisition of Imagenation Corporation (Imagenation),
acquired on October 24, 2000, had occurred as of the beginning of 2000. The
unaudited pro forma consolidated results of operations for the nine months ended
September 30, 2000 include adjustments for additional amortization of
identifiable intangibles and goodwill, the reduction of interest income due to
the cash used for the acquisition and the related tax impact of these
adjustments. The unaudited pro forma consolidated results of operations are
presented for illustrative purposes only and are not necessarily indicative of
the combined financial results that actually would have resulted had the
acquisitions, in fact, occurred at the beginning of 2000(In thousands):

                                            Pro Forma

                                        Nine Months Ended
                                          September 30, 2000
                                          --------------

Revenue                                       $48,349

Net income                                    $ 5,446

Net income per share - Basic                   $0.71

Net income per share - Diluted                 $0.65


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                                                                          PAGE 5
<PAGE>


3.       PURCHASES OF BUSINESSES AND TECHNOLOGIES

In May 2001, the Company paid additional purchase consideration of $164,000 to
the shareholders of HAMA Labratories, Inc. under the terms of the May 1999 Asset
Purchase Agreement. Additional consideration could be payable in May 2002 under
this Agreement based on meeting certain operation thresholds.

In July 2001, the Company acquired certain intellectual property and a software
license for a cash payment of $1.1 million.


4.       INVENTORIES (IN THOUSANDS):

                                                Sept. 30,      Dec. 31,
                                                  2001           2000
                                               (unaudited)
                                               -----------------------
         Raw materials                           $5,506         $5,841

         Work in process                            533          1,177

         Finished goods                           3,684          2,479
                                               -----------------------
         Total inventories                       $9,723         $9,497
                                               =======================


5.       NET INCOME (LOSS) PER SHARE:

Basic net income per share has been computed using the weighted average number
of shares outstanding. The diluted net income per share includes the effect of
common stock equivalents for each period. The shares used in the basic and
diluted net income per share computation for the nine and three month periods
ended September 30, 2001 are the same, as additional shares in the denominator
would be anti-dilutive due to the Company's net loss. The number of shares
utilized in the denominator of the diluted net income per share computation has
been increased by 713,000 and 686,000 equivalent shares for the nine and three
month periods ended September 30, 2000, respectively. Shares for which the
option exercise price exceeded the average market price were 490,000 and 862,000
for the nine and three month periods ended September 30, 2001, respectively.
Shares excluded due to the option exercise price exceeding the average market
price were 60,100 and 5,400 for the nine and three month periods ended September
30, 2000, respectively.


6.       COMPREHENSIVE INCOME (LOSS):

Statement of Financial Accounting Standards No. 130 requires that unrealized
gains and losses on the Company's available-for-sale marketable securities and
certain foreign currency translation adjustments be included as a component of
other comprehensive income.

During the nine month periods ended September 30, 2001 and 2000, total
comprehensive income (loss) amounted to ($844,000) and $6,016,000, respectively.
During the three month periods ended September 30, 2001 and 2000, total
comprehensive income (loss) amounted to ($1,796,000) and $2,927,000,
respectively. Accumulated other comprehensive income (loss) at September 30,
2001 and December 31, 2000 was $98,000 and ($49,000), respectively.


7.       DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," on January 1, 2001. The adoption of SFAS No. 133 did not
materially impact the Company's financial position as of September 30, 2001 or
its results of operations or cash flows for the nine months then ended.





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                                                                          PAGE 6
<PAGE>


The Company enters into foreign currency swap agreements to hedge short term
inter-company financing transactions with its subsidiary in the United Kingdom.
These currency swap agreements are structured to mature on the last day of each
quarter and are designated as cash flow hedges. At September 30, 2001, the
Company had one open swap agreement that was purchased on that date. As a
result, there were no unrealized gains or losses as of September 30, 2001.
During the three months ended September 30, 2001, the Company recognized a loss
of approximately $181,000 from settlement of a foreign currency swap agreement
which offset the $116,000 translation gain on the underlying inter-company
balance.

The Company's foreign currency swap agreements contain credit risk to the extent
that its bank counter-parties may be unable to meet the terms of the agreements.
The Company minimizes such risk by limiting its counter-parties to major
financial institutions. Management does not expect material losses as a result
of defaults by other parties.


8.       RECENT ACCOUNTING DEVELOPMENTS

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations", and Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," (Collectively, "the
Statements"). The Statements eliminate the pooling-of-interest method of
accounting for business combinations and the systematic amortization of goodwill
and other intangible assets with indeterminable lives. The Company will adopt
the Statements on January 1, 2002 and is currently estimating the impact of any
goodwill impairment charge required upon adoption. In addition to any potential
impairment charge that may be required, the Company estimates that the adoption
of the Statements will reduce fiscal 2002 amortization expense, on a pretax
basis by approximately $1.1 million.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (the
"Statement"). This Statement addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This Statement also eliminates
the exception to the consolidation for a subsidiary for which control is likely
to be temporary. The Company will adopt the Statement on January 1, 2002 and
does not expect the adoption of the Statement to have a material impact on
either the finacial position or operating results of the Company.



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is management's discussion and analysis of certain significant
factors which have affected the Company's results and financial position during
the periods included in the accompanying financial statements or could have an
impact on future results. This discussion should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2000 and
the Company's interim consolidated financial statements and associated notes.

The following Management's Discussion and Analysis contains "forward looking
statements" within the meaning of federal securities laws which represent
management's expectations or beliefs relating to future events, including
statements regarding trends in the industries in which the Company functions,
levels of orders, research and development expenses, taxation levels, the
sufficiency of cash to meet operating and capital expenses and the ability to
continue to price foreign transactions in U.S. currency. These and other forward
looking statements made by the Company, must be evaluated in the context of a
number of factors that may affect the Company's financial condition and results
of operations, including the following:

        --  The cyclical nature of capital expenditures in the electronics and
            semiconductor industry;

        --  The affects of world events and economic conditions on the Company
            and its customers;

        --  The dependence of such operations on orders of one sensor product


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                                                                          PAGE 7
<PAGE>


            line from large OEM's of component placement machines in the surface
            mount industry;

        --  The dependence of such operations on orders from two OEM customers;

        --  The significant proportion of the Company's revenue that is derived
            from export sales;

        --  The dependence of the Company's manufacturing on outside contractors
            and suppliers, many of which require significant lead time;

        --  The degree to which the Company is successful in protecting its
            technology and enforcing its technology rights in the United States
            and other countries;

        --  The dependence of the Company's operations on several key personnel;

        --  The ability of the Company to effectively integrate the operations
            of acquired companies and product lines;

        --  The ability to effectively commercialize significant new products
            introduced in 2000 and 2001;

        --  The speed of changes in technology in the microelectronics
            manufacturing industry from which most of the Company's sales are
            derived;

        --  Competition for the functions that the Company's products perform by
            larger "vision" companies and by other optical sensor companies;

        --  The ability of the Company to successfully develop acquired
            in-process technology into viable products;


RESULTS OF OPERATIONS


REVENUES

The following table sets forth revenues by product group for the three and nine
month periods ended September 30 (in Thousands):


<TABLE>
<CAPTION>
                                               Nine months ended            Three months ended
                                                 September 30,                 September 30,
                                             2001           2000           2001           2000
                                            -------        -------        -------        -------
<S>                                         <C>            <C>             <C>           <C>
OEM Solutions:
    Electronic Assembly Sensors (EAS)
       Products                             $19,033        $31,365         $2,345        $11,577
    Semiconductor Products                    5,492          5,622          1,343          2,237
SMT Systems Products                          9,635          7,483          2,501          2,463
                                            -------        -------        -------        -------
    Total                                   $34,160        $44,470         $6,189        $16,277

</TABLE>


Revenues from the EAS sensor products decreased 39% during the nine months ended
September 30, 2001 compared to the same period in 2000. During the third quarter
of 2001, EAS sensor revenues decreased 80% compared to the same period in 2000.
Decreased revenues during the third quarter reflects further deterioration in
global markets for electronic assembly equipment, including demand from our
major EAS customers. A major customer of EAS products has notified the Company
to suspend new product sensor shipments as it works off excess sensor inventory.
The Company believes


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                                                                          PAGE 8
<PAGE>


this suspension of scheduled shipments could continue beyond the end of the
year. During the third quarter, a second OEM sensor customer also significantly
reduced its order rate for the balance of the year. The Company believes that
this reduction could continue beyond the end of the year. As a result of these
developments, fourth quarter sales of electronic assembly sensors are expected
to continue to decline compared to the third quarter of 2001. The Company's two
largest EAS customers accounted for approximately 44% of total revenues for the
nine months ended September 30, 2001, and 57% of revenues for the comparable
period in 2000. These customers accounted for approximately 27% of revenues in
the third quarter of 2001 compared to 59% in the third quarter of 2000.

Semiconductor product revenues decreased 2% during the nine month period ended
September 30, 2001 from the comparable period in 2000, and decreased 40% for the
third quarter of 2001 compared to the same period in 2000. Because it was not
acquired until October 2000, sales from Imagenation are not reflected in sales
for the first nine months of 2000. Excluding the impact of the Imagenation
acquisition, semiconductor product revenues decreased 55% during the nine month
period ended September 30, 2001 from the comparable period in 2000, and
decreased 75% for the third quarter of 2001 compared to the same period in 2000.
This decrease was primarily due to a weakening demand in the semiconductor
capital equipment market which is expected to continue during the fourth quarter
of 2001.

SMT systems product revenues increased 29% during the nine month period ended
September 30, 2001 from the comparable period in 2000, and increased 2% for the
third quarter of 2001 compared to the same period in 2000. The sales increase
was driven by sales of new-generation SE 300 solder paste inspection and KS 100
and KS 50 AOI systems, which all began contributing revenues in the fourth
quarter of 2000. SMT systems revenues reflect continued demand for the Company's
new-generation end user system products from electronic manufacturing services
(EMS) customers. As a result of industry consolidation, EMS companies are
becoming a larger proportion of worldwide electronic assembly capacity. As a
result of weakness in the electronic assembly market, the Company expects demand
below the third quarter 2001 levels for its end-user system products during the
fourth quarter of 2001.

International revenues comprised approximately 69% and 76% of total revenues
during the nine month periods ended September 30, 2001 and 2000, respectively,
and approximately 53% and 75% of revenues during the third quarter of 2001 and
2000, respectively. The international markets in Europe, Japan and the rest of
Asia account for a significant portion of the production capability of capital
equipment for the manufacture of electronics, the primary market for the
Company's EAS sensors and SMT systems product lines.

Revenues generated from products used primarily for SMT production (revenues
from OEM sensors and SMT systems) were approximately 84% and 87% of revenues for
the nine month periods ended September 30, 2001 and 2000, respectively.


GROSS MARGIN

Gross margin for the nine months ended September 30, 2001 decreased as a percent
of revenues to 54% compared to 63% during the same period in 2000. For the third
quarter of 2001, gross margin decreased to 40% of revenues compared to 63%
during the comparable period in 2000. Gross margin is highly dependent on the
level of revenues over which to spread the fixed component of cost of sales and
the related realization of manufacturing efficiencies. During 2001, gross margin
was negatively impacted by lower revenue levels. Gross margin was also
negatively impacted by reduced EAS product and semiconductor product revenues,
which have a higher margin than other products, and the increase in
new-generation SMT Systems product revenues, which generate a lower margin
during their initial introductory period. The Company expects that SMT System
products will continue to grow as a percentage of total revenue, which will
continue to impact gross margin during the fourth quarter of 2001.


RESEARCH AND DEVELOPMENT

Research and development expenses decreased 7% to $6.5 million during the nine



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                                                                          PAGE 9
<PAGE>


month period ended September 30, 2001 compared to the same period of 2000. For
the third quarter of 2001, research and development expenses decreased less than
1% to $2.0 million compared to the same period in 2000. As a percentage of
revenue, research and development expenses increased to 19% during the nine
months ended September 30, 2001 from 16% during the comparable period in 2000,
and increased to 33% in the second quarter of 2001 compared to 13% in the same
period in 2000. Decreased research and development expenses in 2001 is due
primarily to cost reduction measures initiated in the second quarter and
customer funded development recognized as a reduction in research and
development expense.

Research and development expenses during the first three quarters of 2001 were
primarily focused on continued engineering development of the new high speed
solder paste inspection system, the SE 300, and KS 100 and KS 50 AOI systems, as
well as development work on the in-process products acquired from Imagenation
and Hama. In addition, research and development expenses in 2001 included
development of next generation LaserAlign products, a board alignment camera and
enhancements to the semiconductor wafer mapping sensor product family.

Customer funded research and development is recognized as a reduction of
research and development expense. During the nine months ended September 30,
2001, customer funded research and development recognized as a reduction of
research and development expense totaled $604,000 compared to $397,000 during
the comparable period of 2000. The Company expects customer funded R&D
recognized in the fourth quarter of 2001 to exceed the $293,000 recognized in
the third quarter of 2001.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased 19% to $13.0 million
during the nine month period ended September 30, 2001 compared to $10.9 million
during the comparable period in 2000. For the third quarter of 2001, selling,
general and administrative expenses increased 3% to $3.9 million compared to the
same period in 2000. As a percentage of revenue, selling, general and
administrative expenses increased to 38% during the nine month period ended
September 30, 2001 from 25% in 2000, and for the third quarter increased to 63%
in 2001 from 23% in 2000. Increased selling, general and administrative expenses
in 2001 are primarily the result of personnel and marketing investments made to
develop the end-user SMT systems sales and service channel, the acquisition of
Imagenation and the costs associated with operating the new sales office in
Singapore.


ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

On October 24, 2000, the Company acquired Imagenation Corporation. At the time
of acquisition, Imagenation had two products under development. The first was a
new generation of frame grabber that contains features that greatly exceed the
performance of current products. This product was introduced in June 2001. The
second was a machine vision product concept that, if successfully developed,
will integrate all vision components on a single circuit board, to be used as a
'wafer mapper' primarily in a semiconductor manufacturing environment and other
potential applications. The Company recorded a $2.1 million charge to operations
at the time of acquisition for the estimated fair value of the acquired
in-process research and devlopment. Since the date of the acquisition, there
have been no significant changes to the estimated total research and development
costs to be incurred to complete development or the estimated revenues to be
generated from these products, if successfully developed.


NON-RECURRING CHARGES

In April 2001, the Company incurred approximately $250,000 of severance related
costs associated with cost reduction measures. In September 2001, the Company
incurred approximately $169,000 of additional severance related costs associated
with a second round of cost reduction measures. A total of 23 and 22 employees
were terminated in April and September 2001, respectively. Substantially, all of
these costs were paid as of September 30, 2001.



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                                                                         PAGE 10
<PAGE>


AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS

Amortization of acquired intangible assets was approximately $1.8 and $592,000
for the nine and three month periods ended September 30, 2001 compared to $1.3
million and $450,000 during the comparable periods of 2000. The amortization is
attributable to identifiable intangible assets and goodwill resulting from the
Company's acquisition of certain technology and other assets of Kestra and HAMA
during the second quarter of 1999 and the Company's acquisition of Imagenation
during the fourth quarter of 2000. Except for the impact of the possible future
payment of contingent consideration relating to the HAMA and Imagenation
acquisitions, the amounts of which are not yet determinable, amortization of
these intangible assets is expected to approximate $592,000 for the fourth
quarter of fiscal 2001. The Company intends to adopt the provisions of FASB
statements No. 141 and No. 142 during the first quarter of fiscal 2002, which
will eliminate the systematic amortization of goodwill and other intangible
assets with indeterminable lives.


INTEREST AND OTHER

Interest income and other primarily includes interest earned on investments
during the period.


PROVISION FOR INCOME TAXES AND EFFECTIVE INCOME TAX RATE

The Company recorded a tax benefit of $1.1 million for the nine month period
ended September 30, 2001, and $1.5 million for the third quarter of 2001. The
tax benefit during 2001 reflects anticipated tax losses for the year, benefits
from the Company's foreign sales corporation and research and development tax
credits. These benefits were partially offset by non-deductible goodwill
amortization, and valuation allowances established to eliminate the future tax
benefit of net operating loss carryforwards generated by CyberOptics Ltd.
(formerly Kestra) due to uncertainty about realization. The third quarter
benefit from the Company's foreign sales corporation includes a benefit for
amendments to the 1997 through 2000 returns, which were filed in September 2001.


ORDER RATE AND BACKLOG

CyberOptics' orders totaled $25.1 million during the nine month period ended
September 30, 2001 compared to $46.1 million during the same period in 2000. For
the third quarter of 2001, orders totaled $4.6 million compared to $13.0 million
in 2000. Backlog totaled $2.7 million and $13.0 million at September 30, 2001
and 2000, respectively. The scheduled shipment of the September 30, 2001 backlog
is as follows (in thousands):

                           4th Quarter 2001                   $ 2,512
                           1st Quarter 2002 and after             183
                                                              -------
                               Total backlog                  $ 2,695


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities increased $3.1 million to
$31.4 million as of September 30, 2001 from $28.3 million as of December 31,
2000, primarily due to $4.7 million of cash generated from operations and $0.8
million of cash provided by the exercise of stock options and stock issued under
the ESPP. Increases in cash were partially offset by $2.6 million of cash used
to purchase fixed assets and other intangibles.

The Company generated $4.7 million of cash from operations during the first nine
months of 2001, primarily due to a net loss of $1.0 million, including $3.8
million of non-cash expenses for depreciation and amortization, and the
provision for inventory obsolescence. The cash generated from operations also
included a decrease in accounts receivable of $8.8 million primarily the result
of reduced revenue levels. These items were offset somewhat by a $0.7 million
increase



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                                                                         PAGE 11
<PAGE>


in inventories, a $1.7 million decrease in accounts payable, a $2.5 million
decrease in accrued liabilities, and a $2.6 million increase in income taxes
receivable. The decrease in accounts payable and accrued liabilities are the
result of lower purchasing and spending activities associated with lower revenue
volumes and spending reduction measures.

The Company used $2.3 million of cash in investing activities during the nine
month period ended September 30, 2001. The change in cash from investing
activities is partially due to changes in the level of investment in marketable
securities resulting from the purchases and maturities of those securities,
which provided $0.3 million of cash in 2001. In addition, the Company used
approximately $2.6 million of cash for the purchase of fixed assets, and the
acquisition of certain technology and other intangible assets during the nine
months ended Sepetember 30, 2001.

The Company generated $0.8 million of cash from financing activities during the
nine months ended Sepetember 30, 2001, resulting from cash received from stock
option exercises and stock issued under the ESPP.

In May 2001, the Company announced that its board of directors approved the
repurchase of up to 500,000 shares of CyberOptics' common stock. The shares will
be repurchased from time to time in the open market or through negotiated
transactions. Repurchased shares will be utilized for employee compensation
plans and other corporate purposes. As of Sepetember 30, 2001, the company has
not purchased any shares under this authorization.

The Company has no material capital commitments. The Company believes working
capital and anticipated funds from operations will be adequate for anticipated
operating needs.


OTHER FACTORS

Changes in revenues have resulted primarily from changes in the level of unit
shipments and new product introductions. The Company believes that inflation has
not had any significant effect on operations. Most of the Company's
international export sales are negotiated, invoiced and paid in U.S. dollars.
Accordingly, although currency fluctuations do not have a significant effect the
Company's revenue and income per unit, they can influence the price
competitiveness of the Company's products relative to other technologies and the
willingness of existing and potential customers to purchase products and
services.

As a result of the Kestra acquisition the Company has an operating unit located
in the UK. The Company does not believe that currency fluctuations will have a
material impact on its consolidated financial statements.


RECENT ACCOUNTING DEVELOPMENTS

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations", and Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," (Collectively, "the
Statements"). The Statements eliminate the pooling-of-interest method of
accounting for business combinations and the systematic amortization of goodwill
and other intangible assets with indeterminable lives. The Company will adopt
the Statements on January 1, 2002 and is currently estimating the impact of any
goodwill impairment charge required upon adoption. In addition to any potential
impairment charge that may be required, the Company estimates that the adoption
of the Statements will reduce fiscal 2002 amortization expense, on a pretax
basis by approximately $1.1 million.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (the
"Statement"). This Statement addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This Statement also eliminates
the exception to the consolidation for a subsidiary for which control is likely
to be temporary. The Company will adopt the Statement on January 1, 2002 and
does not expect the adoption of the Statement to have a material impact on
either the finacial position or operating results of the Company.



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                                                                         PAGE 12
<PAGE>


PART II. OTHER INFORMATION


ITEM 6 - EXHIBITS AND REPORTS ON 8-K

a.   Exhibits

         None


b.   Reports on Form 8-K

         No reports on Form 8-K were filed during the quarter ended September
         30, 2001, or during the period from September 30, 2001 to the date of
         this quarterly report on Form 10-Q.




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                                                                         PAGE 13
<PAGE>


SIGNATURES


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



                                                         CyberOptics Corporation



                                                             /s/ Steven M. Quist
                                                             -------------------
                          Steven M. Quist, President and Chief Executive Officer
                                                (Principal Executive Officer and
                                                        Duly Authorized Officer)






                                                             /s/ Scott G. Larson
                                                             -------------------
                                        Scott G. Larson, Chief Financial Officer
                                               (Principal Accounting Officer and
                                                        Duly Authorized Officer)



Dated: November 14, 2001



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