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, 1998
                               ------------------

[ ] 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 November 10, 1998, 4,950,320 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, 1998   DEC. 31, 1997
                                                               (UNAUDITED)
-------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>    
ASSETS
Cash and cash equivalents                                          $ 8,752         $ 6,160
Marketable securities                                               13,411          20,577
Accounts receivable, net                                             7,123           7,697
Inventories                                                          6,089           4,611
Other current assets                                                 1,411           1,343
-------------------------------------------------------------------------------------------
                    Total current assets                            36,786          40,388
Marketable securities                                               15,074          14,290
Equipment and leasehold improvements, net                            2,742           2,661
Capitalized patent costs, net                                          162             106
-------------------------------------------------------------------------------------------
                    Total assets                                   $54,764         $57,445
===========================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                   $ 1,555         $ 1,205
Income taxes payable                                                   589             661
Accrued expenses                                                     2,082           2,286
-------------------------------------------------------------------------------------------
                    Total current liabilities                        4,226           4,152

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, 4,949 and 5,341 shares issued
       and outstanding, respectively                                32,658          38,437
     Retained earnings                                              17,880          14,856
-------------------------------------------------------------------------------------------
                    Total stockholders' equity                      50,538          53,293
-------------------------------------------------------------------------------------------
                    Total liabilities and stockholders' equity     $54,764         $57,445
===========================================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

</TABLE>

                                       -2-

<PAGE>

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

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                                              1998             1997
------------------------------------------------------------------------------------
<S>                                                        <C>              <C>    
Revenues                                                   $ 7,737          $ 9,249
Cost of revenues                                             3,660            3,896
------------------------------------------------------------------------------------
     Gross margin                                            4,077            5,353
Research and development expenses                            1,558            1,588
Selling, general and administrative expenses                 2,447            2,127
------------------------------------------------------------------------------------
     Income from operations                                     72            1,638
Interest income                                                532              549
------------------------------------------------------------------------------------
     Income before income taxes                                604            2,187
Provision for income taxes                                     200              700
------------------------------------------------------------------------------------
     Net income                                            $   404          $ 1,487
====================================================================================
Net income per share - Basic                               $  0.08          $  0.28
Net income per share - Diluted                             $  0.08          $  0.27
====================================================================================
Weighted average shares outstanding - Basic                  5,057            5,257
Weighted average shares outstanding - Diluted                5,125            5,607
====================================================================================

                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                              1998             1997
------------------------------------------------------------------------------------
Revenues                                                   $28,085          $24,586
Cost of revenues                                            12,508           11,125
------------------------------------------------------------------------------------
     Gross margin                                           15,577           13,461
Research and development expenses                            5,346            4,566
Selling, general and administrative expenses                 7,499            6,231
------------------------------------------------------------------------------------
     Income from operations                                  2,732            2,664
Interest income                                              1,722            1,578
------------------------------------------------------------------------------------
     Income before income taxes                              4,454            4,242
Provision for income taxes                                   1,430            1,357
====================================================================================
     Net income                                            $ 3,024          $ 2,885
====================================================================================
Net income per share - Basic                               $  0.57          $  0.55
Net income per share - Diluted                             $  0.55          $  0.53
====================================================================================
Weighted average shares outstanding - Basic                  5,273            5,210
Weighted average shares outstanding - Diluted                5,461            5,478
====================================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDTED FINANCIAL STATEMENTS 

</TABLE>

                                       -3-

<PAGE>


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

<TABLE>
<CAPTION>
                                                           NINE MONTHS ENDED SEPTEMBER 30,
                                                                    1998             1997
------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net income                                              $  3,024         $  2,885
        Adjustments to reconcile net income to
          net cash provided by operating
          activities:
          Depreciation and amortization                              845              676
          Provision for inventory obsolesence                        285              379
          Changes in operating assets and
             liabilities:
             Accounts receivable                                     574             (132)
             Inventories                                          (1,763)          (1,271)
             Other current assets                                    (68)             289
             Accounts payable                                        350               39
             Income taxes payable                                    (72)           1,094
             Accrued expenses                                       (204)             142
------------------------------------------------------------------------------------------
                 Net cash provided
                   by operating activities                         2,971            4,101

CASH FLOWS FROM INVESTING ACTIVITIES:
        Maturities of marketable securities                       26,021           12,901
        Purchases of marketable securities                       (19,415)         (14,673)
        Additions to equipment and leaseholds                       (869)            (455)
        Additions to patents                                        (113)             (60)
------------------------------------------------------------------------------------------
                 Net cash provided (used) by
                  investing activities                             5,624           (2,287)

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from exercise of stock options                      409              465
        Proceeds from issuance of common stock
          under Employee Stock Purchase Plan                         355              285
        Repurchase of common stock                                (6,830)            (561)
        Other                                                         63
------------------------------------------------------------------------------------------
             Net cash provided (used) by
               financing activities                               (6,003)             189

Increase in cash and cash equivalents                              2,592            2,003
Cash and cash equivalents - beginning
        of period                                                  6,160            3,453
------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                       $  8,752         $  5,456
==========================================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

</TABLE>

                                       -4-
<PAGE>


                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


1.    INTERIM REPORTING:

The interim consolidated financial statements presented herein as of September
30, 1998, and for the three and nine month periods ended September 30, 1998 and
1997, 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.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been condensed or omitted pursuant to SEC rules and regulations.

The results of operations for the three and nine month periods ended September
30, 1998, do not necessarily indicate the results to be expected for the full
year. 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, 1997.

The December 31, 1997, consolidated balance sheet data was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.


2.     STOCK REPURCHASE:

In December 1996, the Company's Board of Directors authorized the repurchase of
up to 500,000 shares of common stock. During the first quarter of 1997, the
Company repurchased 41,000 shares of common stock under that authorization which
expired in December 1997. In February 1998, the Board of Directors authorized
the repurchase of an additional 500,000 shares, at such times and at such prices
as a committee of the Board of Directors determines. As of September 30, 1998,
all 500,000 shares have been repurchased under the February 1998 authorization.
In October 1998, the Company's Board of Directors authorized the repurchase of
an additional 250,000 shares, at such times and at such prices as a committee of
the Board of Directors determines. No shares have been repurchased under this
authorization. Repurchased shares will be utilized for employee compensation
plans and other corporate purposes.


3.     INVENTORIES (IN THOUSANDS):

                                                 Sept. 30,    Dec. 31,
                                                   1998         1997
                                                (unaudited)
                                                ----------------------
         Raw materials                             $3,934      $3,027

         Work in process                            1,222       1,106

         Finished goods                               933         478
                                                ----------------------
                  Total inventories                $6,089      $4,611
                                                =====================


                                       -5-

<PAGE>


                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


4.    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 as compared to the
basic net income per share computation has been increased by 188,000 and 268,000
equivalent shares for the nine month periods and by 68,000 and 350,000 for the
three month periods ended June 30, 1998 and 1997. Options to purchase 212,000
and 169,000 shares of common stock at a weighted average price of $21.00 and
$19.00 were outstanding but were not included in the computation of diluted net
income per share for the nine month periods ended September 30, 1998 and 1997 as
the exercise price was greater than the average market price of the common
shares during that period. For the three month periods ended September 30, 1998
and 1997, options to purchase 530,000 and 90,000 shares of common stock at a
weighted average price of $18.00 and $22.00 were not included in the computation
of diluted net income per share because the exercise price was greater than the
average price of common shares during the periods.


5.    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. The adoption of SFAS 130 had no impact on the Company's net income.
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 nine months ended September 30, 1998 and 1997, total comprehensive
income amounted to $3,249,000 and $2,885,000, respectively. During the three
month periods ended September 30, 1998 and 1997, total comprehensive income
amounted to $613,000 and $1,487,000, respectively. Accumulated other
comprehensive income as of September 30, 1998 and December 31, 1997 was $250,000
and $26,000, respectively.


6.     RECLASSIFICATIONS:

Certain reclassifications have been made in the statement of cash flows for the
nine month period ended September 30, 1997 to conform to the classifications
used during the nine month period ended September 30, 1998. These
reclassifications had no effect on net income or stockholders' equity.


                                       -6-

<PAGE>


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 that 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, statements
regarding expected spending levels, 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 from several large 
             OEM customers;

         --  The dependence of the Company's manufacturing on outside 
             contractors and suppliers;

         --  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;

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

         --  Competition for the functions that the Company's products perform
             by larger "vision" technology 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.


                                       -7-

<PAGE>


                              RESULTS OF OPERATIONS


The table below lists certain financial data expressed as a percentage of
revenues for the periods ended September 30, 1998 and 1997.

                                     Three Months Ended       Nine Months Ended
                                        September 30,           September 30,
                                       1998      1997          1998      1997
                                     ------------------------------------------
Revenues                               100%      100%          100%      100%

Gross margin                            53%       58%           55%       55%

Research and development expenses       20%       17%           19%       19%

Selling, general and
    administrative expenses             32%       23%           27%       25%

Income from operations                   1%       18%           10%       11%

Net income                               5%       16%           11%       12%


REVENUES

Revenues increased 14% to $28.1 million during the nine month period ended
September 30, 1998 compared to $24.6 million for the comparable period in 1997.
For the third quarter of 1998, revenues decreased 16% to $7.7 million from $9.2
million in the second quarter of 1997. Both the increase in revenues for the
nine month period and the decrease in revenues for the third quarter, compared
to 1997, are primarily the result of changes in the level of demand for surface
mount technology (SMT) process control sensors, primarily LaserAlign and Laser
Lead Locator, from original equipment manufacturer (OEM) customers. Revenues
from SMT sensor products increased 20% to $19.2 million during the nine months
ended September 30, 1998 compared to 1997, and decreased 42% to $3.8 million for
the third quarter of 1998 compared to the third quarter of 1997. The primary
reason for lower revenues in the third quarter of 1998 compared to the same
period in 1997 was the reduction in revenues from the Company's largest OEM
customer, primarily due to weak economic conditions in Japan and other Asian
countries. The Company anticipates increased revenues from this customer in the
fourth quarter of 1998 compared to the third quarter of 1998. As a result, SMT
and total Company revenues are expected to be higher in the fourth quarter of
1998 than the third quarter of 1998, but not at the levels achieved in the
fourth quarter of 1997.

SMT system revenues increased 6% to $5.8 million during the nine month period
ended September 30, 1998 from the comparable period in 1997, and increased 74%
to $3.0 million for the third quarter of 1998 compared to the third quarter of
1997. SMT system revenues result from shipments of the Company's CyberSentry and
LSM solder paste inspection products. The growth in SMT systems revenues is
primarily due to increased revenues during the third quarter 1998 from shipments
of CyberSentry units, primarily to electronic contract manufacturers. The
increase in SMT system revenues was partially offset by reduced demand from our
North American end-user system customers reflecting reduced capital spending due
primarily to weak demand for their products in Asia.


                                       -8-

<PAGE>


Industrial measurement systems and sensor products revenues decreased 31% to
$1.4 million during the nine month period ended September 30, 1998 from the
comparable period in 1997, and decreased 16% to $594,000 for the third quarter
of 1998 compared to the third quarter of 1997. Revenues from industrial
measurement products have been declining in recent quarters primarily as the
result of product changeovers 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 late in
the first quarter of 1998. As a result of these new product introductions and
initial positive effects of efforts to establish improved distribution, the
Company believes that industrial measurement product revenues will increase
during the fourth quarter of 1998 compared to the third quarter of 1998, and
become a larger percentage of revenues.

The Company's two largest customers, Juki Corporation (Juki) and Philips
Electronics, N.V. (Philips), accounted for approximately 24% and 30% of revenues
for the nine months ended September 30, 1998 compared to 24% and 10% during the
same period in 1997. For the third quarter, Juki and Philips accounted for
approximately 16% and 29% of revenues in 1998 compared to 23% and 18% in 1997.
The Company's five principal OEM customers (including Juki and Philips) in the
aggregate accounted for 64% and 54% of revenues for the nine month periods ended
September 30, 1998 and 1997, and 49% and 64% of revenues for the third quarter
of 1998 and 1997.

International revenues comprised approximately 81% and 71% of total revenues
during the nine months ended September 30, 1998 and 1997, and approximately 78%
and 77% of total revenues during the third quarter of 1998 and 1997. Revenues
generated from products used primarily for SMT production have remained at
approximately 90% of revenues during 1998 and 1997.


GROSS MARGIN

Gross margin as a percent of total revenues remained at 55% during the nine
month periods ended September 30, 1998 and 1997. For the third quarter of 1998,
gross margin decreased to 53 % of total revenue compared to 58% in the third
quarter of 1997. Gross margin is highly dependent on the volume of revenues over
which to spread the fixed component of cost of sales and the realization of
manufacturing efficiencies. For the nine month periods, gross margin remained
flat on revenues that increased 14%, primarily due to increased warranty costs
incurred during the third quarter of 1998. These costs were offset by increased
revenues over which to spread fixed costs and a shift in revenue mix towards
higher margin sensor products. Third quarter 1998 gross margins were negatively
impacted by warranty costs and reduced revenues when compared to the same period
in 1997. These factors were offset somewhat in the third quarter by the effects
of a cost containment program implemented by the Company in the third quarter of
1998.


RESEARCH AND DEVELOPMENT

Net research and development expenses increased 17% to $5.3 million during the
nine month period ended September 30, 1998 compared to $4.6 million during the
comparable period in 1997. For the third quarter of 1998, research and
development expenses decreased 2% to $1.6 million from the comparable period in
1997, primarily as the result of the cost containment program implemented by the
Company in the third quarter of 1998. As a percentage of revenues, research and
development expenses remained flat at 19% for the nine months ended September
30, 1998 and 1997, and for the third quarter increased from 17% in 1997 to 20%
in 1998. Research and development expenses during the nine months ended
September 30, 1998 were primarily focused on completion of the new family of
industrial measurement scan stations and sensors introduced during the fourth
quarter of 1997 and the first quarter of 1998, continuing development work on
the LaserAlign technology and the development of additional future product
offerings for solder paste inspection.


                                       -9-

<PAGE>


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased 20% to $7.5 million
during the nine month period ended September 30, 1998 compared to $6.2 million
during the comparable period in 1997. For the third quarter of 1998, selling,
general and administrative expenses increased 15% to $2.4 million compared to
$2.1 million in 1997. As a percentage of revenue, selling, general and
administrative expenses increased from 25% in 1997 to 27% in 1998 for the nine
month periods ended September 30, and for the third quarter increased from 23%
in 1997 to 32% in 1998. The increase in selling, general and administrative
expenses is primarily due to increased compensation and related costs associated
with the addition of a new president and other senior executives. These
additions were made to strategically position the Company for future growth by
focusing on each market served by the Company, and to add depth to the senior
management team. There are no significant new personnel additions planned, and
selling, general and administrative costs are expected to stabilize going
forward.


EFFECTIVE INCOME TAX RATE

The Company's effective income tax rate has remained relatively constant at
approximately 32% during the three and nine months ended September 30, 1998 and
1997. Benefits from the Company's foreign sales corporation and the research and
experimentation tax credit were primarily responsible for reducing the effective
tax rate below the statutory federal rate.


ORDER RATE AND BACKLOG

CyberOptics' order rate totaled $26.1 million during the nine month period ended
September 30, 1998 compared to $27.3 million during the same period in 1997. For
the third quarter of 1998, the order rate totaled $9.5 million compared to $11.0
million in 1997. Backlog totaled $6.7 million and $7.1 million at September 30,
1998 and 1997, respectively. The scheduled shipment of the September 30, 1998
backlog is as follows (in thousands):

                    4th Quarter 1998              $5,132
                    1st Quarter 1999                 835
                    Other                            708
                                                  ------

                       Total backlog              $6,675


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities decreased to $37.2 million
as of September 30, 1998 from $41.0 million as of December 31, 1997, primarily
as the result of $6.8 million in cash used to repurchase CyberOptics common
stock and $982,000 in fixed asset and patent additions. These uses of cash were
partially offset by $3.0 million of cash provided by operations and $764,000 of
cash provided by other common stock related financing activities. Marketable
securities generally consist of U.S. Government or U.S. Government agency
obligations with maturities of three years or less.


                                      -10-

<PAGE>


The Company generated $3.0 million of cash from operations during the first nine
months of 1998, primarily due to net income of $3.0 million, including $1.1
million of non-cash expenses for depreciation and amortization and the provision
for inventory obsolescence, a $350,000 increase in accounts payable and a
$574,000 decrease in accounts receivable. These increases in cash from
operations were primarily offset by an increase in inventory of $1.8 million,
resulting from inventory purchases to support a higher than realized revenue
base, new product introductions and volume last time purchases of certain
critical components. During the nine months ended September 30 1997, the Company
generated $4.1 million of cash from operations, primarily due to net income of
$2.9 million, including $1.1 million of non-cash expenses, a $289,000 decrease
in other current assets and an increase in income taxes payable of $1.1 million.
These increases in cash were offset primarily by a $1.3 million increase in
inventories.

The Company generated $5.6 million of cash from investing activities during the
nine month period ended September 30, 1998 and used $2.3 million in the
comparable period in 1997. The majority of the increase in cash is the result of
the timing of purchases and sales of marketable securities, which provided $6.6
million of cash in 1998 and used $1.8 million in 1997. The Company used $869,000
and $455,000 of cash during 1998 and 1997 to purchase additional equipment and
leasehold improvements. The Company anticipates capital expenditures to be
approximately $1.0 million for the year ending December 31, 1998.

The Company used $6.0 million of cash as the result of financing activities in
the nine month period ended September 30, 1998 and generated $189,000 of cash
from financing activities during the comparable period in 1997. During the first
nine months of 1998 and 1997, cash was used for the repurchase of 500,000 and
41,000 shares, respectively, of CyberOptics common stock. These uses of cash
were partially offset by cash generated primarily as the result of proceeds from
the exercise of stock options and issuances of common stock for the Employee
Stock Purchase Plan.

During the fourth quarter of 1997 and the first half of 1998, the Company
implemented a new enterprise business system, which went "live" on July 1, 1998.
Total external cost of implementation was approximately $575,000, the majority
of which was capitalized with depreciation beginning July 1, 1998. The Company
has no material capital commitments. The Company believes current working
capital and anticipated funds from operations will be adequate for anticipated
operating and capital needs.


OTHER

Changes in revenue levels have resulted primarily from changes in the level of
unit shipments and new product introductions. The Company believes that
inflation has not had a significant effect on operations. Substantially all of
the Company's international export sales are negotiated, invoiced and paid in
U.S. dollars.

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 "noncompliant" 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
misassign date information. The Company has completed an initial analysis of the
potential effect of the year 2000 issue (expending less than $50,000 on such
analysis) on both the system software included in its products and on
application software licensed or purchased by the Company and used in its
internal operations. During its initial testing, the Company has tested system
software included in its products and received feedback from customers on
testing they have performed on the Company's products used in their production
processes. These initial tests have not identified any material year 2000
non-compliance. Based on the results of initial testing, the Company is
determining if additional testing on its products is required. The cost of
additional product testing, if any, is anticipated to be less than $100,000.


                                      -11-

<PAGE>


In addition, the Company has requested and received documentation from vendors
supplying software for its primary business applications addressing year 2000
compliance, although the Company has not independently tested those
applications. In all cases, vendor responses indicated that their applications
are year 2000 compliant. Based on this analysis, the Company does not anticipate
a material cost associated with its primary business application systems
relative to the year 2000 issue.

Additionally, the Company is in the process of contacting all critical suppliers
of raw materials and component parts for its products to verify year 2000
compliance, and to date has not identified any issues. The Company is not
directly linked to any material supplier computer systems. The Company currently
feels that all recognized actions to address the year 2000 issue and minimize
its effect on the Company have been taken, and while no formal contingency plan
currently exists, appropriate actions will be taken if issues are identified.


                                      -12-

<PAGE>


PART II. OTHER INFORMATION


ITEM 5 - OTHER INFORMATION

On October 22, 1998, the Board of Directors amended the Company's Bylaws to
include provisions governing the introduction of proposals and nomination of
persons for election as a director of the Company. As amended the Bylaws provide
that any shareholder desiring to introduce a proposal or to nominate a person
for director at a regular meeting of the shareholders must (i) have been a
shareholder of record at the time of giving of notice as provided for in the
Bylaws, (ii) be entitled to vote at the meeting and (iii) have given prior
notice of the matter, which must otherwise be a proper matter for shareholder
action, in the manner provided for in the Bylaws. The amended Bylaws also
provide that, if a shareholder desires to introduce a proposal or to nominate a
person for director at a regular meeting of the shareholders, written notice of
such business must be received by the Company not less than 120 days before the
date that is one year after the date of the Company's proxy statement for the
prior year's regular meeting. If the Company does not receive timely notice, the
business may be excluded from consideration at the meeting. This advance notice
provision supersedes the statutory notice period in revised Rule 14a-4(c)(1) of
the federal proxy rules which addresses the discretionary proxy voting authority
of the Board of Directors in connection with such shareholder business. The
foregoing description of the amended Bylaws is qualified in its entirety by
reference to the full text of the Company's Bylaws, as amended, filed as Exhibit
3.1 hereto and incorporated by reference herein.

Based on the Bylaws, as amended, if a shareholder desires to make a proposal or
nominate a person for election as a director at the 1999 Annual Meeting of
Shareholders (and such business is not the subject of a shareholder proposal
timely submitted for inclusion in the proxy statement), written notice of such
business containing the information required under the Company's Bylaws must be
received by the Company at its principal executive office on or before December
8, 1998.


ITEM 6 - EXHIBITS AND REPORTS ON 8-K

a.    Exhibits

         Exhibit 3.1--Bylaws of CyberOptics Corporation, as amended

         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 September
         30, 1998, or during the period from September 30, 1998 to the date of
         this quarterly report on Form 10-Q.


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<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: November 13, 1998


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