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 June 30, 2003

[ ]      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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).   Yes ____   No __X__

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

At August 12, 2003, there were 8,247,646 shares of the registrant's Common
Stock, no par value, issued and outstanding.

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                             CYBEROPTICS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   June 30, 2003    DEC. 31, 2002
                                                                      (Unaudited)
--------------------------------------------------------------------------------------------------
<S>                                                                       <C>             <C>
ASSETS
Cash and cash equivalents                                                 $7,395          $11,009
Marketable securities                                                      6,316            4,086
Accounts receivable, net                                                   4,890            3,836
Inventories                                                                5,285            7,065
Income tax receivable                                                      2,618            2,560
Other current assets                                                         396              577
--------------------------------------------------------------------------------------------------
                    Total current assets                                  26,900           29,133

Marketable securities                                                      6,157            5,723
Equipment and leasehold improvements, net                                  1,770            2,354
Intangible and other assets, net                                           4,260            4,882
Goodwill, net                                                              5,665            5,835
--------------------------------------------------------------------------------------------------
                    Total assets                                         $44,752          $47,927
==================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                          $1,307           $1,251
Accrued expenses                                                           2,444            2,614
--------------------------------------------------------------------------------------------------
                    Total current liabilities                              3,751            3,865

Commitments and contingencies
Stockholders' equity:
      Preferred stock, no par value, 5,000 shares
        authorized, none outstanding
      Common stock, no par value, 37,500 shares
       authorized, 8,171 and 8,190 shares issued
       and outstanding, respectively                                      41,665           41,755
      Retained earnings                                                     (341)           2,399
      Accumulated other comprehensive loss                                  (323)             (92)
--------------------------------------------------------------------------------------------------
                    Total stockholders' equity                            41,001           44,062

--------------------------------------------------------------------------------------------------
                    Total liabilities and stockholders' equity           $44,752          $47,927
==================================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

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

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED JUNE 30,
                                                                 2003          2002
-------------------------------------------------------------------------------------
<S>                                                             <C>           <C>
Revenues                                                        $7,508        $5,912
Cost of revenues                                                 3,681         3,772
-------------------------------------------------------------------------------------
     Gross margin                                                3,827         2,140
Research and development expenses                                1,860         2,261
Selling, general and administrative expenses                     2,886         3,582
Restructuring and severance costs                                   -            800
Amortization of intangibles                                        281           281
-------------------------------------------------------------------------------------
     Loss from operations                                       (1,200)       (4,784)
Interest income and other                                           71          (388)
-------------------------------------------------------------------------------------
     Loss before income taxes                                   (1,129)       (5,172)
Income tax (benefit) provision                                     129        (1,880)
-------------------------------------------------------------------------------------
     Net loss                                                  ($1,258)      ($3,292)
=====================================================================================
Net loss per share - Basic                                      ($0.15)       ($0.40)
Net loss per share - Diluted                                    ($0.15)       ($0.40)
=====================================================================================
Weighted average shares outstanding - Basic                      8,180         8,142
Weighted average shares outstanding - Diluted                    8,180         8,142

=====================================================================================
                                                            SIX MONTHS ENDED JUNE 30,
                                                                2003           2002
-------------------------------------------------------------------------------------
Revenues                                                       $13,933       $10,444
Cost of revenues                                                 7,206         6,705
-------------------------------------------------------------------------------------
     Gross margin                                                6,727         3,739
Research and development expenses                                3,600         4,575
Selling, general and administrative expenses                     5,668         7,266
Restructuring and severance costs                                  170         1,647
Gain from technology transfer and license                         (645)           -
Amortization of intangibles                                        561           560
-------------------------------------------------------------------------------------
     Loss from operations                                       (2,627)      (10,309)
Interest income and other                                           76          (165)
-------------------------------------------------------------------------------------
     Loss before income taxes                                   (2,551)      (10,474)
Income tax (benefit) provision                                     189        (3,980)
-------------------------------------------------------------------------------------
     Net Loss                                                   (2,740)       (6,494)
=====================================================================================
Net loss per share - Basic                                      ($0.34)       ($0.80)
Net loss per share - Diluted                                    ($0.34)       ($0.80)
=====================================================================================
Weighted average shares outstanding - Basic                      8,185         8,134
Weighted average shares outstanding - Diluted                    8,185         8,134
=====================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

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

<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED JUNE 30,
                                                                     2003         2002
----------------------------------------------------------------------------------------
<S>                                                                 <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net income (loss)                                           ($2,740)    ($6,494)
        Adjustments to reconcile net income to
          net cash provided by operating activities:
          Depreciation and amortization                               1,576       1,468
          Gain from technology transfer and license                    (645)         -
          Provision for losses on inventories                            61         542
          Provision for doubtful accounts                                48           7
          Deferred income taxes                                          -       (1,592)
          Amortization of restricted stock and other                     -           88
          Equity in losses of related party                              -          645
          Changes in operating assets and liabilities:
             Accounts receivable                                     (1,102)     (1,279)
             Inventories                                              1,494         402
             Other current assets                                       138        (346)
             Accounts payable                                            56        (313)
             Income taxes receivable                                    (58)     (1,621)
             Accrued expenses                                          (190)      1,113
----------------------------------------------------------------------------------------
                 Net cash provided (used)
                   by operating activities                           (1,362)     (7,380)

CASH FLOWS FROM INVESTING ACTIVITIES:
        Maturities of marketable securities                           4,856       5,648
        Purchases of marketable securities                           (7,520)     (5,614)
        Proceeds from technology transfer and license                   750          -
        Loans to related party                                           -       (1,500)
        Additions to equipment and leasehold improvements              (172)       (215)
        Additions to patents                                            (76)       (106)
----------------------------------------------------------------------------------------
                 Net cash provided (used) in
                  investing activities                               (2,162)     (1,787)

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from exercise of stock options                          -          187
        Repurchase of common stock                                      (90)         -
----------------------------------------------------------------------------------------
             Net cash provided (used) by financing
               activities                                               (90)        187

Increase (decrease) in cash and cash equivalents                     (3,614)     (8,980)
Cash and cash equivalents - beginning
        of period                                                    11,009      12,323
----------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                            $7,395      $3,343
========================================================================================
</TABLE>

SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                             CYBEROPTICS CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. INTERIM REPORTING:

The interim consolidated financial statements presented herein as of June 30,
2003, and for the six and three month periods ended June 30, 2003 and 2002, are
unaudited; however, in our opinion, 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 six and three month periods ended June 30,
2003, do not necessarily indicate the results to be expected for the full year.
The December 31, 2002, 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 our
consolidated financial statements and notes thereto, contained in our Annual
Report on Form 10-K for the year ended December 31, 2002.

2. ACCOUNTING FOR STOCK-BASED COMPENSATION:

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
amendment of FASB Statement No. 123". We intend to continue to account for
stock-based compensation to our employees and directors using the intrinsic
value method prescribed by APB Opinion No. 25. We have adopted the disclosure
requirements of SFAS No. 148 in these notes to the consolidated financial
statements.

As permitted by SFAS No. 123, "Accounting for Stock Based Compensation", we
continue to measure compensation cost for our stock incentive and option plans
using the intrinsic value method of accounting. Had we used the fair value
method of accounting for our stock option and incentive plans and charged
compensation costs against income over the vesting period, net income and net
income per share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                          Three Months Ended       Six Months Ended
                                               June 30,                 June 30,
                                           2003      2002           2003      2002
-------------------------------------------------------------------------------------
<S>                                       <C>        <C>          <C>       <C>
Net income (loss) as reported             $(1,258)   $(3,292)     $(2,740)  $(6,494)
  Add: Stock-based compensation
    expense included in net income,
    net of related tax effects                --         --            --        --

  Deduct: Total stock-based compensation
    expense determined under fair value,
    net of related tax effects               (470)      (544)      (1,038)     (985)
-------------------------------------------------------------------------------------
Net income (loss) - Pro forma             $(1,728)   $(3,836)     $(3,778)  $(7,479)
=====================================================================================

Net income (loss) per share:
   As reported - Basic                    $ (0.15)   $ (0.40)     $ (0.34)  $ (0.80)
   Pro forma - Basic                      $ (0.21)   $ (0.47)     $ (0.46)  $ (0.92)

   As reported - Diluted                  $ (0.15)   $ (0.40)     $ (0.34)  $ (0.80)
   Pro forma - Diluted                    $ (0.21)   $ (0.47)     $ (0.46)  $ (0.92)
</TABLE>

In 2003, no tax benefit provision was applied to the fair value expense
calculated under SFAS No. 123 due to establishing valuation allowances on
deferred tax assets during the three month period ended September 30, 2002. In
the three and six month period ended June 31, 2002 the tax benefit provision
applied to fair value expense is consistent with the tax provision in our
Statement of Operations. The assumptions used to calculate the fair value of
options granted are evaluated and revised, as necessary, to reflect market
conditions and our experience.

<PAGE>

3. OTHER FINANCIAL STATEMENT DATA (IN THOUSANDS):

Inventories consisted of the following:

                                          June 30,      December 31,
                                            2003              2002
                                        ---------------------------

           Raw materials                  $4,307            $5,190

           Work in process                   860               896

           Finished goods                  2,247             3,456
                                        ---------------------------
           Allowance for obsolescence     (2,129)           (2,477)
                                        ---------------------------
                   Total inventories      $5,285            $7,065
                                        ===========================

Intangible and other assets include the following:

                                            June 30,   December 31,
                                              2003         2002
                                          -------------------------
           Gross intangibles:
                Developed technology        $  7,275       $  7,275
                Patents and trademarks         1,616          1,540
                Customer Base                    280            280
                Other                             32             50
                                            ------------------------
                                               9,203          9,145
                                            ------------------------
           Accumulated amortization           (4,943)        (4,263)
                                            ------------------------
           Total intangibles
                and other assets, net       $  4,260       $  4,882
                                            ========================

We provide for the estimated cost of product warranties at the time revenue is
recognized. While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of component suppliers,
warranty obligations are affected by product failure rates, material usage and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage or service delivery costs differ from our
estimates, revisions to the estimated warranty liability would be required. At
the end of each reporting period we revise our estimated warranty liability
based on these factors. A reconciliation of the changes in our estimated
warranty liability is as follows:

--------------------------------------------------------------------------------
Six months ended June 30,                                     2003
--------------------------------------------------------------------------------
Balance at the beginning of period                        $    400
   Accruals for Warranties                                    (167)
   Settlements made during the period                          116
--------------------------------------------------------------------------------
Balance at the end of period                              $    349
================================================================================

<PAGE>

4. GEOGRAPHIC REVENUE INFORMATION:

Export sales for the six months ended June 30, 2003 and the six months ended
June 30, 2002 amounted to 75% and 60% of revenues, respectively. For the three
months ended June 30, 2003 and the thee months ended June 30, 2002, export sales
amounted to 75% and 64% of revenues. All or our export sales are negotiated,
invoiced and paid in U.S. dollars. Export sales by geographic area are
summarized as follows:

                                    Three Months Ended       Six Months Ended
                                         June 30,                 June 30,
                                     2003      2002           2003      2002
-------------------------------------------------------------------------------

Americas                           $   117   $   401        $   144   $ 1,014
Europe                               2,208     1,830          4,279     2,697
Asia                                 3,292     1,499          6,010     2,522
Other                                    8        29             17        54
-------------------------------------------------------------------------------
Total export sales                 $ 5,625   $ 3,759        $10,450   $ 6,287
===============================================================================

5. NET INCOME (LOSS) PER SHARE:

Basic net income per share has been computed using the weighted average number
of shares outstanding during the period presented. 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
three and six month periods ended June 30, 2003 and 2002 are the same, as
additional shares in the denominator would be anti-dilutive due to our net loss.
Weighted average shares for which the option price exceeds the average market
price were1,529,000 and 1,551,000 for the three and six month periods ended June
30, 2003, respectively. Weighted average shares for which the option price
exceeds the average market price were 930,000 and 563,000 for the three and six
month periods ended June 30, 2002, respectively.

6. COMPREHENSIVE INCOME (LOSS):

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

During the three and six month periods ended June 30, 2003, total comprehensive
income (loss) amounted to ($1,481,000) and ($2,971,000), respectively. During
the three and six month periods ended June 30, 2002, total comprehensive income
(loss) amounted to (3,650,000) and (7,869,000), respectively. Accumulated other
comprehensive loss at June 30, 2003 and December 31, 2002 was ($323,000) and
($92,000), respectively.

7. INCOME TAXES:

During the third quarter of 2002, we concluded that a valuation allowance
against all of our deferred tax assets was appropriate. A deferred tax asset
generally represents future tax benefits to be received when certain expenses
and losses previously recognized in our U.S. GAAP-based financial statements
become deductible under applicable income tax laws. Consequently, realization of
a deferred tax asset is dependent on future taxable income against which these
deductions can be applied. In accordance with Statement of Financial Accounting
Standards No. 109, as the result of cumulative U.S. based operating losses
incurred over the past three years and continued weakness in the markets we
serve and the resulting impact on order rates, we reduced our effective tax
benefit rate in the year ended December 31, 2002 to reflect only a current
benefit resulting from the ability to carry-back U.S. based operating losses to
prior periods and recorded a valuation allowance against deferred tax assets.

During the three and six month periods ended June 30, 2003, we did not record a
tax benefit on U.S. based operating losses, and do not expect to record tax
expense or benefits on U.S. based operating results until we are consistently
profitable on a quarterly basis. At that time, the valuation allowance will be
reassessed and could be eliminated, resulting in the recognition of the deferred
tax assets. Tax expense of $129,000 and $189,000 recorded during the three and
six month periods ended June 30, 2003 relates to income generated by foreign
subsidiaries. During the three and six month periods ended June 30, 2002, we
recorded a tax benefit of $1,880,000 and $3,980,000, reflecting the estimated
annual effective tax rate at that time.

<PAGE>

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

We enter into foreign currency swap agreements to hedge short term inter-company
financing transactions with our 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 June 30, 2003, CyberOptics had one open swap
agreement that was purchased on that date. As a result, there were no material
unrealized gains or losses as of June 30, 2003. During the six month period
ended June 30, 2003, we recognized a loss of approximately $187,000 from the
settlement of foreign currency swap agreements which offset the $102,000
translation gain on the underlying inter-company balance.

Our foreign currency swap agreements contain credit risk to the extent that our
bank counter-parties may be unable to meet the terms of the agreements. We
minimize such risk by limiting our counter-parties to major financial
institutions. We do not expect material losses as a result of defaults by other
parties.

9. RESTRUCTURING AND SEVERANCE:

In January 2003, we incurred approximately $170,000 of severance costs and
facility costs associated with further consolidation of our semiconductor
product group from Redwood City, California to Portland, Oregon. Severance costs
were associated with a workforce reduction of 5 people. Substantially all of
these costs were paid as of June 30, 2003.

In January 2002, we incurred approximately $847,000 of severance and costs
associated with cost reduction measures. Cost reduction measures included a
workforce reduction, discretionary spending reductions and the consolidation of
semiconductor product manufacturing in Portland, Oregon. Severance costs were
associated with a workforce reduction of 22 people. Substantially all of these
costs were paid as of June 30, 2003.

In June 2002, we incurred approximately $800,000 of severance and related costs
associated with cost reduction measures. Cost reduction measures included a
workforce reduction, and discretionary spending reductions. Severance costs were
associated with a workforce reduction of 48 people. Substantially all of these
costs were paid as of June 30, 2003.

10. TECHNOLOGY TRANSFER AND LICENSE AGREEMENT:

In March 2003, we transferred to the Optical Gaging Products Division of Quality
Vision International, Inc. (QVI) the rights and technology necessary to
manufacture our Digital Range Sensors (DRS). In addition, we granted QVI a
non-exclusive license to the intellectual property associated with this product
line and sold a portion of our inventory as part of this transaction. QVI had
been the primary customer for DRS sensors prior to this agreement as part of a
separate 1999 agreement. As part of the agreement, QVI paid a one-time
technology transfer fee and a pre-paid non-refundable royalty fee covering a
specified number of sensors built by OGP for a period of five years from the
effective date of the contract. As a result of this transaction, we recorded a
$645,000 gain in the three month period ended March 31, 2003.

11. RECENT ACCOUNTING DEVELOPMENTS:

In November 2002, the EITF reached a consensus on Issue No. 00-21, Revenue
Arrangements with Multiple Deliveries (EITF 00-21). EITF 00-21 provides guidance
on how to account for arrangements that involve the delivery of performance of
multiple products, services and/or rights to use assets. The provisions of EITF
00-21 will apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. Management believes the adoption of EITF 00-21
will not have a material impact on either our financial position or results of
operations.

<PAGE>

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

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS:

The following is management's discussion and analysis of certain significant
factors that have affected our results and financial position during the periods
included in the accompanying financial statements or that could have an impact
on future results. This discussion should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 2002 and our 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 our
expectations or beliefs relating to future events, including statements
regarding trends in the industries in which we function, 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. Our actual results may vary from these
expectations because of a number of factors that affect our business, the most
important of which include the following:

         o        We operate in a very cyclical market--the electronics capital
                  equipment market--that is currently in one of the most severe
                  downturns in its history. We have been unable to predict when
                  this downturn will end and if it continues, we likely will not
                  achieve our operating objectives and may need to make further
                  adjustments to our expenses and operations to retain adequate
                  cash to finance operations for the long term.
         o        Our operations and markets could be further negatively
                  affected by world events, including the impact of SARS on the
                  Asian electronic market, that effect economies and commerce in
                  countries, such as China and Japan, in which we do business.
         o        We have been dependent on two original equipment manufacturer
                  customers for a large portion of our revenue that have
                  significantly decreased their order rates during the past 18
                  months. If those customers are unsuccessful selling the
                  products into which our sensors are incorporated, design their
                  products to function without our sensors, purchase sensors
                  from other suppliers, or otherwise terminate their
                  relationships with us, our results of operations would be
                  significantly negatively affected.
         o        During the first six months of 2003 approximately 21% (27% in
                  fiscal 2002) of our total revenue was generated by sales of a
                  single SMT Systems product line, the SE 300. If we are not
                  successful in continuing to sell and differentiate this
                  product line relative to our competition, our results of
                  operations would be significantly negatively affected.
         o        We generate more than half of our revenue (approximately 75%
                  in the first six months of 2003 and 67% in fiscal 2002) from
                  export sales. Our export sales are subject to many of the
                  risks of international operations, including changes in
                  economic and business climate in foreign countries that affect
                  the business health of our customers, changes in exchange
                  rates that affect the willingness of customers to purchase our
                  products, different laws that may affect our ability to
                  protect our intellectual property, and the expense of
                  long-distance commerce.
         o        Our current products, as well as the products we have under
                  development, are designed to operate with the technology we
                  believe currently exists or may exist for electronic
                  components and printed circuit boards. The technology for
                  these components changes rapidly and if we incorrectly
                  anticipate technology developments, or have inadequate
                  resources to develop our products to deal with changes in
                  technology, our products could become obsolete.
         o        Our electronic assembly sensor products compete with products
                  made by larger machine vision companies, other optical sensor
                  companies, and by solutions internally developed by our
                  customers.
         o        The electronics capital equipment market is currently
                  depressed and becoming more mature, resulting in increased
                  price pressure on suppliers of equipment. Consequently, our
                  electronic assembly system and sensor products may become
                  subject to increased levels of price competition and
                  competition from other technologies.
         o        Our surface mount technology systems product group uses a
                  different distribution network and has different margins than
                  our electronic assembly sensor product group and, to the
                  extent it constitutes a larger portion of our business, our
                  profitability may be affected.
         o        We compete with large multinational systems companies in sales
                  of our surface mount technology systems products, many of
                  which are able to take advantage of greater financial
                  resources and larger sales distribution networks.
         o        We compete in large part based on the technology we have
                  developed and our success in competing will depend in part on
                  the degree to which we are successful in protecting that
                  technology and enforcing our technology rights in the United
                  States and other countries.
         o        We use outside contractors to manufacture the components used
                  in some of our products and some of the components we order
                  require significant lead times that could effect our ability
                  to sell our products if not available.
         o        We plan to introduce a number of new products during fiscal
                  2003 and if those introductions are delayed, our revenue and
                  profitability could be negatively affected.

<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The preparation of the financial information contained in this 10-Q requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We evaluate these estimates on an ongoing basis, including
those related to allowances for doubtful accounts, for warranty expense, and for
obsolete inventory, the carrying value and any impairment of intangible assets,
and the valuation allowance for deferred tax assets. These critical accounting
policies are discussed in more detail in the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in our Form
10-K for the year ended December 31, 2002.

RESULTS OF OPERATIONS:

REVENUES

The following table sets forth revenues by product line for the periods
indicated (in thousands):

                                   Six months ended       Three months ended
                                       June 30,                June 30,
                                   2003       2002         2003        2002
                                  -------    -------      ------      ------
OEM Solutions:
    Electronic Assembly Sensors
       (EAS) Products             $ 6,138    $ 2,729       $3,588     $1,515
    Semiconductor Products          2,844      3,216        1,450      1,768
End-User Systems Products           4,951      4,499        2,470      2,629
                                  -------    -------      -------    -------
    Total                         $13,933    $10,444       $7,508     $5,912

Our revenues from EAS products increased 125% during the six months ended June
30, 2003 from the six months ended June 30, 2002 and increased 137% during the
three months ended June 30, 2003 from the three months ended June 30, 2002.
These increased revenues reflect increased order rates from our two largest EAS
customers. Although these order rates have not returned to rates in place prior
to the time these customers suspended or significantly decreased their purchases
in the second half of 2001, we believe they reflect some improvement in the
market for pick and place machines. Our two largest EAS customers accounted for
approximately 37% of total revenues for the six months ended June 30, 2003, and
approximately 17% of revenues for the comparable period in 2002. These customers
accounted for approximately 40% of revenues in the second quarter of 2003,
compared to approximately 17% in the second quarter of 2002.

Our revenues from sales of semiconductor product decreased 12% during the six
months ended June 30, 2003 from the six months ended June 30, 2002 and decreased
18% during the three months ended June 30, 2003 from the three months ended June
30, 2002. Decreasing revenue in 2003 from 2002 is primarily due to the
continuation of weak demand in the overall semiconductor capital equipment
market, which began in early 2001.

Our revenues from sale of end-user systems increased 10% during the six months
ended June 30, 2003 from the six months ended June 30, 2002, but decreased 6%
during the three months ended June 30, 2003 from the three months ended June 30,
2002. The revenue improvements during 2003 are the result of several new
inspection systems and enhancements that we have released over the past 24 to 36
months and increased sales of products to Electronic Manufacturing Services
(EMS) and Original Design Manufacturing Services (ODM) customers located in Asia
- the largest market for new circuit board assembly production capacity. The
SARS outbreak did impact our ability to visit current and potential customers
during the three months ended June 30, 2003. However, now that the outbreak
appears to be contained, our order rates are increasing and we would anticipate
increased revenues from sales of end-user systems in the third quarter of 2003
from the levels recorded in the second quarter. If there is a long-term
impediment on travel to the Hong Kong and Shanghai areas, our ability to better
establish a permanent sales office and to interact with the customers there may
be impaired.

<PAGE>

International revenues comprised approximately 75% and 60% of total revenues
during the six month periods ended June 30, 2003 and 2002, respectively, and
approximately 75% and 64% of revenues during the three month periods ended June
30, 2003 and 2002, respectively. The international markets in Asia, Japan and
Europe account for a significant portion of the capital equipment market for the
manufacture of electronics, the primary market for our EAS sensors and End-User
systems product lines. Revenues generated from products used primarily for SMT
electronic assembly production (revenues from OEM sensors and End-User systems)
were approximately 80% and 69% of revenues for the six month periods ended June
30, 2003 and 2002, respectively, reflecting the level of orders from our two
largest EAS customers and growth in SMT Systems revenues.

GROSS MARGIN

Gross margin for the six months ended June 30, 2003 increased as a percent of
revenues to 48%, compared to 36% during the six months ended June 30, 2002. For
the three months ended June 30, 2003, gross margin increased to 51% of revenues
compared to 36% during the three months ended June 30, 2002. Gross margin is
highly dependent on the level of revenues and resulting production levels over
which to spread fixed manufacturing costs such as facilities and other
compensation and non-compensation expenses that do not vary with activity
levels. In addition, with higher production volumes, manufacturing processes
become more efficient and reduce the overall cost of producing products for
sale. Revenue levels were 33% higher in the six month period ended June 30, 2003
than during the same period in 2002, and 27% higher in the three month period
ended June 30, 2003 than during the same period in 2002, and consequently, gross
margins were favorably impacted. In addition, increased revenues from EAS
sensors as a percentage of total revenues, reduced obsolete inventory expense in
the six and three month periods ended June 30, 2003 compared to the year earlier
period and cost reduction actions, including workforce reductions, contributed
to higher gross margins.

Price pressure on both SMT systems and EAS sensor products has had a negative
impact on gross margins in 2003 compared to 2002. This price pressure is the
result of weak market conditions in the SMT electronic assembly capital
equipment market resulting in many equipment suppliers competing for fewer sales
opportunities. There can be no assurance that selling prices will fully recover
when the electronic assembly market improves.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased 21% to $3.6 million during the six
months ended June 30, 2003 from the six months ended June 30, 2002 and decreased
18% to $1.9 million in the three months ended June 30, 2003 from the three
months ended June 30, 2002. As a percentage of revenue, research and development
expenses decreased to 26% during the six months ended June 30, 2003 from 44%
during the comparable period in 2002 and decreased to 25% in the second quarter
of 2003 compared to 38% in the same period in 2002. Research and development
expenses were maintained at relatively high levels during the first half of 2002
as we continued to fund new product development on important new products even
as revenues levels declined. During the three month period ended September 30,
2002, cost reduction measures initiated in the second quarter of 2002 enabled us
to significantly reduce research and development expenses to approximately
current levels.

Research and development expenses during the six months ended June 30, 2003 were
primarily focused on continued engineering development of the new high speed
solder paste inspection system, the SE 300, and KS series AOI systems, next
generation LaserAlign products, on-head linescan cameras, enhancements to the
semiconductor wafer mapping sensor product family and other new sensors for the
SMT and Semiconductor markets. Customer funded research and development is
recognized as a reduction of research and development expense. During the six
months ended June 30, 2003, customer funded research and development recognized
as a reduction of research and development expense totaled approximately $14,000
compared to approximately $75,000 during the six months ended June 30, 2002.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased 22% to $5.7 million
during the six month period ended June 30, 2003 compared to $7.3 million during
the six months ended June 30, 2002, and decreased 19% to $2.9 million during the
three months ended June 30, 2003 from the three months ended June 30, 2002. As a
percentage of revenue, selling, general and administrative expenses decreased to
41% during the six month period ended June 30, 2003 from 70% in 2002, and for
the second quarter decreased to 38% in 2003 from 61% in 2002. Decreased selling,
general and administrative expenses in 2003 are primarily the result of cost
reduction measures implemented in early 2002, which primarily included workforce
reductions and related costs and reductions in other discretionary spending.

<PAGE>

RESTRUCTURING AND SEVERANCE COSTS

We have implemented a series of workforce reductions, closed our facility in
California, downsized other facilities and made other reductions in
discretionary spending designed to reduce the losses and negative cash flow
resulting from the severe decline in our revenues caused by the depressed
capital equipment markets for suppliers to electronics manufacturing. Two of
those workforce reductions were completed during the year ended December 31,
2001 and three in 2002 and 2003 (discussed below):

In January 2003, we incurred approximately $170,000 of severance costs and
facility closure costs associated with further consolidation of our
semiconductor product group from Redwood City, California to Portland, Oregon.
Severance costs were associated with a workforce reduction of 5 people.
Substantially all of these costs were paid as of June 30, 2003.

In January 2002, we incurred approximately $847,000 of severance and costs
associated with cost reduction measures. Cost reduction measures included a
workforce reduction, discretionary spending reductions and the consolidation of
semiconductor product manufacturing in Portland, Oregon. Severance costs were
associated with a workforce reduction of 22 people. Substantially all of these
costs were paid as of June 30, 2003.

In June 2002, we incurred approximately $800,000 of severance and related costs
associated with cost reduction measures. Cost reduction measures included a
workforce reduction, and discretionary spending reductions. Severance costs were
associated with a workforce reduction of 48 people. Substantially all of these
costs were paid as of June 30, 2003.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of acquired intangible assets was approximately $560,000 for both
the six month period ended June 30, 2003 and the six month period ended June 30,
2002, and approximately $281,000 for both the three month period ended June 30,
2003 and the three month period ended June 30, 2002. The amortization expense
was attributable to developed technology, patents and trademarks and other
assets acquired from HAMA Laboratories Inc. during the second quarter of 1999
and from Imagenation Corporation during the fourth quarter of 2000. Amortization
of these intangible assets is expected to approximate $280,000 per quarter over
the remaining life of the intangible assets.

INTEREST AND OTHER

"Interest income and other" primarily includes interest earned on investments.
Interest income declined during the six and three month periods ended June 30,
2003 compared to the same six and three month periods in 2002 as a result of a
lower investment balance and declining interest rates. In addition, during the
three month period ended June 30, 2002, we reduced the carrying value of a $1.5
million loan to Avanti Optics Corporation, a related party, by our ownership
percentage in the cumulative losses of Avanti, which resulted in a charge of
$645,000. Foreign currency translation charges and certain other expenses are
also included in interest income and other.

<PAGE>

PROVISION FOR INCOME TAXES AND EFFECTIVE INCOME TAX RATE

During the third quarter of 2002, we concluded that a valuation allowance
against all of our deferred tax assets was appropriate. A deferred tax asset
generally represents future tax benefits to be received when expenses and losses
previously recognized with respect to our US operations become deductible under
applicable income tax laws. Realization of a deferred tax asset is dependent on
future taxable income against which these deductions can be applied. In
accordance with Statement of Financial Accounting Standards No. 109, as the
result of cumulative U.S. based operating losses incurred over the past three
years and continued weakness in the markets we serve and the resulting impact on
order rates, we reduced our effective tax benefit rate in the year ended
December 31, 2002 to reflect only a current benefit resulting from the ability
to carry-back U.S. based operating losses to prior periods and recorded during
the third quarter of 2002 a valuation allowance equal to the entire balance of
our deferred tax assets. Because we had no ability to carry-back losses
generated after December 31, 2002, during the six months ended June 30, 2003, we
did not record a tax benefit on U.S. based operating losses, and do not expect
to record tax expense or benefits on U.S. based operating results until we are
consistently profitable on a quarterly basis. At that time, the valuation
allowance will be reassessed and could be eliminated, resulting in the
recognition of the deferred tax assets as income during the period the allowance
is eliminated.

We recorded tax expense (provision) of $189,000 during the six month period
ended June 30, 2003 compared to a tax benefit of $4.0 million for the same
period in 2002, and recorded tax expense of $129,000 during the second quarter
of 2003 compared to a tax benefit of $1.9 million during the same period of
2002. Tax expense recorded during the six and three month periods ended June 30,
2003 relates to income generated by foreign subsidiaries. Tax benefits recorded
during the six and three month periods ended June 30, 2002 reflect the estimated
annual effective tax rate at that time including the effect of benefits from our
foreign sales corporation and research and development tax credits.

ORDER RATE AND BACKLOG

Our orders totaled $16.3 million during the six month period ended June 30, 2003
compared to $12.2 million during the six month period ended June 30, 2002. For
the three month period ended June 30, 2003, orders totaled $10.0 million
compared to $8.0 million for the three month period ended June 30, 2002. Backlog
totaled $5.1 million and $4.8 million at June 30, 2003 and 2002, respectively.
The scheduled shipment of the June 30, 2003 backlog is as follows (in
thousands):

                3rd Quarter 2003                   $ 4,815
                4th Quarter 2003 and after             325
                                                   -------

                    Total backlog                  $ 5,140


LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents declined by $3.6 million during the six months
ended June 30, 2003, primarily because of the purchase of $2.7 million of
marketable securities, net of maturities of marketable securities during the six
month period and $1.4 million of cash used by operating activities. Our cash and
cash equivalents fluctuate in part because of maturities of marketable
securities and investment of cash balances resulting from those maturities, or
from other sources of cash, in additional marketable securities. Accordingly, we
believe the combined balances of cash and marketable securities provide a more
reliable indication of our available liquidity. Our combined balances of cash
and marketable securities decreased $1.1 million to $19.9 million as of June 30,
2003 from $20.8 million as of December 31, 2002.

We used $1.4 million of cash in operations during the first six months of 2003.
We used cash in operations to fund a net loss of $2.7 million, which included a
$645,000 gain from a technology transfer and license agreement and $1.7 million
of non-cash expenses for depreciation and amortization and other non-cash items,
and to fund a $1.1 million increase in receivables and a $190,000 reduction in
accrued expenses. These uses of cash were offset somewhat by a $1.5 million
reduction in inventory and a $138,000 reduction in other current assets. Both
reduced inventory and increased accounts receivable are primarily the result of
increased revenue levels, as well as focused programs to bring down inventory
balances. During the first six months of 2002, we used $7.4 million of cash from
operations, primarily due to a net loss of $6.5 million, which included $2.8
million of non-cash expenses and non-cash income of $1.6 million from the
recording of deferred tax assets. The first six months of 2002 also included a
$2.0 net use of cash from changes in operating assets.

<PAGE>

We used $2.1 million of cash in investing activities during the six months ended
June 30, 2003 compared to using $1.8 million during the same period in 2002.
Changes in the level of investment in marketable securities resulting from the
purchases and maturities of those securities used $2.7 million of cash in 2003
and generated $34,000 of cash in 2002. We generated $750,000 of cash from a
technology transfer and license agreement and used approximately $248,000 of
cash for the purchase of fixed assets and the acquisition of technology and
other intangible assets during the six months ended June 30, 2003. In addition
to applying $318,000 of cash for the purchase of fixed assets and technology and
other intangible assets during the first six months of 2002 we used $1.5 million
of cash for a loan to a related party.

We used $90,000 of cash for financing activities during the six months ended
June 30, 2003 and generated $187,000 of cash from financing activities during
the same period in 2002. Cash used in 2003 was for the repurchase of common
stock, and cash generated in 2002 was from stock option exercises.

In October 2002, our Board of Directors authorized the repurchase of up to
1,000,000 shares of our common stock. At June 30, 2003, we had repurchased
49,370 shares under this authorization and based on current market prices, do
not anticipate substantial additional repurchases.

Except for the share repurchase program discussed above, we had no material
commitments for capital expenditures as of June 30, 2003. While there were no
material commitments, we routinely evaluate investment opportunities that come
to our attention and could make a significant commitment in the future. Our cash
and cash equivalents and investments totaled $19.9 million at June 30, 2003.
With this level of cash and cash equivalents and investments, and the reduced
level of cash expenditures resulting from cost reduction actions over the past
two years, management believes that our cash and cash equivalents and
investments will be adequate to fund cash flow needs for at least 24 months,
even if the severity of the downturn in the electronics capital equipment
industries continues unabated. If the economic conditions appear to be
continuing or worsening over the next year, we may seek bank financing or make
other adjustments in expense levels.

At June 30, 2003, we did not have any relationships with unconsolidated entities
or financial partnerships, such as entities often referred to as structured
finance of special purpose entities. As such, we are not materially exposed to
any financing, liquidity, market or credit risk that could arise if we had
engaged in off-balance sheet or other limited purpose financing arrangements.

OTHER FACTORS

Changes in revenues have resulted primarily from changes in the level of unit
shipments and new product introductions. We believe that inflation has not had
any significant effect on operations. Most of our international export sales are
negotiated, invoiced and paid in U.S. dollars. Accordingly, although currency
fluctuations do not significantly affect our revenue and income per unit, they
can influence the price competitiveness of our products and the willingness of
existing and potential customers to purchase units.

As a result of the Kestra Ltd. acquisition we have a sales and software
development office located in the UK. We also have a sales office in Singapore.
We do not believe that currency fluctuations will have a material impact on our
consolidated financial statements.

<PAGE>

ITEM 4 - CONTROLS AND PROCEDURES

a. Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) under the Exchange Act) as of the end of the period covered by this
quarterly report on form 10-Q. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose
in the reports that we file or submit under the Exchange Act are recorded,
processed, summarized, and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

b. Changes in internal controls.

There were no changes made in our internal controls over financial reporting
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

The annual meeting of shareholders of CyberOptics Corporation was held at 3:00
p.m. on Friday, May 16, 2003. Shareholders holding 7,639,629 shares, or
approximately 93% of the outstanding shares, were represented at the meeting by
proxy or in person. Matters submitted at the meeting for vote by the
shareholders were as follows:

a. Election of Directors

The following nominees were elected to serve as members of the Board of
Directors until the annual meeting of shareholders in 2004 or until such time as
a successor may be elected:

                                           TABULATION OF VOTES
                                       ----------------------------
                                          FOR             WITHHELD
                                       ---------          ---------

            Steven K. Case             6,616,633          1,022,996

            Steven M. Quist            6,595,473          1,044,156

            Alex. B. Cimochowski       6,544,442          1,095,187

            Kathleen P. Iverson        6,570,488          1,069,141

            Erwin A. Kelen             7,463,823            175,806

            Irene M. Qualters          6,537,641          1,101,988

            Michael M. Selzer, Jr.     6,529,540          1,110,089


b. Approval of amendment to the 1992 Employee Stock Purchase Plan

Shareholders approved an amendment to the 1992 Employee Stock Purchase Plan to
increase the number of shares of common stock reserved for issuance by 100,000
and to extend the term of the plan by 10 years by a vote of 7,300,427 shares in
favor, 315,761 shares against, and 23,441 shares abstained. There were no broker
non-votes.

<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON 8-K

a. Exhibits

31.1 Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR
240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR
240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished but not filed)

b. Reports on Form 8-K

The following report on Form 8-K was filed during the quarter ended June 30,
2003, or during the period from June 30, 2003 to the date of this quarterly
report on Form 10-Q

         -Form 8-K - CyberOptics Corporation published press release reporting
         second quarter and 6 months 2003 operating results (7/30/03)

<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/ KATHLEEN P. IVERSON
                                                   ----------------------
               KATHLEEN P. IVERSON, 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: August 12, 2003