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  March 31, 1999

[ ] 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)

                                 (612) 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 May 10, 1999, 4,965,206 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>
                                                                          MARCH 31, 1999   DEC. 31, 1998
                                                                             (Unaudited)
--------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>        
Assets
Cash and cash equivalents                                                    $    17,474     $     4,963
Marketable securities                                                             10,129          17,142
Accounts receivable, net                                                           5,949           6,362
Inventories                                                                        5,552           6,045
Other current assets                                                               1,455           1,540
--------------------------------------------------------------------------------------------------------
                           Total current assets                                   40,559          36,052
Marketable securities                                                             12,284          16,397
Equipment and leasehold improvements, net                                          2,546           2,571
Capitalized patent costs, net                                                        142             157
Other assets, net                                                                    731
--------------------------------------------------------------------------------------------------------
                           Total assets                                           56,262          55,177
========================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                             $     1,480     $     1,215
Income taxes payable                                                                 767             589
Accrued expenses                                                                   2,026           1,940
--------------------------------------------------------------------------------------------------------
                           Total current liabilities                               4,273           3,744
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, 4,960 and 4,950 shares issued
       and outstanding, respectively                                              32,912          32,908
      Retained earnings                                                           19,077          18,525
--------------------------------------------------------------------------------------------------------
                           Total stockholders' equity                             51,989          51,433
--------------------------------------------------------------------------------------------------------
                           Total liabilities and stockholders' equity        $    56,262     $    55,177
========================================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


                                       -2-
<PAGE>


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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED MARCH 31,
                                                                          1999          1998
--------------------------------------------------------------------------------------------
<S>                                                                  <C>           <C>      
Revenues                                                             $   7,705     $  10,630
Cost of revenues                                                         3,537         4,447
--------------------------------------------------------------------------------------------
      Gross margin                                                       4,168         6,183
Research and development expenses                                        1,752         1,845
Selling, general and administrative expenses                             2,164         2,633
--------------------------------------------------------------------------------------------
      Income from operations                                               252         1,705
Interest income                                                            530           593
--------------------------------------------------------------------------------------------
      Income before income taxes                                           782         2,298
Provision for income taxes                                                 230           730
--------------------------------------------------------------------------------------------
      Net income                                                     $     552     $   1,568
============================================================================================
Net income per share - Basic                                         $    0.11     $    0.29
Net income per share - Diluted                                       $    0.11     $    0.28
============================================================================================
Weighted average shares outstanding - Basic                              4,955         5,372
Weighted average shares outstanding - Diluted                            5,039         5,640
============================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


                                       -3-
<PAGE>


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

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED MARCH 31,
                                                                                   1999            1998
-------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income                                                         $      552      $    1,568
          Adjustments to reconcile net income to
            net cash provided by operating
            activities:
            Depreciation and amortization                                           302             255
            Provision for losses on inventories                                      80              62
            Changes in operating assets and
                 liabilities:
                 Accounts receivable                                                413             281
                 Inventories                                                        413          (1,232)
                 Other current assets                                                85            (148)
                 Accounts payable                                                   265             439
                 Income taxes payable                                               178             600
                 Accrued expenses                                                    86            (402)
-------------------------------------------------------------------------------------------------------
                     Net cash provided
                       by operating activities                                    2,374           1,423

CASH FLOWS FROM INVESTING ACTIVITIES:
          Sales and maturities of marketable securities                          11,001           7,674
          Purchases of marketable securities                                                     (5,427)
          Additions to equipment and furnishings                                   (250)           (436)
          Additions to patents                                                       (7)             (9)
          Acquisitions of technology and other assets                              (404)
          Other assets                                                             (332)
-------------------------------------------------------------------------------------------------------
                     Net cash provided by investing
                      activities                                                 10,008           1,802

CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from exercise of stock options                                   119             348
          Other                                                                      10              42
-------------------------------------------------------------------------------------------------------
                 Net cash provided (used) by financing
                   activities                                                       129             390

Increase in cash and cash equivalents                                            12,511           3,615
Cash and cash equivalents - beginning
          of period                                                               4,963           6,160
-------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                                    $   17,474      $    9,775
=======================================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 


                                       -4-
<PAGE>


                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1999


1.    INTERIM REPORTING:

The interim consolidated financial statements presented herein as of March 31,
1999, and for the three months ended March 31, 1999 and 1998, are unaudited;
however, in the opinion of management, the interim consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of financial position, results of
operations and cash flows for the periods presented.

The results of operations for the three month period ended March 31, 1999, do
not necessarily indicate the results to be expected for the full year. These
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, 1998.

The December 31, 1998, consolidated balance sheet data was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.


2.    INVENTORIES (IN THOUSANDS):


                                          March 31,             Dec. 31,
                                            1999                 1998
                                        (unaudited)
                                        -------------------------------

            Raw materials                 $3,931                 $4,427

            Work in process                  744                  1,045

            Finished goods                   877                    573
                                        -------------------------------
                  Total inventories       $5,552                 $6,045
                                        ===============================


3.    NET INCOME 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 number of shares utilized in the
denominator of the diluted net income per share computation has been increased
by 84,000 and 268,000 shares at March 31, 1999 and 1998, respectively. Options
to purchase 467,000 and 14,000 shares of common stock at a weighted average
price of $15.20 and $24.50 were outstanding at March 31, 1999 and 1998 but were
not included in the computation of diluted net income per share as the options
exercise price was greater than the average market price of the common shares.


                                       -5-
<PAGE>


                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1999


4.    COMPREHENSIVE INCOME:

As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130
establishes new rules for the reporting of comprehensive income and its
components, however, the adoption of SFAS 130 had no impact on the Company's net
income or stockholders' equity. SFAS 130 requires unrealized gains and losses on
the Company's available-for-sale securities to be included as a component of
other comprehensive income.

During the first quarter of 1999 and 1998, total comprehensive income amounted
to $427,000 and $1,583,000, respectively. Accumulated other comprehensive income
at March 31, 1999 and December 31, 1998 was $48,000 and $173,000, respectively.


5.    BUSINESS SEGMENTS (IN THOUSANDS):

The Company's businesses are organized, managed, and internally reported as four
segments. Management of these segments, with the exception of the Research and
Development segment, are responsible for different product lines and services
and are responsible for managing, on a worldwide basis, revenues as well as
sales and marketing costs. Management does not represent that these segments, if
operated independently, would report the operating income and other financial
information shown below. The table below presents information about revenues and
income from operations for reportable segments for the three months ended March
31, 1999 and 1998, and identifiable assets as of March 31, 1999 and December 31,
1998.

<TABLE>
<CAPTION>
                                  OEM            SMT        Industrial    Research and     Corporate         Total
                                Sensors        Systems     Measurement    Development   Administration(1)   Company
--------------------------------------------------------------------------------------------------------------------
<S>                   <C>     <C>           <C>            <C>            <C>            <C>              <C>       
Revenues              1999    $    5,577    $    1,529     $      599                                     $    7,705
                      1998         8,800         1,529            301                                         10,630


Income from
Operations            1999    $    2,810    $      262     $       37     $   (1,752)    $   (1,105)      $      252
                      1998         4,952           278           (253)        (1,844)        (1,428)           1,705


Identifiable
Assets(2)             1999    $    6,636    $    2,722     $    2,143                    $   44,761       $   56,262
                      1998         7,617         2,644          2,146                        42,770           55,177
</TABLE>

(1)   Loss from Operations consists of unallocated corporate administrative
      expenses.

(2)   Segment assets include accounts receivable and inventories. Assets
      included in Corporate Administration primarily include cash and marketable
      securities, equipment and leasehold improvements, capitalized patent
      costs, intangible assets, deferred income taxes, accrued interests and
      certain prepaid expenses.


                                       -6-
<PAGE>


6.    ACQUISITION:

During February of 1999, the Company acquired certain technology and other
assets from Electronic Packaging Company (EPC). The acquired technology and
other assets relate to a system that will inspect loaded circuit boards (circuit
boards with components placed thereon) to determine proper orientation of the
component and that the correct component is placed. The system is designed to be
used off-line and for purposes of first article inspection. These assets were
acquired for $404,000 of cash and were accounted for using the purchase method,
whereby the purchase consideration was allocated to assets based on their fair
market values and will be amortized over their estimated useful life.


7.    SUBSEQUENT EVENTS:

On April 6, 1999, the Company completed the acquisition of all of the
outstanding shares of Kestra Limited (Kestra), a British limited liability
company organized under the Companies Act 1985, and repaid certain indebtedness
for approximately $11.4 million of cash. Kestra is a development stage company
that is developing new technology for automated optical inspection systems. The
acquisition will be accounted for under the purchase method of accounting, and
accordingly, Kestra's operating results will be included in the Company's
consolidated results of operations from the date of acquisition.

On May 5, 1999, the Company completed the acquisition of certain assets of Hama
Laboratories, Inc. (HAMA), a California based company that is the leading
designer and manufacturer of laser wafer-mapping and aligning sensors which are
incorporated into robotic equipment that handle silicon wafers during the
fabrication process. The Company purchased these assets for $6.75 million in
cash, plus up to $4.1 million of additional consideration contingent on the
business meeting certain performance criteria. The acquisition will be accounted
for under the purchase method of accounting, and accordingly, the related
operating results will be included in the Company's consolidated results of
operations from the date of acquisition.


                                       -7-
<PAGE>


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

CyberOptics Corporation designs and manufactures intelligent sensors and systems
for high-precision, non-contact dimensional measurement and process control.
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 sells its products worldwide through a
combination of direct sales staff and independent distributors.

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. This discussion
should be read in conjunction with the financial statements and associated
notes.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. 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 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
            industry;

      --    The dependence of such operations on orders of two sensor product
            lines from several large OEM's of component placement machines in
            the surface mount industry;

      --    The significant proportion of the Company's revenue that is derived
            from export sales, including Asia where poor economic conditions
            have continued;

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

      --    The ability of the Company to produce products that do not
            experience significant quality errors;

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

      --    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 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;

      --    Quarterly fluctuations in operating results caused by the timing of
            shipments and other factors not entirely within the Company's
            control.


                                       -8-
<PAGE>


                              RESULTS OF OPERATIONS


The table below lists certain financial data expressed as a percentage of
revenues for the periods ended March 31, 1999 and 1998.

                                                       Three Months Ended
                                                           March 31,
                                                      1999            1998
                                                    ------------------------

            Revenues                                   100%           100%

            Gross margin                                54%            58%

            Research and development expenses           23%            17%

            Selling, general and
                administrative expenses                 28%            25%

            Income from operations                       3%            16%

            Net income                                   7%            15%


PERFORMANCE BY BUSINESS SEGMENT

Financial information and other disclosures relating to the Company's four
business segments are provided in this Form 10-Q. In the discussion of results
of operations, certain reclassifications have been made to revenues in order to
include all revenue in segment disclosures. In quarterly filings prior to 1999,
certain revenues, primarily service revenues and sales of miscellaneous
inventory, had not been assigned to a business segment. These reclassifications
had no effect on net income or stockholders' equity.


REVENUES

Revenues decreased 28% to $7.7 million during the three month period ended March
31, 1999 compared to $10.6 million for the comparable period in 1998. Decreased
revenues are primarily the result of reduced demand for surface mount technology
(SMT) process control sensors, primarily LaserAlign and Laser Lead Locator, from
original equipment manufacturer (OEM) customers. Revenues are heavily dependant
on the level of capital spending in the global SMT assembly market, as the
Company generates approximately 90% of its revenues from the sales and service
of sensors and system products used primarily in SMT production. The first
quarter of 1998 was the last quarter of strong demand, following a year of
strengthening in 1997. During the remainder of 1998, revenue levels were
impacted by a slowdown in worldwide demand for SMT production equipment.

The following table sets forth revenues by business segment for the three months
ended March 31:


                                          1999             1998
                                          ----             ----

OEM Sensors                             $ 5,577          $ 8,800
SMT Systems                               1,529            1,529
Industrial Measurement                      599              301
Research and Development
                                        -------          -------
    Total                               $ 7,705          $10,630


                                       -9-
<PAGE>


Revenues from the OEM sensor segment decreased 37% to $5.6 million during the
three months ended March 31, 1999 compared to $8.8 million for the comparable
period in 1998. The decrease is primarily due to a slowdown in worldwide demand
for SMT production equipment. In addition, revenues from the Company's largest
customer in 1998 have decreased in 1999 due to weakness in the Asian economy and
a product transition at this Japanese manufacturer. This customer has started
the process of managing its inventory in preparation for the introduction of a
new product line in the second half of 1999, which will incorporate the
Company's OEM sensor products.

SMT system segment revenues were unchanged at $1.5 million during the three
month period ended March 31, 1999 from the comparable period in 1998. SMT
systems revenues represent sales of enhanced versions of the Company's
CyberSentry and LSM products, both of which were introduced during the first
quarter of 1997. During the first quarter of 1999, the Company introduced its
new automated LSM product, the AutoLSM, which will be available for shipment in
the second quarter of 1999. System revenue levels are typically low during the
first quarter of each year due to the seasonal nature of capital equipment
buying patterns and the introduction of new products at electronics industry
trade shows. The relatively flat SMT system revenue levels discussed above
reflect a continuation of this buying pattern. On a quarterly basis, the Company
anticipates SMT system revenues for the remainder of 1999 will exceed those
generated during the first quarter.

Industrial measurement segment revenues increased 99% to $599,000 during the
three month period ended March 31, 1999 compared to $301,000 in the first
quarter of 1998. The increase in revenues from industrial measurement products
is primarily the result of new product introductions in both the systems and
sensor product lines. A new family of general measurement sensors was released
during the fourth quarter of 1997, and a new family of general measurement
systems was introduced in the second quarter of 1998. In addition, a new
thickness measurement product for the semiconductor wafer fabrication market
will be introduced in the second quarter of 1999. As a result of these new
product introductions and initial positive effects of efforts to establish
improved distribution, the Company believes that base business (not including
the impact of HAMA) industrial measurement product revenues will continue to
increase on a quarterly basis during the remainder of 1999.

The Company's two largest customers, Juki Corporation (Juki) and Philips
Electronics, N.V. (Philips), accounted for approximately 10% and 36% of revenues
for the three months ended March 31, 1999, and 34% and 18% of revenues for the
comparable period in 1998. In addition, a new customer, Samsung Aerospace,
Limited (Samsung), accounted for approximately 15% of revenues in the three
months ended March 31, 1999. The five principal OEM customers (including Juki,
Philips and Samsung ) in the aggregate accounted for 67% and 70% of revenues for
the periods ended March 31, 1999 and 1998, respectively.

International revenues comprised 77% and 79% of total revenues during the three
months ended March 31, 1999 and 1998, respectively. Sales of the Company's
products, primarily OEM sensors, in Western Europe, Japan and the rest of the
Far East have continued to represent the majority of the Company's revenues.
These international markets account for a significant portion of the production
capability of capital equipment for the manufacture of electronics, the primary
market for the LaserAlign, Laser Lead Locator, CyberSentry and LSM2 products.
Revenues generated from products used primarily for SMT production (revenues
from OEM sensors and SMT systems) were approximately 92% and 91% of revenues for
the three month periods ended March 31, 1999 and 1998, respectively.


                                      -10-
<PAGE>


GROSS MARGIN

Gross margin decreased as a percent of total revenues to 54% during the three
month period ended March 31, 1999 compared to 58% during the comparable period
in 1998. The decrease in gross margin is primarily the result of decreased
revenue volume over which to spread the fixed component of cost of revenues as
well as increased warranty costs. Partially offsetting these negative impacts
was a shift in the revenue mix towards higher margin sensor products and the
effect of cost containment efforts implemented by the Company to address its
cost structure in a period of reduced production volumes.


RESEARCH AND DEVELOPMENT

Research and development expenses decreased 5% to $1.8 million during the three
month period ended March 31, 1999 compared to the same period in 1998. As a
percentage of revenue, expenses have increased to 23% during the three months
ended March 31, 1999 from 17% during the comparable period in 1998. Research and
development expenses during the three months ended March 31, 1999 were primarily
focused on development of new solder paste inspection product offerings,
including the AutoLSM to be released in the second quarter of 1999, development
of the next generation of the LaserAlign family and development of the
semiconductor wafer thickness measurement system. The Company anticipates an
increase in quarterly base business research and development expense levels for
the remainder of 1999 compared to the first quarter of 1999, as it works to
complete development on a number of important new products.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased 18% to $2.2 million
during the three month period ended March 31, 1999 compared to $2.6 million
during the comparable period in 1998. As a percentage of revenue, selling,
general and administrative expenses have increased to 28% in 1999 from 25% in
1998, due to reduced revenue levels in 1999. The dollar decrease in selling,
general and administrative expenses is primarily due to reduced legal expense
related to the Yamaha litigation, which was settled during the first quarter of
1998. To a lesser extent, reduced selling, general and administrative costs are
the results of a cost containment program initiated by the Company in response
to lower revenue volumes.


EFFECTIVE INCOME TAX RATE

The Company's effective income tax rate was 29.5% during the three months ended
March 31, 1999 and 31.8% during the three months ended March 31, 1998. The
reduced rate is primarily the result of tax credits generated from the Company's
foreign sales corporation and the research and experimentation tax credit being
spread over a lower level of taxable income. These credits are primarily
responsible for reducing the effective tax rate below the statutory federal
rate. The Company's federal tax returns for the 1995 and 1996 tax years are
currently under review by the Internal Revenue Service. Company management does
not believe that the resolution of this audit will have a material impact on the
financial position, net income or cash flows of the Company.


                                      -11-
<PAGE>


ORDER RATE AND BACKLOG

CyberOptics' order rate totaled $6.7 million during the three month period ended
March 31, 1999 compared to $8.8 million during the same period in 1998. Backlog
totaled $4.7 million and $6.8 million at March 31, 1999 and 1998, respectively.
The scheduled shipment of the March 31, 1999 backlog is as follows (In
thousands):


                       2nd Quarter 1999             $ 3,601
                       3rd Quarter 1999                 468
                       After 3rd Quarter 1999           627
                                                    -------

                           Total backlog            $ 4,696


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities increased $1.4 million to
$39.9 million as of March 31, 1999 from $38.5 million as of December 31, 1998,
primarily due to $2.4 million in cash provided by operations. Increases in cash
were partially offset by $993,000 of cash used to purchase fixed assets and to
acquire certain technology and other assets.

The Company generated $2.4 million of cash from operations during the first
three months of 1999, primarily due to net income of $552,000, including
$382,000 of non-cash expenses for depreciation and amortization and the
provision for inventory obsolescence and a total decrease of $826,000 in
accounts receivable and inventory. The decrease in accounts receivable and
inventory is primarily due to reduced revenues and resulting production volume
requirements during the first quarter of 1999 compared to the same period in
1998. During 1998, the Company generated $1.4 million of cash from operations,
primarily due to net income of $1.6 million, including $317 million of non-cash
expenses, and increases in accounts payable and income taxes payable, offset
primarily by a $1.2 million increase in inventory.

The Company generated $10.0 million of cash from investing activities during the
three month period ended March 31, 1999 compared to $1.8 million during the same
period in 1998. The majority of the change in cash from investing activities is
due to changes in the level of investment in marketable securities resulting
from the purchases and sales of those securities, which provided $11.0 million
of cash in 1999 and $2.2 million in 1998. The Company used approximately
$993,000 and $445,000 of cash for the purchase of fixed assets, the acquisition
of certain technology (as described in note 6 to the financial statements) and
other assets during the three months ended March 31, 1999 and 1998,
respectively.

The Company generated $129,000 of cash from financing activities during the
three months ended March 31, 1999 and $390,000 in the same period during 1998.
Cash generated represents primarily cash from stock option exercises.

As described in note 6 to the financial statements, subsequent to March 31,
1999, the Company used approximately $18.15 million for the acquisition of
Kestra and certain assets of HAMA. As of March 31, 1999, the Company has no
material capital commitments except for the acquisition of Kestra and Hama
discussed above. Following completion of the Kestra and Hama acquisitions, the
Company believes remaining working capital and anticipated funds from operations
will be adequate for anticipated operating needs.


                                      -12-
<PAGE>


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. Substantially all of the Company's
international export sales are negotiated, invoiced and paid in U.S. dollars.
Accordingly, although currency fluctuations do not 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 units. In addition, although many
of the OEM sensor products the Company manufactures for foreign consumption are
incorporated into products of our OEM customers that are re-exported worldwide,
the Company's operations have been effected by general economic conditions
associated with currency devaluation in Asia.


YEAR 2000 STATUS

The Securities and Exchange Commission and other regulatory bodies have
identified the failure of many computer systems and applications to properly
recognize and process date specific information on and after January 1, 2000 as
a significant risk to many companies. Because these "non-compliant" applications
use only two character date fields, many will, unless altered, incorrectly
identify years commencing with the year 2000 as the year 1900, or otherwise
incorrectly report date information. The Company has established a comprehensive
plan to address these issues. The components of the plan include: an assessment
of internal systems vulnerability; a survey of suppliers to determine their
ability to maintain an uninterrupted supply of goods and services; and an
evaluation of the year 2000 issue on Company products.


Internal Systems

Vendors provide the vast majority of software used in the Company's business
applications. The Company has received documentation from all vendors supplying
software for its primary business applications confirming year 2000 compliance,
including the enterprise-wide information management system installed in
mid-1998. This system was installed primarily to improve operating efficiency.
The Company intends to independently verify compliance of these vendor supplied
systems by June 30, 1999. The Company has also examined the few internally
developed business applications used in operations for year 2000 compliance and
intends to make minor modifications in any non-compliant applications by
September 30, 1999. Finally, the company has completed the assessment of its
technology infrastructure (servers, networks, and phone systems) and expects to
replace or decommission a very minor amount of hardware where issues are
identified by June 30, 1999. Based on this analysis, the Company does not
anticipate a material cost associated with its internal systems relative to the
year 2000 issue.


Vendors

The Company has identified all major or critical (where a second source was not
readily available) suppliers. These suppliers completed a Company survey
regarding the Year 2000 issue. After evaluating survey responses, four vendors
were identified as needing additional investigation. Currently, three of the
four have satisfactorily addressed concerns and the other vendor will continue
to be monitored. Responses indicated that there was minimal exposure to an
interruption of goods or services from these suppliers. The Company is not
directly linked to any supplier computer systems.


                                      -13-
<PAGE>


Products

The Company has completed an analysis of the potential effect of the year 2000
issue on system software included in its products and on application and system
software licensed or purchased by the Company and used in its products. The
analysis did not identify any material year 2000 non-compliance. The analysis
did identify certain imbedded computer components purchased from third party
suppliers and imbedded or sold with the Company's products that used a ROM BIOS
that incorrectly handles information in the year 2000. Although the clock
incorporated into this BIOS does not affect intended functionality of the
system, customers who use the computer or processor for their own purposes may
be affected. Affected customers are being notified by letter. The Company's
web-site provides evaluation guidance for customers as well as potential
solutions if a problem is found. The Company has offered to provide assistance
and hardware as needed at a nominal charge for those customers desiring
assistance.


Cost

The costs associated with the Year 2000 assessment and corrections, if
necessary, and costs anticipated to complete the evaluation are not material and
are not incremental to the Company. Resources have come from the temporary
assignment of existing personnel to these efforts on a part time basis. However,
there can be no assurance that unforeseen factors will not have a material
impact on the Company.


Risks and Contingency Plan

The Company continues to evaluate the risks associated with potential Year 2000
related failures. While supplier input has not identified any year 2000 risk,
critical vendors' failure to make their computer systems Year 2000 compliant
could result in delaying deliveries of products and services to the Company. If
such delays are extended, they could have a material adverse effect on the
Company's business. Due to the general uncertainty inherent in the Year 2000
issue, resulting in part from the uncertainty of the Year 2000 readiness of
third-party vendors, the Company is unable to determine conclusively whether the
consequences of Year 2000 issues will have a material impact on the Company's
operations or financial condition. The Year 2000 readiness assessment is
expected to significantly reduce the Company's level of uncertainty about the
Year 2000 issue and, in particular, about the Year 2000 compliance and readiness
of its critical vendors. However, there can be no assurance that the compliance
project will be fully effective. As risks within the existing set of internal
systems, business partners, and products are better understood, a contingency
plan to alleviate the impact of high potential or serious failures will be
developed. The contingency plan will be outlined by June 30, 1999. The
components of this plan will likely include raw material and finished goods
inventory levels, alternative vendors, and backup systems.


                                      -14-
<PAGE>


PART II. OTHER INFORMATION




ITEM 6 - EXHIBITS AND REPORTS ON 8-K

a.    Exhibits

            Exhibit 27--Financial Data Schedule (For EDGAR filing only)

b.    Reports on Form 8-K

            No reports on Form 8-K were filed during the quarter ended March 31,
            1999. On April 21, 1999 a Form 8-K was filed reporting the
            acquisition of Kestrsa.


                                      -15-
<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
                                                (Principal Executive Officer and
                                                        Duly Authorized Officer)





                                                       /s/ Richard G. Ballintine
                                                       -------------------------
                                 Richard G. Ballintine, Vice President - Finance
                                               (Principal Accounting Officer and
                                                        Duly Authorized Officer)



Dated: May  17, 1999