10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange

Act of 1934 for the Year Ended December 31, 2015.

o TRANSITION PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange

Act of 1934 for the transition period from ______ to ______.

COMMISSION FILE NO. (0-16577)

CYBEROPTICS CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-1472057
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5900 Golden Hills Drive MINNEAPOLIS, MINNESOTA	55416
(Address of principal executive offices)	(Zip Code)
(763) 542-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class: Common Stock, no par value

Name of Exchange: NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES ¨ NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES o NO þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer” or “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $67,047,043.

As of February 29, 2016, there were 6,778,265 shares of the registrant’s Common Stock, no par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

The responses to Part III items 10, 11, 12, 13 and 14 herein are incorporated by reference to certain information in the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held May 20, 2016.

1

CYBEROPTICS CORPORATION

FORM 10-K

For the Fiscal Year Ended December 31, 2015

TABLE OF CONTENTS

PART I
ITEM 1.	DESCRIPTION OF BUSINESS	3
ITEM 1A.	RISK FACTORS	15
ITEM 1B.	UNRESOLVED STAFF COMMENTS	20
ITEM 2.	PROPERTIES	20
ITEM 3.	LEGAL PROCEEDINGS	20
ITEM 4.	MINE SAFETY DISCLOSURES	20
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21
ITEM 6.	SELECTED FINANCIAL DATA (Not Applicable)	21
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	31
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	60
ITEM 9A.	CONTROLS AND PROCEDURES	60
ITEM 9B.	OTHER INFORMATION	60
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE MATTERS	61
ITEM 11.	EXECUTIVE COMPENSATION	61
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	61
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	61
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	61
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	62
	SIGNATURES	64

2

PART I.

ITEM 1. DESCRIPTION OF BUSINESS

Background

CyberOptics Corporation was founded in 1984 and is a leading global developer and manufacturer of high precision sensing technology solutions. Our headquarters are located at 5900 Golden Hills Drive in Golden Valley, Minnesota. Our website address is www.cyberoptics.com. You can access, free of charge, our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and any other amendments to those reports, at our website, or at the Commission’s website at www.sec.gov. Proxy materials for our upcoming 2016 annual shareholders meeting to be held on May 20, 2016 will be available electronically via the internet at the following address: http://www.idelivercommunications.com/proxy/cybe/.

On March 14, 2014, we acquired substantially all of the assets of Laser Design, Inc. (LDI), a general purpose metrology company headquartered in Minneapolis, Minnesota for aggregate consideration of $3.1 million cash, plus the assumption of certain current liabilities. LDI provides three-dimensional (3D) scanning solutions and services to the global general purpose metrology market. Global demand for 3D scanning is growing as this technology is deployed increasingly in markets ranging from automotive and aerospace to medical and consumer electronics.

We are working to establish CyberOptics as a global leader in high precision 3D sensors. Our objective is to deliver profitable growth by leveraging our 3D technologies in our key vertical markets of surface mount technology (SMT), semiconductor and 3D scanning solutions and services.

Our products and services are used in the SMT, semiconductor and 3D scanning solutions and services markets to significantly improve our customers' manufacturing yields and productivity, and to assist our customers in meeting their rigorous demands for manufacturing quality. Our products use a variety of proprietary technologies such as lasers, optics and machine vision, combined with software, electronics and mechanical design. Our SMT and semiconductor products enable manufacturers to increase production volume, product yields and quality by measuring the characteristics and placement of electronic components and semiconductor packages both during and after the assembly process, or by providing SMT electronic circuit board and semiconductor manufacturers with key metrics related to their manufacturing processes that allow them to improve production volumes and yields. Our 3D scanning solutions and services help manufacturers quickly solve their most complex 3D inspection, analysis and product engineering challenges, allowing them to improve product yields and quality.

The majority of our products (60% of revenue in 2015) are developed and sold for use in SMT electronic circuit board assembly or with equipment used in SMT electronic circuit board assembly. We sell products in these markets both as sensor components that are incorporated into products manufactured by other companies for sale to circuit board assembly companies, and as complete stand-alone inspection systems that are sold directly to circuit board assembly companies.

We manufacture 3D and 2D optical sensors for use in our own proprietary SMT inspection systems and for sale to original equipment manufacturers (OEMs) in our key vertical markets and adjacent markets. Our SMT electronic assembly alignment sensor products are sold to manufacturers of pick-and-place machines to align electronic surface mount components during placement on the circuit board and to a solder paste screen printer company to align stencils with circuit boards. We also sell sensors to OEMs for solder paste inspection (SPI) systems, and more recently, high precision 3D sensors to KLA-Tencor for use in systems that inspect back-end semiconductor packaging.

Our SMT inspection system products are sold to electronic manufacturing services (EMS) companies and other manufacturers of SMT electronic circuit boards to control quality as in-line systems. These products are used by manufacturers to measure screen printed solder paste, to inspect circuit boards and components after component placement, to confirm proper placement after full assembly of circuit boards and to inspect solder joints on printed circuit boards. Manufacturers of DRAM and Flash Memory also use our inspection system products to inspect assembly of their memory modules both before and after module singulation.

Our semiconductor products assist with yield improvement and tool uptime in the semiconductor wafer fabrication process by providing highly accurate measurements of critical process factors. These measurements are impossible or very difficult to obtain without powering down the wafer fabrication equipment. Customers who use our products have better yields, through-put and tool up-time. Our products are more accurate when compared to the various manual techniques historically used by semiconductor manufacturers to obtain critical wafer fabrication process measurements.

3

Our 3D scanning solutions capture surface data for product engineering and inspection. Our 3D scanning services scan, model and inspect objects of all sizes and complexity for customers who do not have their own general purpose metrology equipment.

Recent Developments in the Business

Our recent and planned product introductions are designed to strengthen our competitive position in our current markets and to expand into adjacent markets. We believe 3D inspection represents high-growth segments in both the electronic assembly and semiconductor markets. For this reason we are working to strategically reposition ourselves as a leading developer and manufacturer of high-precision 3D sensors. A key element in our strategic re-positioning is the development of new high precision 3D sensors based on our proprietary Multi-Reflection Suppression (MRS) technology. MRS technology inhibits reflections that can result in measurement inaccuracies, which is particularly critical for inspecting shiny objects. We believe that MRS is a break-through technology for optical inspection, with the potential to facilitate expansion of our markets in the future.

For our existing markets in SMT, semiconductor inspection and 3D scanning solutions, we are introducing new products based on MRS technology that we believe present a significant opportunity for growth. Our 3D MRS technology has also been deployed in our new 3D automated optical inspection (AOI) system, the SQ3000, which is designed to expand our presence in markets requiring high precision inspection. In these markets, identifying defects has become highly challenging and critical due to smaller electronics packaging and increasing component density on circuit boards. We believe the combination of our MRS technology and sophisticated 3D fusing algorithms allows us to offer microscopic image quality at production speeds. We recognized our initial revenues from sales of the SQ3000 in the second quarter of 2015, and since the start of the fourth quarter of 2015 have received follow-on orders totaling approximately $4.7 million for the SQ3000 from a key customer. Our recent success and the competitive advantages offered by our MRS technology causes us to be very optimistic about the future sales potential of the SQ3000.

LDI represents another aspect of our 3D strategy. We are incorporating our MRS technology into a new 3D scanning system, CyberGage360, that we believe will serve a wide range of inspection applications in the general purpose 3D metrology market. Beta testing for CyberGage360 commenced in the first quarter of 2016. We believe customer interest in this product is high, and we presently anticipate initial CyberGage360 sales in 2016. We believe the unique performance characteristics of MRS, which inhibit reflections and enable very accurate measurements at fast speeds, will give CyberGage360 a competitive advantage in the marketplace for 3D scanning systems.

In February 2015 we entered into a mutually exclusive agreement to supply KLA-Tencor with high-precision 3D sensor subsystems for its back-end semiconductor packaging inspection systems. We also have entered into an agreement to supply Nordson Corporation (Nordson) with high-precision 3D sensor subsystems for the SMT market and have sold initial units for testing and demonstration purposes. The sensor subsystems are based on our new MRS technology.

In addition to deploying MRS equipped 3D sensors in our key vertical markets of SMT, semiconductor and 3D scanning solutions and services, we intend to expand sales of this technology into adjacent markets that require high precision optical 3D inspection, including pursuing new OEM opportunities with our MRS technology.

We also have committed funds to development of new products for inspecting memory modules. To date, we have received orders worth approximately $3.9 million from one of the world’s top four memory manufacturers for our newly-developed MX600 system that will inspect memory modules at the end of the production line after singulation. We recognized our first revenue from the sale of the MX600 system in the third quarter of 2015, and we had a backlog of MX600 orders at December 31, 2015 totaling approximately $3.4 million.

We also have continued to invest in our WaferSense/ReticleSense product lines and have recently announced new offerings for advanced particle measurement and a line of multi-purpose sensors that measure leveling, vibration and humidity in an all-in-one wireless real-time device.

Our ability to achieve our forecast and to implement our strategy effectively is subject to numerous uncertainties and risks, including the risks identified in Item 1A of this Annual Report on Form 10-K. We cannot assure you that our efforts will be successful.

4

OPERATIONS AND PRODUCTS

We develop, manufacture and sell intelligent, non-contact sensors and systems for process control and inspection and, through LDI, for metrology applications and services. Our product offerings are sold to OEMs and end-user customers in the SMT circuit board assembly and semiconductor industries. Our OEMs incorporate our sensor offerings into capital equipment serving these industries. We also sell sensors and stand-alone inspection systems directly to end-users. We create value-added products by integrating LDI's proprietary software with sensors and other hardware purchased from third parties, and sell these products and complete metrology systems manufactured by third parties for use to create detailed, 3D digital maps of objects. These 3D digital images are used in manufacturing, 3D printing, and similar applications. Through LDI, we also provide services for 3D mapping for those customers who cannot justify the capital cost of a scanning project, or need services for special projects.

Our principal products are used by manufacturers to increase operating efficiencies and yields, and to assist them in meeting rigorous demands for product quality. In addition to proprietary hardware designs that combine precision optics, various light sources and multiple detectors, our products incorporate software that controls the hardware and filters and converts raw data into application specific information. Our 3D scanning solutions and services help manufacturers quickly solve their most complex 3D inspection, analysis and product engineering challenges, allowing them to improve product yields and quality.

Optical Sensors

We manufacture high precision sensors for use in our own products in key vertical markets and for sale into adjacent markets, mainly through OEM relationships. Although most of our revenue from sensor sales has historically come from our alignment sensors, we began selling the sensor used in our SPI systems under an OEM agreement in 2011. We have integrated the new MRS 3D sensor technology into our own stand-alone products for 3D AOI and 3D scanning. We also sell 3D MRS sensor subsystems to OEMs for integration into their own proprietary stand-alone products.

In February 2015 we entered into a mutually exclusive agreement to supply KLA-Tencor with high-precision 3D sensor subsystems for its back-end semiconductor packaging inspection systems. We also have entered into an agreement to supply Nordson with high-precision 3D sensor subsystems for the SMT market and have sold initial units for testing and demonstration purposes. The sensor subsystems are based on our new MRS technology. We intend to negotiate agreements for sale of these sensors to OEMs and end-users in other markets. We also have developed a strobe inspection module (SIM) that features extremely fast image acquisition and low false call rates in 2D applications. We use the SIM in our 2D AOI products and intend to sell it as a sensor kit.

We believe that a strategy of developing and selling complete inspection systems and of refining the sensors and sensor subsystems that are part of these complete systems and selling them to OEM customers allows us to have direct end-user customer input as to the features of inspection systems that are most desired and purchased in our markets. At the same time, sales to OEMs allow us to capitalize on our strengths in optical physics and software implementations, such as noise suppression. We believe that the resulting sensor products and subsystems are unique and add significant value to the products of our OEM customers.

SMT Electronic Assembly Alignment Sensors

Our SMT electronic assembly alignment sensor products, which had generated the largest component of our sales until 2011, is a family of alignment sensors that are customized and incorporated into the equipment manufactured by our customers for use in SMT circuit board assembly. We work closely with our OEM customers to integrate sensors into their equipment.

Sales of our SMT electronic assembly alignment sensor products, including service repairs, to Juki Corporation accounted for approximately 10% of our revenue in 2015 and 17% of our revenue in 2014. Sales of these products, including service repairs, to Assembleon B.V. (acquired by Kulicke and Soffa Industries in January 2015) accounted for approximately 11% of our revenue in 2015 and 8% of our revenue in 2014. Historically, our revenues and operations have been heavily influenced by the level of purchases from these two customers, reflecting their success in the market for pick-and-place machines, the cyclical nature of the SMT production industry and their ability to accurately forecast production requirements and need for our sensors. We anticipate that our future revenue and operations will be less dependent on these two customers, given the recent success we have had with sales of new MRS-enabled products, including the SQ3000 and 3D sensor subsystems, and the anticipated future sales of our new CyberGage360, 3D scanning system.

LaserAlign®. Our LaserAlign sensor family has accounted for the vast majority of our sales in the SMT electronic assembly alignment sensors product line. These sensors are primarily sold for incorporation into pick-and-place machines manufactured and sold by a number of different OEM customers for use in SMT production lines.

5

The LaserAlign family of products aligns both large and extremely small surface mount and through-hole components, known as chip capacitors and resistors, during transport on a pick-and-place machine prior to placement. LaserAlign sensors are incorporated into the placement heads of pick-and-place machines to ensure accurate component placement at high production speeds. Various high-speed pick-and-place machines use between one and twenty LaserAlign sensors per machine. LaserAlign integrates an intelligent sensor, composed of a laser, optics and detectors with a microprocessor and software for making specific measurements. LaserAlign enables quick and accurate alignment of each component as it is being transported by the pick-and-place arm for surface mount or through-hole assembly. Using non-contact technology, LaserAlign facilitates orientation and placement of components at higher speeds than can be achieved using conventional mechanical or machine vision component centering systems.

The LaserAlign sensor is offered in several different configurations to satisfy the requirements of the machines on which it is used. The latest version of the LaserAlign sensor technology was introduced in 2013 as a sixth generation sensor for Juki Corporation. Revenue from product shipments of LaserAlign sensors has been a principal contributor to revenue during the past five years and accounted for 14% of our revenue in 2015 and 20% of our revenue in 2014.

BoardAlign Camera (BA Camera). The BA Camera, which is incorporated directly into the placement head of a pick-and-place machine, identifies fiducial markings on a circuit board and aligns the board in the pick-and-place machine prior to component placement. The BA Camera was first introduced in a sensor for Assembleon B.V. during 2003 and a second generation BA Camera, which was introduced in 2012, has been incorporated into the latest version of Assembleon B.V.’s component placement machine. Revenue from shipments of BA Camera sensors to Assembleon B.V. (acquired by Kulicke and Soffa Industries in January 2015) accounted for 6% of our revenue in 2015 and 5% in 2014.

InPrinter Inspection Camera. The InPrinter Inspection Camera, which is mounted directly in DEK brand screen printers manufactured by ASM Pacific Technology Ltd., is used to identify fiducial markings on a circuit board to ensure accurate board registration prior to placement of solder paste, as well as to provide an upgraded capability for 2D solder paste and stencil inspection. The InPrinter Inspection Camera was introduced for DEK brand screen printers during the third quarter of 2005. Revenue from shipments of the InPrinter Inspection Camera accounted for 5% of our revenue in 2015 and 4% in 2014.

3D Solder Paste Inspection (SPI) Sensors

We manufacture custom designed 3D SPI sensors for use in our own family of SPI systems. We also sell our 3D SPI sensors to Viscom GmbH for use in their SPI platforms. Sales of 3D SPI sensors to Viscom accounted for less than 1% of our revenue in 2015 and less than 2% of revenue in 2014.

MRS Sensors for Semiconductor and SMT

Although we have been focusing on development of the MRS sensor for application in the SMT industry, in January 2015, we entered into a mutually exclusive agreement with KLA-Tencor to supply MRS sensor subsystems for its back-end semiconductor package inspection systems. We also have entered into an agreement to supply Nordson with high-precision 3D sensor subsystems for the SMT market. Our high precision 3D sensors are based on commercially available cameras, DLP projectors and other hardware components, combined with our proprietary MRS technology and 3D fusing algorithms. The combination of these elements allows our sensor to capture, what we believe, are microscopic quality images, at production speeds. Revenue from shipments of high precision 3D MRS sensor subsystems accounted for 4% of our revenue in 2015.

Strobe Inspection Modules (SIM)

We also design and manufacture 2D sensors based on our strobe inspection module or SIM technology and proprietary Autonomous Image Interpretation (Ai²) software for automated optical inspection. These sensors are based on a proprietary hardware design utilizing a strobed based lighting concept for extremely fast image acquisition. We deploy these sensors in our family of 2D AOI inspection systems which, we believe, offer an industry leading level of low false call performance, at fast in-line production speeds. We also utilize this technology in our newly-developed MX600 system for post-singulation inspection of memory modules. To date our use of the SIM technology has been limited to our own 2D AOI offerings for SMT. We intend to develop sensor kits based on our SIM technology that can be used for a variety of inspection tasks outside of traditional SMT applications, including inspecting for completeness and accuracy at end of line final assembly.

6

SMT Inspection System Products

Our SMT inspection system products are used in the SMT electronic assembly industry for process control and inspection. These systems are sold directly to end-user manufacturing customers that use them in a production line or along-side a production line to maintain process and quality control. Our products incorporate our proprietary 3D and 2D optical sensors, off the shelf, translation or robotics hardware and conveyors and complete computer systems or processors with internally developed software.

Solder Paste Inspection (SPI) Products

We have been selling in-line 3D solder paste measurement machines for over a decade and have continued to develop and evolve our SPI family of products since their introduction.

SE600. The SE600 is an in-line system based on a dual-illumination sensor that measures in 3D the amount of solder paste applied to the circuit board after the first step of the SMT circuit board assembly process. Because of the small size of the components that must be placed on each pad of solder paste and the density of components placed on the circuit board, a significant amount of SMT assembly problems are related to the quality of solder paste deposition. Misplaced solder paste or excess or inadequate amounts of paste can lead to improper connections or bridges between leads causing an entire circuit board to malfunction. The SE600 inspects the height, area and volume of solder paste placed on an entire circuit board at production line speeds and with resolution that allows the SE600 to measure the smallest chip scale packages and micro ball array component sites. The SE600 can be integrated into most SMT production lines, providing real time quality control immediately after a printed circuit board leaves the screen printer and before component placement commences.

SE500ULTRA. The SE500ULTRA is an in-line solder paste inspection system incorporating the same proprietary 3D inspection technology as the SE600, but with a single illumination sensor. The SE500ULTRA inspects at faster speeds than the SE600 and is intended for use in high-volume production environments. Because the SE500ULTRA prioritizes speed, it does not provide the same level of resolution and measurement performance as the SE600.

Revenues from shipments of our SPI products accounted for 8% of our revenue in 2015 and 15% of our revenue in 2014.

Automated Optical Inspection (AOI) Products

We have been selling AOI products for well over a decade and have continued to develop and evolve our AOI offerings since inception. These products inspect circuit boards after component placement to determine whether all components are present and have been placed correctly. AOI products can also be used to measure the quality of solder joints after reflow.

SQ3000. Our first 3D AOI system, the SQ3000, is designed to expand our presence in markets requiring high precision inspection. Identifying defects on circuit boards has become highly challenging and critical due to smaller electronics packaging and increasing component density, combined with smaller and more complex solder joints. We believe the combination of our MRS technology and sophisticated 3D fusing algorithms allows us to offer microscopic image quality at production speeds. We recognized our initial revenues from sales of the SQ3000 in the second quarter of 2015, and since the start of the fourth quarter of 2015 have received follow-on orders totaling approximately $4.7 million for the SQ3000 from a key customer. Our recent success and the competitive advantages offered by our MRS technology causes us to be very optimistic about the future sales potential of the SQ3000.

QX600 and QX150i. Our next generation 2D QX600 and QX150i AOI systems feature our SIM sensor technology and advanced Ai² software which, we believe, offer an industry leading level of low false call performance. We have invested in significant software enhancements for all of our AOI products that improve set-up and programming time and ease of use for the customer. Our QX600 is also available in versions that can accommodate dual production lanes and larger circuit board sizes.

QX500 and QX100i. We market our 2D QX500 and QX100i AOI systems for production lines requiring faster inspection speeds. These products also feature our SIM sensor technology and advanced Ai² software. The QX500 and QX100i do not offer the resolution capability of the QX600 or QX150i, but instead were designed to provide the fastest AOI inspection times currently available in the market and also an industry leading level of low false call performance. The QX500 can also accommodate dual production lanes and larger circuit board sizes.

7

MX600. Our newly-developed MX600 system is based on our 2D SIM module and Ai² software technology and is used for post-singulation inspection of memory modules. To date, we have received orders worth approximately $3.9 million from one of the world’s top four memory manufacturers for our newly-developed MX600 system that will inspect memory modules at the end of the production line after singulation. We recognized our first revenue from the sale of the MX600 system in the third quarter of 2015, and we had a backlog of MX600 orders at December 31, 2015 totaling approximately $3.4 million.

Revenues from shipments of our AOI products accounted for 20% of our revenue in 2015 and 19% of our revenue in 2014.

3D Scanning Solutions and Services

LDI provides 3D scanning systems and services to the global general purpose metrology market. Global demand for 3D scanning, which digitally captures the shape of an object, is growing as this technology is deployed increasingly in markets ranging from automotive and aerospace to medical and consumer electronics.

LDI's high end 3D scanners are sold either as kits or as complete systems that integrate LDI's proprietary Surveyor series software with coordinate measuring machines or articulated robotic arms manufactured by other companies. LDI also sells other types of 3D scanning equipment manufactured by other suppliers. Using its 3D scanners, LDI also provides services that scan, model and inspect objects of all sizes and complexity for customers who do not have their own 3D scanning equipment, or the in-house capability to scan complex parts. Revenue from sales of LDI's 3D scanning solutions and services accounted for 17% of our revenue in 2015 and 11% of our revenue in 2014.

One of the principal reasons for our acquisition of LDI was a high-speed 3D scanning system that it had developed. We are further enhancing this scanning system by integrating it with our new MRS technology. Beta testing for this new MRS equipped scanning system, CyberGage360, commenced in the first quarter of 2016. We believe customer interest in this product is high, and we presently anticipate initial CyberGage360 sales in 2016. We believe the unique performance characteristics of MRS which inhibit reflections and enable very accurate measurements at fast speeds, will give CyberGage360 a competitive advantage in the marketplace for 3D scanning systems.

Semiconductor Products

Our principal semiconductor products, the WaferSense^® and ReticleSense™ family of products, are a series of wireless sensors that provide measurements of critical factors in the semiconductor fabrication process. We sell our semiconductor products to both OEM and end-user customers through a network of independent sales representatives. Sales of our semiconductor products constituted 19% of our revenue in 2015 and 16% of our revenue in 2014.

WaferSense/ReticleSenseSensors. We designed our WaferSense/ReticleSense family of sensors to go where wafers go in semiconductor fabrication and provide measurements of critical factors that are currently impossible or extremely difficult to obtain without powering down the fabrication process equipment. Because the user is not required to break down semiconductor fabrication equipment when using our WaferSense/ReticleSense products, significant time is saved and accuracy is increased compared to the manual techniques currently used by many customers when checking the process parameters measured by our WaferSense/ReticleSense products. As a result of WaferSense/ReticleSense technology, up-time, through-put and process yield for semiconductor fabrication equipment is improved.

We introduced our first WaferSense product, the automatic leveling sensor (ALS), in late 2004 and have since continued to add new products to the WaferSense family. The ALS is a wireless, vacuum-compatible sensor that can be placed in cassettes, FOUPS, on end effectors, aligners, in load locks and process chambers used in semiconductor fabrication to ensure that all stations are level and coplanar. The automatic gapping sensor (AGS) is a gapping tool that measures the gap in three places between the shower head and pedestal in semiconductor process equipment. The automatic teaching sensor (ATS) measures X-Y-Z offset from robotic transfers of wafers to the pedestal in semiconductor process equipment. The amount of gap and offset after robotic transfer of wafers to the shower pedestal can affect film thickness and uniformity when material is deposited on semiconductor wafers, impacting quality and product yields. The automatic vibration sensor (AVS) measures X-Y-Z acceleration for shock and vibration, which can generate wafer particles, scratches or wafer breakage, thereby reducing yield. The automatic particle sensor (APS), allows engineers to efficiently detect and classify particles and their exact sources in a process as wafers are transferred, slit valves are actuated and chambers are cycled, pumped down and purged. APS is designed to be compatible with front-ends, coater/developer tracks, and deposition and etch equipment.

8

In 2014, we expanded our particle sensing technology by launching a particle sensor in a reticle shaped form factor. The wireless, real-time capability of ReticleSense allows users to quickly identify geographic particle sources in reticle environments. In early 2015, we launched a ReticleSense Airborne Particle Sensor with a quartz housing (APSRQ) for use in semiconductor tools that handle quartz reticles. Designed and developed specifically for use with scanners in the semiconductor fabs, the ReticleSense APSRQ has all of the necessary alignment marks and bar codes for compatibility with ASML, Nikon and Canon scanners. The APSRQ can be loaded directly into a scanner and can travel the entire reticle path to detect in real-time when and where particles occur. By extending the line to include a quartz airborne particle sensor, we are helping our customers exceed manufacturing quality and productivity standards in the Photo Lithography scanner environment.

We also have recently announced new offerings for advanced particle measurement and new WaferSense/ReticleSense Auto Multi Sensors (AMS/AMSR) that measure leveling, vibration and humidity in an all-in-one wireless real-time device. We intend to continue to enhance and expand the WaferSense/ReticleSense product lines in the future.

Markets and Customers

We sell the majority of our products into the SMT electronics assembly and memory manufacturing markets (60% of total revenue in 2015). The value of automation is high in these markets because the products produced have high unit costs and are manufactured at speeds too high for effective human intervention. Moreover, the trend toward smaller electronic devices with higher circuit densities, smaller circuit paths and extremely small components requires manufacturing and testing equipment capable of extremely accurate alignment and multidimensional measurement, which can be achieved using non-contact optical sensors. Trends in these markets include further efforts to reduce the cost of the manufacturing process, and to limit human intervention through automation.

Our SMT electronic assembly alignment sensors are sold to OEMs serving the SMT circuit board assembly market. The vast majority of our 3D and 2D optical sensors are used in our own SPI and AOI system products that we sell to circuit board assembly manufacturers serving the electronics assembly market or to OEMs which manufacture their own circuit boards. Our AOI and SPI system sales occur in all global geographies. Our sales of inspection systems are more heavily concentrated in Asia where a significant portion of the worldwide production capacity for circuit board assembly occurs, and Europe where we have a strong sales channel. We manufacture all of our sensor products in our Minneapolis, Minnesota headquarters facility. All final assembly and integration for our inspection system products takes place in our Singapore facility.

We sell our SMT sensor and inspection system products worldwide to many of the leading manufacturers of electronic circuit board assembly equipment, manufacturers of semiconductor DRAM and SSD memory and end-user electronic assembly manufacturers, including original design manufacturers (ODMs), EMS providers and outsourced semiconductor assembly and test (OSAT) companies, which manufacture cell phones, smart phones, notebook computers, server boards, and other electronic devices. We have sales and service offices in China and Singapore to serve the market for manufacturing production equipment in Asia. Our sales and service office in the United Kingdom serves the European market, and we have sales and service team members based in the United States to serve the Americas market. We have partnered with Viscom, a German distributor with significant sales to the automotive industry, to better penetrate the European market with our SPI sensors. We intend to expand our global sales and marketing efforts across all geographies.

In January 2015, we qualified as a supplier to KLA-Tencor and entered into a mutually exclusive agreement to supply 3D sensor subsystems for KLA-Tencor's back-end semiconductor package inspection systems. We believe that our MRS technology is a breakthrough 3D inspection technology that can be deployed in a wide range of markets, including the semiconductor market served by KLA-Tencor, and that selling sensor subsystems to leading manufacturers such as KLA-Tencor will allow us to reach these markets more effectively. We also have entered into an agreement to supply Nordson with high-precision 3D MRS sensor subsystems for the SMT market and have sold initial units for testing and demonstration purposes. The sensor subsystems are based on our new MRS technology. We believe our arrangement with Nordson will allow us to better penetrate the SMT market with our 3D MRS sensor offerings.

Our semiconductor products, primarily consisting of the WaferSense and ReticleSense family of products, accounted for 19% of our revenue in 2015. This market has many of the same characteristics as the SMT electronics assembly market and requires non-contact optical measurement tools that enable the production of more complex, higher density and smaller semiconductor devices. Our WaferSense/ReticleSense family of precision measurement tools for process optimization in semiconductor processing equipment is sold directly to semiconductor fabrication facilities or through semiconductor capital equipment manufacturers to semiconductor fabrication facilities. Our semiconductor products are used by process and equipment engineers during the production of semiconductor wafers. The world’s largest semiconductor manufacturers purchase our products.

9

We sell our high end 3D scanning solutions and services directly in the United States and through a small channel of Asian based resellers. We intend to use the global distribution channel for our SMT inspection system products to sell the CyberGage360 3D scanning product that we plan to introduce in 2016. We support our sales efforts for 3D scanning products and services by utilizing an internet based search engine marketing program to generate leads from prospects who have expressed interest in obtaining these types of products and services.

Export sales represent a large percentage of our total sales because a large portion of the global capacity for electronics assembly and semiconductor production occurs outside the United States. In addition, a significant portion of our export sales include SMT electronic assembly alignment sensors and 3D MRS sensors sold to OEM customers located in Europe and Asia.

The following table sets forth the percentage of total sales revenue represented by total export sales (sales for delivery to countries other than the United States, including sales delivered through distributors) by location during the past two years:

	December 31,
	2015		2014
Asia	39	%	44	%
Europe	29	%	25	%
Other export sales (1)	4	%	4	%

(1) Includes export sales in the Americas, primarily Canada, Mexico and Latin America.

See Note 14 to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K. Most of our international export sales are negotiated, invoiced and paid in U.S. dollars. We manufacture our SMT system products in Singapore and a portion of our raw material purchases are denominated in Singapore dollars. We also have R&D and sales personnel located in Singapore and sales offices located in other parts of the world. Although currency fluctuations do not significantly affect our revenue, they can impact our costs and influence the price competitiveness of our products and the willingness of existing and potential customers to purchase the products.

Sales and Marketing

Our SMT alignment and 3D high precision MRS sensors for back-end semiconductor packaging and the SMT inspection systems market are sold to large OEM customers by a direct sales staff located in Minnesota. Our stand-alone SMT inspection system products for end-user customers are primarily sold through independent representatives and distributors managed by direct sales personnel located in Singapore, as well as in the United Kingdom, the U.S. and China. We have agreements with 40 independent representatives and distributors which focus on sales and service of our stand-alone system products to end-user customers. These agreements cover North and South America (12), Europe (16) and China and the rest of Asia (12).

We have established a separate worldwide sales representative organization for our WaferSense and ReticleSense semiconductor products. We currently have agreements in place or in process with sales representatives in the U.S. (3), Europe (3) and the Pacific Rim (6). In some cases we sell our WaferSense and ReticleSense products directly to large OEM customers. Our independent sales representatives and sales to OEM customers are managed by direct sales personnel located in the U.S. and Asia.

We sell 3D scanning solutions and services through a direct sales staff located in Minnesota, and three resellers located in Asia. We intend to sell our CyberGage360 product by using the same independent sales representatives and distributors which sell our SPI and AOI system products.

We market our products through appearances at industry trade shows, advertising in industry journals, articles published in industry and technical journals and on the Internet. In addition, we have strategic relationships with certain key customers that serve as highly visible references.

10

Backlog

Product backlog was $15.0 million at December 31, 2015, compared to $5.9 million at December 31, 2014. Our products are typically shipped two weeks to two months after the receipt of an order. Sales of some SMT inspection system products may require customer acceptance due to performance or other acceptance criteria included in the terms of sale. For these SMT product sales, revenue is recognized at the time of customer acceptance. Although our business is generally not of a highly seasonal nature, sales may vary based on the capital procurement practices in the SMT electronics assembly, general industrial manufacturing and semiconductor fabrication industries. For example, production capacity expansion in the SMT electronics assembly industry for anticipated holiday or back to school demands can result in higher levels of sales in our second and third quarters. However, we are not able to quantify with any level of precision, the impact of these events on our sales in any given quarterly period, and any seasonal cyclicality is often masked by more dramatic changes in demand caused by the normal volatility in electronics markets that is associated with changes in the economy. Our scheduled backlog at any time may vary significantly based on the timing of orders from OEM customers. Accordingly, backlog may not be an accurate indicator of performance in the future.

Research and Development

We differentiate our products primarily on the basis of customer benefits afforded by the use of innovative and proprietary technology and on our ability to combine several different technical disciplines to address industry and customer needs. In addition, we actively seek ongoing strategic customer relationships with leading product innovators in both our existing and new markets. We actively investigate the needs of, and seek input from, these customers to ensure adoption of current technologies and to identify opportunities to improve manufacturing processes.

We commit substantial resources to the development of important next-generation technologies that, we believe, will position us to be a global technology leader in high precision 3D sensors and capture additional market share in our key vertical markets of SMT, semiconductor and 3D scanning solutions and services. We maintain our commitment to research and development and product development even during periods when demand in our markets is weak. During the past two years, research and development efforts have been focused on a number of activities that are critical to our future growth and success, including the following:

• Development of our new MRS technology, a high speed metrology grade 3D measurement capability using commercially available components and proprietary algorithms that we believe will solve many of the reflecting issues impacting all triangulation sensor technologies.

• Development of our first 3D AOI system, the SQ3000. This system is designed to expand our presence in markets requiring high precision measurement and inspection. Identifying defects on circuit boards has become highly challenging and critical due to smaller electronics packaging and increasing component density, combined with smaller and more complex solder joints. We believe the combination of our MRS technology and sophisticated 3D fusing algorithms offers microscopic image quality at production speeds. We recognized our initial revenues from sales of the SQ3000 in the second quarter of 2015, and since the start of the fourth quarter of 2015 have received follow-on orders totaling approximately $4.7 million for the SQ3000 from a key customer. Our recent success and the competitive advantages offered by our MRS technology causes us to be very optimistic about the future sales potential of the SQ3000.

• Development of our first system for post-singulation inspection of memory modules, the MX600. This system is based on our 2D SIM sensor technology and Ai² image recognition software. The inspection requirements for this system are similar to AOI requirements for circuit board production. We recognized our first revenue from the sale of the MX600 system in the third quarter of 2015, and we had a backlog of MX600 orders at December 31, 2015 totaling approximately $3.4 million from one of the world’s top four memory manufacturers. We believe the MX600 system offers superior speed, inspection performance and a low level of false calls.

• Development of a new 3D scanning system, CyberGage360, which incorporates our new MRS technology. We believe this system will be used to inspect and measure a wide range of components and manufactured parts in the general industrial market. Beta testing for CyberGage360 commenced in the first quarter of 2016. We believe customer interest in this product is high, and we presently anticipate initial CyberGage360 sales in 2016. We believe the unique performance characteristics of MRS that inhibit reflections and enable very accurate measurements at fast speeds, will give CyberGage360 a competitive advantage in the marketplace for 3D scanning systems.

11

• Continued development of our WaferSense/ReticleSense line of products by introducing a particle sensor in a reticle shaped form factor (ReticleSense™) and a ReticleSense Airborne Particle Sensor with a quartz housing (APSRQ) for use in semiconductor tools that handle quartz reticles. We also have announced new offerings for advanced particle measurement and new WaferSense/ReticleSense AMS and AMSR that measure leveling, vibration and humidity in an all-in-one wireless real-time device.

Research and development expenses were $7.6 million in 2015 and $8.8 million in 2014. These amounts represent 18% of revenue in 2015 and 19% in 2014, and include LDI research and development expenses since the date of acquisition. Research and development expenses consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and enhancement efforts. Research and development resource utilization is centrally managed based on market opportunities and the status of individual projects.

Manufacturing

All of our 3D and 2D optical sensors, SMT alignment sensors and WaferSense/ReticleSense semiconductor sensor products are assembled at our Minneapolis, Minnesota headquarters facility. Our SMT inspection system products are assembled in Singapore. Much of our product manufacturing, which is primarily circuit board manufacturing, lens manufacturing and metal parts production, is contracted with outside suppliers. Our production personnel inspect incoming parts, perform final assembly, calibrate and perform final quality control testing of finished products. Our products are not well suited for the large production runs that would justify the capital investment necessary for complete internal manufacturing.

A variety of components used in our products are available only from single sources and involve relatively long order cycles, in some cases over one year. We believe we have identified alternative assembly contractors for most of our sub-assemblies. Use of those alternative contractors could require substantial rework of the product designs, resulting in periods during which we could not satisfy customer orders. An actual change in such contractors would likely require a period of training and testing. Accordingly, an interruption in a supply relationship or the production capacity of one or more of such contractors could result in the inability to deliver one or more products for a period of several months. To help prevent delays in the shipment of our products, we maintain in inventory, or on scheduled delivery from suppliers, components that we believe will be sufficient to meet forecast demand (our forecast extends a minimum of 6 months).

Competition

We face competition from a number of companies in the machine vision, image processing and inspection systems market, some of which are larger and have greater financial resources.

Our 3D and 2D optical sensors and SMT electronic assembly alignment sensors primarily compete with the sensors and vision systems developed by OEMs using their own design staff for incorporation into their products. We believe our high precision 3D sensors based on our MRS technology are unique in the marketplace based on the ability to offer microscopic quality images at fast production line speeds. Our 2D SIM sensors and SMT electronic assembly alignment sensor products also compete with vision (camera and software based) systems and component libraries available from Cognex Corporation and others. Although advances in vision systems have reduced some of the advantages of our SMT electronic assembly alignment sensor products in some configurations, we continue to believe that our sensors compete favorably based on our ability to custom design products with stringent physical form requirements, speed, flexibility, low cost and ease of use.

The primary competition for sales of our SPI and AOI systems has been from Korean based companies, including Koh Young Technology, MirTec Ltd., and Parmi (SPI). We also compete with Taiwanese based Test Research, Inc. and German based Viscom, among others. Sales of AOI systems account for roughly two-thirds of the approximate $500 million total SPI/AOI inspection systems market, with 3D AOI representing the fastest growing segment of this market. We believe our 2D SIM and 3D MRS sensor technology and the Ai² software used in our QX and SQ family of products is differentiated from the competition and that these products compete effectively in the AOI market based on cost, ease of use at rapid production line speeds and the low rate of false calls. We believe that our new SQ3000 3D AOI offering, enabled by our proprietary MRS technology and 3D fusing algorithms, is differentiated and will allow us to gain market share based on our ability to offer microscopic quality images at production line speeds.

12

The approximate $1.0 billion plus market for 3D scanning solutions and services is highly fragmented. The primary competition for our 3D scanning solutions include CMM based products from Zeiss and others, articulated robotic arm products from Faro and assorted other 3D measurement technologies offering varying combinations of speed and accuracy. The market for 3D scanning services is dominated by small regional market participants. We believe the unique performance characteristics of MRS that inhibit reflections, particularly critical for shiny objects, and enable extremely accurate measurements at high speeds, will give CyberGage360 a competitive advantage in the portion of the market that prioritizes these performance characteristics.

We believe our WaferSense and ReticleSense products are unique to the marketplace and primarily face competition from the manual techniques currently used by most customers to monitor their semiconductor fabrication equipment. Because the user is not required to break down semiconductor fabrication equipment, or pressurize a vacuum chamber, we believe that our WaferSense/ReticleSense products save significant time and increase measurement accuracy over the manual techniques currently used by customers and that these products improve tool up-time, through-put and process yield.

We believe our current and planned products offer advantages in terms of price and suitability for specific applications. Although we have attempted to protect the proprietary nature of such products, it is possible that any of our products could be duplicated by other companies in the same general markets in which we participate.

Employees

As of December 31, 2015, we had 154 full-time employees worldwide, including 36 in sales, marketing and customer support, 55 in manufacturing, purchasing and production operations, 48 in engineering, research and development, and 15 in finance, administration and information services. Of these employees, 86 are located at our corporate headquarters in Minneapolis, Minnesota, 22 are located at LDI’s facility in Bloomington, Minnesota and 46 are located in other offices (5 in the United Kingdom, 1 in Oregon, 1 in California, 31 in Singapore, 4 in China, 2 in Taiwan, 1 in Japan and 1 in Korea). To date, we have been successful in attracting and retaining qualified technical personnel, although there can be no assurance that this success will continue. None of our employees are covered by collective bargaining agreements or are members of a union.

Proprietary Protection

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

We hold 57 patents (34 U.S. and 23 foreign) on a number of technologies, including those used in our 3D optical sensors, MRS technology, LaserAlign products, SIM sensor technology, inspection systems, WaferSense/ReticleSense products, CyberGage360 3D scanning system and other products. Some of the patents relate to equipment such as pick-and-place machines into which our products are integrated. In addition, we have 16 pending patents (6 U.S. and 10 foreign). We protect the proprietary nature of our software primarily through copyright and license agreements, but also through close integration with our hardware offerings. We utilize 18 registered trademarks (11 U.S. and 7 foreign) and have 8 trademark registrations pending (1 U.S. and 7 foreign). We also have 14 domain names and several common law trademarks. It is our policy to protect the proprietary nature of our new product developments whenever they are likely to become significant sources of revenue. No guarantee can be given that we will be able to obtain patent or other protection for other products.

As the number of our products increases and the functionality of those products expands, we may become increasingly subject to attempts to duplicate our proprietary technology and to infringement claims. In addition, although we do not believe that any of our products infringe the rights of others, there can be no assurance that third parties will not assert infringement claims in the future or that any such assertion will not require us to enter into a royalty arrangement or result in litigation.

13

Government Regulation

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

14

ITEM 1A. RISK FACTORS

Our operations are subject to a number of risks and uncertainties that may affect our financial results, and the accuracy of the forward looking statements we make in this Annual Report on Form 10-K. We make statements regarding anticipated product introductions and performance, changes in markets, customers and customer order rates, expenditures in research and development, growth in revenue and improvement in profits, taxation levels, the effects of pricing, and competition, all of which represent our expectations and beliefs about future events. 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:

• We have recently introduced or are in the process of introducing a number of products based upon our new 3D MRS technology and the failure of this technology to perform up to our expectations would materially adversely affect our anticipated operating results. We believe our MRS technology is unique in the marketplace based upon its ability to inhibit reflections and offer microscopic quality images at production line speeds, and we have high expectations about the prospect for longer-term sales of products based on this technology. We have incorporated the MRS technology into several of the products that we have recently introduced or are about to launch, including our new 3D AOI offering, the SQ3000, the CyberGage360 product we intend to introduce in the 3D scanning market in 2016, and new products for OEM customers, including KLA-Tencor and Nordson. We also expect to use this technology in other next generation inspection products and in products for new applications. If the performance of the MRS technology does not meet our expectations, if the products we have introduced or are about to introduce based upon the MRS technology do not operate up to specifications, if the market otherwise does not find this technology attractive, or if we are unable to efficiently identify new customers and new applications for this technology given our current sales channels, our operating results for 2016, and our expectations for longer term growth in revenue, would be materially adversely affected.

• Our business has been and will continue to be significantly impacted by the global economy and uncertainty in the outlook for the global economy makes it more likely that our actual results will differ materially from expectations. In 2009, the world economy experienced the worst economic recession since the great depression of the 1930’s. The severe economic conditions were brought about by extreme disruptions in global credit and financial markets including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. These economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. Further political instability or uncertainty could cause new tightening of credit in financial markets, may lead consumers and businesses to postpone spending, and may cause our customers to cancel, decrease or delay their existing and future orders with us. In addition, financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable defaults and inventory challenges. The OEMs and semiconductor manufacturers that purchase our sensors and the circuit board manufacturers and others that purchase our SMT inspection system products are largely dependent on continued demand for consumer and commercial electronics, including smart phones, tablets and computers. Demand for electronics is a function of the health of the economies in the United States and around the world. Sales of our 3D scanning solutions and services are also dependent upon the health of the global economy. Our results would be adversely affected in the future, if these economies were to experience recessions.

• World events beyond our control may affect our operations. Our operations and markets could be negatively affected by world events that effect economies and commerce in the specific countries, such as China, Singapore and Japan, in which we do business. Natural disasters, such as the tsunami and earthquake that hit Japan and the floods that hit Thailand in 2011, have affected travel patterns and accessibility in these countries in the past and other natural occurrences, such as a bird flu outbreak, could affect the business we do in these countries in the future. Terrorist activity or other armed conflicts that could occur in countries in which we do business, labor disputes that impact complex international shipping arrangements, or other unanticipated actions by local populations could affect our ability to do business in specific geographies. Many of the countries in which we do business can be affected by economic forces that are different from the forces that affect the United States and change the amount of business we conduct.

15

• Our operating results have varied, and will likely continue to vary significantly, from quarter to quarter, causing volatility in our stock price. Our quarterly operating results have varied in the past and will likely continue to vary significantly from quarter to quarter, causing volatility in our stock price. Some of the factors that may influence our operating results and subject our stock to price and volume fluctuations include the following: changes in customer demand for our sensors, inspection systems and 3D scanning solutions, which is influenced by economic conditions in these industries and the overall health of the global economy; demand for products that use circuit boards and semiconductors; market acceptance of our products and those developed by our customers; competition; seasonal variations in customer demand; the timing, cancellation or delay of customer orders, shipments and acceptances; and product development costs, including increased research, development, engineering and marketing expenses associated with our introduction of new products and product enhancements.

• The markets for capital equipment in the electronics assembly and semiconductor industries in which we operate are cyclical and we cannot predict with precision when market downturns will occur. We operate in cyclical markets–the electronics assembly and semiconductor capital equipment markets–that periodically adjusts independent of global economic conditions. We have been unable to predict with accuracy the timing or magnitude of periodic downturns in this market. These downturns, particularly the severe downturns in electronics production markets from 2001 through 2003, and from 2008 through 2009, severely affected our operations and generated several years of unprofitable operations. Ultimately, we have difficulty determining the duration or severity of any market downturns, the strength of any subsequent recoveries, and the long-term impact that the market may have on our business.

• Our operating results and financial position could be negatively affected by acquisitions, including our acquisition of LDI. In March 2014, we acquired substantially all of the assets of LDI, a 3D metrology company located in Minneapolis, Minnesota, for aggregate consideration of $3.1 million cash, plus the assumption of certain current liabilities. If the LDI business does not perform as anticipated, we may be forced to incur additional expense to enhance its development, sales or marketing capabilities, negatively impacting our earnings and financial position. In addition, we may be unable to successfully integrate other businesses that we choose to acquire in the future in a cost-effective and non-disruptive manner. Business acquisitions present a number of risks, including:

• diversion of management’s attention from daily operational matters, current products and customers;

• lack of synergy, or the inability to realize expected synergies;

• failure to commercialize or meet the expected performance of the new technology or business;

• failure to retain key employees and customer or supplier relationships;

• lower-than-expected market opportunities or market acceptance of any new products; and

• unexpected reduction of sales of existing products by new products.

Our failure to realize the intended benefits of one or more acquisitions could have a material adverse effect on our business, liquidity, financial position and/or results of operations, including our assumption of unforeseen contingent liabilities.

• Sales of SMT electronic assembly alignment sensors to two OEM customers constituted 21% of our revenue in 2015, and the loss of either of these customers would have a materially adverse impact on our results of operations. Although we anticipate that our future revenue and operations will be less dependent on these two customers, given recent success with new products based on our high precision 3D MRS sensor technology, and anticipated future revenue potential of our new CyberGage360 3D scanning system, if the order rates from these customers are negatively impacted by global economic events beyond their control or competitive factors, if they choose sensors manufactured by other suppliers, or otherwise terminate their relationships with us, our results of operations would be adversely affected.

16

• We generate approximately three quarters of our revenue from export sales that are subject to risks of international operations. Our export sales are subject to many of the risks of international operations, including:

• currency controls and fluctuations in currency exchange rates;

• changes in local market business requirements and increased cost and development time required to modify and translate our products for local markets;

• inability to recruit qualified personnel in a specific country or region;

• difficulty in establishing and maintaining relationships with local vendors;

• differing foreign technical standards;

• differing regulatory requirements;

• export restrictions and controls, tariffs and other trade barriers;

• reduced protection for intellectual property rights;

• changes in political and economic conditions;

• potentially adverse tax assessments; and

• terrorism, disease, or other events that may affect local economies and access.

• Our development and assembly operations in Singapore, and our sales operations in Asia, are subject to unique risks because of the remote nature of the operations. Our Singapore development and manufacturing operations, and our Asian sales operations, present a number of risks related to the retention of personnel, management of product development and operations, management and access to customer and distributor interactions, control over administrative and business processes, regulatory and legal issues we may encounter and other matters relating to foreign operations. We cannot be certain that we will be able to retain software development and management personnel in Singapore, and sales personnel in other territories, who are reliable and who will accept employment terms that are attractive. Although most components for our system products are more readily available in Singapore, some of the hardware components used in our system products necessary for manufacture in Singapore may be difficult to import at satisfactory prices. Our financial performance, ability to serve our customers and ability to manufacture and sell products could be negatively impacted if we are unable to retain our Asian based employees, if it costs more than expected to retain these employees or hire other experienced employees in a timely manner, if we are unable to manage these employees appropriately, or if we are unable to locate suitable sources of supply for our products manufactured in Asia.

• We price our products in U.S. dollars, and as a result, our products may have difficulty competing in periods of increasing strength of the dollar. Most of our international export sales are negotiated, invoiced and paid in U.S. dollars, and accordingly, currency fluctuations do not affect our revenue per unit. However, significant fluctuations in the value of the U.S. dollar relative to other currencies could have an impact on the price competitiveness of our products relative to foreign competitors, which could impact the willingness of customers to purchase our products and have an impact on our results of operations.

• Because of our significant operations in Singapore, our costs are negatively impacted when the U.S. dollar weakens relative to the Singapore dollar. A significant portion of our cost of revenues, research and development and sales and marketing costs are denominated in the Singapore dollar. In addition, other sales and marketing costs are denominated in British Pounds Sterling and the Chinese Yuan, resulting from our sales offices located in the UK and China. Our costs will increase, and our results will be negatively impacted in future periods, if the U.S. dollar weakens relative to the currencies of these countries. The ultimate impact of any fluctuation in the relationship between the U.S. dollar and the currencies of other geographies where we have operations, is dependent on the level of cash flows denominated in these currencies in future periods.

• Our products could become obsolete. Our current products, as well as the products we have under development, are designed to operate with the technology that we believe currently exists or may exist for electronic components, printed circuit boards, memory modules and semiconductor manufacturing markets, and other adjacent markets, including general purpose metrology. The products we develop to meet customer needs and requirements are subject to rapid technological change, and because it takes considerable time to develop new products, we must anticipate industry trends, as well as technological developments, in order to effectively compete. Further, because we do not have unlimited development resources, we might choose to forgo the pursuit of what becomes a leading technology or market and devote our resources to technologies and markets that are less successful. If we incorrectly anticipate technology developments or market trends, or have inadequate resources to develop our products to deal with changes in technology and markets, our products could become obsolete.

17

• Advances in the SMT electronics assembly alignment sensor market have eliminated some of the advantages of our sensors. Our SMT electronic assembly alignment sensor products compete with products made by larger machine vision companies and other optical sensor companies, and with solutions internally developed by our customers. Advances in machine vision technology in recent years have eliminated some, but not all, of the advantages that have differentiated our products from some of these competitors, and advances in other technologies could eliminate other advantages.

• The market for surface mount capital equipment has become more mature and price competitive, negatively impacting our margins. The electronics capital equipment market for surface mount technologies is becoming more mature, resulting in increased price pressure on suppliers of equipment. Consequently, our SMT electronic assembly inspection systems and alignment sensor products have become subject to increased levels of price competition and competition from other suppliers and technologies, including suppliers in Asia who have specifically designed their products to compete favorably against our products.

• Because of the high cost of changing equipment, customers in our markets are sometimes resistant to purchasing our products even if they are superior. We believe that, because of the high cost of installation and integration of new inspection equipment into production lines, once an SMT customer has selected a vendor’s capital equipment, the customer generally relies upon that capital equipment and, to the extent possible, subsequent generations of the same vendor’s equipment. Accordingly, unless our systems offer performance or cost advantages that outweigh the expense of installing and integrating new systems, it may be difficult for us to achieve significant sales to a customer that currently uses a competitor’s equipment.

• Our ability to compete in the market for SMT inspection systems is dependent upon the sales skills of our channel of independent sales representatives, value added resellers and distributors. Our ability to successfully compete in the market for SMT inspection systems is dependent upon the ability of our channel partners to sell our products. To the extent our competitors have relationships with stronger channel partners, it may be difficult for us to achieve significant sales, even if our products are technologically superior.

• Competitors in Asia may be able to compete favorably with us based on lower production and employee costs, and in some cases, governmental support. We compete with large multinational companies when selling our inspection system products, many of which are able to take advantage of greater financial resources and larger sales distribution networks. We also compete with new Asian based suppliers, many of which may have lower overall production and employee costs and are willing to offer their products at lower selling prices to customers. Further, we believe some competitors receive government sponsored research and manufacturing assistance that can cause their relative cost of development of new products to be lower. These competitors may also be under less market pressure to forgo the short-term negative financial impact of concentrated investment in research and development.

• We are exposed to credit risk through sales to our OEM customers and distributors of our stand-alone system products. We sell our products through key OEM customers, and usually have significant credit exposure with respect to these customers. In addition, we sell our stand-alone inspection system products through a network of international distributors. These distributors tend to be small and have limited financial resources and access to capital. Although these distributors do not hold our products in inventory for re-sale, we are exposed to credit risk and would incur losses if they are unable to pay for the products they have purchased from us.

• We are dependent upon outside suppliers for components of our products, and delays in or unavailability of those components would adversely affect our results. We use outside contractors to manufacture the components used in many of our products and some of the components we order require significant lead times that could affect our ability to sell our products if the components are not available. In addition, if these components do not meet stringent quality requirements or become obsolete, there could be delays in the availability of our products, and we could be required to make significant investments in designing replacement components.

18

• Future sales of MX600 will require a significant upfront investment in working capital. Thematerials handling component of our MX600 system for post-singulation memory inspection, which constitutes the vast majority of the content and cost of the system, is manufactured by a third-party contractor. We are required to make significant upfront inventory investments with that contractor to facilitate future sales of the MX600 system, and we cannot be assured that, if significant orders of the system were received, the contractor would be able to satisfy our production needs. If for some reason our supplier for the MX600 system should fail to appropriately complete its work in a timely manner, or if our end customer should ultimately fail to accept and pay for these systems, we could incur losses.

• We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage. Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology for our principal product families, and we rely, in part, on patent and trade secret law and confidentiality agreements to protect that technology. If we fail to adequately protect our intellectual property, our competitors may be able to duplicate and enhance the products we have developed. We own or have licensed a number of patents, and have filed applications for additional patents. Any of our pending patent applications may be rejected, and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and may be challenged by third parties. Further, third parties may also design around these patents. In addition to patent protection, we rely upon trade secret protection for our confidential and proprietary information and technology. We routinely enter into confidentiality agreements with our employees and other third parties. Even though these agreements are in place, there can be no assurance that trade secrets and proprietary information will not be disclosed, that others will not independently develop technology substantially equivalent to our proprietary technology or otherwise gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition. Costly and time-consuming litigation might be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection might adversely affect our ability to continue our research or bring products to market.

• Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or the loss of important intellectual property rights. We may be required to initiate litigation in order to enforce any patents issued to or licensed by us, or to determine the scope or validity of a third party’s patent or other proprietary rights. Any litigation, regardless of outcome, could be expensive and time consuming, and could subject us to significant liabilities or require us to re-engineer our products or obtain expensive licenses from third parties. There can be no assurance that any patents issued to or licensed by us will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide us with a competitive advantage. In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other proprietary rights owned by third parties. From time to time, we may receive communications from third parties asserting that our products infringe, or may infringe, the proprietary rights of these third parties. These claims of infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of our products stopped by an injunction. Infringement claims could also cause product delays or require us to redesign our products and these delays could result in the loss of substantial revenues. We may also be required to obtain a license from the third party or cease activities utilizing the third party’s proprietary rights. We may not be able to enter into such a license or such a license may not be available on commercially reasonable terms. Accordingly, the loss of important intellectual property rights could hinder our ability to sell our products, or make the sale of these products more expensive.

• Our efforts to protect our intellectual property may be less effective in certain foreign countries, where intellectual property rights are not as well protected as in the United States. The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the U.S., and many U.S. companies have encountered substantial problems in protecting their proprietary rights against infringement abroad. Consequently, there is a risk that we may be unable to adequately protect our proprietary rights in certain foreign countries. If this occurs, it would be easier for our competitors to develop and sell competing products in these countries.

19

• Breaches of our network security could expose us to losses. We manage and store on our network systems various proprietary information and sensitive or confidential data relating to our operations. There has been an increasing incidence of unauthorized access to the computer networks of various technology companies, and we are not immune to attempted unauthorized access. Computer programmers and hackers may be able to gain unauthorized access to our network system and steal proprietary information, compromise confidential information, create system disruptions, or cause shutdowns. These parties may also be able to develop and deploy viruses, worms, and other malicious software programs that disrupt our operations and create security vulnerabilities. Attacks on our network systems could result in significant losses, compromise our competitive advantages and damage our reputation with customers.

• The absence of significant market liquidity in our common stock could impact the ability of our shareholders to purchase and sell larger blocks, the attractiveness of our stock to institutional shareholders, and the market value of our common stock. There were 6,771,668 shares of our common stock outstanding as of December 31, 2015. Although our common stock is traded in the NASDAQ Global Market, in part because of the number of shares we have outstanding and available for trading, the daily trading volume in our stock is low, averaging less than 50,000 shares per day. Shareholders wishing to purchase or sell larger blocks of stock may not be able to do so quickly, and disposal by any shareholder of a significant block of stock could adversely affect the sale price in the marketplace. Further, institutional investors often have policies against investment in stock that is illiquid, and many institutional investors may elect not to purchase or hold our stock because of the inability to dispose of it. The reduced institutional interest, as well as the lack of current research reports by securities analysts, has had and can be expected to continue to have a further adverse impact on the market price and liquidity of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

We lease a 50,724 square foot mixed office and warehouse facility built to our specifications in Golden Valley, Minnesota, which functions as our corporate headquarters and primary manufacturing facility for all of our sensor products, including those used in our SMT inspection system products. Our lease for the Golden Valley facility expires December 31, 2018, contains an escalation clause and two renewal options of three years each.

We lease a 19,805 square foot mixed office and warehouse facility in Singapore that serves as a sales, development and final assembly and integration facility for our SMT inspection system products. We recently extended the lease for our Singapore facility for a period of one year expiring on July 24, 2017. The new lease contains one three year renewal option.

We lease a 10,165 square foot mixed office and warehouse facility in Bloomington, Minnesota that serves as a sales, service, final assembly and integration facility for our 3D scanning solutions and services. Our lease for the Bloomington, Minnesota facility expires April 30, 2018.

As of December 31, 2015, we also have operating leases in the United Kingdom and China, which expire in June 2018 and September 2016, respectively. We believe that our leased facilities are adequate for our anticipated needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We are not currently subject to any material pending or threatened legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

None.

20

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Global Market. The following table sets forth, for the fiscal periods indicated, the high and low sales prices for our common stock as reported by the Nasdaq Global Market. These prices do not reflect adjustments for retail markups, markdowns or commissions.

	2015				2014
Quarter	High		Low		High		Low
First	$	11.75	$	9.01	$	9.17	$	6.13
Second	$	11.24	$	9.77	$	8.45	$	7.49
Third	$	10.46	$	4.80	$	12.84	$	7.97
Fourth	$	8.48	$	5.86	$	11.30	$	7.54

As of February 29, 2016, there were approximately 200 holders of record of our common stock and approximately 3,000 beneficial holders. We have never paid a dividend on our common stock. Dividends are payable at the discretion of the Board of Directors out of funds legally available. Our Board has no current intention of paying dividends.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

21

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

Results of Operations for the Two Years Ended December 31, 2015:

General Overview

Our products are sold primarily into the electronics assembly, DRAM and flash memory, and semiconductor fabrication capital equipment markets. We sell products in these markets both to OEMs of production equipment and to end-user customers that assemble circuit boards and semiconductor wafers and devices. In March 2014, we completed our acquisition of LDI for aggregate consideration of approximately $3.1 million in cash plus the assumption of certain current liabilities. LDI provides 3D scanning solutions and services to the global 3D scanner and services metrology market and enabled us to enter the growing market for general purpose 3D metrology.

Our recent and planned product introductions are designed to strengthen our competitive position in our current markets and expand into adjacent markets. We believe 3D inspection represents a high-growth segment of both the electronic assembly market and the semiconductor market. For this reason we are working to strategically reposition ourselves as a leading developer and manufacturer of high-precision 3D sensors. A key element in our strategic re-positioning is the development of new high precision 3D sensors based on our proprietary MRS technology. MRS technology inhibits reflections that can result in measurement inaccuracies, which is particularly critical for inspecting shiny objects.

We believe that MRS is a break-through technology for optical inspection, with the potential to facilitate expansion of our markets in the future. In the existing markets for our SMT, semiconductor inspection and 3D scanning solutions, we are introducing new products based on MRS technology that we believe present a significant opportunity for increased revenues.

We recently entered into a mutually exclusive agreement to supply KLA-Tencor with high-precision 3D sensor subsystems for its back-end semiconductor packaging inspection systems. We also have entered into an agreement to supply Nordson Corporation (Nordson) with high-precision 3D sensor subsystems for the SMT market and have sold initial units for testing and demonstration purposes. The sensor subsystems are based on the new MRS technology that we have been developing for the past several years. We intend to expand sales of MRS technology into both the SMT market and adjacent markets that require high precision 3D optical inspection. We also plan to sell products based on our MRS technology to OEMs. Sales of high-precision 3D sensor subsystems have started to increase in recent months.

Our 3D MRS technology has also been deployed in our new 3D AOI system, the SQ3000, which is designed to expand our presence in markets requiring high precision inspection. In these markets identifying defects has become highly challenging and critical due to smaller electronics packaging and increasing component density on circuit boards. We believe the combination of our MRS technology and sophisticated 3D fusing algorithms allows us to offer microscopic quality images at production speeds. We recognized initial revenues from sales of the SQ3000 in the second quarter of 2015, and since the start of the fourth quarter of 2015 have received follow-on orders totaling approximately $4.7 million for the SQ3000 from a key customer. Our recent success and the competitive advantages offered by our MRS technology causes us to be very optimistic about the future sales potential of the SQ3000.

LDI represents another aspect of our 3D strategy. We are incorporating our MRS technology into a new 3D scanning system, CyberGage360, which we believe will serve a wide range of inspection applications in the general purpose 3D metrology market. Beta testing for CyberGage360 commenced in the first quarter of 2016. We believe customer interest in this product is high, and we presently anticipate initial CyberGage360 sales in 2016. We believe the unique performance characteristics of MRS that inhibit reflections and enable very accurate measurements at fast speeds, will give CyberGage360 a competitive advantage in the marketplace for 3D scanning systems.

We also have committed funds to development of new products for inspecting memory modules. To date, we have received orders worth approximately $3.9 million from one of the world’s top four memory manufacturers for our newly-developed MX600 system that will inspect memory modules at the end of the production line after singulation. We recognized our first revenue from the sale of the MX600 system in the third quarter of 2015, and had an order backlog for MX600 at December 31, 2015 totaling approximately $3.4 million.

We have continued to invest in our WaferSense and ReticleSense product lines and have recently announced new offerings for advanced particle measurement and new AMS and AMSR sensors that measure leveling, vibration and humidity in an all-in-one wireless real-time device.

22

We ended 2015 with a $15.0 million order backlog and are forecasting strongly improved sales and profitable operations for the first quarter of 2016, reflecting growing demand and shipment schedules for SQ3000 systems and 3D MRS-enabled sensors. We also are very optimistic about our full-year 2016 prospects. We expect to receive customer acceptance and recognize revenues for our backlog of MX600 systems in the first half of 2016. The recent sizable orders for our 3D products demonstrate they are gaining traction in the marketplace, and we believe this sales momentum should continue during 2016. In addition to the positive outlook for CyberGage360, we also expect to benefit from future growth of our WaferSense/ReticleSense product lines.

Longer term, the anticipated sales growth of our MRS-enabled products and promising outlook for the WaferSense/ReticleSense product lines should increase our revenues and net income. We believe that we have the resources required to attain our growth objectives, given our available cash and marketable securities balances totaling $17.6 million at December 31, 2015.

Our ability to achieve our forecast and to implement our strategy effectively is subject to numerous uncertainties and risks, including the risks identified in Item 1A of this Annual Report on Form 10-K. We cannot assure you that our efforts will be successful.

Revenues

Our revenues decreased by 12% to $41.1 million in 2015 from $46.5 million in 2014 and increased by 40% in 2014 from $33.3 million in 2013. The following table sets forth, for the years indicated, revenues by product line (in thousands):

(In thousands)	2015		2014		2013
SMT and High Precision 3D OEM Sensors	$	13,022	$	15,493	$	10,792
Semiconductor Sensors	7,677		7,595		7,096
SMT Inspection Systems	13,578		18,089		15,420
3D Scanning Solutions and Services	6,853		5,306		—
Total	$	41,130	$	46,483	$	33,308

Revenue from sales of SMT and high precision 3D OEM sensors decreased by $2.5 million or 16% to $13.0 million in 2015, and increased by $4.7 million, or 44%, to $15.5 million in 2014, from $10.8 million in 2013. Revenue decreases resulted from soft demand for traditional electronic assembly sensors from OEM customers selling into the China market, where market conditions have been challenging. During 2015, we sold additional 3D MRS sensors to KLA-Tencor under our long-term supply agreement. Revenue increases in 2014 were driven by demand for LaserAlign sensors from our two largest OEM customers. Strong sales to other key customers in 2014, including sales of 3D SPI sensors to Viscom also contributed to the higher revenue levels.

Sales to KLA-Tencor are expected to increase in 2016 as our 3D MRS sensor subsystems are being incorporated into a growing portion of its back-end semiconductor packaging inspection systems. We also have entered into an agreement to supply Nordson with high-precision 3D sensor subsystems for the SMT market and have sold initial units for testing and demonstration purposes. Nordson recently launched its product incorporating our sensor and we believe this new relationship has potential for considerable 2016 revenues.

Revenue from sales of semiconductor sensors, primarily consisting of our WaferSense and ReticleSense family of products, increased by $82,000 or 1% to $7.7 million in 2015, and increased by $499,000, or 7%, to $7.6 million in 2014, from $7.1 million in 2013. Sales of semiconductor sensors in 2015 were negatively impacted by a general slowdown in the semiconductor capital equipment market. Semiconductor sensor sales were also impacted by production delays for our new Auto Multi Sensor (AMS) line, the first wireless sensors to combine leveling, vibration and humidity measurements. Sales increases in 2014 were due to increased customer awareness and account penetration at major semiconductor manufacturers and capital equipment suppliers.

We anticipate that the benefits from growing market awareness and new product introductions will lead to additional WaferSense and ReticleSensesales in future periods. We are devoting additional resources to increased marketing of our WaferSense and ReticleSense products. We anticipate that the benefits from growing market awareness and new product introductions, including recent new offerings for advanced particle measurement and new AMS and AMSR sensors that measure leveling, vibration and humidity in an all-in-one wireless real-time device, will result in additional sales. We also are starting to generate sales of our WaferSense products to manufacturers of flat panel displays, as these customers have determined that WaferSense is able to significantly improve their manufacturing processes and yields.

23

Revenue from sales of SMT inspection system products decreased by $4.5 million or 25% to $13.6 million in 2015, and increased by $2.7 million, or 17%, to $18.1 million in 2014, from $15.4 million in 2013. Revenue decreases in 2015 resulted from lower sales of older more established SPI and 2D AOI systems, offset in part by initial sales of our newly developed MX600 system, that inspects memory modules at the end of the production line, and our new 3D AOI system, the SQ3000. Revenue from sales of new 3D AOI and MX600 products in 2015 totaled approximately $3.7 million. Revenue increases from sales of SMT inspection system products in 2014 were due to sales of new SPI and 2D AOI system products featuring improved measurement performance and ease of use.

Our backlog of MX600 and SQ3000 systems products totaled approximately $4.2 million at December 31, 2015. The timing of revenue recognition for this backlog is dependent upon receipt of customer acceptance. We expect to receive customer acceptance and recognize revenues for our backlog of MX600 systems in the first half of 2016.

We believe the markets for 2D AOI and SPI systems have become highly competitive and a growing number of companies are transitioning from 2D AOI to 3D AOI to meet the increasingly demanding inspection requirements of the electronics and industrial markets. We believe sales of our new 3D MRS enabled AOI products will represent an increasing percentage of our AOI and SPI sales in the future. We believe our differentiated 3D MRS platform technology will provide us with an opportunity to capture meaningful market share in the 3D AOI market, due to the competitive advantages of our MRS technology.

LDI contributed $6.9 million to our revenue in 2015 and $5.3 million to our revenue in 2014. Revenue from sales of 3D scanning solutions and services increased significantly in 2015, when compared to 2014, due to the fact that we acquired LDI in 2014. Future revenue growth in 3D scanning solutions and services will be driven in part by our new MRS-equipped CyberGage360 scanning system. We believe the unique performance characteristics of MRS that inhibit reflections, which is particularly critical for shiny objects, and enable very accurate measurements at fast speeds, will give CyberGage360 a competitive advantage in the marketplace for 3D scanning technology. We started beta testing for CyberGage360 in the first quarter of 2016, and presently anticipate initial sales of our 3D MRS-equipped CyberGage360 scanning system in 2016.

Export revenue totaled $29.7 million or 72% of total revenue in 2015, compared to $34.1 million or 73% of total revenue in 2014, and $26.0 million or 78% of revenue in 2013. Export revenue as a percentage of total revenue declined in 2015 due to the decline in sales of SMT systems and electronic assembly alignment sensors, which tend to have a higher proportion of sales outside the United States compared to our other products. Export revenue as a percentage of total revenue declined in 2014 because LDI generates a proportionately higher percentage of its revenue from domestic customers.

Cost of Revenues and Gross Margin

Cost of revenue decreased by $2.3 million, or 9%, to $23.0 million in 2015 from $25.3 million in 2014, and increased by $6.6 million, or 36%, in 2014 from $18.7 million in 2013. The decrease in cost of revenues in 2015 was due to the corresponding sales decrease of 12%, while the increase in cost of revenue in 2014 was due to the corresponding sales increase of 40%. Items included in cost of revenue that fluctuate with the level of sales include materials and components, direct labor and factory overhead costs.

Total gross margin as a percentage of sales was 44% in 2015, 46% in 2014 and 44% in 2013. The decrease in gross margin percentage in 2015 compared to 2014 was attributable to sales price erosion for our 2D AOI and SPI systems, reflecting competitive market conditions, and a slight change in product mix. The increase in gross margin percentage in 2014 compared to 2013 was due to increased revenue from higher margin SMT and 3D OEM sensor products, and more sales of SMT inspection systems in geographic areas where higher gross margins are available. Sales of 3D scanning solutions and services resulting from our acquisition of LDI in March 2014 did not have a significant impact on our overall gross margin percentage.

Our markets are highly price competitive, particularly the electronic assembly market, resulting in continual pressure on our gross margins. We compensate for pricing pressure by introducing new products with more features and improved performance and through manufacturing cost reduction programs. Many products that we have recently introduced or are about to introduce, including our SQ3000 3D AOI system, CyberGage360 scanning system, MRS sensor subsystems and WaferSense and ReticleSense sensors, have more favorable margins than many of our existing products.

Operating Expenses

Operating expenses decreased by $2.4 million, or 10%, to $20.3 million in 2015 from $22.7 million in 2014, and increased by $1.8 million, or 9%, in 2014, from $20.8 million in 2013.

24

Research and development expenses were $7.6 million or 18% of revenue in 2015, $8.8 million or 19% of revenue in 2014, and $7.5 million or 23% of revenue in 2013. Research and development expenses were lower in 2015 due to substantial completion of several critical development programs that required significant investment in 2014, including our new SQ3000 3D AOI system. Current research and development expenditures are focused on continued development of our MRS technology and related products, including 3D sensor subsystems, CyberGage360 scanning system and WaferSenseand ReticleSenseproduct lines. The increase in research and development expenses in 2014 resulted from our acquisition of LDI, continued development of our MRS technology, and 3D AOI and post-singulation memory inspection systems, offset in part by cost savings from a workforce reduction in the fourth quarter of 2013.

Selling, general and administrative expenses were $12.6 million, or 31%, of revenue in 2015, $13.8 million, or 30%, of revenue in 2014 and $12.3 million, or 37%, of revenue in 2013. The expense reductions in 2015 were due to lower professional fees, lower incentive compensation costs due to financial results below expectations, and cost savings from selective reductions in SMT system sales and marketing personnel that were implemented in the last six months of 2014. These reductions were offset in part by the impact of the LDI acquisition, which accounted for $600,000 of additional expense in 2015, because our results include LDI for the entire year, as compared to only a partial year in 2014. Expenses for incentive compensation were higher in 2014 due to our improved financial performance. Our acquisition of LDI added $2.3 million to selling, general and administrative expenses in 2014. These cost increases were offset in part by cost efficiencies resulting from a workforce reduction in the fourth quarter of 2013.

Interest Income and Other

Interest income and other includes interest earned on investments and gains and losses associated with foreign currency transactions, including intercompany financing transactions associated with our subsidiaries in the United Kingdom, Singapore and China. Because we maintain our investments in instruments designed to avoid risk of loss of principal, in the current interest rate environment, we have generated very little interest income. We recognized gains from foreign currency transactions, primarily intercompany financing transactions, of $103,000 in 2015 and $130,000 in 2014.

Provision for Income Taxes and Effective Income Tax Rate

We recorded income tax expense of $28,000 in 2015, $133,000 in 2014, and an income tax benefit of $186,000 in 2013. At December 31, 2015, we continue to have a valuation allowance recorded against all of our United States and Singapore based deferred tax assets. The valuation allowances may be reversed once our operations and outlook become materially stronger. Income tax expense in 2015 and 2014 reflects an increase in our valuation allowances, state income tax expense and foreign income tax expense associated with our subsidiaries in the United Kingdom and China. The reduction in income tax expense in 2015 was due to lower current state and foreign tax expenses resulting from our lower level of financial performance, and reduced deferred income tax expense resulting from fluctuations in the level of valuation allowances. Income tax expense was higher in 2014 due to a 2013 reduction in our reserve for income taxes resulting from the expiration of the statute of limitations for various income tax exposures.

We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Our federal income tax returns for years after 2011 are still subject to examination by the Internal Revenue Service. We are no longer subject to state and local income tax examinations by tax authorities for years prior to 2011. Our 2012 income tax return for Singapore is currently being audited by the Inland Revenue Authority of Singapore. We do not presently anticipate that the outcome of this audit will have a significant impact on our financial position or results of operations.

Liquidity and Capital Resources

Our cash and cash equivalents decreased by $897,000 in 2015, principally resulting from $2.4 million of cash used by operating activities, purchases of fixed asset and capitalized patent costs totaling $797,000, offset in part by $1.8 million of proceeds from maturities and sales of marketable securities, net of purchases of marketable securities, and $636,000 of proceeds from stock option exercises and share purchases under our employee stock purchase plan. Our cash and cash equivalents fluctuate in part because of maturities of marketable securities, and investment of cash balances in marketable securities, or from other sources of cash. Accordingly, we believe the combined balances of cash and marketable securities provide a more reliable indication of our available liquidity. Combined balances of cash and marketable securities decreased by $2.7 million to $17.6 million as of December 31, 2015 from $20.3 million as of December 31, 2014.

25

Operating activities used $2.4 million of cash in 2015. Cash used by operations included our net loss of $2.1 million, which included non-cash expenses totaling $2.2 million for depreciation and amortization, provision for doubtful accounts, deferred taxes, non-cash gains from foreign currency transactions and stock compensation expenses. Changes in operating assets and liabilities providing cash included an increase in accounts payable of $1.1 million. Changes in operating assets and liabilities using cash included increases in inventories of $2.5 million, accounts receivable of $161,000 and a decrease in accrued expenses of $1.0 million. The increase in inventories and accounts payable was related to the timing of inventory purchases needed for higher customer demand, as reflected in our large year end backlog, and new large orders received subsequent to year end. Accounts receivable increased because it took us slightly longer to collect for products sold in the fourth quarter of 2015 compared to the fourth quarter of 2014. Accrued expenses decreased due to payment of calendar year 2014 incentive compensation accruals and LDI stay bonuses in 2015, and lower warranty accruals resulting from the reduced level of sales.

Operating activities provided $827,000 of cash in 2014. Cash provided by operations included our net loss of $1.5 million, which included non-cash expenses totaling $2.2 million for depreciation and amortization, provision for doubtful accounts, deferred taxes, non-cash gains from foreign currency transactions, realized gains on available-for-sale securities and stock compensation expenses. Changes in operating assets and liabilities providing cash included increases in accounts payable of $1.5 million and accrued expenses of $503,000. Changes in operating assets and liabilities using cash included increases in accounts receivable of $646,000, inventories of $647,000 and a decrease in advance customer payments of $534,000. The increase in accounts payable and inventories was due to the timing of fourth quarter inventory purchases to meet anticipated future demand. Accounts payable was also driven higher by the timing of vendor payments at year end. The increase in accounts receivable was due to higher sales in the fourth quarter of 2014 compared to the fourth quarter of 2013. Accrued expenses increased due to higher warranty and incentive compensation accruals, offset in part by payment of the remaining balance of the 2013 restructuring accrual in 2014. Our warranty accruals increased due to higher sales levels and because we increased the warranty period for some products to three years. Advance customer payments declined due to recognition of revenue for transactions that were previously collected and deferred at December 31, 2013.

Investing activities provided $954,000 of cash in 2015, compared to providing $513,000 of cash in 2014. Changes in the level of investment in marketable securities, resulting from the purchases, sales and maturities of those securities provided $1.8 million of cash in 2015, compared to $5.0 million of cash in 2014. We used $797,000 of cash in 2015 for the purchase of fixed assets and capitalized patent costs, compared to using $1.4 million of cash for these types of purchases in 2014. The higher level of fixed asset purchases in 2014 was for new sales demonstration and services equipment to enhance our 3D scanning solutions and services offerings.

Financing activities from stock option exercises and employee share purchases under our employee stock purchase plan provided $636,000 of cash in 2015, compared to providing $741,000 of cash in 2014.

Our Board of Directors has authorized a $2.0 million share repurchase program. The common stock may be acquired from time to time in open market transactions, block purchases and other transactions complying with the Securities and Exchange Commission’s Rule 10b-18. We adopted a 10b5-1 trading plan to implement the repurchase program. As of December 31, 2015, no shares have been repurchased under this authorization.

At December 31, 2015, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of establishing off-balance sheet arrangements or other contractually narrow or limited purposes.

Except for obligations under facility leases and purchase contracts, we had no material commitments for expenditures as of December 31, 2015. Purchase commitments for inventory can vary based on the volume of revenue and resulting inventory requirements.

Our cash, cash equivalents and marketable securities totaled $17.6 million at December 31, 2015. We believe that on-hand cash, cash equivalents and marketable securities, coupled with anticipated future cash flow from operations, will be adequate to fund our cash flow needs for the foreseeable future, including the contractual obligations discussed above.

Inflation and Foreign Currency Transactions

Changes in our revenues have resulted primarily because of changes in the level of unit shipments due to competitive factors and the relative strength or weakness of the worldwide electronics assembly and semiconductor fabrication capital equipment markets. We believe that inflation has not had a significant effect on our operations.

26

Most of our international export sales are negotiated, invoiced and paid in U.S. dollars. We manufacture our SMT inspection system products in Singapore and a portion of our raw material purchases are denominated in Singapore dollars. We also have R&D and sales personnel located in Singapore and sales offices located in other parts of the world. Although currency fluctuations do not significantly affect our revenue, they can impact our costs and influence the price competitiveness of our products and the willingness of existing and potential customers to purchase our products.

We have entered into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. The maximum length of time over which we hedge our exposure to the variability in future cash flows is 12 months and, accordingly, at December 31, 2015, all of our open foreign exchange forward contracts had maturities of one year or less. The dollar equivalent gross notional amount of our foreign exchange forward contracts designated as cash flow hedges at December 31, 2015 was approximately $1.8 million. During 2015, we reduced our open Singapore dollar denominated foreign exchange forward contracts due to changes in our supplier base and product mix.

At December 31, 2015, our open foreign exchange forward contracts were in an unrealized loss position totaling $78,000 on a pre-tax basis due to a strengthening of the U.S. dollar in relation to the Singapore dollar during the time from when we first entered into these contracts through December 31, 2015. If the exchange rate between the U.S. dollar and the Singapore dollar were to remain unchanged over the next twelve months, we would realize this pre-tax loss through our consolidated statement of operations. If the U.S. dollar were to further strengthen, the unrealized losses on our open foreign exchange forward contracts would increase. However, if the U.S. dollar strengthens, our costs, when converted from Singapore dollars to U.S. dollars, would decline, and because we do not fully hedge all of our future anticipated cash flows that are denominated in Singapore dollars, the decline in costs would normally exceed the increased loss from hedging. Conversely, if the U.S. dollar were to weaken in future periods in relation to the Singapore dollar, the loss on our open foreign exchange forward contracts would be reduced, but our costs would increase. The increased costs in U.S. dollar terms would normally exceed the reduction in the loss from hedging. The ultimate impact of any fluctuation in the relationship between the U.S. dollar and Singapore dollar is dependent on the level of Singapore denominated cash flows in future periods.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements 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. On an on-going basis, we evaluate these estimates, including estimates related to revenue recognition, bad debts, warranty obligations, inventory valuation, intangible assets, derivatives and hedging and income taxes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that we believe have the most effect on our reported financial position and results of operations are as follows:

Revenue Recognition.

Revenue from all customers, including distributors, is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Generally, product revenues are recognized upon shipment under FOB shipping point terms, and include shipping and handling costs. Revenue from services is recognized as work is performed. Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. Estimated returns and warranty costs are recorded at the time of sale. Sales of some SMT system products may require customer acceptance due to performance or other acceptance criteria included in the terms of sale. For these SMT product sales, revenue is recognized at the time of customer acceptance. Our multiple deliverable arrangements typically include the sale of an SMT inspection system or 3D scanning solution, related installation and training, and in some cases, an extended warranty. Revenue from installation and training are recognized as the services are provided. Revenue from extended warranties is recognized ratably over the warranty period.

27

When a sale involves multiple elements, revenue is allocated to each respective element at inception of an arrangement using the relative selling price method. Selling price is determined based on a selling price hierarchy, consisting of vendor specific objective evidence (VSOE), third party evidence or estimated selling price. Management’s best estimate of the selling price of a SMT machine and 3D scanning solution is based on the cost of the product and a reasonable margin based on geographic location and competitive market conditions. We use VSOE to establish fair value for extended warranty, installation and training services. If VSOE is not available to establish fair value for extended warranty, installation and training services, we estimate a selling price based on the cost-build-up for the particular service and a reasonable gross margin. Costs related to products delivered are recognized in the period revenue is recognized. Cost of revenues consists primarily of direct labor, manufacturing overhead, materials and components and excludes amortization of intangible assets.

Allowance for Doubtful Accounts.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In making the determination of the appropriate allowance for doubtful accounts, we consider specific accounts, historical write-offs, changes in customer relationships and credit worthiness and concentrations of credit risk. Specific accounts receivable are written-off once a determination is made that the account is uncollectible. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $521,000 at December 31, 2015 and $561,000 at December 31, 2014.

Allowance for Warranty Expenses.

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. The allowance for warranties was $645,000 at December 31, 2015 and $839,000 at December 31, 2014.

Inventory Write Downs.

We write down inventory for estimated obsolescence or lack of marketability equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. We formulate our assumptions regarding future demand and market conditions based on order trends and input from customers regarding their future requirements. If actual market conditions are less favorable than those projected, or if in the future we decide to discontinue sales and marketing of any of our products, additional inventory write-downs may be required. Excess and obsolete inventories were written down by $1.0 million at December 31, 2015 and $914,000 at December 31, 2014.

Business Combinations.

We recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill is measured as the excess of consideration transferred over the acquisition date fair value of the assets acquired and liabilities assumed. Assets acquired include tangible and intangible assets. We determine the value and useful lives of equipment and leasehold improvements and purchased intangible assets with the assistance of an independent third-party valuation firm using certain estimates and assumptions.

While we use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation process to accurately value the assets acquired and the liabilities assumed at the acquisition date, the estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of the assets acquired and the liabilities assumed based on new information about facts and circumstances that existed as of the acquisition date. Any such adjustments would be recorded as an offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be recorded in our consolidated statements of operations.

28

During the three months ended June 30, 2014, we completed our valuation work and management review of the assets acquired and liabilities assumed related to our acquisition of LDI on March 14, 2014, and finalized the purchase price adjustment for the net working capital acquired. Adjustments to provisional amounts reflected in our preliminary purchase price allocation as of March 31, 2014 included a $24,000 decrease in intangible assets and a $46,000 increase in goodwill, among other adjustments. These measurement period adjustments required the revision of comparative financial information for the quarter ended March 31, 2014. The adjustment to intangible assets decreased amortization expense in the three months ended March 31, 2014 by less than $300. None of the other adjustments to the provisional amounts had any impact on our results of operations for the first quarter of 2014.

Valuation of Intangible and Long-Lived Assets.

We assess the impairment of identifiable intangible assets, long lived assets and related goodwill whenever events or changes in circumstances indicate the carrying value may not be recoverable. In addition, goodwill is tested for impairment annually. Factors we consider important, which could trigger an impairment review include the following:

• Significant under-performance relative to expected historical or projected future operating results.

• Significant changes in the manner of our use of the acquired assets or the strategy for our overall business.

• Significant negative industry or economic trends.

• Significant decline in our stock price for a sustained period, and the size of our market capitalization relative to our net book value.

• For intangible and long-lived assets, if the carrying value exceeds the un-discounted cash flows from such asset.

• For goodwill, if the carrying value of our net assets (net book value) exceeds fair value.

When we determine that the carrying value of intangibles, long-lived assets and related goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any potential impairment based on a projected discounted cash flow method using a discount rate that we believe is commensurate with the risk inherent in our current business model. Annually, we also test for impairment of goodwill, and utilize the income approach to estimate our fair value. The income approach is a valuation technique under which we estimate future cash flows using financial forecasts. Future estimated cash flows are discounted to their present value to calculate fair value. When considering fair value, we also give consideration to the control premium in excess of our current market capitalization that might be obtained from a third party acquirer. These assumptions require significant judgment and actual results may differ from assumed or estimated amounts.

At December 31, 2015 we had goodwill of $1.4 million. Our recent analysis performed in the fourth quarter of 2015 indicates that our goodwill is not impaired. However, our conclusion could change in the future, if our assumptions about future economic conditions, revenue growth or profitability change. Any resulting impairment charge could have a material effect on our financial position and results of operations in the future.

Income Taxes.

Significant judgment is required in determining worldwide income tax expense based upon tax laws in the various jurisdictions in which we operate. We have established reserves for uncertain tax positions by applying the “more likely than not” threshold (i.e., a likelihood of occurrence greater than fifty percent). The recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained. All tax positions are analyzed periodically and adjustments are made as events warrant modification, such as the completion of audits or the expiration of statutes of limitations, which may result in future charges or credits to income tax expense.

As part of the process of preparing consolidated financial statements, management is required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the current tax liability, as well as assessing temporary differences arising from the different treatment of items for financial statement and tax purposes. These differences result in deferred tax assets and liabilities, which are recorded on our consolidated balance sheet.

29

We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and federal, state and foreign net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our consolidated financial statements become deductible for income tax purposes, or when net operating loss carry forwards or credits are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.

Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives.

At December 31, 2015 we concluded that a $10.6 million valuation allowance is needed for all of our United States and Singapore based deferred tax assets due to our recurring losses and financial outlook. In analyzing the need for a valuation allowance, we first considered our history of cumulative operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, our financial performance in recent quarters, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all of our U.S. and Singapore based deferred tax assets. A similar analysis was performed in 2014, resulting in a $10.5 million valuation allowance at December 31, 2014 for substantially all of our U.S. and Singapore based deferred tax assets.

Deferred tax assets at December 31, 2015, include $58,000 for net operating loss carry forwards incurred in the UK by CyberOptics Ltd., which was acquired in 1999. A valuation allowance has not been recorded against these deferred tax assets. The utilization of these net operating loss carry forwards is dependent on CyberOptics Ltd.’s ability to generate sufficient UK taxable income during the carry forward period.

Derivatives and Hedging.

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. The maximum length of time over which we hedge our exposure to the variability in future cash flows is 12 months. Accordingly, at December 31, 2015 and December 31, 2014, all of our open foreign exchange forward contracts had maturities of one year or less. The dollar equivalent gross notional amount of our foreign exchange forward contracts designated as cash flow hedges was approximately $1.8 million at December 31, 2015 and $7.1 million at December 31, 2014.

We estimate hedge ineffectiveness on a quarterly basis by considering the difference between the prices of a hypothetical forward contract maturing on the last day of a given month, to the prices of a series of hypothetically perfect daily forward contracts. Hedge ineffectiveness and the amounts excluded from effectiveness testing recognized in earnings on cash flow hedges were not material for the years ended December 31, 2015 and 2014. The fair value of our foreign exchange forward contracts representing losses in the amount of $78,000 as of December 31, 2015, and $352,000 as of December 31, 2014 have been recorded in accrued expenses.

The fair value for our foreign exchange forward contracts is based on foreign currency spot and forward rates obtained from reputable financial institutions with resulting valuations periodically validated by obtaining foreign currency spot rates and forward quotes from other industry standard sources or third party or counterparty quotes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

30

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

CYBEROPTICS CORPORATION

	December 31,			December 31,
(In thousands, except share information)	2015			2014
ASSETS
Cash and cash equivalents	$	4,274		$	5,171
Marketable securities	5,249			5,285
Accounts receivable, less allowance for doubtful accounts of $521 at December 31, 2015 and $561 at December 31, 2014	8,150			7,945
Inventories	13,265			11,657
Other current assets	1,190			1,202
Deferred tax assets	—			82
Total current assets	32,128			31,342
Marketable securities, long-term	8,084			9,889
Equipment and leasehold improvements, net	2,368			2,918
Intangibles, net	549			642
Goodwill	1,366			1,366
Other assets	186			188
Deferred tax assets	58			67
Total assets	$	44,739		$	46,412
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	5,778		$	4,713
Advance customer payments	481			490
Accrued expenses	1,959			3,112
Total current liabilities	8,218			8,315
Other liabilities	268			400
Deferred tax liability	69			119
Reserve for income taxes	126			140
Total liabilities	8,681			8,974
Commitments and contingencies
Stockholders’ equity:
Preferred stock, no par value, 5,000,000 shares authorized, none outstanding	—			—
Common stock, no par value, 25,000,000 shares authorized, 6,771,668 shares issued and outstanding at December 31, 2015 and 6,643,851 shares issued and outstanding at December 31, 2014	31,292			30,145
Accumulated other comprehensive loss	(1,709		)	(1,271		)
Retained earnings	6,475			8,564
Total stockholders’ equity	36,058			37,438
Total liabilities and stockholders’ equity	$	44,739		$	46,412

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.

31

CONSOLIDATED STATEMENTS OF OPERATIONS

CYBEROPTICS CORPORATION

	Year Ended December 31,
(In thousands, except per share amounts)	2015			2014
Revenues	$	41,130		$	46,483
Cost of revenues	22,989			25,298
Gross margin	18,141			21,185
Research and development expenses	7,602			8,789
Selling, general and administrative expenses	12,635			13,820
Amortization of intangibles	67			53
Loss from operations	(2,163		)	(1,477		)
Interest income and other	102			123
Loss before income taxes	(2,061		)	(1,354		)
Income tax provision	28			133
Net loss	$	(2,089	)	$	(1,487	)
Net loss per share – Basic	$	(0.31	)	$	(0.23	)
Net loss per share – Diluted	$	(0.31	)	$	(0.23	)
Weighted average shares outstanding – Basic	6,706			6,576
Weighted average shares outstanding – Diluted	6,706			6,576

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.

32

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CYBEROPTICS CORPORATION

	Year Ended December 31,
(In thousands)	2015			2014
Net loss	$	(2,089	)	$	(1,487	)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(625		)	(464		)
Unrealized gains (losses) on available-for-sale securities:
Unrealized gains (losses)	(78		)	31
Reclassification adjustment for gains included in net loss	—			(2		)
Total unrealized gains (losses) on available-for-sales securities	(78		)	29
Unrealized gains (losses) on foreign exchange forward contracts:
Unrealized losses	(298		)	(399		)
Reclassification adjustment for losses included in net loss	563			103
Total unrealized gains (losses) on foreign exchange forward contracts	265			(296		)
Other comprehensive loss, before tax	(438		)	(731		)
Income tax provision related to items of other comprehensive loss	—			—
Other comprehensive loss, net of tax	(438		)	(731		)
Total comprehensive loss	$	(2,527	)	$	(2,218	)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.

33

CONSOLIDATED STATEMENTS OF CASH FLOWS

CYBEROPTICS CORPORATION

	Year Ended December 31,
(In thousands)	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,089	)	$	(1,487	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,968			1,914
Provision for doubtful accounts	(44		)	(75		)
Deferred taxes	38			120
Foreign currency transaction gains	(225		)	(230		)
Realized gains on available-for-sale securities	—			(2		)
Stock-based compensation	511			436
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	(161		)	(646		)
Inventories	(2,489		)	(647		)
Other assets	(24		)	(16		)
Accounts payable	1,146			1,491
Advance customer payments	(9		)	(534		)
Accrued expenses	(1,011		)	503
Net cash provided by (used in) operating activities	(2,389		)	827
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale marketable securities	5,167			7,080
Proceeds from sales of available-for-sale marketable securities	1,518			5,050
Purchases of available-for-sale marketable securities	(4,934		)	(7,147		)
Purchase of LDI	—			(3,108		)
Additions to equipment and leasehold improvements	(691		)	(1,251		)
Additions to patents	(106		)	(111		)
Net cash provided by investing activities	954			513
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	458			628
Proceeds from issuance of common stock under employee stock purchase plan	178			113
Net cash provided by financing activities	636			741
Effects of exchange rate changes on cash and cash equivalents	(98		)	(11		)
Net increase (decrease) in cash and cash equivalents	(897		)	2,070
Cash and cash equivalents – beginning of period	5,171			3,101
Cash and cash equivalents – end of period	$	4,274		$	5,171

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.

34

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CYBEROPTICS CORPORATION

	Common Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders’ Equity
(In thousands)	Shares	Amount
BALANCE, DECEMBER 31, 2013	6,497	$	28,968	$	(540	)	$	10,051		$	38,479
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment	121	628		—			—			628
Share issuances for compensation purposes	4	32		—			—			32
Stock-based compensation	—	404		—			—			404
Issuance of common stock under Employee Stock Purchase Plan	22	113		—			—			113
Other comprehensive loss, net of tax	—	—		(731		)	—			(731		)
Net loss	—	—		—			(1,487		)	(1,487		)
BALANCE, DECEMBER 31, 2014	6,644	30,145		(1,271		)	8,564			37,438
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment	88	458		—			—			458
Share issuances for compensation purposes	4	41		—			—			41
Stock-based compensation	—	470		—			—			470
Issuance of common stock under Employee Stock Purchase Plan	36	178		—			—			178
Other comprehensive loss, net of tax	—	—		(438		)	—			(438		)
Net loss	—	—		—			(2,089		)	(2,089		)
BALANCE, DECEMBER 31, 2015	6,772	$	31,292	$	(1,709	)	$	6,475		$	36,058

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CYBEROPTICS CORPORATION

NOTE 1 – BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

We are a leading global developer and manufacturer of high precision sensing technology solutions. Our sensors are used in surface mount technology (SMT), semiconductor and general purpose metrology and 3D scanning markets to significantly improve yields and productivity.

Principles of Consolidation

The consolidated financial statements include the accounts of CyberOptics Corporation and its wholly-owned subsidiaries. In these notes to the consolidated financial statements, these companies are collectively referred to as “CyberOptics,” “we,” “us,” or “our.” All significant inter-company accounts and transactions have been eliminated in consolidation.

Segment Reporting

We operate in a single reportable segment.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Reclassifications

Certain reclassifications have been made to the previously reported consolidated financial statements in order to conform to the current presentation. These reclassifications had no impact on the consolidated balance sheets, statements of operations, cash flows or statements of stockholders' equity (deficit).

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash and cash equivalents consist of funds maintained in demand deposit accounts, money market accounts, corporate debt instruments and U.S. government backed obligations. Cash and cash equivalent balances, at times, may exceed federally insured limits.

Marketable Securities

All marketable securities are classified as available-for-sale and consist of U.S. government and agency backed obligations, certificates of deposit, corporate debt instruments, asset backed securities or equity securities. Marketable securities are classified as short-term or long-term in the consolidated balance sheet based on their maturity date and expectations regarding sales.

Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity until realized. These fair values are primarily determined using quoted market prices. The carrying amounts of securities, for purposes of computing unrealized gains and losses, are determined by specific identification. The cost of securities sold is also determined by specific identification.

We monitor the carrying value of our investments compared to their fair value to determine whether an other-than-temporary impairment has occurred. If a decline in fair value is determined to be other-than-temporary, an impairment charge related to that specific investment is recorded in current operations.

Cash and marketable securities held by foreign subsidiaries totaled $701,000 at December 31, 2015 and $1,095,000 at December 31, 2014.

36

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. Appropriate consideration is given to deterioration, obsolescence, and other factors in evaluating net realizable value. Demonstration inventories are stated at cost less accumulated amortization, generally based on a 36 month useful life.

Accumulated amortization for demonstration inventories totaled $1,310,000 at December 31, 2015 and $1,181,000 at December 31, 2014.

Accounts Receivable and Allowance for Doubtful Accounts

We extend unsecured credit to our customers in the normal course of business. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of our customers to make required payments. In making the determination of the appropriate allowance for doubtful accounts, we consider specific accounts, historical write-offs, changes in customer relationships and credit worthiness and concentrations of credit risk. Specific accounts receivable are written-off once a determination is made that the account is uncollectible.

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense as incurred. In-progress costs are capitalized with depreciation beginning when assets are placed in service. Depreciation is recorded using the straight-line method over the estimated useful lives of the equipment, ranging from one to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the asset useful life or the underlying lease term, ranging from one to eight years. Gains or losses on dispositions are included in current operations.

Business Combinations

We recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill is measured as the excess of consideration transferred over the acquisition date fair value of the assets acquired and liabilities assumed. Assets acquired include tangible and intangible assets. We determine the value and useful lives of equipment, leasehold improvements and purchased intangible assets with the assistance of an independent third-party valuation firm using certain estimates and assumptions.

While we use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation process to accurately value the assets acquired and the liabilities assumed at the acquisition date, the estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of the assets acquired and the liabilities assumed based on new information about facts and circumstances that existed as of the acquisition date. Any such adjustments would be recorded as an offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be recorded in our consolidated statements of operations.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired in a business combination. We evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that indicate goodwill might be impaired. We have determined that we have one reporting unit. Goodwill is tested by comparing our fair value, as determined based on our future estimated discounted cash flows, to our net book value.

Patents

Patents consist of legal and patent registration costs for protection of our proprietary technology. We amortize patent costs on a straight-line basis, based upon their estimated life.

Long Lived Assets

Intangible assets subject to amortization and other long lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss would be recognized when future undiscounted cash flows expected to result from use of the asset and eventual disposition are less than the carrying amount.

37

Revenue Recognition

Revenue from all customers, including distributors, is recognized when all significant contractual obligations have been satisfied, pricing is fixed and determinable and collection of the resulting receivable is reasonably assured. Generally, product revenues are recognized upon shipment under FOB shipping point terms, and include shipping and handling costs. Revenue from services is recognized as work is performed. Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. Estimated returns and warranty costs are recorded at the time of sale. Sales of some surface mount technology (SMT) system products may require customer acceptance due to performance or other acceptance criteria included in the terms of sale. For these SMT product sales, revenue is recognized at the time of customer acceptance. Our multiple deliverable arrangements typically include the sale of an SMT inspection system or 3D scanning solution, related installation and training, and in some cases, an extended warranty. Revenue from installation and training are recognized as the services are provided. Revenue from extended warranties is recognized ratably over the warranty period.

When a sale involves multiple elements, revenue is allocated to each respective element at inception of an arrangement using the relative selling price method. Selling price is determined based on a selling price hierarchy, consisting of vendor specific objective evidence (VSOE), third party evidence or estimated selling price. Management’s best estimate of the selling price of an SMT machine and 3D scanning solution is based on the cost of the product and a reasonable margin based on geographic location and competitive market conditions. We use VSOE to establish fair value for extended warranty, installation and training services. If VSOE is not available to establish fair value for extended warranty, installation and training services, we estimate a selling price based on the cost-build-up for the particular service and a reasonable gross margin. Costs related to products delivered are recognized in the period revenue is recognized. Cost of revenues consists primarily of direct labor, manufacturing overhead, materials and components and excludes amortization of intangible assets.

Foreign Currency Translation

Financial position and results of operations of our international subsidiaries are measured using local currency as their functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year-end. Statements of operations accounts are translated at the average rates of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a cumulative translation adjustment in stockholders’ equity.

Foreign Currency Transactions

Foreign currency transaction gains and losses are included in interest income and other in the statement of operations. We recognized a foreign currency transaction gain of $103,000 in 2015 and $130,000 in 2014.

Research and Development

Research and development (R&D) costs, including software development, are expensed when incurred. Software development costs are required to be expensed until the point that technological feasibility and proven marketability of the product are established; costs otherwise capitalizable after such point also are expensed because they are insignificant. All other R&D costs are expensed as incurred. R&D expenses consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and enhancement efforts.

Derivatives and Hedging

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Cash flows from derivative instruments are classified in the consolidated statement of cash flows in the same category as the cash flows from the items subject to designated hedge relationships.

Advertising Costs

We expense all advertising costs as incurred. Advertising expense incurred was $410,000 in 2015 and $296,000 in 2014.

38

Warranty Costs

We provide for the estimated cost of product warranties which cover products for periods ranging from one to three years at the time revenue is recognized. In 2014, the warranty period for certain products was increased to three years from a one year period.

Income Taxes

We evaluate uncertain tax positions using the “more likely than not” threshold (i.e., a likelihood of occurrence greater than fifty percent). The recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are classified as a gross unrecognized tax benefit until the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Only the portion of the unrecognized tax benefit that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g., resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. It is our policy to record estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense.

Deferred income taxes are recorded to reflect the tax consequences in future years of differences between the financial reporting and tax bases of assets and liabilities. Income tax expense is the sum of the tax currently payable and the change in the deferred tax assets and liabilities during the period, excluding changes in deferred tax assets recorded to equity and goodwill. Valuation allowances are established when, in the opinion of management, there is uncertainty that some portion or all of the deferred tax assets will not be realized. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on all positive and negative evidence.

Net Loss Per Share

Net loss per basic and diluted share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common equivalent shares consist of common shares to be issued upon exercise of stock options, vesting of restricted stock units and from purchases of shares under our employee stock purchase plan, as calculated using the treasury stock method. All common equivalent shares are excluded from the calculation of net loss per diluted share due to their anti-dilutive effect.

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these instruments.

Stock-Based Compensation

All equity-based payments to employees, including grants of employee stock options, are required to be recognized as an expense in our consolidated statements of operations based on the grant date fair value of the award. We utilize the straight-line method of expense recognition over the award’s service period for our graded vesting options. The fair value of stock options has been determined using the Black-Scholes model. The compensation expense recognized for all equity based awards is net of estimated forfeitures, which is based on historical data. We have classified equity based compensation within our consolidated statement of operations in the same manner as our cash based employee compensation costs. We elected to use the alternative transition guidance known as the “short-cut method” to determine our pool of windfall tax benefits at January 1, 2006.

See Note 7 to the consolidated financial statements for additional information on stock-based compensation.

39

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on the recognition of revenue from contracts with customers (Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers). Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The FASB has delayed the effective date of the standard by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company is currently evaluating the method of adoption and the impact of the new guidance on the consolidated financial statements.

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases).Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance.Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory (ASU No. 2015-11, Simplifying the Measurement of Inventory). The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which consists of estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. The new guidance eliminates unnecessary complexity that exists under current "lower of cost or market" guidance. For public entities, the updated guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The guidance is to be applied prospectively as of the beginning of an interim or annual reporting period, with early adoption permitted. We do not believe the implementation of this standard will have a material impact on our consolidated financial statements.

In November 2015, the FASB issued guidance on simplifying the balance sheet classification of deferred taxes (ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes). To simplify the presentation of deferred income taxes, the new guidance requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. Under prior guidance, an entity was required to separate deferred income tax liabilities and assets into current and non-current amounts. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected. For public entities, the guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We adopted the new guidance on a prospective basis for our year ending December 31, 2015. Financial statements for prior periods were not retrospectively adjusted. The new guidance was adopted to simplify the balance sheet presentation of deferred taxes, and had no other impact on our consolidated financial statements.

NOTE 2 - ACQUISITION

On March 14, 2014 we acquired substantially all of the assets of Laser Design, Inc. (LDI), a privately held company based in Minneapolis, Minnesota, for aggregate consideration of $2,633,000 in cash plus the assumption of certain current liabilities of $1,073,000. We also paid aggregate signing bonuses of $475,000 to key executives of LDI which have been accounted for as acquisition consideration. LDI provides scanning systems and services to the global 3D scanner and services metrology market and enables us to enter the growing market for general purpose 3D metrology. We also include our proprietary 3D sensor technology in LDI’s products to enable differentiated product offerings.

40

Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets acquired, based upon their estimated fair values as of March 14, 2014. During the three months ended June 30, 2014, we completed our valuation work and management review of the assets acquired and liabilities assumed and finalized the purchase price adjustment for the net working capital acquired. Adjustments to provisional amounts reflected in our preliminary purchase price allocation as of March 31, 2014 included a $24,000 decrease in intangible assets and a $46,000 increase in goodwill, among other adjustments. These measurement period adjustments require the revision of comparative financial information for the quarter ended March 31, 2014. The adjustment to intangible assets decreased amortization expense in the three months ended March 31, 2014 by less than $300. None of the other adjustments to the provisional amounts had any impact on our results of operations for the first quarter of 2014.

The purchase price allocation for our acquisition of LDI is as follows:

(In thousands)
Accounts receivable	$	662
Inventories	551
Equipment and leasehold improvements	1,507
Other assets	91
Intangible assets	573
Identifiable assets acquired	3,384
Accounts payable	640
Accrued expenses and advance customer payments	433
Liabilities assumed	1,073
Net identifiable assets acquired	2,311
Goodwill	797
Purchase price	$	3,108

The allocation of the purchase price resulted in recognition of the following identified intangible assets:

	(In thousands)		Weighted Average Life-Years
Software	$	206	7
Patent	165		7
Marketing assets and customer relationships	101		9
Non-compete agreements	101		4
	$	573	7

The fair value of the above identified intangible assets was estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. The software, patent and marketing intangible assets have been appraised using a relief from royalty income methodology; the non-competes using a “with and without” income methodology; and customer relationships using a multi period excess earnings methodology. The goodwill recognized as a result of the LDI acquisition was primarily attributable to the value of the workforce, as well as unidentifiable intangible assets. We paid a premium over the net tangible and identifiable intangible assets acquired (i.e., goodwill) because owning LDI enables us to have access to the general purpose 3D metrology market and allows us to include our proprietary 3D sensor technology in LDI’s products.

All of the goodwill is expected to be deductible for income tax purposes over a 15 year period. The useful life of the intangible assets was determined based on management’s best estimate of the expected cash flows used to measure the fair value of the intangible assets, adjusted as appropriate for entity-specific factors, including competitive, economic or other factors that may limit the useful life of the intangible assets.

For the year ended December 31, 2015, LDI contributed $6,853,000 to our revenue and $389,000 to our net loss. For the year ended December 31, 2014, since the date of acquisition, LDI contributed $5,306,000 to our revenue and $537,000 to our net loss.

41

The following unaudited pro forma consolidated financial information presents our revenue and net loss as if the acquisition of LDI occurred on January 1, 2014. The unaudited pro forma consolidated financial information has been prepared for illustrative purposes only and does not purport to be indicative of the results that would have been achieved had the acquisition occurred on January 1, 2014, or of future results. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from integration of LDI.

(In thousands, except per share amounts)	Year Ended December 31,
	2015			2014
Revenue	$	41,130		$	47,904
Net loss	(2,089		)	(1,292		)
Basic and diluted loss per share	$	(0.31	)	$	(0.20	)

We incurred approximately $117,000 in LDI related acquisition costs. Approximately $47,000 of these costs were recorded as selling, general and administrative expenses in the first quarter of 2014, with the remaining balance recorded as selling, general and administrative expense in prior periods. The pro forma consolidated net loss for 2014 reflected in the table above was adjusted to exclude all acquisition related costs and the impact of the fair value adjustment to acquisition date inventories of $222,000.

NOTE 3 – MARKETABLE SECURITIES

Our investments in marketable securities are classified as available-for-sale and consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,806	$	—	$	(2	)	$	3,804
Corporate debt securities and certificates of deposit	1,440		—		(1		)	1,439
Asset backed securities	6		—		—			6
Marketable securities – short-term	$	5,252	$	—	$	(3	)	$	5,249
Long-Term
U.S. government and agency obligations	$	6,681	$	1	$	(18	)	$	6,664
Corporate debt securities and certificates of deposit	675		—		(1		)	674
Asset backed securities	694		—		(1		)	693
Equity security	42		11		—			53
Marketable securities – long-term	$	8,092	$	12	$	(20	)	$	8,084

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,378	$	2	$	—		$	3,380
Corporate debt securities and certificates of deposit	1,903		2		—			1,905
Marketable securities – short-term	$	5,281	$	4	$	—		$	5,285
Long-Term
U.S. government and agency obligations	$	5,761	$	3	$	(5	)	$	5,759
Corporate debt securities and certificates of deposit	1,867		1		(1		)	1,867
Asset back securities	2,156		1		(1		)	2,156
Equity security	42		65		—			107
Marketable securities – long-term	$	9,826	$	70	$	(7	)	$	9,889

42

Our investments in marketable debt securities all have maturities of less than 5 years. At December 31, 2015, marketable debt securities valued at $2,321,000 were in an unrealized gain position totaling $1,000 and marketable debt securities valued at $10,959,000 were in an unrealized loss position totaling $23,000 (all had been in an unrealized loss position for less than 12 months). At December 31, 2014, marketable debt securities valued at $9,287,000 were in an unrealized gain position totaling $9,000 and marketable debt securities valued at $5,780,000 were in an unrealized loss position totaling $7,000 (all had been in an unrealized loss position for less than 12 months).

We hold an investment in one equity security. At December 31, 2015, our equity security had a fair value of $53,000, and was in an $11,000 unrealized gain position. At December 31, 2014, our equity security had a fair value of $107,000, and was in a $65,000 unrealized gain position.

Net pre-tax unrealized losses for marketable securities of $11,000 at December 31, 2015 and net pre-tax unrealized gains for marketable securities of $67,000 at December 31, 2014 were recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We received proceeds from the sale of marketable securities of $1,518,000 in 2015 and $5,050,000 in 2014. No gain or loss was recognized from the sale of marketable securities in 2015. A gain of $2,000 from the sale of marketable securities was recognized in 2014.

Investments in marketable securities classified as cash equivalents of $791,000 at December 31, 2015 and $321,000 at December 31, 2014 consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	791	$	—	$	—	$	791
	$	791	$	—	$	—	$	791

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	321	$	—	$	—	$	321
	$	321	$	—	$	—	$	321

NOTE 4 – DERIVATIVES

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Hedge ineffectiveness and the amounts excluded from effectiveness testing recognized in earnings on cash flow hedges were not material for the years ended December 31, 2015 and December 31, 2014.

The maximum length of time over which we hedge our exposure to the variability in future cash flows is 12 months. Accordingly, at December 31, 2015 and December 31, 2014, all of our open foreign exchange forward contracts had maturities of one year or less. The dollar equivalent gross notional amount of our foreign exchange forward contracts designated as cash flow hedges was approximately $1,800,000 at December 31, 2015 and $7,100,000 at December 31, 2014.

43

Reclassifications of amounts from accumulated other comprehensive loss into earnings include accumulated gains (losses) at the time earnings are impacted by the forecasted transaction. The location in the consolidated statements of operations and consolidated statements of comprehensive loss and amounts of gains and losses related to derivative instruments designated as cash flow hedges are as follows:

	Year Ended December 31, 2015
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(185	)	$	(352	)
Research and development	(71		)	(118		)
Selling, general and administrative	(42		)	(93		)
Total	$	(298	)	$	(563	)

	Year Ended December 31, 2014
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(252	)	$	(60	)
Research and development	(76		)	(21		)
Selling, general and administrative	(71		)	(22		)
Total	$	(399	)	$	(103	)

Amounts recorded in accumulated other comprehensive loss for the after tax net unrealized gain or loss associated with cash flow hedging instruments was a loss of $147,000 as of December 31, 2015 and a loss of $412,000 as of December 31, 2014. We expect to reclassify the December 31, 2015 pre-tax net unrealized loss of $90,000 recorded in accumulated other comprehensive loss to earnings over the next 12 months with the impact offset by cash flows from underlying hedged items. The fair value of our foreign exchange forward contracts representing losses in the amount of $78,000 as of December 31, 2015 and $352,000 as of December 31, 2014 have been recorded in accrued expenses.

Additional information with respect to the impact of derivative instruments on other comprehensive loss is included in Note 5. Additional information with respect to the fair value of derivative instruments is included in Note 6.

Our foreign exchange forward contracts 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.

44

NOTE 5 – COMPREHENSIVE LOSS

Reclassification adjustments are made to avoid double counting for items included in comprehensive loss that are also recorded as part of net loss. Reclassifications to earnings related to cash flow hedging instruments are discussed in Note 4. We have recorded a valuation allowance against all of our United States and Singapore based deferred tax assets. Accordingly, we do not expect to record a tax provision for items of other comprehensive loss until such time as the valuation allowance is substantially reduced. The effect of the reclassifications from comprehensive loss to earnings by line items is as follows:

Details about Components of Accumulated Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Statements of Operations
	Year Ended
(In thousands)	2015			2014
Unrealized gains on available-for-sale securities	$	—		$	2		Interest income and other
	—			—			Income tax provision (benefit)
	$	—		$	2		Net of tax
Unrealized losses on foreign exchange forward contracts	$	(352	)	$	(60	)	Cost of revenues
	(118		)	(21		)	Research and development expenses
	(93		)	(22		)	Selling, general and administrative expenses
	(563		)	(103		)	Total before tax
	—			—			Income tax provision (benefit)
	$	(563	)	$	(103	)	Net of tax

At December 31, 2015 and December 31, 2014 components of accumulated other comprehensive loss is as follows:

(In thousands)	Foreign Currency Translation Adjustments			Available- for-Sale Securities			Foreign Exchange Forward Contracts			Accumulated Other Comprehensive Loss
Balances at December 31, 2013	$	(456	)	$	32		$	(116	)	$	(540	)
Other comprehensive income (loss) before reclassifications	(464		)	31			(399		)	(832		)
Amounts reclassified from accumulated other comprehensive loss	—			(2		)	103			101
Net current period other comprehensive income (loss)	(464		)	29			(296		)	(731		)
Balances at December 31, 2014	$	(920	)	$	61		$	(412	)	$	(1,271	)
Other comprehensive loss before reclassifications	(625		)	(78		)	(298		)	(1,001		)
Amounts reclassified from accumulated other comprehensive loss	—			—			563			563
Net current period other comprehensive income (loss)	(625		)	(78		)	265			(438		)
Balances at December 31, 2015	$	(1,545	)	$	(17	)	$	(147	)	$	(1,709	)

45

NOTE 6 – FAIR VALUE MEASUREMENTS

We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our marketable securities and foreign exchange forward contracts as of December 31, 2015 and December 31, 2014 according to the three-level fair value hierarchy.

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Balance December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	10,468	$	—	$	10,468	$	—
Corporate debt securities and certificates of deposit	2,113		—		2,113		—
Asset backed securities	699		—		699		—
Equity security	53		53		—		—
Total marketable securities	$	13,333	$	53	$	13,280	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	78	$	—	$	78	$	—

	Fair Value Measurements at December 31, 2014 Using
(In thousands)	Balance December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	9,139	$	—	$	9,139	$	—
Corporate debt securities and certificates of deposit	3,772		—		3,772		—
Asset backed securities	2,156		—		2,156		—
Equity security	107		107		—		—
Total marketable securities	$	15,174	$	107	$	15,067	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	352	$	—	$	352	$	—

During the years ended December 31, 2015 and 2014 there were no transfers within the three level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed which merit a transfer between the disclosed levels of the valuation hierarchy.

The fair value for our U.S. government and agency obligations, corporate debt securities and certificates of deposit and asset backed securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers. The fair value for our equity security is based on a quoted market price obtained from an active market.

46

The fair value for our foreign exchange forward contracts is based on foreign currency spot and forward rates obtained from reputable financial institutions, with resulting valuations periodically validated by obtaining foreign currency spot rate and forward quotes from other industry standard sources or third party or counterparty quotes. The fair value of our foreign exchange forward contracts representing losses in the amount of $78,000 as of December 31, 2015 and $352,000 as of December 31, 2014 have been recorded in accrued expenses.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these instruments. Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in 2015 or 2014.

NOTE 7 – STOCK-BASED COMPENSATION

We have four stock-based compensation plans, including two stock incentive plans that are administered under the supervision of the Compensation Committee of the Board of Directors and under which we have granted options and restricted stock units to officers, directors and other employees, an employee stock purchase plan administered by the Committee, and a stock grant plan for directors that provides for automatic grants of shares of our common stock. New shares are issued for all option exercises, upon vesting of restricted stock units, for share issuances to board members and for issuances under our employee stock purchase plan.

Stock Incentive Plans

As of December 31, 2015, there were 778,105 shares of common stock reserved in the aggregate for issuance of awards to employees, officers and others under our two stock incentive plans. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share based benefits under these plans, it has only issued restricted stock units and options under the plans during the past ten years. As of December 31, 2015, there were 153,290 shares of common stock available for awards that may be granted under these plans in the future to employees, officers and others. Reserved shares underlying outstanding awards, including options and restricted shares, that are forfeited are available under our active stock incentive plan for future grant.

Stock Options

Options are granted under our plans at an option price per share equal to or greater than the market value of our common stock on the date of grant. Generally, options granted to employees vest over a four-year period and expire seven years after the date of grant. The plans allow for option holders to tender shares of our common stock as consideration for the option price, provided that the tendered shares have been held by the option holder at least six months.

The following is a summary of stock option activity for the year ended December 31, 2015:

	Options Outstanding		Weighted Average Exercise Price Per Share
Outstanding, December 31, 2014	578,901		$	8.30
Granted	141,000		7.18
Exercised	(72,651	)	6.30
Expired	(61,750	)	11.17
Forfeited	(15,000	)	7.13
Outstanding, December 31, 2015	570,500		$	8.00
Exercisable, December 31, 2015	194,127		$	8.51

47

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. For options outstanding at December 31, 2015, the weighted average remaining contractual term of all outstanding options was 5.01 years and their aggregate intrinsic value was $276,000. At December 31, 2015, the weighted average remaining contractual term of options that were exercisable was 3.29 years and their aggregate intrinsic value was $118,000. The aggregate intrinsic value of stock options exercised was $182,000 in 2015 and $263,000 in 2014. We received proceeds from stock option exercises of $458,000 in 2015 and $628,000 in 2014. No tax benefit was realized from the exercise of these stock options and no amounts were credited to additional paid-in capital. The total fair value of shares that vested in 2015 was $264,000 and the total fair value of shares that vested in 2014 was $209,000.

The fair value of stock options granted to our employees was estimated on the date of grant using the Black-Scholes model. The Black-Scholes valuation model incorporates ranges of assumptions that are disclosed in the table below. The risk-free interest rate is based on the United States Treasury yield curve at the time of grant with a remaining term equal to the expected life of the awards. We estimated the expected term for our graded vesting options, representing the length of time in years that the options are expected to be outstanding, using historical experience. Expected volatility was computed based on historical fluctuations in the daily price of our common stock.

For stock options granted in the two year period ended December 31, 2015, we utilized the fair value of our common stock on the date of grant and employed the following key assumptions in computing fair value using the Black-Scholes option-pricing model:

	2015	2014
Risk-free interest rates	1.56%	1.55% - 1.69%
Expected life in years	5.01 - 5.11	5.12 - 5.48
Expected volatility	40.82%	42.45% - 46.90%
Dividend yield	0.00%	0.00%
Weighted average fair value on grant date	$2.73	$3.55

Restricted Stock Units

Restricted stock units are valued at a price equal to the market value of our common stock on the date of grant, vest over a four year period provided the employee is still working for the company and entitle the holders to one share of our common stock for each restricted stock unit. There were 18,250 restricted stock units granted in 2015 and their weighted average grant date fair value was $7.18 each. There were 35,450 restricted stock units granted in 2014 and their weighted average grant date fair value was $8.12 each. The aggregate fair value of outstanding restricted stock units based on the closing share price of our common stock as of December 31, 2015 was $416,000. The aggregate fair value of restricted stock units that vested, based on the closing share price of our common stock on the vesting date, was $129,000 for the year ended December 31, 2015 and $112,000 for the year ended December 31, 2014.

A summary of activity in non-vested restricted stock units for the year ended December 31, 2015 is as follows:

Non-vested restricted stock units	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2014	53,718		$	7.43
Granted	18,250		7.18
Vested	(15,321	)	7.36
Forfeited	(2,332	)	6.10
Non-vested at December 31, 2015	54,315		$	7.43

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market value of our common stock on the first or last day of the offering period. There were 35,845 shares issued under this plan in the year ended December 31, 2015 and 22,324 shares issued in the year ended December 31, 2014. As of December 31, 2015, 95,757 shares remain available for future issuance under this plan.

48

Stock Grant Plan for Non-Employee Directors

Our stock grant plan for non-employee directors provides for automatic grants of 1,000 shares of our common stock to each of our non-employee directors upon their re-election to the Board of Directors. The plan provides for a total of 60,000 shares of our common stock for issuance to directors and will expire on May 19, 2018. Share issuances under the stock grant plan for non-employee directors were 4,000 shares of common stock in the year ended December 31, 2015 and 4,000 shares in the year ended December 31, 2014. The shares issued in 2015 had a fair market value on the date of grant equal to $41,000 (weighted average grant date fair value of $10.36). The shares issued in 2014 had a fair market value on the date of grant equal to $32,000 (weighted average grant date fair value of $8.05). As of December 31, 2015, 28,000 shares of common stock are reserved in the aggregate for future issuance under this plan.

Stock Based Compensation Information

Pre-tax stock-based compensation expense for 2015 included $398,000 for stock options and restricted stock units, $72,000 for our employee stock purchase plan, and $41,000 for 4,000 shares issued to board members for compensation purposes. Pre-tax stock-based compensation expense for 2014 included $356,000 for stock options and restricted stock units, $48,000 for our employee stock purchase plan, and $32,000 for 4,000 shares issued to board members for compensation purposes.

(In thousands)	2015		2014
Pre-tax stock-based compensation expense	$	511	$	436
Income tax benefits related to stock-based compensation	$	—	$	—

We use historical data to estimate pre-vesting forfeitures. At December 31, 2015, the total unrecognized compensation cost related to non-vested stock-based compensation arrangements was $1,413,000 and the related weighted average period over which such cost is expected to be recognized is 2.45 years.

NOTE 8 – NET LOSS PER SHARE

Net loss per basic and diluted share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common equivalent shares consist of common shares to be issued upon exercise of stock options, vesting of restricted stock units and the purchase of shares under our employee stock purchase plan, as calculated using the treasury stock method. All common equivalent shares are excluded from the calculation of net loss per diluted share due to their anti-dilutive effect. As a result, no common equivalent shares were included in the calculation of net loss per diluted share for the years ended December 31, 2015 or December 31, 2014. The components of net loss per basic and diluted share are as follows:

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2015:
Basic	$	(2,089	)	6,706	$	(0.31	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(2,089	)	6,706	$	(0.31	)

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2014:
Basic	$	(1,487	)	6,576	$	(0.23	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(1,487	)	6,576	$	(0.23	)

The calculation of diluted net loss per common share excludes 587,000 potentially dilutive shares for the year ended December 31, 2015 and 683,000 potentially dilutive shares for the year ended December 31, 2014, because their effect would be anti-dilutive.

49

NOTE 9 – OTHER FINANCIAL STATEMENT DATA

Inventories consist of the following:

	December 31,
(In thousands)	2015		2014
Raw materials and purchased parts	$	6,787	$	6,581
Work in process	508		503
Finished goods	5,970		4,573
Total inventories	$	13,265	$	11,657

Equipment and leasehold improvements consist of the following:

	December 31,
(In thousands)	2015			2014
Equipment	$	12,500		$	12,382
Leasehold improvements	1,588			1,615
	14,088			13,997
Accumulated depreciation and amortization	(11,720		)	(11,079		)
	$	2,368		$	2,918

Total depreciation and amortization expense related to equipment and leasehold improvements was $1,177,000 for the year ended December 31, 2015 and $1,081,000 for the year ended December 31, 2014.

Intangible assets consist of the following:

	December 31, 2015							December 31, 2014
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Patents	$	2,513	$	(2,253	)	$	260	$	2,625	$	(2,338	)	$	287
Software	206		(53		)	153		206		(23		)	183
Marketing assets and customer relationships	101		(21		)	80		101		(10		)	91
Non-compete agreements	101		(45		)	56		101		(20		)	81
	$	2,921	$	(2,372	)	$	549	$	3,033	$	(2,391	)	$	642

Amortization expense for the years ended December 31, 2015 and 2014 is as follows:

	Year Ended December 31,				Weighted Avg. Remaining Life-Years at December 31, 2015
(In thousands)	2015		2014
Patents	$	110	$	113	3.0
Software	29		23		5.2
Marketing assets and customer relationships	12		10		6.8
Non-compete agreements	25		20		2.2
	$	176	$	166

Amortization of patents has been classified as research and development expense in the accompanying consolidated statement of operations. Estimated aggregate amortization expense based on current intangible assets for the next five years is expected to be as follows: $163,000 in 2016, $138,000 in 2017, $85,000 in 2018, $62,000 in 2019 and $62,000 in 2020.

50

Accrued expenses consist of the following:

	December 31,
(In thousands)	2015		2014
Wages and benefits	$	1,014	$	1,715
Warranty liability	584		750
Other	361		647
	$	1,959	$	3,112

Other liabilities consist of the following:

	December 31,
(In thousands)	2015		2014
Deferred rent	$	204	$	285
Warranty liability	61		89
Deferred warranty revenue	3		26
	$	268	$	400

Warranty costs:

We provide for the estimated cost of product warranties, which cover products for periods ranging from one to three years, 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 and could be material. Our warranty liability is included as a component of accrued expenses. 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:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	839		$	513
Accrual for warranties	441			1,171
Assumed in acquisition	—			5
Warranty revision	(19		)	12
Settlements made during the period	(616		)	(862		)
Balance at end of period	645			839
Current portion of estimated warranty liability	(584		)	(750		)
Long-term estimated warranty liability	$	61		$	89

51

Deferred warranty revenue:

The current portion of our deferred warranty revenue is included as a component of advance customer payments. A reconciliation of the changes in our deferred warranty revenue is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	475		$	444
Revenue deferrals	353			338
Assumed in acquisition	—			89
Amortization of deferred revenue	(629		)	(396		)
Total deferred warranty revenue	199			475
Current portion of deferred warranty revenue	(196		)	(449		)
Long-term deferred warranty revenue	$	3		$	26

NOTE 10 – GOODWILL

There was no change in our goodwill balance in 2015. Goodwill increased by $797,000 in 2014 due to our acquisition of LDI. Adjustments to provisional amounts reflected in our March 31, 2014 consolidated balance sheet for the LDI acquisition resulted in a $46,000 increase to goodwill in the three months ended June 30, 2014.

We assess our goodwill for impairment in the fourth quarter of each year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In evaluating whether goodwill was impaired, we compared our fair value to our net book value or carrying value (Step 1 of the impairment test). In calculating fair value, we used the income approach. The income approach is a valuation technique under which we estimate future cash flows using financial forecasts. Future estimated cash flows are discounted to their present value to calculate fair value. When considering fair value, we also gave consideration to the control premium in excess of our current market capitalization that might be obtained from a third party acquirer. In the situation where net book value or carrying value exceeds fair value, the amount of impairment loss must be measured. The measurement of impairment (Step 2 of the impairment test) is calculated by determining the implied fair value of goodwill, which equals the excess of any remaining fair value over the fair values assigned to other assets and liabilities. Goodwill impairment is measured as the excess of the carrying amount of goodwill over its implied fair value.

In determining fair value under the income approach, our expected cash flows are affected by various assumptions. Fair value on a discounted cash flow basis uses our business plan and projections as the basis for expected future cash flow forecasts, with an estimation of residual growth rates thereafter. For our 2015 and 2014 goodwill impairment tests, we utilized a 15% discount rate and our terminal value was based on a multiple equal to 6 times our projected future earnings before interest, taxes, depreciation and amortization. We believe the significant assumptions used in our 2015 and 2014 goodwill impairment tests, including a 15% discount rate, are reflective of the assumptions currently used in the marketplace to evaluate fair value. Our recent analyses indicate that our goodwill at December 31, 2015 and 2014 in the amount of $1,366,000 is not impaired.

NOTE 11 – INCOME TAXES

Loss before income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Sources of income (loss) before income taxes:
United States	$	(2,994	)	$	(2,536	)
Foreign	933			1,182
Total loss before income taxes	$	(2,061	)	$	(1,354	)

52

The provision (benefit) for income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Current:
Federal	$	(14	)	$	(10	)
State	4			13
Foreign	—			10
Total current	$	(10	)	$	13
Deferred:
Federal	$	(4	)	$	73
State	1			1
Foreign	41			46
Total deferred	$	38		$	120
Total provision for income taxes	$	28		$	133

A reconciliation of the statutory rate to the effective income tax rate is as follows:

	Year Ended December 31,
	2015		2014
Federal statutory rate	34.0	%	34.0	%
State income taxes, net of federal benefit	(0.2	)	6.4
U.S. Subpart F income	(1.0	)	(2.6	)
Dividend - foreign affiliate	(28.9	)	—
Stock based compensation	(1.4	)	(1.1	)
Research and experimentation credit	4.6		7.8
Foreign rate difference	17.8		34.1
Reserve for income taxes	0.7		0.7
Valuation allowance	(26.1	)	(86.6	)
Other, net	(0.8	)	(2.5	)
Effective tax rate	(1.3	)%	(9.8	)%

Our effective tax rate for 2015 and 2014 reflects the impact of having a significant portion of our operations in Singapore where corporate income tax rates are substantially lower than the United States. Lower tax rates in foreign jurisdictions impacted our income tax rate by 17.8% in 2015 and 34.1% in 2014. Receipt of a dividend from our wholly owned subsidiary in Singapore impacted our income tax rate by a negative 28.9% in 2015.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Gross UTB balance at beginning of year	$	1,508		$	1,408
Additions based on tax positions related to the current year	186			165
Additions for tax positions of prior years	289			—
Reductions for tax positions of prior years	(78		)	(48		)
Reductions due to lapse of applicable statute of limitations	(18		)	(17		)
Gross UTB balance at end of year	$	1,887		$	1,508
Net UTB balance at end of year	$	126		$	140

53

The ending net UTB results from adjusting the gross balance for items such as federal, state, and non-U.S. deferred items, interest and penalties, and deductible taxes. The net UTB is a long-term income tax reserve within our consolidated balance sheets. We recognize interest and penalties related to unrecognized tax benefits in tax expense. Accrued interest and penalties on a gross basis were $1,000 as of December 31, 2015 and $6,000 as of December 31, 2014.

During the year ended December 31, 2015 we recorded a $14,000 decrease in our liability for uncertain tax positions that was recorded as an income tax benefit. Estimated gross interest and penalties included in this amount were $5,000. During the year ended December 31, 2014 we recorded a $10,000 decrease in our liability for uncertain tax positions that was recorded as an income tax benefit. Estimated gross interest and penalties included in this amount were $6,000.

We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Our federal income tax returns for years after 2011 are still subject to examination by the Internal Revenue Service. We are no longer subject to state and local income tax examinations by tax authorities for years prior to 2011. Our 2012 income tax return for Singapore is currently being audited by the Inland Revenue Authority of Singapore. We do not presently anticipate that the outcome of this audit will have any impact on our financial position or results of operations.

Deferred tax assets and liabilities consist of the following:

	December 31, 2015					December 31, 2014
(In thousands)	Assets			Liabilities		Assets			Liabilities
Equipment, leaseholds and intangible amortization, net	$	377		$	367	$	464		$	256
Inventory allowances	797			6		653			—
Accrued expenses	286			—		353			—
Warranty accrual	222			—		289			—
Deferred revenue	686			—		300			—
Accounts receivable allowance	179			—		194			—
Federal and state tax credits	3,319			—		3,175			—
Federal and state net operating loss carry forwards	4,379			—		4,296			—
Foreign net operating loss carry forwards	394			—		419			—
Stock based compensation	331			—		391			—
Unrealized gains and losses - other comprehensive loss	—			35		115			—
Other, net	73			—		137			—
Subtotal	11,043			408		10,786			256
Valuation allowance	(10,644		)	—		(10,500		)	—
Total deferred tax assets and liabilities	$	399		$	408	$	286		$	256

We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and federal, state and foreign net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our consolidated financial statements become deductible for income tax purposes, when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.

Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives.

54

At December 31, 2015, we concluded that a $10,644,000 valuation allowance is needed for all of our United States and Singapore based deferred tax assets due to our recurring losses and financial outlook. In analyzing the need for a valuation allowance, we first considered our history of cumulative operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, our financial performance in recent quarters, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all of our U.S. and Singapore based deferred tax assets. A similar analysis was performed in 2014, resulting in a $10,500,000 valuation allowance at December 31, 2014 for substantially all of our United States and Singapore based deferred tax assets. Our valuation allowance increased by $144,000 in 2015 due to the increase in total deferred tax assets. At December 31, 2015, we had federal R&D tax credit carryforwards of $3,498,000 that will begin to expire in 2019 and a federal net operating loss carry forward of $11,875,000 that will begin to expire in 2022, if unused. At December 31, 2015, the amount of tax benefit from the exercise of stock options that will be recorded as a credit to stockholder's equity when realized is insignificant.

Deferred tax assets at December 31, 2015, include $58,000 for net operating loss carryforwards incurred in the UK by CyberOptics Ltd., which was acquired in 1999. A valuation allowance has not been recorded against these deferred tax assets. The utilization of these net operating loss carry forwards is dependent on CyberOptics Ltd.’s ability to generate sufficient UK taxable income during the carry forward period. We reduced our deferred tax asset for UK net operating loss carry forwards by $6,000 in 2015 due to reductions in the future UK income tax rate.

Cash payments for income taxes, net of refunds received, were $16,000 for the year ended December 31, 2015. Cash payments for income taxes, net of refunds received, were $6,000 for the year ended December 31, 2014.

During 2015, our wholly owned Singapore subsidiary repatriated approximately $3,600,000 to our U.S. based parent, of which approximately $1,900,000 had been previously taxed. We were able to accomplish the repatriation without having to pay cash taxes given available U.S. net operating loss carryforwards. For this reason and given our current tax situation, we concluded that a one-time repatriation of funds was appropriate. It is our intention to permanently reinvest the remaining undistributed earnings of our international subsidiaries. Accordingly, we have not recorded the related deferred tax liability of approximately $2,000,000 for U.S. based income taxes on these earnings. If we were to change our position on permanent reinvestment of undistributed earnings of our international subsidiaries, it is anticipated that any such change would not have a significant impact on our financial position or results of operations. This assessment is based on the amount of remaining undistributed earnings of international subsidiaries and the size of our available U.S. net operating loss carryforwards.

NOTE 12 – OPERATING LEASES

We lease a 50,724 square foot mixed office and warehouse facility in Golden Valley, Minnesota. The lease has a term of 90 months and expires on December 31, 2018. The lease contains an escalation clause and two renewal options of three years each. Rental expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease. We are also required to pay insurance, property taxes and other operating expenses related to the leased facility.

We lease a 10,165 square foot mixed office and warehouse facility in Bloomington, Minnesota. The lease was assumed on March 14, 2014 in connection with our purchase of LDI and expires on April 30, 2018. Rental expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease. We are also required to pay insurance, property taxes and other operating expenses related to the leased facility.

We lease a 19,805 square foot mixed office and warehouse facility in Singapore. The current lease contains an escalation clause and expires in July 2016. Rental expense is recognized on a straight-line basis over the three year lease term. We recently extended the lease for a period of one year expiring in July 2017. The new lease contains onethree year renewal option. In addition, we lease facilities for the operations of our other subsidiaries under operating leases that expire at various times through June 2018.

55

Total rent expense was $1,218,000 for the year ended December 31, 2015 and $1,299,000 for the year ended December 31, 2014. At December 31, 2015, the future minimum lease payments required under non-cancelable operating lease agreements are as follows:

Year ending December 31,	(In thousands)
2016	$	777
2017	587
2018	529
Total	$	1,893

NOTE 13 – 401(K) AND OTHER DEFINED CONTRIBUTION PLANS

We have a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code (the Code), whereby eligible employees may contribute a portion of their earnings, not to exceed annual amounts allowed under the Code. In addition, we may also make contributions at the discretion of the Board of Directors. We provided matching contributions to employees totaling $300,000 in 2015 and $227,000 in 2014.

We also contribute to defined contribution retirement savings plans on behalf of our employees in the United Kingdom. We made contributions to these plans totaling $33,000 in 2015 and $35,000 in 2014.

NOTE 14 – REVENUE CONCENTRATIONS, SIGNIFICANT CUSTOMERS, AND GEOGRAPHIC AREAS

The following summarizes our revenue by product line:

(In thousands)	2015		2014
SMT and High Precision 3D OEM Sensors	$	13,022	$	15,493
Semiconductor Sensors	7,677		7,595
SMT Inspection Systems	13,578		18,089
3D Scanning Solutions and Services	6,853		5,306
Total	$	41,130	$	46,483

The following summarizes certain significant customer information:

(In thousands)	Significant Customer	Percentage of Revenues
Year ended December 31, 2015	A	10	%
	B	11	%
Year ended December 31, 2014	A	17	%
	B	8	%

Our LaserAlign® sensor family has historically accounted for a significant portion of our revenues and profitability. Revenue from product shipments of LaserAlign sensors accounted for 14% of our total revenue in 2015 and 20% in 2014. Our revenue, results of operations and cash flows would be negatively impacted if our LaserAlign 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.

Export sales as a percentage of total sales were 72% for the year ended December 31, 2015 and 73% for the year ended December 31, 2014. Export sales are attributed to the country where the product is shipped. Substantially all of our export sales are negotiated, invoiced and paid in U.S. dollars.

56

Revenue by geographic area is summarized as follows:

	Year Ended December 31,
(In thousands)	2015		2014
United States	$	11,452	$	12,339
Americas	1,424		1,233
Netherlands	4,533		3,813
Other Europe	7,462		7,978
China	2,581		3,665
Japan	4,802		8,460
Other Asia	8,531		8,182
Other	345		813
Total revenues	$	41,130	$	46,483

Long-lived assets include equipment and leasehold improvements and intangible and other assets attributable to each geographic area’s operations. Long-lived assets at December 31, 2015 and 2014 are as follows:

(In thousands)	2015		2014
Long-lived assets:
United States	$	2,782	$	3,245
Europe	2		8
Asia and other	133		307
Total long-lived assets	$	2,917	$	3,560

NOTE 15 – CONTINGENCIES

We are periodically a defendant in miscellaneous claims and disputes in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management presently believes the disposition of these matters will not have a material effect on our financial position, results of operations or cash flows.

In the normal course of business to facilitate sales of our products and services, we at times indemnify other parties, including customers, with respect to certain matters. In these instances, we have agreed to hold the other parties harmless against losses arising out of intellectual property infringement or other types of claims. These agreements may limit the time within which an indemnification claim can be made, and almost always limit the amount of the claim. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made, if any, under these agreements have not had a material impact on our operating results, financial position or cash flows.

NOTE 16 – SHARE REPURCHASE

In August 2015 our Board of Directors authorized a $2,000,000 share repurchase program. The common stock may be acquired from time to time in open market transactions, block purchases and other transactions complying with the Securities and Exchange Commission's Rule 10b-18. We adopted a 10b5-1 trading plan to implement the repurchase program. We did not repurchase any of our common stock in 2015.

57

NOTE 17 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(In thousands, except per share amounts)

2015	March 31			June 30			September 30			December 31
Revenues	$	9,545		$	10,254		$	9,937		$	11,394
Gross margin	4,561			4,569			4,239			4,772
Income (loss) from operations	(826		)	(655		)	(721		)	39
Net loss	(781		)	(761		)	(514		)	(33		)
Net loss per share - Basic (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)
Net loss per share - Diluted (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)

2014	March 31			June 30			September 30			December 31
Revenues	$	9,835		$	13,263		$	11,657		$	11,728
Gross margin	4,568			5,867			5,296			5,454
Income (loss) from operations	(722		)	(275		)	(514		)	34
Net income (loss)	(809		)	(315		)	(448		)	85
Net income (loss) per share - Basic (1)	(0.12		)	(0.05		)	(0.07		)	0.01
Net income (loss) per share - Diluted (1)	(0.12		)	(0.05		)	(0.07		)	0.01

(1) The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

CyberOptics Corporation

We have audited the accompanying consolidated balance sheets of CyberOptics Corporation (a Minnesota corporation) and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CyberOptics Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

/s/GRANT THORNTON LLP

Minneapolis, Minnesota

March 9, 2016

59

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

NONE.

ITEM 9A. 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 the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

(i). MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f), and for performing an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2015. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2015 based upon criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management determined that our internal control over financial reporting was effective as of December 31, 2015 based on the criteria in Internal Control-Integrated Framework (2013) issued by the COSO.

Because CyberOptics is a smaller reporting company, this annual report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

(ii). During the quarter ended December 31, 2015, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

NONE.

60

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information contained under the headings “Proposal I–Election of Directors,” “Information About our Board of Directors and its Committees and Other Corporate Governance Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s definitive proxy statement for its annual meeting of shareholders to be held May 20, 2016 (the Proxy Statement), is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information under the headings “Information About our Board of Directors and its Committees and Other Corporate Governance Matters–Compensation of Independent Directors,” and “Executive Compensation” of the Proxy Statement is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information contained under the headings “Shares Outstanding” and "Equity Compensation Plan Information" of the Proxy Statement is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information under the headings “Information About our Board of Directors and its Committees and Other Corporate Governance Matters –Committees of Our Board–Audit Committee” and "Related Person Transactions" of the Proxy Statement is hereby incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information under the heading “Independent Accountants and Payment of Fees” and “Information About our Board of Directors and its Committees and Other Corporate Governance Matters –Committees of Our Board–Audit Committee” of the Proxy Statement is hereby incorporated by reference.

61

PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)      Financial Statements: The Consolidated Financial Statements included in Item 8 to this Form 10-K consist of the following:

Consolidated Balance Sheets as of December 31, 2015 and 2014.

Consolidated Statements of Operations for the years ended December 31, 2015 and 2014.

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 and 2014.

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014.

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and 2014.

Notes to the Consolidated Financial Statements.

62

	(b)	LIST OF EXHIBITS
Exhibit Number		Description
	2.0	Asset purchase agreement by and among LDI Acquisition Corp., Laser Design Inc., GKS Services Corp., Innovative Design Group, Inc. 3D Scanning Technologies, Ltd., and certain shareholders of Laser Design, Inc. dated as of January 14, 2014 (incorporated by reference to Exhibit 2.0 to the Company's annual report on Form 10-K for the year ended December 31, 2013).
	3.1	Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997).
	3.2	Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K dated September 8, 2008).
	*4.1	CyberOptics Corporation Stock Option Plan for Non-Employee Directors, as amended (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8 filed August 10, 2006 (file no 333-136500)).
	*4.2	CyberOptics Corporation 1998 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed August 14, 2012 (file no. 333-183296)).
	*4.3	CyberOptics Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-8 filed August 10, 2011 (file no 333-176196)).
	*4.4	CyberOptics Corporation Stock Grant Plan for Non-Employee Directors (incorporated by reference to the Company's Registration Statement on Form S-8 filed August 13, 2014 (file no 333-198100) and Exhibit 4.1 of the Company’s Registration Statement on Form S-8 filed August 14, 2008 (file no 333-153015)).
	10.1	Lease Agreement between FirstCal Industrial 2 Acquisitions LLC and the Company dated March 27, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2006).
	10.2	First Amendment to Lease effective as of March 14, 2011, by and between Hines REIT Minneapolis Industrial, LLC and CyberOptics Corporation (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2011).
	*10.3	Severance Pay Agreement with Jeffrey A. Bertelsen (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K dated May 19, 2008).
	*10.4	Amendment to Severance Pay Agreement with Jeffrey A. Bertelsen (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K dated May 18, 2009).
	*10.5	Clarification to Severance Pay Agreement with Jeffrey A. Bertelsen (incorporated by reference to Exhibit 10.9 to the Company’s annual report on Form 10-K for the year ended December 31, 2011).
	*10.6	Employment agreement with Subodh Kulkarni dated January 13, 2014 (incorporated by reference to Exhibit 10.12 to the Company's annual report on Form 10-K for the year ended December 31, 2013)
	10.8	Tenancy agreement between RBC Investor Services Trust Singapore Limited and CyberOptics Singapore Private Limited dated April 4, 2013 (incorporated by reference to Exhibit 10 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2013).
	10.9	Tenancy agreement between RBC Investor Services Trust Singapore Limited and CyberOptics Singapore Private Limited dated January 27, 2016.
	*10.10	Form of stock option agreement used for option grants to employees (incorporated by reference to Exhibit 10.9 to the Company's annual report on Form 10-K for the year ended December 31, 2014).
	*10.11	Form of restricted stock award agreement used for awards to employees (incorporated by reference to Exhibit 10.10 to the Company's annual report on Form 10-K for the year ended December 31, 2014).
	21.0	Subsidiaries of the Company.
	23.1	Consent of Independent Registered Public Accounting Firm.
	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.0	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.0	Financial statements formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statement of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders' Equity, and (vi) the Notes to the Consolidated Financial Statements.

* Management Contract or Compensatory Plan or Arrangement

63

SIGNATURES

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

CYBEROPTICS CORPORATION

/s/ SUBODH KULKARNI

By Subodh Kulkarni, President and CEO

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

Name	Title	Date
/s/ SUBODH KULKARNI	President and CEO	March 7, 2016
Subodh Kulkarni	(Principal Executive Officer)
/s/ ALEX B. CIMOCHOWSKI	Director	March 7, 2016
Alex B. Cimochowski
/s/ MICHAEL M. SELZER JR.	Chairman, Director	March 7, 2016
Michael M. Selzer, Jr.
/s/ IRENE M. QUALTERS	Director	March 7, 2016
Irene M. Qualters
/s/ CRAIG D. GATES	Director	March 7, 2016
Craig D. Gates
/s/ JEFFREY A. BERTELSEN	Vice President, CFO, and COO	March 7, 2016
Jeffrey A. Bertelsen	(Principal Financial Officer
	and Principal Accounting Officer)

64

EX-10.9

___________________________

RBC INVESTOR SERVICES TRUST SINGAPORE LIMITED (in its capacity as trustee of Cambridge Industrial Trust)

CYBEROPTICS (SINGAPORE) PRIVATE LIMITED

TENANCY AGREEMENT

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 1

CONTENTS

CLAUSE	PAGE
1. TERMS AND INTERPRETATION	3
2. LETTING	3
3. THE TENANT'S COVENANTS	3
4. THE LANDLORD'S COVENANTS	14
5. RIGHTS RESERVED BY THE LANDLORD	16
SCHEDULE 1 - INTERPRETATION	25
SCHEDULE 2 - TERMS AND PARTICULARS OF RENT	29
SCHEDULE 3 - SCOPE FOR PROPERTY MANAGEMENT AND MAINTENANCE	32
SCHEDULE 4 - PROHIBITED MATERIAL / ITEMS/ ACTIVITIES ON THE
PREMISES, BUILDING OR PROPERTY (FOR THE PURPOSE OF SHARIAH
COMPLIANCE)	34
SCHEDULE - LIST OF LICENCES	35
ANNEXURE A - PLAN OF PREMISES

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 2

THIS TENANCY AGREEMENT is made on January 27, 2016.

BETWEEN:

(1) The Landlord: As defined in Item 2 of Schedule 2.

(2) The Tenant: As defined in Item 3 of Schedule 2.

THIS TENANCY AGREEMENT WITNESSETH as follows:

1. TERMS AND INTERPRETATION

1.1 Unless otherwise defined, words and expressions used in this Tenancy Agreement shall have the meanings set out in Schedule 1 unless the context requires otherwise.

1.2     The Schedules form part of this Tenancy Agreement.

2. LETTING

2.1 Letting: The Landlord lets the Premises to the Tenant for the Term on the Tenant agreeing to pay to the Landlord, the Rent and Service Charge in accordance with the provisions of Schedule 2.

2.2 Possession: The Landlord shall give and the Tenant shall take possession of the Premises on the date of this Tenancy Agreement or such other date as the parties hereto may agree (Possession Date).

3. THE TENANT'S COVENANTS

The Tenant hereby covenants with the Landlord as follows:

3.1Payment of Rent, Service Charge and other Payments:

(a) The Tenant shall pay the (i) Rent and Service Charge calculated at the Rent Rate and Service Charge rate specified in Items 11(a) and (c) of Schedule 2 respectively on the Floor Area specified in Item 6 of Schedule 2; and (ii) reimbursements and other payments, at the times and in the manner specified in this Tenancy Agreement without any deduction or demand whatsoever and there shall be no abatement of Rent, reimbursements and other payments hereby reserved by reason of any claim by the Landlord against the Tenant whether for non-performance or breach of the Landlord's obligations hereunder or otherwise. For the avoidance of doubt, the Tenant must not exercise any right or claim to withhold the Rent, reimbursements and other payments hereby reserved, or any right or claim to legal or equitable set off.

(b) The Tenant shall pay the Rent, Service Charge, reimbursement and other payments hereby reserved to the Landlord by way of GIRO payments through a bank account notified by the Landlord to the Tenant for this purpose. All bank charges levied in respect of any unsuccessful GIRO deductions together with an administrative charge (subject to applicable GST) of Singapore Dollars Twenty (S$20), shall be borne by the Tenant.

(c) The first payment of the Rent after the execution of this Tenancy Agreement is payable on or before the Term Commencement Date and shall be paid via GIRO payment through a bank account notified by the Landlord to the Tenant for this purpose and is for the period of one (1) month from the commencement date of the Term. In the event that the Term Commencement Date falls on a day other than the first day of a month,

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 3

the Tenant shall pay to the Landlord pro-rated Rent calculated from the Term Commencement Date up to the day immediately before the first day of the following month, together with the Rent in advance for the following month, and thereafter all payments shall be made on the first day of each month via GIRO.

(d) Any sums received by the Landlord from the Tenant towards payment or part payment of the Outstanding Debt may be applied at the Landlord's sole and absolute discretion, in or towards payment of any part of the Outstanding Debt and such application by the Landlord shall override any directions given by the Tenant that such sums be specifically applied in or towards satisfaction of any particular portion or specific items or part thereof of the Outstanding Debt.

3.2Payment of the Security Deposit:

(a) On or before the Term Commencement Date, the Tenant shall pay and maintain to the Landlord the amount stated in Item 8 of Schedule 2 by way of Security Deposit which said sum shall be paid by way of cash on or before the Term Commencement Date and maintained throughout the Term as security for the due observance and performance by the Tenant of all and singular the several covenants, conditions, stipulations and agreements on the part of the Tenant herein contained.

(b) In the event that the Landlord shall exercise its right of set off against the Security Deposit or any part of the Security Deposit remains outstanding for any reason whatsoever, the Tenant shall immediately pay to the Landlord an amount sufficient to restore the Security Deposit to the amount stated in Item 8 of Schedule 2 or such other amount as may be specified by the Landlord.

(c) Further the Landlord reserves the right, at its absolute discretion, to credit any payment made by the Tenant to its account as the Security Deposit until the Security Deposit has been received in full.

(d) In addition to and without prejudice to the rights of the Landlord at law, in equity and herein, if the Tenant shall at any time fail to observe or perform any of the terms covenants, conditions and obligations herein contained, the Landlord may, at its option, appropriate and apply all or any part of the Security Deposit held by the Landlord to set off all and any outstanding Rent or to compensate the Landlord for its loss or damage or provide for any contingent liabilities incurred by the Landlord due to any breach of any of the terms covenants, conditions and obligations on the part of the Tenant to be performed and or observed under this Tenancy Agreement. Any appropriation by the Landlord of the Security Deposit shall not be deemed to be a waiver by the Landlord of any non-payment or nonperformance on the part of the Tenant and shall not preclude the Landlord from exercising any of its other rights and obligations hereunder. In the event the Landlord appropriates or applies the Security Deposit in accordance with this Clause 3.2, the Tenant shall immediately on demand pay to the Landlord a sufficient amount to restore the Security Deposit to the amount stated in Item 8 of Schedule 2 or such other amount as may be specified by the Landlord.

(e) The Security Deposit shall be refunded to the Tenant free of interest after the expiry of the Term provided that the Tenant has duly performed and observed all of its covenants, conditions and obligations and is not in breach of any of the terms contained herein.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 4

3.3 Payment for Utilities: The Tenant shall pay all charges including any taxes now or in the future imposed, in respect of water, gas, electricity and any other services supplied and metered to the Premises which shall be consumed or supplied on or to the Premises and shall pay all necessary hire charges for any equipment or appliances supplied to the Tenant by SP Services Ltd or other appropriate authority or company appointed by the Landlord. Any costs in connection with the opening of account and/or upgrading of the water, gas, electrical, power and/or other supply of services to the Premises, as may be required by the Tenant shall be borne by the Tenant.

3.4 Insurance:

(a) The Tenant shall keep current at all times during the Term and during any period of holding over an adequate insurance policy for industrial all risks, and in respect of all goods (including machinery and all contents and internal partitions) belonging to or held in trust by the Tenant within the Premises, against all loss and damage including against loss or damage by fire or water.

(b) The Tenant shall keep current at all times during the Term in respect of the Premises an adequate public liability insurance policy (including products liability).

(c) The Tenant expressly agrees at its own cost, to take out such other insurance policies in such amounts as the Landlord may specify from time to time, having regard to the market practice and after consultation with the Tenant.

(d) All insurance policies referred to in this Clause 3.4 shall be taken out with such insurer as shall be approved in advance by the Landlord.

(e) Tenant shall furnish to the Landlord on demand all policies taken up and the receipts for payment of premium in respect thereof.

(f) The Tenant shall not do or permit or suffer to be done anything whereby any policies of insurance taken up on the Premises for the time being subsisting may be vitiated or rendered void or voidable or whereby the rate of premium on any insurance policy shall be liable to be increased and shall make good all damage suffered by the Landlord and repay to the Landlord all sums paid by the Landlord by way of increased premium and all expenses incurred by the Landlord in or about any renewal of such policy or policies rendered necessary by a breach or non-observance of this covenant.

3.5Administrative Fees, Legal Costs and Expenses:

(a) The Tenant agrees to pay the Landlord (on a full indemnity basis):

(i) all stamp duties in respect of this Tenancy Agreement;

(ii) all the Landlord's legal costs and expenses incurred in enforcing any provision of this Tenancy Agreement in the event of a breach by the Tenant; and

(iii) all the Landlord's costs and expenses (including solicitors' costs and costs of the Landlord's architect, engineer or surveyor where applicable, and including any and all subletting and other fees, taxes, or charges by whatever name called in respect or in connection with subletting) incurred in connection with every application made by the Tenant for any consent or approval required under this Tenancy Agreement whether or not such consent or approval shall be granted or given.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 5

(b) Each party shall bear their own solicitors' costs incurred in the preparation of this Tenancy Agreement.

3.6 Permitted Use: Unless otherwise permitted by the Landlord, Head Lessor and the Authorities, the Tenant shall at all times use the Premises strictly and only for the use specified in Item 9 of Schedule 2, subject to the Tenant obtaining all necessary approvals and licences (if any) from the Authorities at the Tenant's own cost and absolute responsibility. Provided always that the Tenant shall under no circumstances use the Premises or Property or any part thereof for activities listed under Schedule 4.

3.7 Keep in Tenantable Repair:

(a) The Tenant shall at all times keep clean and in a good and tenantable repair and condition (fair wear and tear excepted), the Premises (including the structures within), the interior, the flooring, the interior plaster or other surface material or rendering on walls and ceilings, the fixtures, all doors, windows, glass, locks, fastenings, installations and fittings for light and power, the Conducting Media within the Property and serving the Premises, sanitary, water, gas and electrical apparatus and fire detection and fire fighting installations comprised in the Premises. The Tenant's obligations in this Clause 3.7 shall extend to all improvements and additions to the Premises and to all of the Landlord's fixtures, fittings and appurtenances of whatever nature affixed or fastened to the Premises.

(b) In addition to and without prejudice to the other provisions of this Tenancy Agreement, the Tenant shall at all times, at the Tenant's cost and expense, comply with the provisions set out in Schedule 3.

(c) The Tenant shall be wholly responsible if any damage or injury is caused to the Landlord or to any person whomsoever directly or indirectly on account of the condition of any part of the interior of the Premises (including flooring, walls, ceiling, doors, windows, curtain wall and its related parts including fluoro-carbon coating thereon (if any) and other fixtures) and the Premises and shall fully indemnify the Landlord against all claims, demands, actions and legal proceedings whatsoever made against the Landlord by any person in respect thereof. In the interpretation and application of the provisions of this sub-clause, the decision of the surveyor or architect of the Landlord shall be final and binding upon the Tenant.

3.8 To Make Good Damage to Premises: The Tenant shall make good any breakage, defect or damage to the Premises or any part thereof or to any facility or appurtenances thereof or to any glass window, glass door, glass wall or glass panel of the Premises and all damaged or broken lighting, electrical equipment (including light bulbs and fluorescent tubes) and plumbing installed in or about the Premises thereof occasioned by want of care, misuse or abuse on the part of the Tenant or the Tenant's servants, agents, independent contractors, sub-contractors or licensees.

3.9 The Landlord's Right of Inspection and Right Of Repair:

(a) The Tenant shall permit the Landlord and its servants or agents at all reasonable times to enter into, inspect and view the Premises and examine the condition, to ensure that the provisions of this Tenancy Agreement has been observed and also to take a schedule of fixtures in the Premises.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 6

(b) Upon notice being given by the Landlord to the Tenant of any breach of covenant, defect, want of repair, removal of fixture or unauthorised alteration or addition or painting work for which the Tenant shall be responsible under the terms, conditions, stipulations, obligations and agreements herein, the Tenant shall execute and complete all repairs, works, replacements or removals set out in the said notice within fourteen (14) days after the service of such notice (or within such timeframe as may be reasonably required by the Landlord), to the satisfaction of the Landlord or its surveyor. If the Tenant shall not execute or complete all repairs, works, replacements or removals set out in the said notice within fourteen (14) days after the service of such notice, it shall be lawful for the Landlord's agents or workmen to enter into the Premises and execute such repairs, works, replacements or removals. The Tenant shall pay to the Landlord immediately on demand all costs and expenses so incurred by the Landlord with penalty from the date of expenditure until the date they are paid by the Tenant to the Landlord, such costs and expenses and interest to be recoverable as if they were rent in arrears.

(c) The Tenant shall permit the Landlord or the Head Lessor and its agents and workmen and all others employed by the Landlord or the Head Lessor at all reasonable times, upon giving to the Tenant prior notice (except in any case which the Landlord or Head Lessor considers an emergency in which case no notice is required) to enter upon the Premises to effect or carry out any maintenance, repairs, alterations or additions or other works which the Landlord or Head Lessor may consider necessary or desirable to any part of the Premises or the water, electrical and other facilities and services of the Premises; without payment of compensation for any nuisance, annoyance, inconvenience or damage caused to the Tenant subject to the Landlord (or other person so entering) exercising such right in a reasonable manner.

3.10 Notice of Damage: The Tenant shall give notice in writing forthwith to the Landlord of any damage that may occur to the Premises or of any damage to or want of repair or defects in the water pipes, electrical wiring, fittings, fixtures or other facilities provided by the Landlord or of any circumstances likely to cause the Premises or any person therein to be in danger, at risk or subject to any hazard.

3.11 Alterations and Additions:

(a) The Tenant shall not, without the prior written consent of the Landlord, Head Lessor and/or relevant Authorities, make or permit to be made any alterations or additions to or affecting the structure or exterior of the Premises or the appearance of the Premises as seen from the exterior.

(b) The Tenant shall not and shall not permit any person to paint or make any additions or alterations or exert any force or load on the curtain wall, its frame structure and all its related parts or to place or affix any structures or articles or materials thereon which would otherwise render the warranty granted in favour of the Landlord in respect of such wall and structure null and void.

Alterations and additions for such purpose of this Clause shall include but shall not be limited to the following works relating to:

(i) internal partitions, floors and ceilings within the Premises;

(ii) electrical wiring, conduits, light fittings and fixtures;

(iii) air conditioning installations, ducts and vents;

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 7

(iv) fire protection devices;

(v) all plumbing and gas installations, pipes, apparatus, fittings and fixtures;

(vi) all mechanical and electrical engineering works; and

(vii) painting of the Premises.

(c) The Tenant shall, in connection with the alterations and additions:

(i) remove all waste material and debris from the Property in a manner satisfactory to the Landlord; and

(ii) make good to the satisfaction of the Landlord all damage to the Property resulting from the execution of the alterations and additions.

(d) The Tenant undertakes to ensure that any such proposed alterations and additions shall be in compliance with all applicable laws and regulations and shall, furnish to the Landlord copies of all necessary permits, consents, licences, certificates and other approvals for the proposed alterations and additions. All planning and other consents necessary or required pursuant to the provisions of any statute, rule, order, regulation or by-law for any alteration or addition to the Premises or any part thereof, shall be applied for and obtained by the Tenant at the Tenant's own cost and expense, such expenses to be paid immediately by the Tenant when they fall due.

(e) The Tenant shall carry out and complete all alterations and additions to the Premises in accordance with plans, layouts, designs, drawings, specifications and using materials approved by the Landlord in a good and workmanlike manner and in accordance with all planning and other consents referred to in Clause 3.11(d), and in compliance with the reasonable requirements of the Landlord's consultants.

(f) The Tenant shall submit to the Landlord as-built drawings relating to all such alterations, additions or other works. If the Tenant fails to do so, the Landlord shall be entitled to take all action necessary (including engaging consultants to make necessary inspections and to prepare the relevant as-built drawings and making payments to the Tenant's consultants). All costs and expenses so incurred by the Landlord together with interest from the date of expenditure until the date they are paid by the Tenant to the Landlord shall be recoverable from the Tenant as if they were rent in arrears.

(g) The Tenant shall effect and maintain at the Tenant's cost and expense, comprehensive risk insurance policies and public liability policies, from the period of the commencement of the additions and alterations, with an insurance company in Singapore approved by the Landlord. Copies of such policies shall be furnished to the Landlord by the Tenant without demand, prior to the commencement of the additions and alterations.

(h) The Tenant shall indemnify the Landlord against (i) any breach, non-observance or non-performance in obtaining any of the consents mentioned in Clause 3.11(a) herein and (ii) any claims, losses, damages, demands or actions brought by any person arising out of or incidental to the execution of the additions and alterations.

3.12 Yield Up in Repair at End of Term and Reinstatement: At the expiration or earlier determination of the Term:

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 8

(a) The Tenant shall surrender to the Landlord all keys giving access to all parts of the Premises irrespective of whether or not the same have been supplied by the Landlord.

(b) The Tenant shall reinstate (as set out in Clause 3.12(d)) within the Reinstatement Period and quietly yield up the Premises in the bare condition (fair wear and tear excepted) to the satisfaction of the Landlord after removal of all additions and improvements made by the Tenant to the Premises and all fixtures which may be fixed or fastened to or upon the Premises by the Tenant save for those which the Landlord has expressly agreed at its absolute discretion need not be reinstated.

(c) Prior to yielding up of the Premises, the Landlord and the Tenant shall conduct one or more joint- inspections of the Premises, including but not limited to the fixtures and fittings thereon and on the mechanical and electrical equipment systems (where applicable) and any defects, damage or items requiring rectification (which shall include replacing) by the Landlord shall be rectified by the Tenant (at its own cost) to the satisfaction of the Landlord before yielding up of the Premises.

(d) If the Tenant fails to reinstate the Premises by the end of the Reinstatement Period or fails to effect the rectification before yielding up of the Premises in accordance with the provisions of this Clause 3.12, the Landlord may effect the same at the Tenant's cost and expense. All costs and expenses incurred by the Landlord together with double the amount of Rent in accordance with Clause 3.13 which the Landlord shall be entitled to receive had the period within which such works effected by the Landlord been added to the Term, shall be paid by the Tenant within seven (7) days of the Landlord notifying the Tenant of the amount thereof, and in this connection, a certificate from the Landlord as to the amount of costs and expenses incurred by the Landlord shall be conclusive and binding on the Tenant. The Tenant shall pay to the Landlord on demand all costs and expenses so incurred by the Landlord with penalty from the date of expenditure until the date they are paid by the Tenant to the Landlord, such costs and expenses and penalty to be recoverable as if they were rent in arrears.

(e) For the purpose hereof, the term "reinstate" shall include, but not limited to, the washing of the whole of the interior of the Premises (including the cleaning of all glass, doors and windows) and the painting with two coats of oil paint or emulsion paint or other appropriate treatment of all of the internal parts of the premises previously so treated.

3.13 Holding Over: If the Tenant continues to occupy the Premises beyond the expiration or earlier determination of the Term or fails to deliver vacant possession of the Premises to the Landlord and/or fails to reinstate the Premises in accordance with Clause 3.12 after the expiration or earlier determination of the Term, the Tenant shall pay to the Landlord for every month or part thereof of such holding over double the amount of Rent or, at the Landlord's discretion, the prevailing market rent for the Premises and such service charges as may be determined and such holding over shall not constitute a renewal of this Tenancy Agreement. During such holding over all provisions of this Tenancy Agreement with necessary changes shall apply. The inclusion of this Clause shall not be construed as the Landlord's consent for the Tenant to hold over.

3.14 Approvals, Licences and Permits: The Tenant shall obtain, effect and keep effective all approvals, licences and permits which may be required by the Landlord, Head Lessor and relevant Authorities in connection with the use and/or occupation of the Premises by the Tenant, including but not limited to those set out in Schedule 5. All costs, expenses (including appointment of consultants) and fees incurred for the obtaining/maintaining of such approvals, licences and permits shall be borne by the Tenant.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 9

Copies of all necessary approvals, licences and permits shall be given to the Landlord forthwith upon receipt/renewal thereof.

3.15 To Inform the Landlord of Notices: The Tenant shall immediately give to the Landlord a copy of any notice or letter received by the Tenant from any governmental, statutory, public or other authority in respect of the Premises.

3.16 To Comply with All Notices: The Tenant shall promptly at the Tenant's own expense comply and cause its sub-Tenants, servants or employees to comply with all notices, order, requisition or direction made or issued by the Authorities in respect of the Premises as may be imposed on the occupier of the Premises.

3.17 To Comply with Head Lease:

(a) The Tenant shall observe and promptly at the Tenant's own expense comply with and cause its servants, employees, agents, invitees, licensees and visitors to observe and comply with all such requirements as may be imposed on the occupier of the Premises by any statute, ordinance or Act now or hereafter in force and with all terms and conditions of the Head Lease.

(b) The Tenant shall indemnify the Landlord for and against all costs, losses and damages suffered by the Landlord as a result of the Tenant's breach of this Clause 3.17.

3.18 To Indemnify the Landlord: The Tenant shall indemnify, keep indemnified and hold the Landlord harmless from and against:

(a) all claims, demands, writs, summons, actions, suits, proceedings, judgments, orders, decrees, damages, costs, losses and expenses of any nature whatsoever which the Landlord may suffer or incur in connection with loss of life, personal injury and/or damage or loss to property arising from or out of any occurrence in, upon or at the Premises or the use of the Premises or any part thereof or the breach of any of the obligations herein by the Tenant or by any of the Tenant's employees, independent contractors, agents, invitees or licensees; and

(b) all loss and damage to the Premises, the Building and to all property and goods therein caused directly or indirectly by the Tenant or the Tenant's employees, independent contractors, agents, invitees or licensees and in particular but without limiting the generality of the foregoing caused directly or indirectly by the use or misuse, waste or abuse of water, electricity or gas or by faulty fittings or fixtures of the Tenant or the failure of the Tenant to maintain the Premises and/or the Building or observe the covenants in accordance with its obligations herein.

3.19 Dangerous Goods: The Tenant shall not store or bring upon the Premises or any part thereof any goods or things which are unlawful or which in the opinion of the Landlord are of an obnoxious, dangerous or hazardous nature or any explosive, combustible or inflammable substance provided always that if such explosive, combustible or inflammable materials are stored in the Premises or any part thereof with the consent in writing of the Landlord. Any increase in the premium of fire or other insurance as may have been taken out by the Landlord shall be borne by the Tenant.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 10

3.20 Discharge of Dangerous Substances: The Tenant must not permit any noxious or any deleterious, objectionable, dangerous, poisonous or explosive matter or substance to be discharged into any of the Conducting Media, and must take all measures to ensure that any effluent discharged into the Conducting Media does not harm the environment, or corrode or otherwise harm the Conducting Media or cause obstruction or deposit in the Conducting Media and that the Tenant shall take all precautions to ensure that no noxious substances are spilled or deposited on the Property and that contamination does not occur.

3.21 Safety Measures and Fire Safety:

(a) The Tenant shall keep the Premises and all fixtures, fittings, installations and appliances therein in a safe condition by adopting all necessary measures to prevent any outbreak or occurrence of fire in the Premises, to comply with the requirements of the Singapore Civil Defence Force's Fire Safety Bureau and the Fire Safety Act (Chapter 109A) and upon written notice from the Landlord to comply with such reasonable requirements as the Landlord may in its discretion stipulate as to fire precautions relating to the Premises.

(b) The Tenant shall comply with insurance, sprinkler and fire alarm regulations in respect of any partitions or other works which may be effected by the Tenant upon the Premises and to pay the costs, fees and expenses of the mechanical and engineering consultants appointed by the Landlord to ensure that the Tenant complies with such insurance, sprinkler and fire alarm regulations and to pay the costs of any alterations to the said partitions or other works or of repairing or replacing any damaged sprinklers and/or fire alarm installations incurred by reason of the non-compliance by the Tenant with such regulations.

3.22 No Cooking or Sleeping: The Tenant shall not without the written consent of the Landlord, Relevant Authorities or Head Lessor use the Premises or any part thereof or permit the same to be used for the cooking or the preparation of food nor to permit or suffer any one to sleep or reside therein but shall keep the Premises securely fastened and locked at all times when it is unattended.

3.23 The Tenant's Manager and Authorised Personnel: The Tenant shall inform the Landlord of the name and contact number of the Tenant's manager who is responsible for the daily management of the Tenant's business at the Premises including the name and contact number of the authorised personnel to contact in the case of emergency and to promptly notify the Landlord of any changes in the appointment of and particulars of such manager and/or authorised personnel.

3.24 No Parking: The Tenant shall not permit or cause to be permitted the placing or parking of bicycles, motor-cycles or scooters, trolleys and other wheeled vehicles except in places approved by the Authorities.

3.25 To Attend to Complaints: The Tenant undertakes to attend to any complaints by any members of the public against the Tenant which come to the attention of the Landlord to the satisfaction of the Landlord.

3.26 Use of Lifts:

(a) The Tenant shall ensure that the use of the lifts does not exceed the permissible load limits prescribed for such lifts.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 11

(b) Where service and/or cargo lifts are available, the Tenant shall not permit or allow the contractors, workmen or cleaners (with or without equipment tools) engaged by the Tenant to use the passenger lifts of the Property and shall ensure that they use only the service and/or cargo lifts.

3.27 No Auction or Prohibited Trade:

(a) The Tenant shall not use or permit or suffer the Premises or any part thereof to be used for an auction sale or to conduct any sale described as a bankruptcy sale or closing down sale or any sale carrying a description which in the opinion of the Landlord has a negative connotation.

(b) The Tenant shall not use the Premises or any part thereof for any gambling or any unlawful or immoral or improper purpose nor carry out or permit to be carried out any noxious, immoral, noisome, offensive or illegal act, trade, business, occupation or calling in or upon the Premises and shall not do or permit to be done any act or thing which may become a nuisance to or cause annoyance, grievance, damage or disturbance to or give cause for reasonable complaint from the tenants or occupants of neighbouring premises or of other buildings adjoining the Premises.

3.28 No Overloading: The Tenant shall not without the prior written consent of the Landlord at any time load or permit or suffer to be loaded any part of the floors of the Premises to a weight greater than the permissible load limits prescribed in the relevant building plans or approved by the Authorities for the respective floors (or such other weight as may be prescribed by the Landlord) and shall when required by the Landlord distribute any load on any part of the floor of the Premises in accordance with the directions and requirements of the Landlord, and in the interpretation and application of the provisions of this Clause relating to loading requirements the decision of the surveyor or engineer or architect of the Landlord shall be final and binding upon the Tenant. The fees of any architect, engineer or other consultant employed by the Landlord for the purpose of considering, approving and supervising any load under this Clause and all costs and expenses incurred by the Landlord in connection therewith shall be borne by the Tenant and paid forthwith upon notice being given by the Landlord to the Tenant. All costs and expenses so incurred by the Landlord together with interest from the date of expenditure until the date they are paid by the Tenant to the Landlord shall be recoverable from the Tenant as if they were rent in arrears.

3.29 Not to Interfere with Mechanical and Electrical and other Systems: The Tenant shall not use or permit to be used any heating or cooking devices or any other devices, equipment or machines which may interfere with the efficient running of the lift system, lighting, or power system or any other mechanical or electrical system or apparatus in the Premises.

3.30 Cleaning, Servicing and Landscaping:

(a) The Tenant shall undertake at the Tenant's own cost and expense the regular cleaning, servicing and maintenance of all fixtures, fittings, installations and appliances in or serving the Premises including but not limited to ventilation system, gas valves, sanitary and waste pipes and domestic waste water pipes (if applicable).

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 12

(b) The Tenant shall pay on demand to the Landlord the costs and expenses incurred by the Landlord in cleaning any drains and pipes choked or blocked up in the Premises due to the fault or default of the Tenant or its employees, customers, invitees or licensees.

(c) The Tenant shall keep the Premises clean and free from dirt and rubbish and throw all trade waste, debris, dirt and rubbish (and in particular wet waste) in proper receptacles and shall arrange for the regular removal thereof from the Premises. The Tenant shall on demand pay to the Landlord the costs and expenses of making good any damage resulting from breach of this Clause by the Tenant or by any of the Tenant's sub-Tenants, employees or visitors and shall indemnify the Landlord for any costs incurred in the removal and clearance of any rubbish or trade waste in the event the Tenant is in breach of this provision.

(d) Any cleaners employed by the Tenant for the purposes of cleaning the Premises shall be at the sole expense and responsibility of the Tenant. The Landlord shall not be liable for any misconduct or negligent acts or defaults of the said cleaning contractor or contractors.

3.31 No Disturbing Noises: The Tenant shall not do or produce, or suffer or permit to be done or produced any music, sound or noise which is/are or may be a nuisance or annoyance to the Landlord or to tenants or occupiers of adjacent or neighbouring premises.

3.32 Not to Cause any Odours and Fumes: The Tenant shall not burn or cause or permit any odours or smells to be produced or to permeate or emanate from the Premises which are in the Landlord's opinion offensive or unusual. The Tenant shall take necessary measures to ensure proper ventilation and to prevent smoke fumes or unpleasant odours and/or leakage of any substances or materials from and into the Premises and in the event that the Tenant fails to do so the Landlord may without prior notice to the Tenant take all such measures as it deems necessary to remedy this breach and all costs and expenses incurred by the Landlord shall be solely borne by the Tenant and paid forthwith. All such costs and expenses so incurred by the Landlord together with interest from the date of expenditure until the date they are paid by the Tenant to the Landlord shall be recoverable from the Tenant as if they were rent in arrears.

3.33 No Animals: The Tenant shall not keep, permit or suffer to be kept any animals, fishes, reptiles, birds, insects, pests, vermin or other livestock whatsoever in or about the Premises and shall take all reasonable precautions to keep the Premises free of rodents, insects and other pests.

3.34 Signs and Advertisements:

(a) The Tenant shall not affix, paint, attach or otherwise exhibit or permit or suffer so to be upon any part of the Premises any new sign, device, furnishing, ornament, announcement, placard, poster, light, display, advertisement, nameplate, flag, flag pole, or any other object unless approved in writing by the Landlord and at such location as shall be approved by the Landlord. The Tenant shall obtain at its own cost and expense all approvals, permits and licences from the Authorities for the display of any nameplate or signboard approved by the Landlord. In this respect, the Landlord shall assist the Tenant in the submission and application by endorsing on such plans previously

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 13

approved by the Landlord and all costs and expenses, if any, shall be borne by the Tenant. All installation costs and the electricity costs in respect of any nameplate or signboard shall be borne solely by the Tenant. Provided Always that any approval given by the Landlord pursuant to this Clause 3.34 may at the sole discretion of the Landlord be subsequently withdrawn, modified or varied.

(b) The Tenant shall not erect or install any sign, device, furnishing, ornament or object which is visible from the street or from any other building and which, in the opinion of the Landlord is incongruous or unsightly or may detract from the appearance of the Premises.

(c) Upon written request of the Landlord, the Tenant shall immediately remove anything it may have done in contravention of this Clause 3.34.

(d) If the Tenant shall fail to comply with the Landlord's written request under Clause 3.34(c), the Landlord may in addition to any other remedy available to it enter upon the Premises and do such acts and things as may be required to remedy such breach at the Tenant's expense without being liable to the Tenant for loss.

3.35 No Adverse Publicity: The Tenant shall not advertise the Tenant's business or participate in any form of publicity or promotion which the Landlord in its absolute discretion considers detrimental to the Property and/or the reputation of the Landlord.

3.36 Not to Assign: The Tenant will not at any time during the continuance of this Tenancy Agreement assign, sublet, underlet, licence or otherwise share or part with possession or use of the Premises or otherwise deal with or dispose of the Premises or any part thereof unless the Landlord has given its prior written approval thereto. In the event of a breach of this Clause 3.36, the Landlord may at its absolute discretion terminate this Tenancy Agreement whereupon the Tenant shall forthwith surrender the Premises with vacant possession without prejudice to the rights of the Landlord in respect of any antecedent breach.

3.37 Change of Address: The Tenant shall advise the Landlord in writing of any change in the address or registered office of the Tenant within seven (7) days of such change.

3.38 GST: The Tenant shall pay any tax levied on the supply of goods and services or such taxes, or impositions by whatever name called, levied or imposed by the appropriate government authority on the Rent, Service Charge and such other monies as are required to be paid under this Tenancy Agreement or under any statutory law during the Term.

3.39 Sanitary and Plumbing Facilities: All costs and expenses incurred by the Landlord in connection with or in respect of plumbing works done in the Premises shall be borne by the Tenant and paid forthwith upon notice from the Landlord to the Tenant. All cost and expenses so incurred by the Landlord together with interest from the date of expenditure until the date they are paid by the Tenant shall be recoverable from the Tenant as if they were rent in arrears.

3.40 Compliance with Immigration Act: The Tenant shall not use the Premises as a place in which any person is employed or occupies in contravention of Section

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 14

57(1)(e) of the Immigration Act (Chapter 133, Singapore) and shall indemnify the Landlord against all costs, claims, liabilities, fines or expenses whatsoever which may fall upon the Landlord by reason of any non-compliance thereof.

3.41 Financial Statements: The Tenant shall arrange at the Tenant's expense and submit to the Landlord copies of its audited annual Financial Statements and the report of its auditors as soon as available and in any event within one hundred and twenty (120) days after the close of every financial year of the Tenant (beginning with the current one).

4. THE LANDLORD'S COVENANTS

The Landlord hereby covenants with the Tenant as follows:

4.1 Quiet Enjoyment: That the Tenant, duly paying the Rent and any other charges hereby reserved and observing and performing the several covenants and stipulations herein contained on the Tenants' part to be observed and performed, shall peaceably hold and have quiet possession and enjoyment of the Premises during the Term without any disturbance by the Landlord or any person lawfully claiming under or in trust for the Landlord except as provided in this Tenancy Agreement.

4.2 Insurance of the Property: The Landlord shall at all times have the sole discretion as to whether to take out and maintain additional insurance in respect of the Property at the Landlord's own cost and expense.

4.3 Rates, Taxes And Outgoings: The Landlord shall pay all present and future rates, taxes, assessments, impositions and outgoings (including land rental) throughout the Term imposed upon or in respect of the Property or any part thereof save, except such as are herein agreed to be paid by the Tenant.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 15

5. RIGHTS RESERVED BY THE LANDLORD

PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:

5.1 Right of Re-Entry: If:

(a) the Rent hereby reserved or any part thereof or any Interest payable thereon or any other monies payable under this Tenancy Agreement shall at any time be unpaid for fourteen (14) days after the same shall have become due (whether formally demanded or not); or

(b) any covenant on the Tenant's part herein contained shall not be performed or observed; or

(c) the Tenant being a company shall go into liquidation whether voluntarily (save for the purpose of amalgamation or reconstruction) or compulsorily or a receiver shall be appointed of its undertaking, property or assets; or

(d) the Tenant shall make any arrangement with creditors for liquidation of its debts by composition or otherwise or if a judicial manager is appointed over the Tenant; or

(e) any execution or attachment shall be levied upon or issued against any of the property or assets of the Tenant, then in any one of the said events it shall be lawful for the Landlord at any time thereafter to re-enter upon the Premises or any part thereof in the name of the whole and thereupon the Term shall forthwith and absolutely cease and determine but without prejudice to the right of action of the Landlord in respect of any arrears of the Rent or of any antecedent breach of the Tenant's covenants herein contained and without prejudice to any other rights or remedies of the Landlord, the Tenant shall also pay to the Landlord compensation and damages for the loss of Rent suffered by the Landlord consequential upon the Landlord exercising its rights of re-entry.

5.2 Penalty for Non-Payment: In addition and without prejudice to any other right, power or remedy of the Landlord if the Rent and Service Charge hereby reserved or any part thereof or any monies payable by the Tenant to the Landlord in connection with the tenancy herein shall at any time remain unpaid for fourteen (14) days after the same shall have become due (whether any formal demand therefor shall have been made or not) then the Tenant shall pay to the Landlord penalty at the interest rate of twelve per cent (12%) commencing on the date on which such monies fall due for payment up to the date on which such monies are actually paid to the Landlord. The Landlord shall be entitled to recover any monies payable by the Tenant to the Landlord in connection with this Tenancy Agreement and such penalty on the Rent and/or such monies payable as aforesaid as if such monies payable and such penalty were rent in arrears.

5.3 Rights Against the Tenant's Goods:

(a) Notwithstanding anything herein contained if this Tenancy Agreement shall come to an end whether by effluxion of time or otherwise and the Tenant shall within seven (7) days thereafter fail to remove all its goods whether

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 16

belonging to the Tenant or otherwise (which expression shall include personal property of every description save for property and goods belonging to the Landlord) from the Premises or if the Tenant shall abandon the Premises (and the Tenant shall be deemed to have abandoned the Premises and terminated this Tenancy Agreement unilaterally if the Tenant without the consent in writing of the Landlord fails to open the Premises for a continuous period of seven (7) days) then and in any of the said events it shall be lawful for the Landlord to repossess the Premises for the purpose of mitigating damages and to sell or otherwise dispose of the said goods in the Premises at such time and at such price as the Landlord shall in its absolute discretion think fit without prejudice to all other rights and remedies of the Landlord. The Landlord shall after payment out of the proceeds of sale of the costs and expenses connected with the said sale apply the net proceeds of sale towards payment of all arrears of Rent and the interest thereon and all other sums of monies due and payable by the Tenant to the Landlord under this Tenancy Agreement and the balance (if any) thereof shall be retained by the Landlord. For the purpose of this Clause, goods shall include all fixtures and fittings of the Tenant.

(b) The Tenant hereby unconditionally and irrevocably agrees to indemnify the Landlord against any liability incurred by the Landlord to any third party whose property is dealt with or disposed of by the Landlord in the mistaken belief (which will be presumed unless the contrary is proved) that such property belonged to the Tenant.

5.4 Option to Renew:

(a) If:

(i) the Tenant gives a written request to the Landlord, not later than six (6) months before the expiry date of the Term (time being of the essence), that it requires an extension of the tenancy hereby created for a further term; and

(ii) at and if there shall not at the time of such request or at the time of renewal be any existing breach or non-observance of any of the covenants on the part of the Tenant herein contained, the Landlord shall at the Tenant's expense grant to the Tenant the Renewal Term, conditional upon and subject to (A) consent of the Head Lessor under the Head Lease for the renewal of the Tenancy Agreement of the Property, and (B) the revised rent and such other terms and conditions as may be prescribed by the Landlord at its absolute discretion in respect of the Tenancy Agreement for the Renewal Term.

(b) If after the new document for the Renewal Term has been signed but before commencement of the Renewal Term, the Tenant is in default of the provisions of this Tenancy Agreement, the Landlord is entitled to terminate the agreement for the Renewal Term by giving notice to the Tenant. Upon receipt of the notice, the Renewal Term will be terminated without affecting the other rights of the Landlord against the Tenant in respect of the default. The Landlord will not be liable for any loss, damage, cost, expense or compensation in connection with the termination.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 17

(c) The Tenant shall pay for (i) all fees payable to the Head Lessor in connection with the application for and grant of consent of the Head Lessor to the renewal of the Tenancy Agreement of the Premises; and (ii) stamp duty on the Tenancy Agreement (in duplicate) for the Renewal Term.

5.5 Power of The Landlord to Deal with Adjoining Property and the Premises:

(a) The Landlord may deal as it may think fit with other property belonging to the

Landlord adjoining or nearby and may erect or suffer to be erected on such property any buildings whatsoever whether or not such buildings shall affect or diminish the light or air which may now or at any time be enjoyed by the Tenant in respect of the Premises.

(b) The Landlord shall have the right at all times without obtaining any consent from the Tenant to develop the vacant land on the Property (if any) and to alter, reconstruct or modify in any way whatsoever any parts of the Building, so long as means of access to and egress from the Premises are possible and such development does not unreasonably interfere with the Tenant's operations.

(c) For the avoidance of doubt, any such development or addition or alteration shall not reduce the Rent payable under this Tenancy Agreement. The Landlord shall have the absolute right to tenant out any new space created.

5.6 Rights To Alter Building: The Landlord shall have the right to deal with the Property or any part thereof if it is so required by the Authorities notwithstanding that the same may interfere with, disturb, interrupt or affect the Tenant's peaceful and quiet enjoyment of the Premises or diminish the access of light and air enjoyed by the Premises or impede the ingress to and egress from the Premises and the Tenant shall not have any claim against the Landlord and the Landlord shall not be liable to the Tenant in any manner whatsoever for any damages or expenses whatsoever incurred by the Tenant as a result thereof.

5.7 No Representations: This Tenancy Agreement shall in no way be modified by any oral discussions which may have preceded the signing of this Tenancy Agreement. The Landlord shall not be bound by any oral representations or oral promises with respect to the Property or in respect of the Premises, except as expressly set forth in this Tenancy Agreement with the object and intention that the whole of the agreement between the Landlord and the Tenant shall be set forth herein, subject however to any variations or modifications to the terms of this Tenancy Agreement which are expressly agreed in writing by the parties hereto on or after the date of this Tenancy Agreement, as supplements to this Tenancy Agreement. The Landlord does not expressly or impliedly warrant that the Property will remain suitable or adequate for all or any of the purposes of the Tenant notwithstanding that permitted use of the Property is set out in this Tenancy Agreement and all warranties (if any) as to suitability and adequacy of the Property implied by law are hereby expressly negatived.

5.8 Damage To Building: In the event that the Building or any part thereof shall be damaged or destroyed by fire, flood, tempest, explosion, storm, lightning, act of God or other cause beyond the control of the Landlord so as to render the Premises or any part thereof substantially unfit for occupation and use then the Landlord may in its absolute discretion decide that it will rebuild or reinstate or

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 18

make fit for occupation the Premises and in such event the Landlord shall within ninety (90) days after such damage has been sustained give notice in writing to the Tenant of its decision and may in its discretion terminate this Tenancy Agreement and thereupon the Tenant shall if still in occupation vacate the Premises without compensation from the Landlord. In the case of damage caused aforesaid the Tenant shall have no claim against the Landlord for delay howsoever caused in the repairing and/or rebuilding of the Premises or the Building or any part thereof and nothing herein contained or implied shall be deemed to impose any obligations upon the Landlord to rebuild or reinstate or make fit for occupation the Building, provided that in the event that such damage or destruction has been caused by the act or default of the Tenant, its servants, independent contractors, agents, visitors, invitees or licensees, the Tenant shall be liable to the Landlord for any loss, damage, cost and expense suffered by the Landlord as a result thereof.

5.9 Costs of Improvements: If the Landlord shall at any time during the Term effect any structural alterations or any alterations or additions to the water, gas, electrical, plumbing or fire equipment or other services or appurtenances to the Premises which may be required by reason of any future statute, regulation, ordinance or by-law of the Authorities arising from or relating to the Tenant's use or requirements, then the cost of such improvements with interest to be calculated at the time payments are due shall be paid by the Tenant to the Landlord, Provided that the Tenant is duly informed of the aforesaid works and the costs in respect thereof before the Landlord commences any such works.

5.10 Use of Premises at Risk of the Tenant: The use and occupation and possession of the Premises is at the risk of the Tenant and the Tenant hereby releases to the full extent permitted by the law the Landlord, its agents, servants, contractors, licensees and invitees from all claims and demands of every kind in respect of or resulting from any accident, damage or injury occurring in the Premises and the Landlord shall have no responsibility or liability for any loss, damage or injury suffered by the Tenant whether to or in respect of the Tenant's person or property or the business conducted by the Tenant as a result of any breakage, leakage, accident, happening, occurrence or event in the Premises.

5.11 The Landlord Not Liable: Notwithstanding anything herein contained the Landlord shall not be liable to the Tenant, nor shall the Tenant have any claim against the Landlord and/or the Landlord's agents, servants, employees or contractors in respect of:

(a) any failure or inability of or delay by the Landlord and/or the Landlord's agents, servants, employees or contractors in fulfilling any of its obligations under this Tenancy Agreement or any interruption in any of the services provided by the Landlord and/or the Landlord's agents, servants, employees or contractors by reason of necessary repair or maintenance of any installations or apparatus or damage thereto or destruction thereof or by reason of mechanical or other defect or breakdown or by reason of any events or circumstances beyond the control of the Landlord and/or the Landlord's agents, servants, employees or contractors (including but not limited to fire, flood, act of God, force majeure, escape of water, riot, civil commotion, curfew, emergency, labour disputes, shortage of manpower, fuel, materials, electricity or water and/or any acts, restrictions, regulations, bylaws, prohibitions or measures of any kind on the part of any government

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 19

authorities); or

(b) any act, omission, default, misconduct or negligence of any porter, attendant or other servant or employee, independent contractor or agent of the Landlord in or about the performance or purported performance of any duty relating to the provision of the services or any of them as provided by the Landlord; or

(c) any act, omission, default, misconduct or negligence of any contractor nominated or approved by the Landlord and any such contractor appointed by the Tenant shall not be deemed to be an agent or employee of the Landlord; or

(d) any damage, injury or loss arising out of the leakage or defect of the piping, wiring and sprinkler system in the Premises and/or the structure of the Premises; or

(e) any damage, injury or loss caused by other tenants or persons in the Premises; or

Sub-paragraphs (a), (b) and (e) of this Clause 5.11 shall apply for a case of negligence as well as to any other cause(s) howsoever arising.

5.12 The Landlord's Right to Exhibit Notice and Prospective Tenants to Inspect: Except where the Tenant is granted an option to renew for the Renewal Term and the Tenant exercises such option pursuant to Clause 5.4, the Landlord have the unqualified and irrevocable right six (6) months preceding the expiration of the Term to exhibit where the Landlord shall think fit a notice indicating that the Premises will be vacant and will be available for letting which notice the Tenant shall not remove or conceal and to allow the Landlord or a representative of the Landlord at all reasonable times during the aforesaid six (6) months to view the Premises with prospective tenants or occupiers.

5.13 Signs and Advertisements: The Landlord shall have the right to erect any signs, placards, posters, lights, displays or advertisements at such location and in such manner and for such length of time as the Landlord shall in its sole discretion deem appropriate.

5.14 Government Acquisition: If:

(a) the Property is acquired by any relevant authority; or

(b) a notice, order or gazette notification is issued, made or published in respect of the intended or actual acquisition of the Property by any relevant authority, the Landlord may terminate this Tenancy Agreement by giving written notice to the Tenant. On the said expiry date of such notice, this Tenancy Agreement will end without affecting the rights of the Landlord against the Tenant for any previous default by the Tenant arising out of or in connection with this Tenancy Agreement, and without the Landlord being liable for any inconvenience, loss, damage, cost, expense or compensation in connection with the termination of this Tenancy Agreement pursuant to this Clause 5.14.

5.15 Termination of Head Lease Term by Head Lessor:

(a) If the Head Lessor, at any time before the expiry of the Head Lease Term:

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 20

(i) terminates the lease granted to the Landlord under the Head Lease, and in connection therewith, gives notice in writing thereof to the Landlord (Head Lease Termination Notice);

(ii) notifies the Landlord of the revocation of its consent to the Tenancy Agreement (Revocation Notice); or

(iii) becomes entitled to and re-enters the Property or any part thereof in the name of the whole, or

(b) if upon the expiration of the initial leasehold term of 30 years under the Head Lease, the Head Lessor does not grant the further term of 30 years from the expiry of the said initial leasehold term, the Landlord shall, upon the Landlord's receipt of the Head Lease Termination Notice or the Revocation Notice or upon the Landlord becoming aware of Head Lessor's intention to re-enter the Property or upon the Landlord becoming aware of Head Lessor's intention not to grant the further term of 30 years from the expiry of the initial leasehold term of 30 years under the Head Lease, give written notice thereof to the Tenant. On (i) the expiry date of the Head Lease Termination Notice or (ii) the expiry date of the Revocation Notice or (iii) the date of Head Lessor's re-entry into the Property or (iv) the expiry of the initial leasehold term of 30 years under the Head Lease, whichever date is the earliest, the Term and this Tenancy Agreement will end without affecting the rights of the Landlord against the Tenant for any previous default by the Tenant arising out of or in connection with this Tenancy Agreement, and without the Head Lessor or the Landlord being liable for any inconvenience, loss, damage, cost, expense or compensation in connection with the termination of this Tenancy Agreement pursuant to this Clause 5.15.

5.16 Landlord May Assign:

(a) The Landlord may assign or charge all of its rights and benefits under this Tenancy Agreement to any lender of the Landlord or any mortgagee of the Property.

(b) The Tenant acknowledges that the Landlord's rights and benefits under this Tenancy Agreement must accrue to the owner for the time being of the Property and that:

(i) the Landlord shall be entitled to assign or transfer its rights and benefits under this Tenancy Agreement to any trustee for the time being of REIT; and

(ii) on any disposal of the Property by any owner of the Property (including, without limitation, the Landlord or any trustee for the time being of REIT, such owner shall be entitled to, assign or transfer its rights and benefits under this Tenancy Agreement to any subsequent purchaser(s) of the Property.

(c) Upon such assignment or transfer, the Tenant:

(i) is treated to have consented to such assignment or transfer;

(ii) must accept any transferee of the Landlord as its new Landlord;

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 21

(iii) must release the Landlord from all its obligations in this Tenancy Agreement, particularly, the Landlord's obligation to refund the Security Deposit and other sums under this Tenancy Agreement upon transfer (less any authorized deductions) of such Security Deposit to the transferee; and

(iv) must become a party to and sign any agreement with the Landlord and its transferee relating to the said assignment or transfer, if required by the Landlord. Such agreement will be prepared by the Landlord at its own cost and expense.

5.17 The Landlord Not a Partner: The Landlord shall not in any way or for any purpose be construed as a partner or being in joint venture with the Tenant and the provisions herein relating to additional rent (if any) are solely to provide a method of computing rent and shall not create any relationship between the parties other than that of Landlord and Tenant.

5.18 Waivers and Extension of Time: Any indulgence or extension of time granted by the Landlord to the Tenant and/or any oversight by the Landlord shall not operate as a waiver of the Landlord's rights hereunder in respect of any continuing or subsequent default, breach or non-observance or non-performance of the Tenant's covenants and conditions herein contained or so as to defeat or affect in any way the rights of the Landlord herein in respect of any such continuing or subsequent default, breach or nonobservance or non-performance. Any consent given by the Landlord shall operate as a consent only for the particular matter to which it relates and shall in no way operate as a waiver or release of any of the provisions hereof, nor shall it be construed as dispensing with the necessity of obtaining the specific written consent of the Landlord in future, unless expressly so extended. The acceptance of rent or any other monthly charges or fees (if any) or any other sums payable by the Tenant to the Landlord shall not be deemed to operate as a waiver by the Landlord of any right to proceed against the Tenant in respect of a breach by the Tenant of any of the Tenant's obligations contained herein.

5.19 Performance at the Tenant's Own Cost and Expense: The Tenant shall perform and observe all the Tenant's covenants, conditions, terms, obligations and stipulations in connection with this Tenancy Agreement at its own cost and expense.

5.20 Pre-Termination of Tenancy Agreement: Without prejudice to the rights of the Landlord at law and in equity, in the event the Tenant purports to terminate this Tenancy Agreement for any reason prior to expiry of the Term, the Landlord shall be entitled to receive from the Tenant forthwith in one lump sum the amount equivalent to the aggregate Rent for the whole Term less any Rent actually received by the Landlord at the time of the purported termination of the Tenancy Agreement by the Tenant, Provided nothing herein shall be construed to impose or imply any obligation on the Landlord to accept the Tenant's purported termination of this Tenancy Agreement.

5.21 Severability: If any one or more of the provisions contained in this Tenancy Agreement or part thereof shall be deemed invalid, unlawful or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions (or part thereof as the case may be) contained herein shall not in any way be affected or impaired.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 22

5.22 Registration of Tenancy Agreement and Subdivision: The Tenant shall not at any time, register the Tenancy Agreement hereby created under this Tenancy Agreement at the Singapore Land Authority or at any other Registry in Singapore, or require the Landlord to subdivide the Property or any part thereof or to do any act or thing which could result in the Landlord being required to subdivide the Property or any part thereof.

5.23 Tenancy Agreement to Prevail: Where the covenants, conditions, terms, obligations, stipulations and powers contained in or subsisting in connection with this Tenancy Agreement are inconsistent with or contradictory to those contained in or subsisting under any other document where applicable, the covenants, conditions, terms, obligations, stipulations and powers contained in or subsisting in connection with this Tenancy Agreement shall prevail and have full force and effect.

5.24 Representations & Warranties: The Tenant hereby represents and warrants for the benefit of the Landlord that:

(a) it has full power and authority to enter into, exercise its rights and perform and comply with its obligations (where applicable) under this Tenancy Agreement, and all transactions arising from and in connection to the same and this Tenancy Agreement constitutes legal valid binding and enforceable obligation on its part;

(b) all actions, conditions and things required to be taken, fulfilled and done (including without limitation the obtaining of any necessary consents or licences or the making of any filing or registration) in order to (i) enable it lawfully to enter into, exercise its rights and perform and comply with its obligations (where applicable) under this Tenancy Agreement, and all transactions relating to the same; and (ii) ensure that those obligations which are legally binding and enforceable have been taken, fulfilled and done; and

(c) its entry into, exercise of its rights and/or performance of or compliance with its obligations (where applicable) under this Tenancy Agreement, and all transactions relating to the same do not and will not violate, or exceed any power or restriction granted or imposed by:

(i) any law, regulation, authorisation, directive or order (whether or not having the force of law) to which it is subject; or

(ii) the memorandum and articles and constitutive documents of it; or

(iii) any agreement to which it is a party or which is binding on it; or

(iv) any order, judgement or decree of any court or any governmental department or the Authorities.

5.25 Third Party Rights: This Tenancy Agreement shall not create any right under the Contracts (Rights of Third Parties) Act (Chapter 53B), which is enforceable by any party who is not a party to this Tenancy Agreement.

5.26 Notices: All notices, demands or other communications required or permitted to be given or made hereunder shall be in writing and delivered personally or sent by prepaid post (by air-mail if to or from an address outside Singapore) with recorded delivery or facsimile address to the intended recipient thereof at its

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 23

address set out in Schedule 2 or at its last known address or at its facsimile number set out in Schedule 2 (or to such other address or facsimile number as any party may from time to time duly notify in writing to the other). Any such notice, demand or communication shall be deemed to have been duly served (if given or made by facsimile) immediately or (if given or made by letter) 24 hours after posting or (if made or given to or from an address outside Singapore) 72 hours after posting and in proving the same it shall be sufficient to show that the envelope containing the same was duly addressed, stamped and posted. The initial addresses and facsimile numbers of the parties for the purposes of this Tenancy Agreement are specified in Schedule 2.

5.27 Governing Law: The validity, construction, interpretation and enforcement of this Tenancy Agreement and any document or agreement contemplated herein and all rights, remedies, powers, obligations and liabilities hereunder shall be governed by the Laws of the Republic of Singapore. The parties herein agree to submit to the jurisdiction of the courts of the Republic of Singapore.

5.28 Limitation of Liability: Notwithstanding any contrary provision in this Tenancy Agreement, the parties herein agree and acknowledge that the Landlord is entering into this Tenancy Agreement in its capacity as trustee of REIT and not in its personal capacity. As such, any liability of or indemnity given or to be given by the Landlord shall be limited to the assets of REIT over which the Landlord in its capacity as trustee has recourse.

5.29 Counterparts: This Tenancy Agreement may be executed in one or more counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart and each such counterpart shall constitute an original of this Tenancy Agreement but all the counterparts shall together constitute one and the same instrument.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 24

SCHEDULE 1 INTERPRETATION

1.1 Interpretation: In this Tenancy Agreement the following expressions shall have the following meanings assigned to them unless the contrary intention appears:

Act means the Land Titles (Strata) Act (Chapter 158);

Authorities means all relevant government authorities or statutory boards;

Car Park means that part of the Property designated from time to time by the Landlord to be used for the parking of motor vehicles;

Common Property means:

(i) (if the Building is subdivided and registered under the Act) the parts of the Building which are within the definition of common property under the Act; or

(ii) (if the Building is not subdivided and registered under the Act) the parts of the Building which would reasonably be treated as common parts of the Building for common use or benefit if the Building had been subdivided and registered under the Act;

Conducting Media means drains, sewers, conduits, flues, gutters, gullies, channels, ducts, shafts, watercourses, pipes, cables, wires and mains or any of them;

Financial Statements means the audited financial statements of the Tenant for the each of their financial year, which have been prepared, audited, examined, reported on and approved in accordance with accounting principles and practices generally accepted and consistently applied in Singapore and in accordance with the laws of Singapore and the Memorandum and Articles of Association of the Tenant;

Floor Area means the estimated floor area of the Premises specified in Item 6, which is measured to include:

(i) half the thickness of the walls/partitions/glass (as may be the case) which form the external boundaries of the Premises; and

(ii) the area occupied by all pillars, columns, mullions and projections within the Premises.

GST means the goods and services tax (which includes any imposition, duty or levy) chargeable under the Goods and Services Tax Act (Chapter 117A) or any statutory modification or re-enactment thereof;

HDB means Housing Development Board;

Head Lease means the Lease Agreement No. 23095 granted by the President of the Republic of Singapore and Lease Agreement No. IA/338968L granted by HDB and any reference in this Tenancy Agreement to the Head Lease includes that document as from time to time amended, modified or supplemented and any document which amends, modifies or supplements that document.;

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 25

Head Lease Term means the initial leasehold term of 30 years commencing from 1 February 1997 with a covenant by HDB to grant a further term of 30 years from the expiry of the initial leasehold term, subject to the fulfilment of the terms and conditions of the Head Lease;

Head Lease Termination Notice has the meaning ascribed to it under Clause 5.15(a)(i);

Head Lessor means the President of the Republic of Singapore and/or the HDB (as the case may be);

Interest means interest at the rate of twelve per cent (12%) per annum calculated on a daily basis of a 365-day year (as well before as after judgment);

Item means an item in Schedule 2;

Landlord includes the Landlord's successors in title and assigns;

Original Condition means the bare state and original condition of the Premises as at the Possession Date (as hereinafter defined) without any fixtures, fittings, renovations, additions, alterations, improvements made or installed in the Premises by the Tenant or taken over by the Tenant, and includes the concrete topping, sprinklers and all fixtures and fittings originally provided by the Landlord;

Outstanding Debt means all sums which are or at any time may be or become due from or owing by the Tenant to the Landlord, whether as Security Deposit, Rent, Service Charge, GST, interest, penalty or otherwise, whether actually or contingently, which the

Tenant has covenanted or is liable to pay or discharge, under or in connection with this Tenancy Agreement;

Possession Date means the date referred to in Clause 2.2;

Premises means the premises in the Building, described in Item 5 of Schedule 2, excluding the exterior faces of exterior walls, external faces of boundary walls and the roof;

Property means the property stated in Item 4 of Schedule 2;

Property Tax means the property tax payable by the Tenant in accordance with Schedule 5;

Reinstatement Period means the period of 1 month before the expiration or earlier determine of the term or such other period as the Landlord may in its absolute discretion agree;

REIT means the real estate investment trust known as Cambridge Industrial Trust, established in Singapore;

Renewal Term means the further term specified in Item 10 of Schedule 2;

Rent comprises the rent (exclusive of service charge) payable by the Tenant in accordance with Clause 3.1, and the applicable GST;

Rent Rate means the rent rate stated in Item 11(a) of Schedule 2;

Revocation Notice has the meaning ascribed to it under Clause 5.15(a)(ii);

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 26

S$ means the lawful currency of Singapore;

Security Deposit means the amount stated in Item 8 of Schedule 2 payable by the Tenant to the Landlord as security deposit;

Service Charge means the service charge payable by the Tenant as stated in Item 11(c) of Schedule 2, and the applicable GST;

Tenancy Agreement means this Tenancy Agreement including the Schedules and Annexure hereto and any agreements supplemental to it;

Tenant includes, if the Tenant is an individual, his personal representatives and permitted assigns, or if the Tenant is a company, its successors in title and permitted assigns;

Term means the term of this Tenancy Agreement stated in Item 7 of Schedule 2;

Term Commencement Date means the commencement date of the Term, as stated in Item 7 of Schedule 2; and

Utilities means electricity, water, sewerage and telecommunications.

1.2     General:

(a) Interpretation of restrictions on the Tenant: In any case where the Tenant is placed under a restriction by reason of the covenants and conditions contained in this Tenancy Agreement, the restriction shall be deemed to include the obligation on the Tenant not to permit or allow the infringement of the restriction by any person claiming rights to use, enjoy or visit the Property through, under or in trust for the Tenant.

(b) Schedules and Annexures: The Schedules and Annexures hereto shall be taken, read and construed as parts of this Tenancy Agreement and the provisions thereof shall have the same force and effect as if expressly set out in the body of this Tenancy Agreement.

(c) Clause and paragraph headings: The clause and paragraph headings in this Tenancy Agreement are inserted for ease of reference only and shall not be taken into account in the construction or interpretation of any covenant, condition or proviso to which they refer.

References in this Tenancy Agreement to a clause or Schedule or Annexure are references where the context so admits to a clause or Schedule or Annexure in this Tenancy Agreement. References in a clause to a paragraph are (unless the context otherwise requires) references to a paragraph of that clause, and references in a Schedule or Annexure to a paragraph are (unless the context otherwise requires) references to a paragraph of that Schedule or Annexure.

(d) Singular and plural meanings: Words in this Tenancy Agreement importing the singular meaning shall where the context so admits include the plural meaning and vice versa.

(e) Statutes and statutory instruments: References in this Tenancy Agreement to any statutes or statutory instruments shall include and refer to

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 27

any statute or statutory instrument amending, consolidating or replacing them respectively from time to time and for the time being in force.

(f) Gender: Words in this Tenancy Agreement for the masculine gender shall include the feminine and neuter genders and vice versa and words denoting

natural persons shall include corporations and firms and all such words shall be construed interchangeably in that manner.

(g) Joint and several obligations: Where two or more persons are included in the term Tenant, all covenants, agreements, terms, conditions and restrictions shall be binding on and applicable to them jointly and each of them severally, and shall be binding on and applicable to their personal representatives and permitted assigns respectively jointly and severally.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 28

SCHEDULE 2 TERMS AND PARTICULARS OF RENT

1.	Date
2.	Landlord
	Name:	RBC INVESTOR SERVICES TRUST
		SINGAPORE LIMITED in its capacity as trustee
		of Cambridge Industrial Trust
	Company Registration No.:	199504677Z
	Country of Incorporation:	Singapore
	Registered Office Address:	77 Robinson Road
		#18-00 Robinson 77
		Singapore 068896
	Telephone No:	62301988
3.	Tenant
	Name:	Cyberoptics (Singapore) Private Limited
	Company Registration No.:	200103162D
	Country of Incorporation:	Singapore
	Registered Office Address	21 Ubi Road 1 #02-01
		Singapore 408724
	Telephone No:	68445331
4.	Property
	Address:	21 Ubi Road 1
		Singapore 408724
	Name:	such name as may be decided by the Landlord
		and approved by the relevant authorities
5.	Premises
	Building Level:	Level 2
	Unit No(s).:	#02-01
	Demarcation:	(for purpose of identification only) edged in red
		on the attached plan marked Annexure A

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 29

6.	Floor Area
	Unit No	Area (sft)
	#02-01	19,805.58 square feet
7.	Term
	1 year from 25 July 2016 to 24 July 2017
8.	Security Deposit Amount
	S$184,000.00
9.	Permitted Use
	Assembly of electronics inspection machines, storage of high-tech automated optical
	equipment with office
10.	Renewal Term
	3 years from 25 July 2017 to 24 July 2020 at prevailing market rental rates
11.	Rent and Service Charge (Subject to GST: (With air-conditioning)
(a)	Rent Rate:		S$1.80 per square foot per month
(b)	Monthly Rent:		S$35,650.04 per month
(c)	Service Charge Rate:		S$0.60 per square foot per month
(d)	Monthly Service Charge:		S$11,883.35 per month
(e)	Total Monthly Rent & Service Charge:		S$47,533.39 per month
12.	Floor Loading
	12.5kN/m2

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 30

13. Any Other Terms and Conditions

(a) HDB sublet fees for the lease period

The amount of sublet fees shall be determined by HDB and subject to revision at each application. The HDB sublet fee shall be borne by Tenant.

(b) Mode of Rental Payment

    Tenant to pay monthly rent via GIRO.

(c) Allocation of Carpark Lots

Landlord will allocate 4 complimentary carpark lots to the Tenant. As Landlord has appointed a third party carpark operator during the lease term, Tenant shall liaise with the appointed carpark operator directly on additional allotment of carpark lots and the carpark fees chargeable.

(d) Installation of Signage

Tenant is allowed to install their company’s signage on the parapet wall at their own cost and subject to Landlord’s consent. Tenant is required to make good to the parapet wall as part of their reinstatement works at the expiry of their tenancy period. Prior to installation, Tenant shall provide the artwork and proposed location for the Landlord’s endorsement. Tenant shall pay S$150.00 per month (subject to GST) and is required to make one-time payment of S$1,926.00 (includes GST) for the signage during the Term.

(e) Reinstatement

The Tenant shall reinstate the Premises in the original condition upon the expiry of their tenancy period.

(f) Air-Conditioning Hours

Air-conditioning will only be supplied from 0800 to 1800 (Mondays to Fridays, excluding Public Holidays).

Tenant is required to submit their request to the Landlord in advance should they require air-conditioning beyond the stipulated time, on weekend or public holiday. Additional request for air-conditioning beyond the stipulated time will be chargeable at S$100.00 per hour (minimum 2 hours).

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 31

SCHEDULE 3

SCOPE FOR PROPERTY MANAGEMENT AND MAINTENANCE SERVICE

1. To keep the Premises and the Landlord's fixtures and fittings therein including without limiting the generality of the foregoing, all doors, locks, window frames, window glass, window fittings, floors, interior plaster and other finishing materials and rendering to walls and ceiling, drainage, water and other pipes and sanitary water, gas and electrical apparatus and wiring, air-conditioning and other installations from the points where the supplies enter into meters that may serve the Premises in good clean tenantable substantial and proper repair and condition (fair wear and tear alone excepted) and to so maintain the same at the expense of the Tenant and not to substitute or replace any external window of the Building but upon any window becoming damaged, broken or defective to give notice to the Landlord.

2. The Tenant particularly agrees:

(a) to reimburse the Landlord the cost of replacing all windows broken or damaged by the negligence of the Tenant or its employees, customers, invitees or licensees;

(b) to preserve and protect the fire detection and fire fighting installations provided by the Landlord within the Premises against possible damage or unauthorised interference and to indemnify the Landlord against all costs claims and damages arising from all damage thereto;

(c) to be wholly responsible for any damage or injury caused to any other person whomsoever directly or indirectly through the defective or damaged condition of any part of the Premises and to make good the same by payment or otherwise and to indemnify the Landlord against all costs, claims, demands, actions, liabilities and legal proceedings whatsoever made upon the Landlord by any person in respect thereof;

(d) to make good to the satisfaction of the Landlord any damage or breakage caused to any part of the Premises and/or the Building and/or to the Landlord's fixtures and fittings by the transportation of the Tenant's goods or effects or as a consequence of any neglect or malicious act or default of the Tenant its employees or invitees.

3. Waste collection service: All waste disposals from the property, be it the Tenant's or the sub-Tenants' refuse, shall strictly follow the guidelines set by the Environment Public Health Act.

4. Pest control service: The Tenant shall regularly examine and exterminate all pests including and not limited to rodents, cockroaches, ants and termites in the Property at least once a month.

5. Other periodic property maintenance programs:

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 32

(a) Ensure good up keeping of signage(s) and renewal of the relevant certificate(s).

(b) The windows and doors are regularly painted and kept in a good state of repair.

(c) The Premises is kept clean and free from scribbling or drawings on walls, floors or ceilings.

(d) Adequate ventilation and lighting are provided in all common and circulation areas and lifts, and any blown fuses, bulbs or defective wires and switches are immediately replaced.

(e) Roofing and gutters, when damaged, are to be repaired as soon as possible.

(f) All drawings are to be kept at the maintenance department at all times. This is to ensure proper control of the building services records.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 33

SCHEDULE 4

PROHIBITED MATERIAL /ITEMS /ACTIVITIES ON THE PREMISES,BUILDING OR PROPERTY (FOR THE PURPOSE OF SHARIAH COMPLIANCE)

The manufacturing (including without limitation printing and publication), assembly and storage of following:

• Conventional banking, conventional retail finance, conventional insurance and conventional stockbrokerage business;

• Alcoholic beverages;

• Beverages containing alcohol, regardless of % content;

• Food containing alcohol, regardless of % content;

• Pornography, lewd and sexually suggestive materials;

• Food containing pork, lard and any produce derived from pigs, regardless of % content;

• Consumable food related by-product and food related ingredients or enhancer containing produce derived from pigs, regardless of content;

• Cosmetics, perfumery and other forms of beauty enhancer applied externally or otherwise, which contain alcohol, regardless of % content;

• Any gadget, device or mechanism of any description, the primary purpose of which is to enable user to engage in any game of wager or gambling, regardless of motive behind such engagement;

• Weaponry, ammunition or other device, gadget or mechanism of any description, the primary purpose of utilisation is capable of inflicting bodily harm to humans and may depending on severity of application, result in death to humans; and

• Cigarette, cigar and any other device or gadget, the net of effect of usage thereof is to, seek relaxation through exhalation of smoke after inhalation of substance deemed harmful to bodily health of humans.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 34

SCHEDULE 5

LIST OF LICENCES

(where applicable)

1. Advertisement Licence;

2. Vehicle Parking Certificate Parking Place Licence;

3. Foodshop Licence;

4. Dangerous Goods Licence;

5. Flammable Materials Licence; and

6. Any other requirements by Authorities, where such requirements are imposed due to the Tenant's or Sub-Tenants' use or requirements.

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 35

IN WITNESS WHEREOF, the parties herein have caused this Tenancy Agreement to be executed on the day and year first abovewritten:

SIGNED by
for and on behalf of
RBC INVESTOR SERVICES TRUST
SINGAPORE LIMITED
(in its capacity as trustee of
Cambridge Industrial Trust)
in the presence of:
	/s/ Andrew Charles Allen
	Name: Andrew Charles Allen
	Designation: Authorised Signatory
	/s/ Quek Jo Feng
	Name: Quek Jo Feng
	Designation: Authorised Signatory
/s/ Vanessa Low
Witness' signature
Name: Vanessa Low
Identity Card / Passport No:
Signed by Jeffrey Bertelsen
for and on behalf of
CYBEROPTICS (SINGAPORE) PRIVATE
LIMITED
In the presence of: David Hatteberg
	/s/ Jeffrey Bertelsen
	Name: Jeffrey Bertelsen
	Designation: Executive Vice President
	CFO/COO and Director
/s/ David Hatteberg
Witness' signature
Name: David Hatteberg
Identity Card / Passport No: 439903670

Tenancy Agreement – Cyberoptics (Singapore) Private Limited - Page 36

ANNEXURE A

PLAN OF PREMISES

EX-21

Exhibit 21.0

SUBSIDIARIES

Name	Jurisdiction of Formation
CyberOptics Ltd.	United Kingdom
CyberOptics Holdings Ltd.	United Kingdom
CyberOptics (Singapore) Pte. Ltd	Singapore
Laser Design, Inc.	Minnesota
CyberOptics (China) Co., Ltd.	People’s Republic of China

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our report dated March 9, 2016, with respect to the consolidated financial statements included in the Annual Report of CyberOptics Corporation on Form 10-K for the year ended December 31, 2015. We hereby consent to the incorporation by reference of said report in the Registration Statements of CyberOptics Corporation on Forms S-8 (File No. 333-198100 effective August 13, 2014, File No. 333-183296 effective August 14, 2012, File No. 333-176196 effective August 10, 2011, File No. 333-153015 effective August 14, 2008, File No. 333-136500 effective August 10, 2006, File No. 333-115973 effective May 28, 2004, File No. 333-103310 effective February 19, 2003, File No. 333-51200 effective December 4, 2000, and File No. 333-85321 effective August 16, 1999).

/s/GRANT THORNTON LLP

Minneapolis, Minnesota

March 9, 2016

EX-31.1

Exhibit 31.1

I, Subodh Kulkarni, certify that:

1. I have reviewed this Annual Report on Form 10-K of CyberOptics Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2016

/s/ Subodh Kulkarni

Signature

Name: Subodh Kulkarni

Title:   President and CEO

EX-31.2

Exhibit 31.2

I, Jeffrey A. Bertelsen, certify that:

1. I have reviewed this Annual Report on Form 10-K of CyberOptics Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2016

/s/ Jeffrey A. Bertelsen

Signature

Name: Jeffrey A. Bertelsen

Title:   Vice President, CFO and COO

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CyberOptics Corporation (the “Company”) on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, Subodh Kulkarni, Chief Executive Officer, and Jeffrey A. Bertelsen, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Subodh Kulkarni

Subodh Kulkarni

President and CEO

March 9, 2016

/s/ Jeffrey A. Bertelsen

Jeffrey A. Bertelsen

Vice President, CFO and COO

March 9, 2016

END OF FILING

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Feb. 29, 2016	Jun. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2015
Entity Registrant Name	CYBEROPTICS CORP
Entity Central Index Key	0000768411
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,778,265
Entity Current Reporting Status	Yes
Entity Public Float			$ 67,047,043
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 4,274	$ 5,171
Marketable securities	5,249	5,285
Accounts receivable, less allowance for doubtful accounts of $521 at December 31, 2015 and $561 at December 31, 2014	8,150	7,945
Inventories	13,265	11,657
Other current assets	1,190	1,202
Deferred tax assets	0	82
Total current assets	32,128	31,342
Marketable securities, long-term	8,084	9,889
Equipment and leasehold improvements, net	2,368	2,918
Intangibles, net	549	642
Goodwill	1,366	1,366
Other assets	186	188
Deferred tax assets	58	67
Total assets	44,739	46,412
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	5,778	4,713
Advance customer payments	481	490
Accrued expenses	1,959	3,112
Total current liabilities	8,218	8,315
Other liabilities	268	400
Deferred tax liability	69	119
Reserve for income taxes	126	140
Total liabilities	$ 8,681	$ 8,974
Commitments and contingencies
Stockholders’ equity:
Preferred stock, no par value, 5,000,000 shares authorized, none outstanding	$ 0	$ 0
Common stock, no par value, 25,000,000 shares authorized, 6,771,668 shares issued and outstanding at December 31, 2015 and 6,643,851 shares issued and outstanding at December 31, 2014	31,292	30,145
Accumulated other comprehensive loss	(1,709)	(1,271)
Retained earnings	6,475	8,564
Total stockholders’ equity	36,058	37,438
Total liabilities and stockholders’ equity	$ 44,739	$ 46,412

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 521	$ 561
Preferred stock, par value (in usd per share)
Preferred stock, shares authorized, shares	5,000,000	5,000,000
Preferred stock, shares outstanding, shares	0	0
Common stock, par value (in usd per share)
Common stock, shares authorized, shares	25,000,000	25,000,000
Common stock, shares issued, shares	6,771,668	6,643,851
Common stock, shares outstanding, shares	6,771,668	6,643,851

XML

Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Revenues	$ 41,130	$ 46,483
Cost of revenues	22,989	25,298
Gross margin	18,141	21,185
Research and development expenses	7,602	8,789
Selling, general and administrative expenses	12,635	13,820
Amortization of intangibles	67	53
Loss from operations	(2,163)	(1,477)
Interest income and other	102	123
Loss before income taxes	(2,061)	(1,354)
Income tax provision	28	133
Net loss	$ (2,089)	$ (1,487)
Net loss per share - Basic (in usd per share)	$ (0.31)	$ (0.23)
Net loss per share - Diluted (in usd per share)	$ (0.31)	$ (0.23)
Weighted average shares outstanding – Basic, shares	6,706	6,576
Weighted average shares outstanding – Diluted, shares	6,706	6,576

XML

Consolidated Statements Of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net loss	$ (2,089)	$ (1,487)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(625)	(464)
Unrealized gains (losses) on available-for-sale securities:
Unrealized gains (losses)	(78)	31
Reclassification adjustment for gains included in net loss	0	(2)
Total unrealized gains (losses) on available-for-sales securities	(78)	29
Unrealized gains (losses) on foreign exchange forward contracts:
Unrealized losses	(298)	(399)
Reclassification adjustment for losses included in net loss	563	103
Total unrealized gains (losses) on foreign exchange forward contracts	265	(296)
Other comprehensive loss, before tax	(438)	(731)
Income tax provision related to items of other comprehensive loss	0	0
Other comprehensive loss, net of tax	(438)	(731)
Total comprehensive loss	$ (2,527)	$ (2,218)

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,089)	$ (1,487)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,968	1,914
Provision for doubtful accounts	(44)	(75)
Deferred taxes	38	120
Foreign currency transaction gains	(225)	(230)
Realized gains on available-for-sale securities	0	(2)
Stock-based compensation	511	436
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	(161)	(646)
Inventories	(2,489)	(647)
Other assets	(24)	(16)
Accounts payable	1,146	1,491
Advance customer payments	(9)	(534)
Accrued expenses	(1,011)	503
Net cash provided by (used in) operating activities	(2,389)	827
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale marketable securities	5,167	7,080
Proceeds from sales of available-for-sale marketable securities	1,518	5,050
Purchases of available-for-sale marketable securities	(4,934)	(7,147)
Purchase of LDI	0	(3,108)
Additions to equipment and leasehold improvements	(691)	(1,251)
Additions to patents	(106)	(111)
Net cash provided by investing activities	954	513
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	458	628
Proceeds from issuance of common stock under employee stock purchase plan	178	113
Net cash provided by financing activities	636	741
Effects of exchange rate changes on cash and cash equivalents	(98)	(11)
Net increase (decrease) in cash and cash equivalents	(897)	2,070
Cash and cash equivalents – beginning of period	5,171	3,101
Cash and cash equivalents – end of period	$ 4,274	$ 5,171

XML

Consolidated Statements Of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]
BALANCE at Dec. 31, 2013	$ 38,479	$ 28,968	$ (540)	$ 10,051
BALANCE, shares at Dec. 31, 2013		6,497
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment	628	$ 628
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment, shares		121
Share issuances for compensation purposes	32	$ 32
Share issuances for compensation purposes, shares		4
Stock-based compensation	404	$ 404
Issuance of common stock under Employee Stock Purchase Plan	113	$ 113
Issuance of common stock under Employee Stock Purchase Plan, shares		22
Other comprehensive loss, net of tax	(731)		(731)
Net loss	(1,487)			(1,487)
BALANCE at Dec. 31, 2014	37,438	$ 30,145	(1,271)	8,564
BALANCE, shares at Dec. 31, 2014		6,644
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment	458	$ 458
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment, shares		88
Share issuances for compensation purposes	41	$ 41
Share issuances for compensation purposes, shares		4
Stock-based compensation	470	$ 470
Issuance of common stock under Employee Stock Purchase Plan	178	$ 178
Issuance of common stock under Employee Stock Purchase Plan, shares		36
Other comprehensive loss, net of tax	(438)		(438)
Net loss	(2,089)			(2,089)
BALANCE at Dec. 31, 2015	$ 36,058	$ 31,292	$ (1,709)	$ 6,475
BALANCE, shares at Dec. 31, 2015		6,772

XML

Business Description And Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS DESCRIPTION AND SIGNICANT ACCOUNTING POLICIES

BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

We are a leading global developer and manufacturer of high precision sensing technology solutions. Our sensors are used in surface mount technology (SMT), semiconductor and general purpose metrology and 3D scanning markets to significantly improve yields and productivity.

Principles of Consolidation

The consolidated financial statements include the accounts of CyberOptics Corporation and its wholly-owned subsidiaries. In these notes to the consolidated financial statements, these companies are collectively referred to as “CyberOptics,” “we,” “us,” or “our.” All significant inter-company accounts and transactions have been eliminated in consolidation.

Segment Reporting

We operate in a single reportable segment.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Reclassifications

Certain reclassifications have been made to the previously reported consolidated financial statements in order to conform to the current presentation. These reclassifications had no impact on the consolidated balance sheets, statements of operations, cash flows or statements of stockholders' equity (deficit).

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash and cash equivalents consist of funds maintained in demand deposit accounts, money market accounts, corporate debt instruments and U.S. government backed obligations. Cash and cash equivalent balances, at times, may exceed federally insured limits.

Marketable Securities

All marketable securities are classified as available-for-sale and consist of U.S. government and agency backed obligations, certificates of deposit, corporate debt instruments, asset backed securities or equity securities. Marketable securities are classified as short-term or long-term in the consolidated balance sheet based on their maturity date and expectations regarding sales.

Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity until realized. These fair values are primarily determined using quoted market prices. The carrying amounts of securities, for purposes of computing unrealized gains and losses, are determined by specific identification. The cost of securities sold is also determined by specific identification.

We monitor the carrying value of our investments compared to their fair value to determine whether an other-than-temporary impairment has occurred. If a decline in fair value is determined to be other-than-temporary, an impairment charge related to that specific investment is recorded in current operations.

Cash and marketable securities held by foreign subsidiaries totaled $701,000 at December 31, 2015 and $1,095,000 at December 31, 2014.

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. Appropriate consideration is given to deterioration, obsolescence, and other factors in evaluating net realizable value. Demonstration inventories are stated at cost less accumulated amortization, generally based on a 36 month useful life.

Accumulated amortization for demonstration inventories totaled $1,310,000 at December 31, 2015 and $1,181,000 at December 31, 2014.

Accounts Receivable and Allowance for Doubtful Accounts

We extend unsecured credit to our customers in the normal course of business. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of our customers to make required payments. In making the determination of the appropriate allowance for doubtful accounts, we consider specific accounts, historical write-offs, changes in customer relationships and credit worthiness and concentrations of credit risk. Specific accounts receivable are written-off once a determination is made that the account is uncollectible.

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense as incurred. In-progress costs are capitalized with depreciation beginning when assets are placed in service. Depreciation is recorded using the straight-line method over the estimated useful lives of the equipment, ranging from one to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the asset useful life or the underlying lease term, ranging from one to eight years. Gains or losses on dispositions are included in current operations.

Business Combinations

We recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill is measured as the excess of consideration transferred over the acquisition date fair value of the assets acquired and liabilities assumed. Assets acquired include tangible and intangible assets. We determine the value and useful lives of equipment, leasehold improvements and purchased intangible assets with the assistance of an independent third-party valuation firm using certain estimates and assumptions.

While we use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation process to accurately value the assets acquired and the liabilities assumed at the acquisition date, the estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of the assets acquired and the liabilities assumed based on new information about facts and circumstances that existed as of the acquisition date. Any such adjustments would be recorded as an offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be recorded in our consolidated statements of operations.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired in a business combination. We evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that indicate goodwill might be impaired. We have determined that we have one reporting unit. Goodwill is tested by comparing our fair value, as determined based on our future estimated discounted cash flows, to our net book value.

Patents

Patents consist of legal and patent registration costs for protection of our proprietary technology. We amortize patent costs on a straight-line basis, based upon their estimated life.

Long Lived Assets

Intangible assets subject to amortization and other long lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss would be recognized when future undiscounted cash flows expected to result from use of the asset and eventual disposition are less than the carrying amount.

Revenue Recognition

Revenue from all customers, including distributors, is recognized when all significant contractual obligations have been satisfied, pricing is fixed and determinable and collection of the resulting receivable is reasonably assured. Generally, product revenues are recognized upon shipment under FOB shipping point terms, and include shipping and handling costs. Revenue from services is recognized as work is performed. Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. Estimated returns and warranty costs are recorded at the time of sale. Sales of some surface mount technology (SMT) system products may require customer acceptance due to performance or other acceptance criteria included in the terms of sale. For these SMT product sales, revenue is recognized at the time of customer acceptance. Our multiple deliverable arrangements typically include the sale of an SMT inspection system or 3D scanning solution, related installation and training, and in some cases, an extended warranty. Revenue from installation and training are recognized as the services are provided. Revenue from extended warranties is recognized ratably over the warranty period.

When a sale involves multiple elements, revenue is allocated to each respective element at inception of an arrangement using the relative selling price method. Selling price is determined based on a selling price hierarchy, consisting of vendor specific objective evidence (VSOE), third party evidence or estimated selling price. Management’s best estimate of the selling price of an SMT machine and 3D scanning solution is based on the cost of the product and a reasonable margin based on geographic location and competitive market conditions. We use VSOE to establish fair value for extended warranty, installation and training services. If VSOE is not available to establish fair value for extended warranty, installation and training services, we estimate a selling price based on the cost-build-up for the particular service and a reasonable gross margin. Costs related to products delivered are recognized in the period revenue is recognized. Cost of revenues consists primarily of direct labor, manufacturing overhead, materials and components and excludes amortization of intangible assets.

Foreign Currency Translation

Financial position and results of operations of our international subsidiaries are measured using local currency as their functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year-end. Statements of operations accounts are translated at the average rates of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a cumulative translation adjustment in stockholders’ equity.

Foreign Currency Transactions

Foreign currency transaction gains and losses are included in interest income and other in the statement of operations. We recognized a foreign currency transaction gain of $103,000 in 2015 and $130,000 in 2014.

Research and Development

Research and development (R&D) costs, including software development, are expensed when incurred. Software development costs are required to be expensed until the point that technological feasibility and proven marketability of the product are established; costs otherwise capitalizable after such point also are expensed because they are insignificant. All other R&D costs are expensed as incurred. R&D expenses consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and enhancement efforts.

Derivatives and Hedging

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Cash flows from derivative instruments are classified in the consolidated statement of cash flows in the same category as the cash flows from the items subject to designated hedge relationships.

Advertising Costs

We expense all advertising costs as incurred. Advertising expense incurred was $410,000 in 2015 and $296,000 in 2014.

Warranty Costs

We provide for the estimated cost of product warranties which cover products for periods ranging from one to three years at the time revenue is recognized. In 2014, the warranty period for certain products was increased to three years from a one year period.

Income Taxes

We evaluate uncertain tax positions using the “more likely than not” threshold (i.e., a likelihood of occurrence greater than fifty percent). The recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are classified as a gross unrecognized tax benefit until the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Only the portion of the unrecognized tax benefit that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g., resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. It is our policy to record estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense.

Deferred income taxes are recorded to reflect the tax consequences in future years of differences between the financial reporting and tax bases of assets and liabilities. Income tax expense is the sum of the tax currently payable and the change in the deferred tax assets and liabilities during the period, excluding changes in deferred tax assets recorded to equity and goodwill. Valuation allowances are established when, in the opinion of management, there is uncertainty that some portion or all of the deferred tax assets will not be realized. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on all positive and negative evidence.

Net Loss Per Share

Net loss per basic and diluted share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common equivalent shares consist of common shares to be issued upon exercise of stock options, vesting of restricted stock units and from purchases of shares under our employee stock purchase plan, as calculated using the treasury stock method. All common equivalent shares are excluded from the calculation of net loss per diluted share due to their anti-dilutive effect.

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these instruments.

Stock-Based Compensation

All equity-based payments to employees, including grants of employee stock options, are required to be recognized as an expense in our consolidated statements of operations based on the grant date fair value of the award. We utilize the straight-line method of expense recognition over the award’s service period for our graded vesting options. The fair value of stock options has been determined using the Black-Scholes model. The compensation expense recognized for all equity based awards is net of estimated forfeitures, which is based on historical data. We have classified equity based compensation within our consolidated statement of operations in the same manner as our cash based employee compensation costs. We elected to use the alternative transition guidance known as the “short-cut method” to determine our pool of windfall tax benefits at January 1, 2006.

See Note 7 to the consolidated financial statements for additional information on stock-based compensation.

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on the recognition of revenue from contracts with customers (Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers). Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The FASB has delayed the effective date of the standard by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company is currently evaluating the method of adoption and the impact of the new guidance on the consolidated financial statements.

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases).Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance.Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory (ASU No. 2015-11, Simplifying the Measurement of Inventory). The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which consists of estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. The new guidance eliminates unnecessary complexity that exists under current "lower of cost or market" guidance. For public entities, the updated guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The guidance is to be applied prospectively as of the beginning of an interim or annual reporting period, with early adoption permitted. We do not believe the implementation of this standard will have a material impact on our consolidated financial statements.

In November 2015, the FASB issued guidance on simplifying the balance sheet classification of deferred taxes (ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes). To simplify the presentation of deferred income taxes, the new guidance requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. Under prior guidance, an entity was required to separate deferred income tax liabilities and assets into current and non-current amounts. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected. For public entities, the guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We adopted the new guidance on a prospective basis for our year ending December 31, 2015. Financial statements for prior periods were not retrospectively adjusted. The new guidance was adopted to simplify the balance sheet presentation of deferred taxes, and had no other impact on our consolidated financial statements.

XML

Acquisition

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

ACQUISITION

ACQUISITION

On March 14, 2014 we acquired substantially all of the assets of Laser Design, Inc. (LDI), a privately held company based in Minneapolis, Minnesota, for aggregate consideration of $2,633,000 in cash plus the assumption of certain current liabilities of $1,073,000. We also paid aggregate signing bonuses of $475,000 to key executives of LDI which have been accounted for as acquisition consideration. LDI provides scanning systems and services to the global 3D scanner and services metrology market and enables us to enter the growing market for general purpose 3D metrology. We also include our proprietary 3D sensor technology in LDI’s products to enable differentiated product offerings.

Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets acquired, based upon their estimated fair values as of March 14, 2014. During the three months ended June 30, 2014, we completed our valuation work and management review of the assets acquired and liabilities assumed and finalized the purchase price adjustment for the net working capital acquired. Adjustments to provisional amounts reflected in our preliminary purchase price allocation as of March 31, 2014 included a $24,000 decrease in intangible assets and a $46,000 increase in goodwill, among other adjustments. These measurement period adjustments require the revision of comparative financial information for the quarter ended March 31, 2014. The adjustment to intangible assets decreased amortization expense in the three months ended March 31, 2014 by less than $300. None of the other adjustments to the provisional amounts had any impact on our results of operations for the first quarter of 2014.

The purchase price allocation for our acquisition of LDI is as follows:

(In thousands)
Accounts receivable	$	662
Inventories	551
Equipment and leasehold improvements	1,507
Other assets	91
Intangible assets	573
Identifiable assets acquired	3,384
Accounts payable	640
Accrued expenses and advance customer payments	433
Liabilities assumed	1,073
Net identifiable assets acquired	2,311
Goodwill	797
Purchase price	$	3,108

The allocation of the purchase price resulted in recognition of the following identified intangible assets:

	(In thousands)		Weighted Average Life-Years
Software	$	206	7
Patent	165		7
Marketing assets and customer relationships	101		9
Non-compete agreements	101		4
	$	573	7

The fair value of the above identified intangible assets was estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. The software, patent and marketing intangible assets have been appraised using a relief from royalty income methodology; the non-competes using a “with and without” income methodology; and customer relationships using a multi period excess earnings methodology. The goodwill recognized as a result of the LDI acquisition was primarily attributable to the value of the workforce, as well as unidentifiable intangible assets. We paid a premium over the net tangible and identifiable intangible assets acquired (i.e., goodwill) because owning LDI enables us to have access to the general purpose 3D metrology market and allows us to include our proprietary 3D sensor technology in LDI’s products.

All of the goodwill is expected to be deductible for income tax purposes over a 15 year period. The useful life of the intangible assets was determined based on management’s best estimate of the expected cash flows used to measure the fair value of the intangible assets, adjusted as appropriate for entity-specific factors, including competitive, economic or other factors that may limit the useful life of the intangible assets.

For the year ended December 31, 2015, LDI contributed $6,853,000 to our revenue and $389,000 to our net loss. For the year ended December 31, 2014, since the date of acquisition, LDI contributed $5,306,000 to our revenue and $537,000 to our net loss.

The following unaudited pro forma consolidated financial information presents our revenue and net loss as if the acquisition of LDI occurred on January 1, 2014. The unaudited pro forma consolidated financial information has been prepared for illustrative purposes only and does not purport to be indicative of the results that would have been achieved had the acquisition occurred on January 1, 2014, or of future results. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from integration of LDI.

(In thousands, except per share amounts)	Year Ended December 31,
	2015			2014
Revenue	$	41,130		$	47,904
Net loss	(2,089		)	(1,292		)
Basic and diluted loss per share	$	(0.31	)	$	(0.20	)

We incurred approximately $117,000 in LDI related acquisition costs. Approximately $47,000 of these costs were recorded as selling, general and administrative expenses in the first quarter of 2014, with the remaining balance recorded as selling, general and administrative expense in prior periods. The pro forma consolidated net loss for 2014 reflected in the table above was adjusted to exclude all acquisition related costs and the impact of the fair value adjustment to acquisition date inventories of $222,000.

XML

Marketable Securities

12 Months Ended

Dec. 31, 2015

Marketable Securities [Abstract]

MARKETABLE SECURITIES

MARKETABLE SECURITIES

Our investments in marketable securities are classified as available-for-sale and consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,806	$	—	$	(2	)	$	3,804
Corporate debt securities and certificates of deposit	1,440		—		(1		)	1,439
Asset backed securities	6		—		—			6
Marketable securities – short-term	$	5,252	$	—	$	(3	)	$	5,249
Long-Term
U.S. government and agency obligations	$	6,681	$	1	$	(18	)	$	6,664
Corporate debt securities and certificates of deposit	675		—		(1		)	674
Asset backed securities	694		—		(1		)	693
Equity security	42		11		—			53
Marketable securities – long-term	$	8,092	$	12	$	(20	)	$	8,084

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,378	$	2	$	—		$	3,380
Corporate debt securities and certificates of deposit	1,903		2		—			1,905
Marketable securities – short-term	$	5,281	$	4	$	—		$	5,285
Long-Term
U.S. government and agency obligations	$	5,761	$	3	$	(5	)	$	5,759
Corporate debt securities and certificates of deposit	1,867		1		(1		)	1,867
Asset back securities	2,156		1		(1		)	2,156
Equity security	42		65		—			107
Marketable securities – long-term	$	9,826	$	70	$	(7	)	$	9,889

Our investments in marketable debt securities all have maturities of less than 5 years. At December 31, 2015, marketable debt securities valued at $2,321,000 were in an unrealized gain position totaling $1,000 and marketable debt securities valued at $10,959,000 were in an unrealized loss position totaling $23,000 (all had been in an unrealized loss position for less than 12 months). At December 31, 2014, marketable debt securities valued at $9,287,000 were in an unrealized gain position totaling $9,000 and marketable debt securities valued at $5,780,000 were in an unrealized loss position totaling $7,000 (all had been in an unrealized loss position for less than 12 months).

We hold an investment in one equity security. At December 31, 2015, our equity security had a fair value of $53,000, and was in an $11,000 unrealized gain position. At December 31, 2014, our equity security had a fair value of $107,000, and was in a $65,000 unrealized gain position.

Net pre-tax unrealized losses for marketable securities of $11,000 at December 31, 2015 and net pre-tax unrealized gains for marketable securities of $67,000 at December 31, 2014 were recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We received proceeds from the sale of marketable securities of $1,518,000 in 2015 and $5,050,000 in 2014. No gain or loss was recognized from the sale of marketable securities in 2015. A gain of $2,000 from the sale of marketable securities was recognized in 2014.

Investments in marketable securities classified as cash equivalents of $791,000 at December 31, 2015 and $321,000 at December 31, 2014 consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	791	$	—	$	—	$	791
	$	791	$	—	$	—	$	791

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	321	$	—	$	—	$	321
	$	321	$	—	$	—	$	321

XML

Derivatives

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedges, Assets [Abstract]

DERIVATIVES

DERIVATIVES

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Hedge ineffectiveness and the amounts excluded from effectiveness testing recognized in earnings on cash flow hedges were not material for the years ended December 31, 2015 and December 31, 2014.

The maximum length of time over which we hedge our exposure to the variability in future cash flows is 12 months. Accordingly, at December 31, 2015 and December 31, 2014, all of our open foreign exchange forward contracts had maturities of one year or less. The dollar equivalent gross notional amount of our foreign exchange forward contracts designated as cash flow hedges was approximately $1,800,000 at December 31, 2015 and $7,100,000 at December 31, 2014.

Reclassifications of amounts from accumulated other comprehensive loss into earnings include accumulated gains (losses) at the time earnings are impacted by the forecasted transaction. The location in the consolidated statements of operations and consolidated statements of comprehensive loss and amounts of gains and losses related to derivative instruments designated as cash flow hedges are as follows:

	Year Ended December 31, 2015
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(185	)	$	(352	)
Research and development	(71		)	(118		)
Selling, general and administrative	(42		)	(93		)
Total	$	(298	)	$	(563	)

	Year Ended December 31, 2014
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(252	)	$	(60	)
Research and development	(76		)	(21		)
Selling, general and administrative	(71		)	(22		)
Total	$	(399	)	$	(103	)

Amounts recorded in accumulated other comprehensive loss for the after tax net unrealized gain or loss associated with cash flow hedging instruments was a loss of $147,000 as of December 31, 2015 and a loss of $412,000 as of December 31, 2014. We expect to reclassify the December 31, 2015 pre-tax net unrealized loss of $90,000 recorded in accumulated other comprehensive loss to earnings over the next 12 months with the impact offset by cash flows from underlying hedged items. The fair value of our foreign exchange forward contracts representing losses in the amount of $78,000 as of December 31, 2015 and $352,000 as of December 31, 2014 have been recorded in accrued expenses.

Additional information with respect to the impact of derivative instruments on other comprehensive loss is included in Note 5. Additional information with respect to the fair value of derivative instruments is included in Note 6.

Our foreign exchange forward contracts 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.

XML

Comprehensive Loss

12 Months Ended

Dec. 31, 2015

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

COMPREHENSIVE LOSS

COMPREHENSIVE LOSS

Reclassification adjustments are made to avoid double counting for items included in comprehensive loss that are also recorded as part of net loss. Reclassifications to earnings related to cash flow hedging instruments are discussed in Note 4. We have recorded a valuation allowance against all of our United States and Singapore based deferred tax assets. Accordingly, we do not expect to record a tax provision for items of other comprehensive loss until such time as the valuation allowance is substantially reduced. The effect of the reclassifications from comprehensive loss to earnings by line items is as follows:

Details about Components of Accumulated Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Statements of Operations
	Year Ended
(In thousands)	2015			2014
Unrealized gains on available-for-sale securities	$	—		$	2		Interest income and other
	—			—			Income tax provision (benefit)
	$	—		$	2		Net of tax
Unrealized losses on foreign exchange forward contracts	$	(352	)	$	(60	)	Cost of revenues
	(118		)	(21		)	Research and development expenses
	(93		)	(22		)	Selling, general and administrative expenses
	(563		)	(103		)	Total before tax
	—			—			Income tax provision (benefit)
	$	(563	)	$	(103	)	Net of tax

At December 31, 2015 and December 31, 2014 components of accumulated other comprehensive loss is as follows:

(In thousands)	Foreign Currency Translation Adjustments			Available- for-Sale Securities			Foreign Exchange Forward Contracts			Accumulated Other Comprehensive Loss
Balances at December 31, 2013	$	(456	)	$	32		$	(116	)	$	(540	)
Other comprehensive income (loss) before reclassifications	(464		)	31			(399		)	(832		)
Amounts reclassified from accumulated other comprehensive loss	—			(2		)	103			101
Net current period other comprehensive income (loss)	(464		)	29			(296		)	(731		)
Balances at December 31, 2014	$	(920	)	$	61		$	(412	)	$	(1,271	)
Other comprehensive loss before reclassifications	(625		)	(78		)	(298		)	(1,001		)
Amounts reclassified from accumulated other comprehensive loss	—			—			563			563
Net current period other comprehensive income (loss)	(625		)	(78		)	265			(438		)
Balances at December 31, 2015	$	(1,545	)	$	(17	)	$	(147	)	$	(1,709	)

XML

Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our marketable securities and foreign exchange forward contracts as of December 31, 2015 and December 31, 2014 according to the three-level fair value hierarchy.

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Balance December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	10,468	$	—	$	10,468	$	—
Corporate debt securities and certificates of deposit	2,113		—		2,113		—
Asset backed securities	699		—		699		—
Equity security	53		53		—		—
Total marketable securities	$	13,333	$	53	$	13,280	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	78	$	—	$	78	$	—

	Fair Value Measurements at December 31, 2014 Using
(In thousands)	Balance December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	9,139	$	—	$	9,139	$	—
Corporate debt securities and certificates of deposit	3,772		—		3,772		—
Asset backed securities	2,156		—		2,156		—
Equity security	107		107		—		—
Total marketable securities	$	15,174	$	107	$	15,067	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	352	$	—	$	352	$	—

During the years ended December 31, 2015 and 2014 there were no transfers within the three level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed which merit a transfer between the disclosed levels of the valuation hierarchy.

The fair value for our U.S. government and agency obligations, corporate debt securities and certificates of deposit and asset backed securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers. The fair value for our equity security is based on a quoted market price obtained from an active market.

The fair value for our foreign exchange forward contracts is based on foreign currency spot and forward rates obtained from reputable financial institutions, with resulting valuations periodically validated by obtaining foreign currency spot rate and forward quotes from other industry standard sources or third party or counterparty quotes. The fair value of our foreign exchange forward contracts representing losses in the amount of $78,000 as of December 31, 2015 and $352,000 as of December 31, 2014 have been recorded in accrued expenses.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these instruments. Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in 2015 or 2014.

XML

Stock-Based Compensation

12 Months Ended

Dec. 31, 2015

Share-based Compensation [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

We have four stock-based compensation plans, including two stock incentive plans that are administered under the supervision of the Compensation Committee of the Board of Directors and under which we have granted options and restricted stock units to officers, directors and other employees, an employee stock purchase plan administered by the Committee, and a stock grant plan for directors that provides for automatic grants of shares of our common stock. New shares are issued for all option exercises, upon vesting of restricted stock units, for share issuances to board members and for issuances under our employee stock purchase plan.

Stock Incentive Plans

As of December 31, 2015, there were 778,105 shares of common stock reserved in the aggregate for issuance of awards to employees, officers and others under our two stock incentive plans. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share based benefits under these plans, it has only issued restricted stock units and options under the plans during the past ten years. As of December 31, 2015, there were 153,290 shares of common stock available for awards that may be granted under these plans in the future to employees, officers and others. Reserved shares underlying outstanding awards, including options and restricted shares, that are forfeited are available under our active stock incentive plan for future grant.

Stock Options

Options are granted under our plans at an option price per share equal to or greater than the market value of our common stock on the date of grant. Generally, options granted to employees vest over a four-year period and expire seven years after the date of grant. The plans allow for option holders to tender shares of our common stock as consideration for the option price, provided that the tendered shares have been held by the option holder at least six months.

The following is a summary of stock option activity for the year ended December 31, 2015:

	Options Outstanding		Weighted Average Exercise Price Per Share
Outstanding, December 31, 2014	578,901		$	8.30
Granted	141,000		7.18
Exercised	(72,651	)	6.30
Expired	(61,750	)	11.17
Forfeited	(15,000	)	7.13
Outstanding, December 31, 2015	570,500		$	8.00
Exercisable, December 31, 2015	194,127		$	8.51

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. For options outstanding at December 31, 2015, the weighted average remaining contractual term of all outstanding options was 5.01 years and their aggregate intrinsic value was $276,000. At December 31, 2015, the weighted average remaining contractual term of options that were exercisable was 3.29 years and their aggregate intrinsic value was $118,000. The aggregate intrinsic value of stock options exercised was $182,000 in 2015 and $263,000 in 2014. We received proceeds from stock option exercises of $458,000 in 2015 and $628,000 in 2014. No tax benefit was realized from the exercise of these stock options and no amounts were credited to additional paid-in capital. The total fair value of shares that vested in 2015 was $264,000 and the total fair value of shares that vested in 2014 was $209,000.

The fair value of stock options granted to our employees was estimated on the date of grant using the Black-Scholes model. The Black-Scholes valuation model incorporates ranges of assumptions that are disclosed in the table below. The risk-free interest rate is based on the United States Treasury yield curve at the time of grant with a remaining term equal to the expected life of the awards. We estimated the expected term for our graded vesting options, representing the length of time in years that the options are expected to be outstanding, using historical experience. Expected volatility was computed based on historical fluctuations in the daily price of our common stock.

For stock options granted in the two year period ended December 31, 2015, we utilized the fair value of our common stock on the date of grant and employed the following key assumptions in computing fair value using the Black-Scholes option-pricing model:

	2015	2014
Risk-free interest rates	1.56%	1.55% - 1.69%
Expected life in years	5.01 - 5.11	5.12 - 5.48
Expected volatility	40.82%	42.45% - 46.90%
Dividend yield	0.00%	0.00%
Weighted average fair value on grant date	$2.73	$3.55

Restricted Stock Units

Restricted stock units are valued at a price equal to the market value of our common stock on the date of grant, vest over a four year period provided the employee is still working for the company and entitle the holders to one share of our common stock for each restricted stock unit. There were 18,250 restricted stock units granted in 2015 and their weighted average grant date fair value was $7.18 each. There were 35,450 restricted stock units granted in 2014 and their weighted average grant date fair value was $8.12 each. The aggregate fair value of outstanding restricted stock units based on the closing share price of our common stock as of December 31, 2015 was $416,000. The aggregate fair value of restricted stock units that vested, based on the closing share price of our common stock on the vesting date, was $129,000 for the year ended December 31, 2015 and $112,000 for the year ended December 31, 2014.

A summary of activity in non-vested restricted stock units for the year ended December 31, 2015 is as follows:

Non-vested restricted stock units	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2014	53,718		$	7.43
Granted	18,250		7.18
Vested	(15,321	)	7.36
Forfeited	(2,332	)	6.10
Non-vested at December 31, 2015	54,315		$	7.43

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market value of our common stock on the first or last day of the offering period. There were 35,845 shares issued under this plan in the year ended December 31, 2015 and 22,324 shares issued in the year ended December 31, 2014. As of December 31, 2015, 95,757 shares remain available for future issuance under this plan.

Stock Grant Plan for Non-Employee Directors

Our stock grant plan for non-employee directors provides for automatic grants of 1,000 shares of our common stock to each of our non-employee directors upon their re-election to the Board of Directors. The plan provides for a total of 60,000 shares of our common stock for issuance to directors and will expire on May 19, 2018. Share issuances under the stock grant plan for non-employee directors were 4,000 shares of common stock in the year ended December 31, 2015 and 4,000 shares in the year ended December 31, 2014. The shares issued in 2015 had a fair market value on the date of grant equal to $41,000 (weighted average grant date fair value of $10.36). The shares issued in 2014 had a fair market value on the date of grant equal to $32,000 (weighted average grant date fair value of $8.05). As of December 31, 2015, 28,000 shares of common stock are reserved in the aggregate for future issuance under this plan.

Stock Based Compensation Information

Pre-tax stock-based compensation expense for 2015 included $398,000 for stock options and restricted stock units, $72,000 for our employee stock purchase plan, and $41,000 for 4,000 shares issued to board members for compensation purposes. Pre-tax stock-based compensation expense for 2014 included $356,000 for stock options and restricted stock units, $48,000 for our employee stock purchase plan, and $32,000 for 4,000 shares issued to board members for compensation purposes.

(In thousands)	2015		2014
Pre-tax stock-based compensation expense	$	511	$	436
Income tax benefits related to stock-based compensation	$	—	$	—

We use historical data to estimate pre-vesting forfeitures. At December 31, 2015, the total unrecognized compensation cost related to non-vested stock-based compensation arrangements was $1,413,000 and the related weighted average period over which such cost is expected to be recognized is 2.45 years.

XML

Net Loss Per Share

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET LOSS PER SHARE

Net loss per basic and diluted share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common equivalent shares consist of common shares to be issued upon exercise of stock options, vesting of restricted stock units and the purchase of shares under our employee stock purchase plan, as calculated using the treasury stock method. All common equivalent shares are excluded from the calculation of net loss per diluted share due to their anti-dilutive effect. As a result, no common equivalent shares were included in the calculation of net loss per diluted share for the years ended December 31, 2015 or December 31, 2014. The components of net loss per basic and diluted share are as follows:

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2015:
Basic	$	(2,089	)	6,706	$	(0.31	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(2,089	)	6,706	$	(0.31	)

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2014:
Basic	$	(1,487	)	6,576	$	(0.23	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(1,487	)	6,576	$	(0.23	)

The calculation of diluted net loss per common share excludes 587,000 potentially dilutive shares for the year ended December 31, 2015 and 683,000 potentially dilutive shares for the year ended December 31, 2014, because their effect would be anti-dilutive.

XML

Other Financial Statement Data

12 Months Ended

Dec. 31, 2015

Other Financial Statement Data [Abstract]

OTHER FINANCIAL STATEMENT DATA

OTHER FINANCIAL STATEMENT DATA

Inventories consist of the following:

	December 31,
(In thousands)	2015		2014
Raw materials and purchased parts	$	6,787	$	6,581
Work in process	508		503
Finished goods	5,970		4,573
Total inventories	$	13,265	$	11,657

Equipment and leasehold improvements consist of the following:

	December 31,
(In thousands)	2015			2014
Equipment	$	12,500		$	12,382
Leasehold improvements	1,588			1,615
	14,088			13,997
Accumulated depreciation and amortization	(11,720		)	(11,079		)
	$	2,368		$	2,918

Total depreciation and amortization expense related to equipment and leasehold improvements was $1,177,000 for the year ended December 31, 2015 and $1,081,000 for the year ended December 31, 2014.

Intangible assets consist of the following:

	December 31, 2015							December 31, 2014
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Patents	$	2,513	$	(2,253	)	$	260	$	2,625	$	(2,338	)	$	287
Software	206		(53		)	153		206		(23		)	183
Marketing assets and customer relationships	101		(21		)	80		101		(10		)	91
Non-compete agreements	101		(45		)	56		101		(20		)	81
	$	2,921	$	(2,372	)	$	549	$	3,033	$	(2,391	)	$	642

Amortization expense for the years ended December 31, 2015 and 2014 is as follows:

	Year Ended December 31,				Weighted Avg. Remaining Life-Years at December 31, 2015
(In thousands)	2015		2014
Patents	$	110	$	113	3.0
Software	29		23		5.2
Marketing assets and customer relationships	12		10		6.8
Non-compete agreements	25		20		2.2
	$	176	$	166

Amortization of patents has been classified as research and development expense in the accompanying consolidated statement of operations. Estimated aggregate amortization expense based on current intangible assets for the next five years is expected to be as follows: $163,000 in 2016, $138,000 in 2017, $85,000 in 2018, $62,000 in 2019 and $62,000 in 2020.

Accrued expenses consist of the following:

	December 31,
(In thousands)	2015		2014
Wages and benefits	$	1,014	$	1,715
Warranty liability	584		750
Other	361		647
	$	1,959	$	3,112

Other liabilities consist of the following:

	December 31,
(In thousands)	2015		2014
Deferred rent	$	204	$	285
Warranty liability	61		89
Deferred warranty revenue	3		26
	$	268	$	400

Warranty costs:

We provide for the estimated cost of product warranties, which cover products for periods ranging from one to three years, 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 and could be material. Our warranty liability is included as a component of accrued expenses. 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:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	839		$	513
Accrual for warranties	441			1,171
Assumed in acquisition	—			5
Warranty revision	(19		)	12
Settlements made during the period	(616		)	(862		)
Balance at end of period	645			839
Current portion of estimated warranty liability	(584		)	(750		)
Long-term estimated warranty liability	$	61		$	89

Deferred warranty revenue:

The current portion of our deferred warranty revenue is included as a component of advance customer payments. A reconciliation of the changes in our deferred warranty revenue is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	475		$	444
Revenue deferrals	353			338
Assumed in acquisition	—			89
Amortization of deferred revenue	(629		)	(396		)
Total deferred warranty revenue	199			475
Current portion of deferred warranty revenue	(196		)	(449		)
Long-term deferred warranty revenue	$	3		$	26

XML

Goodwill

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

There was no change in our goodwill balance in 2015. Goodwill increased by $797,000 in 2014 due to our acquisition of LDI. Adjustments to provisional amounts reflected in our March 31, 2014 consolidated balance sheet for the LDI acquisition resulted in a $46,000 increase to goodwill in the three months ended June 30, 2014.

We assess our goodwill for impairment in the fourth quarter of each year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In evaluating whether goodwill was impaired, we compared our fair value to our net book value or carrying value (Step 1 of the impairment test). In calculating fair value, we used the income approach. The income approach is a valuation technique under which we estimate future cash flows using financial forecasts. Future estimated cash flows are discounted to their present value to calculate fair value. When considering fair value, we also gave consideration to the control premium in excess of our current market capitalization that might be obtained from a third party acquirer. In the situation where net book value or carrying value exceeds fair value, the amount of impairment loss must be measured. The measurement of impairment (Step 2 of the impairment test) is calculated by determining the implied fair value of goodwill, which equals the excess of any remaining fair value over the fair values assigned to other assets and liabilities. Goodwill impairment is measured as the excess of the carrying amount of goodwill over its implied fair value.

In determining fair value under the income approach, our expected cash flows are affected by various assumptions. Fair value on a discounted cash flow basis uses our business plan and projections as the basis for expected future cash flow forecasts, with an estimation of residual growth rates thereafter. For our 2015 and 2014 goodwill impairment tests, we utilized a 15% discount rate and our terminal value was based on a multiple equal to 6 times our projected future earnings before interest, taxes, depreciation and amortization. We believe the significant assumptions used in our 2015 and 2014 goodwill impairment tests, including a 15% discount rate, are reflective of the assumptions currently used in the marketplace to evaluate fair value. Our recent analyses indicate that our goodwill at December 31, 2015 and 2014 in the amount of $1,366,000 is not impaired.

XML

Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Loss before income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Sources of income (loss) before income taxes:
United States	$	(2,994	)	$	(2,536	)
Foreign	933			1,182
Total loss before income taxes	$	(2,061	)	$	(1,354	)

The provision (benefit) for income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Current:
Federal	$	(14	)	$	(10	)
State	4			13
Foreign	—			10
Total current	$	(10	)	$	13
Deferred:
Federal	$	(4	)	$	73
State	1			1
Foreign	41			46
Total deferred	$	38		$	120
Total provision for income taxes	$	28		$	133

A reconciliation of the statutory rate to the effective income tax rate is as follows:

	Year Ended December 31,
	2015		2014
Federal statutory rate	34.0	%	34.0	%
State income taxes, net of federal benefit	(0.2	)	6.4
U.S. Subpart F income	(1.0	)	(2.6	)
Dividend - foreign affiliate	(28.9	)	—
Stock based compensation	(1.4	)	(1.1	)
Research and experimentation credit	4.6		7.8
Foreign rate difference	17.8		34.1
Reserve for income taxes	0.7		0.7
Valuation allowance	(26.1	)	(86.6	)
Other, net	(0.8	)	(2.5	)
Effective tax rate	(1.3	)%	(9.8	)%

Our effective tax rate for 2015 and 2014 reflects the impact of having a significant portion of our operations in Singapore where corporate income tax rates are substantially lower than the United States. Lower tax rates in foreign jurisdictions impacted our income tax rate by 17.8% in 2015 and 34.1% in 2014. Receipt of a dividend from our wholly owned subsidiary in Singapore impacted our income tax rate by a negative 28.9% in 2015.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Gross UTB balance at beginning of year	$	1,508		$	1,408
Additions based on tax positions related to the current year	186			165
Additions for tax positions of prior years	289			—
Reductions for tax positions of prior years	(78		)	(48		)
Reductions due to lapse of applicable statute of limitations	(18		)	(17		)
Gross UTB balance at end of year	$	1,887		$	1,508
Net UTB balance at end of year	$	126		$	140

The ending net UTB results from adjusting the gross balance for items such as federal, state, and non-U.S. deferred items, interest and penalties, and deductible taxes. The net UTB is a long-term income tax reserve within our consolidated balance sheets. We recognize interest and penalties related to unrecognized tax benefits in tax expense. Accrued interest and penalties on a gross basis were $1,000 as of December 31, 2015 and $6,000 as of December 31, 2014.

During the year ended December 31, 2015 we recorded a $14,000 decrease in our liability for uncertain tax positions that was recorded as an income tax benefit. Estimated gross interest and penalties included in this amount were $5,000. During the year ended December 31, 2014 we recorded a $10,000 decrease in our liability for uncertain tax positions that was recorded as an income tax benefit. Estimated gross interest and penalties included in this amount were $6,000.

We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Our federal income tax returns for years after 2011 are still subject to examination by the Internal Revenue Service. We are no longer subject to state and local income tax examinations by tax authorities for years prior to 2011. Our 2012 income tax return for Singapore is currently being audited by the Inland Revenue Authority of Singapore. We do not presently anticipate that the outcome of this audit will have any impact on our financial position or results of operations.

Deferred tax assets and liabilities consist of the following:

	December 31, 2015					December 31, 2014
(In thousands)	Assets			Liabilities		Assets			Liabilities
Equipment, leaseholds and intangible amortization, net	$	377		$	367	$	464		$	256
Inventory allowances	797			6		653			—
Accrued expenses	286			—		353			—
Warranty accrual	222			—		289			—
Deferred revenue	686			—		300			—
Accounts receivable allowance	179			—		194			—
Federal and state tax credits	3,319			—		3,175			—
Federal and state net operating loss carry forwards	4,379			—		4,296			—
Foreign net operating loss carry forwards	394			—		419			—
Stock based compensation	331			—		391			—
Unrealized gains and losses - other comprehensive loss	—			35		115			—
Other, net	73			—		137			—
Subtotal	11,043			408		10,786			256
Valuation allowance	(10,644		)	—		(10,500		)	—
Total deferred tax assets and liabilities	$	399		$	408	$	286		$	256

We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and federal, state and foreign net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our consolidated financial statements become deductible for income tax purposes, when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.

Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives.

At December 31, 2015, we concluded that a $10,644,000 valuation allowance is needed for all of our United States and Singapore based deferred tax assets due to our recurring losses and financial outlook. In analyzing the need for a valuation allowance, we first considered our history of cumulative operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, our financial performance in recent quarters, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all of our U.S. and Singapore based deferred tax assets. A similar analysis was performed in 2014, resulting in a $10,500,000 valuation allowance at December 31, 2014 for substantially all of our United States and Singapore based deferred tax assets. Our valuation allowance increased by $144,000 in 2015 due to the increase in total deferred tax assets. At December 31, 2015, we had federal R&D tax credit carryforwards of $3,498,000 that will begin to expire in 2019 and a federal net operating loss carry forward of $11,875,000 that will begin to expire in 2022, if unused. At December 31, 2015, the amount of tax benefit from the exercise of stock options that will be recorded as a credit to stockholder's equity when realized is insignificant.

Deferred tax assets at December 31, 2015, include $58,000 for net operating loss carryforwards incurred in the UK by CyberOptics Ltd., which was acquired in 1999. A valuation allowance has not been recorded against these deferred tax assets. The utilization of these net operating loss carry forwards is dependent on CyberOptics Ltd.’s ability to generate sufficient UK taxable income during the carry forward period. We reduced our deferred tax asset for UK net operating loss carry forwards by $6,000 in 2015 due to reductions in the future UK income tax rate.

Cash payments for income taxes, net of refunds received, were $16,000 for the year ended December 31, 2015. Cash payments for income taxes, net of refunds received, were $6,000 for the year ended December 31, 2014.

During 2015, our wholly owned Singapore subsidiary repatriated approximately $3,600,000 to our U.S. based parent, of which approximately $1,900,000 had been previously taxed. We were able to accomplish the repatriation without having to pay cash taxes given available U.S. net operating loss carryforwards. For this reason and given our current tax situation, we concluded that a one-time repatriation of funds was appropriate. It is our intention to permanently reinvest the remaining undistributed earnings of our international subsidiaries. Accordingly, we have not recorded the related deferred tax liability of approximately $2,000,000 for U.S. based income taxes on these earnings. If we were to change our position on permanent reinvestment of undistributed earnings of our international subsidiaries, it is anticipated that any such change would not have a significant impact on our financial position or results of operations. This assessment is based on the amount of remaining undistributed earnings of international subsidiaries and the size of our available U.S. net operating loss carryforwards.

XML

Operating Leases

12 Months Ended

Dec. 31, 2015

Leases, Operating [Abstract]

OPERATING LEASES

OPERATING LEASES

We lease a 50,724 square foot mixed office and warehouse facility in Golden Valley, Minnesota. The lease has a term of 90 months and expires on December 31, 2018. The lease contains an escalation clause and two renewal options of three years each. Rental expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease. We are also required to pay insurance, property taxes and other operating expenses related to the leased facility.

We lease a 10,165 square foot mixed office and warehouse facility in Bloomington, Minnesota. The lease was assumed on March 14, 2014 in connection with our purchase of LDI and expires on April 30, 2018. Rental expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease. We are also required to pay insurance, property taxes and other operating expenses related to the leased facility.

We lease a 19,805 square foot mixed office and warehouse facility in Singapore. The current lease contains an escalation clause and expires in July 2016. Rental expense is recognized on a straight-line basis over the three year lease term. We recently extended the lease for a period of one year expiring in July 2017. The new lease contains onethree year renewal option. In addition, we lease facilities for the operations of our other subsidiaries under operating leases that expire at various times through June 2018.

Total rent expense was $1,218,000 for the year ended December 31, 2015 and $1,299,000 for the year ended December 31, 2014. At December 31, 2015, the future minimum lease payments required under non-cancelable operating lease agreements are as follows:

Year ending December 31,	(In thousands)
2016	$	777
2017	587
2018	529
Total	$	1,893

XML

401(K) and Other Defined Contribution Plans

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

401(K) AND OTHER DEFINED CONTRIBUTION PLANS

401(K) AND OTHER DEFINED CONTRIBUTION PLANS

We have a retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code (the Code), whereby eligible employees may contribute a portion of their earnings, not to exceed annual amounts allowed under the Code. In addition, we may also make contributions at the discretion of the Board of Directors. We provided matching contributions to employees totaling $300,000 in 2015 and $227,000 in 2014.

We also contribute to defined contribution retirement savings plans on behalf of our employees in the United Kingdom. We made contributions to these plans totaling $33,000 in 2015 and $35,000 in 2014.

XML

Revenue Concentrations, Significant Customers, and Geographic Areas

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

REVENUE CONCENETRATIONS, SIGNIFICANT CUSTOMERS, AND GEOGRAPHIC AREAS

REVENUE CONCENTRATIONS, SIGNIFICANT CUSTOMERS, AND GEOGRAPHIC AREAS

The following summarizes our revenue by product line:

(In thousands)	2015		2014
SMT and High Precision 3D OEM Sensors	$	13,022	$	15,493
Semiconductor Sensors	7,677		7,595
SMT Inspection Systems	13,578		18,089
3D Scanning Solutions and Services	6,853		5,306
Total	$	41,130	$	46,483

The following summarizes certain significant customer information:

(In thousands)	Significant Customer	Percentage of Revenues
Year ended December 31, 2015	A	10	%
	B	11	%
Year ended December 31, 2014	A	17	%
	B	8	%

Our LaserAlign® sensor family has historically accounted for a significant portion of our revenues and profitability. Revenue from product shipments of LaserAlign sensors accounted for 14% of our total revenue in 2015 and 20% in 2014. Our revenue, results of operations and cash flows would be negatively impacted if our LaserAlign 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.

Export sales as a percentage of total sales were 72% for the year ended December 31, 2015 and 73% for the year ended December 31, 2014. Export sales are attributed to the country where the product is shipped. Substantially all of our export sales are negotiated, invoiced and paid in U.S. dollars.

Revenue by geographic area is summarized as follows:

	Year Ended December 31,
(In thousands)	2015		2014
United States	$	11,452	$	12,339
Americas	1,424		1,233
Netherlands	4,533		3,813
Other Europe	7,462		7,978
China	2,581		3,665
Japan	4,802		8,460
Other Asia	8,531		8,182
Other	345		813
Total revenues	$	41,130	$	46,483

Long-lived assets include equipment and leasehold improvements and intangible and other assets attributable to each geographic area’s operations. Long-lived assets at December 31, 2015 and 2014 are as follows:

(In thousands)	2015		2014
Long-lived assets:
United States	$	2,782	$	3,245
Europe	2		8
Asia and other	133		307
Total long-lived assets	$	2,917	$	3,560

XML

Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

CONTINGENCIES

We are periodically a defendant in miscellaneous claims and disputes in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management presently believes the disposition of these matters will not have a material effect on our financial position, results of operations or cash flows.

In the normal course of business to facilitate sales of our products and services, we at times indemnify other parties, including customers, with respect to certain matters. In these instances, we have agreed to hold the other parties harmless against losses arising out of intellectual property infringement or other types of claims. These agreements may limit the time within which an indemnification claim can be made, and almost always limit the amount of the claim. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made, if any, under these agreements have not had a material impact on our operating results, financial position or cash flows.

XML

Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL INFORMATION (UNAUTDITED)

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(In thousands, except per share amounts)

2015	March 31			June 30			September 30			December 31
Revenues	$	9,545		$	10,254		$	9,937		$	11,394
Gross margin	4,561			4,569			4,239			4,772
Income (loss) from operations	(826		)	(655		)	(721		)	39
Net loss	(781		)	(761		)	(514		)	(33		)
Net loss per share - Basic (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)
Net loss per share - Diluted (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)

2014	March 31			June 30			September 30			December 31
Revenues	$	9,835		$	13,263		$	11,657		$	11,728
Gross margin	4,568			5,867			5,296			5,454
Income (loss) from operations	(722		)	(275		)	(514		)	34
Net income (loss)	(809		)	(315		)	(448		)	85
Net income (loss) per share - Basic (1)	(0.12		)	(0.05		)	(0.07		)	0.01
Net income (loss) per share - Diluted (1)	(0.12		)	(0.05		)	(0.07		)	0.01

(1) The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

XML

Share Repurchase

12 Months Ended

Dec. 31, 2015

Disclosure of Repurchase Agreements [Abstract]

SHARE REPURCHASE

SHARE REPURCHASE

In August 2015 our Board of Directors authorized a $2,000,000 share repurchase program. The common stock may be acquired from time to time in open market transactions, block purchases and other transactions complying with the Securities and Exchange Commission's Rule 10b-18. We adopted a 10b5-1 trading plan to implement the repurchase program. We did not repurchase any of our common stock in 2015.

XML

Business Description And Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of CyberOptics Corporation and its wholly-owned subsidiaries. In these notes to the consolidated financial statements, these companies are collectively referred to as “CyberOptics,” “we,” “us,” or “our.” All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Reclassifications

Reclassifications

Certain reclassifications have been made to the previously reported consolidated financial statements in order to conform to the current presentation. These reclassifications had no impact on the consolidated balance sheets, statements of operations, cash flows or statements of stockholders' equity (deficit).

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash and cash equivalents consist of funds maintained in demand deposit accounts, money market accounts, corporate debt instruments and U.S. government backed obligations. Cash and cash equivalent balances, at times, may exceed federally insured limits.

Marketable Securities

Marketable Securities

All marketable securities are classified as available-for-sale and consist of U.S. government and agency backed obligations, certificates of deposit, corporate debt instruments, asset backed securities or equity securities. Marketable securities are classified as short-term or long-term in the consolidated balance sheet based on their maturity date and expectations regarding sales.

Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity until realized. These fair values are primarily determined using quoted market prices. The carrying amounts of securities, for purposes of computing unrealized gains and losses, are determined by specific identification. The cost of securities sold is also determined by specific identification.

We monitor the carrying value of our investments compared to their fair value to determine whether an other-than-temporary impairment has occurred. If a decline in fair value is determined to be other-than-temporary, an impairment charge related to that specific investment is recorded in current operations.

Inventories

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. Appropriate consideration is given to deterioration, obsolescence, and other factors in evaluating net realizable value. Demonstration inventories are stated at cost less accumulated amortization, generally based on a 36 month useful life.

Accounts Receivable and Allowance For Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

We extend unsecured credit to our customers in the normal course of business. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of our customers to make required payments. In making the determination of the appropriate allowance for doubtful accounts, we consider specific accounts, historical write-offs, changes in customer relationships and credit worthiness and concentrations of credit risk. Specific accounts receivable are written-off once a determination is made that the account is uncollectible.

Equipment and Leasehold Improvements

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense as incurred. In-progress costs are capitalized with depreciation beginning when assets are placed in service. Depreciation is recorded using the straight-line method over the estimated useful lives of the equipment, ranging from one to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the asset useful life or the underlying lease term, ranging from one to eight years. Gains or losses on dispositions are included in current operations.

Business Combinations

Business Combinations

We recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill is measured as the excess of consideration transferred over the acquisition date fair value of the assets acquired and liabilities assumed. Assets acquired include tangible and intangible assets. We determine the value and useful lives of equipment, leasehold improvements and purchased intangible assets with the assistance of an independent third-party valuation firm using certain estimates and assumptions.

While we use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation process to accurately value the assets acquired and the liabilities assumed at the acquisition date, the estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of the assets acquired and the liabilities assumed based on new information about facts and circumstances that existed as of the acquisition date. Any such adjustments would be recorded as an offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be recorded in our consolidated statements of operations.

Goodwill

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired in a business combination. We evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that indicate goodwill might be impaired. We have determined that we have one reporting unit. Goodwill is tested by comparing our fair value, as determined based on our future estimated discounted cash flows, to our net book value.

Patents

Patents

Patents consist of legal and patent registration costs for protection of our proprietary technology. We amortize patent costs on a straight-line basis, based upon their estimated life.

Long Lived Assets

Long Lived Assets

Intangible assets subject to amortization and other long lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss would be recognized when future undiscounted cash flows expected to result from use of the asset and eventual disposition are less than the carrying amount.

Revenue Recognition

Revenue Recognition

Revenue from all customers, including distributors, is recognized when all significant contractual obligations have been satisfied, pricing is fixed and determinable and collection of the resulting receivable is reasonably assured. Generally, product revenues are recognized upon shipment under FOB shipping point terms, and include shipping and handling costs. Revenue from services is recognized as work is performed. Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. Estimated returns and warranty costs are recorded at the time of sale. Sales of some surface mount technology (SMT) system products may require customer acceptance due to performance or other acceptance criteria included in the terms of sale. For these SMT product sales, revenue is recognized at the time of customer acceptance. Our multiple deliverable arrangements typically include the sale of an SMT inspection system or 3D scanning solution, related installation and training, and in some cases, an extended warranty. Revenue from installation and training are recognized as the services are provided. Revenue from extended warranties is recognized ratably over the warranty period.

When a sale involves multiple elements, revenue is allocated to each respective element at inception of an arrangement using the relative selling price method. Selling price is determined based on a selling price hierarchy, consisting of vendor specific objective evidence (VSOE), third party evidence or estimated selling price. Management’s best estimate of the selling price of an SMT machine and 3D scanning solution is based on the cost of the product and a reasonable margin based on geographic location and competitive market conditions. We use VSOE to establish fair value for extended warranty, installation and training services. If VSOE is not available to establish fair value for extended warranty, installation and training services, we estimate a selling price based on the cost-build-up for the particular service and a reasonable gross margin. Costs related to products delivered are recognized in the period revenue is recognized. Cost of revenues consists primarily of direct labor, manufacturing overhead, materials and components and excludes amortization of intangible assets.

Foreign Currency Translation And Transactions

Foreign Currency Translation

Financial position and results of operations of our international subsidiaries are measured using local currency as their functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year-end. Statements of operations accounts are translated at the average rates of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a cumulative translation adjustment in stockholders’ equity.

Foreign Currency Transactions

Foreign currency transaction gains and losses are included in interest income and other in the statement of operations.

Research and Development

Research and Development

Research and development (R&D) costs, including software development, are expensed when incurred. Software development costs are required to be expensed until the point that technological feasibility and proven marketability of the product are established; costs otherwise capitalizable after such point also are expensed because they are insignificant. All other R&D costs are expensed as incurred. R&D expenses consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and enhancement efforts.

Derivatives and Hedging

Derivatives and Hedging

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore. These transactions are designated as cash flow hedges and are recorded in the accompanying consolidated balance sheet at fair value. The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Cash flows from derivative instruments are classified in the consolidated statement of cash flows in the same category as the cash flows from the items subject to designated hedge relationships.

Advertising Costs

Advertising Costs

We expense all advertising costs as incurred.

Warranty Costs

Warranty Costs

We provide for the estimated cost of product warranties which cover products for periods ranging from one to three years at the time revenue is recognized.

Income Taxes

Income Taxes

We evaluate uncertain tax positions using the “more likely than not” threshold (i.e., a likelihood of occurrence greater than fifty percent). The recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are classified as a gross unrecognized tax benefit until the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Only the portion of the unrecognized tax benefit that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g., resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. It is our policy to record estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense.

Deferred income taxes are recorded to reflect the tax consequences in future years of differences between the financial reporting and tax bases of assets and liabilities. Income tax expense is the sum of the tax currently payable and the change in the deferred tax assets and liabilities during the period, excluding changes in deferred tax assets recorded to equity and goodwill. Valuation allowances are established when, in the opinion of management, there is uncertainty that some portion or all of the deferred tax assets will not be realized. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on all positive and negative evidence.

Net Loss Per Share

Net Loss Per Share

Net loss per basic and diluted share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common equivalent shares consist of common shares to be issued upon exercise of stock options, vesting of restricted stock units and from purchases of shares under our employee stock purchase plan, as calculated using the treasury stock method. All common equivalent shares are excluded from the calculation of net loss per diluted share due to their anti-dilutive effect.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these instruments.

Share-Based Compensation

Stock-Based Compensation

All equity-based payments to employees, including grants of employee stock options, are required to be recognized as an expense in our consolidated statements of operations based on the grant date fair value of the award. We utilize the straight-line method of expense recognition over the award’s service period for our graded vesting options. The fair value of stock options has been determined using the Black-Scholes model. The compensation expense recognized for all equity based awards is net of estimated forfeitures, which is based on historical data. We have classified equity based compensation within our consolidated statement of operations in the same manner as our cash based employee compensation costs. We elected to use the alternative transition guidance known as the “short-cut method” to determine our pool of windfall tax benefits at January 1, 2006.

Recent Accounting Developments

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on the recognition of revenue from contracts with customers (Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers). Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The FASB has delayed the effective date of the standard by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company is currently evaluating the method of adoption and the impact of the new guidance on the consolidated financial statements.

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases).Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance.Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory (ASU No. 2015-11, Simplifying the Measurement of Inventory). The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which consists of estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. The new guidance eliminates unnecessary complexity that exists under current "lower of cost or market" guidance. For public entities, the updated guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The guidance is to be applied prospectively as of the beginning of an interim or annual reporting period, with early adoption permitted. We do not believe the implementation of this standard will have a material impact on our consolidated financial statements.

In November 2015, the FASB issued guidance on simplifying the balance sheet classification of deferred taxes (ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes). To simplify the presentation of deferred income taxes, the new guidance requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. Under prior guidance, an entity was required to separate deferred income tax liabilities and assets into current and non-current amounts. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected. For public entities, the guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We adopted the new guidance on a prospective basis for our year ending December 31, 2015. Financial statements for prior periods were not retrospectively adjusted. The new guidance was adopted to simplify the balance sheet presentation of deferred taxes, and had no other impact on our consolidated financial statements.

XML

Acquisition (Tables)

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

The purchase price allocation for our acquisition of LDI is as follows:

(In thousands)
Accounts receivable	$	662
Inventories	551
Equipment and leasehold improvements	1,507
Other assets	91
Intangible assets	573
Identifiable assets acquired	3,384
Accounts payable	640
Accrued expenses and advance customer payments	433
Liabilities assumed	1,073
Net identifiable assets acquired	2,311
Goodwill	797
Purchase price	$	3,108

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

The allocation of the purchase price resulted in recognition of the following identified intangible assets:

	(In thousands)		Weighted Average Life-Years
Software	$	206	7
Patent	165		7
Marketing assets and customer relationships	101		9
Non-compete agreements	101		4
	$	573	7

Business Acquisition, Pro Forma Information

The following unaudited pro forma consolidated financial information presents our revenue and net loss as if the acquisition of LDI occurred on January 1, 2014. The unaudited pro forma consolidated financial information has been prepared for illustrative purposes only and does not purport to be indicative of the results that would have been achieved had the acquisition occurred on January 1, 2014, or of future results. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from integration of LDI.

(In thousands, except per share amounts)	Year Ended December 31,
	2015			2014
Revenue	$	41,130		$	47,904
Net loss	(2,089		)	(1,292		)
Basic and diluted loss per share	$	(0.31	)	$	(0.20	)

XML

Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2015

Marketable Securities [Abstract]

Schedule Of Marketable Securities

Our investments in marketable securities are classified as available-for-sale and consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,806	$	—	$	(2	)	$	3,804
Corporate debt securities and certificates of deposit	1,440		—		(1		)	1,439
Asset backed securities	6		—		—			6
Marketable securities – short-term	$	5,252	$	—	$	(3	)	$	5,249
Long-Term
U.S. government and agency obligations	$	6,681	$	1	$	(18	)	$	6,664
Corporate debt securities and certificates of deposit	675		—		(1		)	674
Asset backed securities	694		—		(1		)	693
Equity security	42		11		—			53
Marketable securities – long-term	$	8,092	$	12	$	(20	)	$	8,084

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Short-Term
U.S. government and agency obligations	$	3,378	$	2	$	—		$	3,380
Corporate debt securities and certificates of deposit	1,903		2		—			1,905
Marketable securities – short-term	$	5,281	$	4	$	—		$	5,285
Long-Term
U.S. government and agency obligations	$	5,761	$	3	$	(5	)	$	5,759
Corporate debt securities and certificates of deposit	1,867		1		(1		)	1,867
Asset back securities	2,156		1		(1		)	2,156
Equity security	42		65		—			107
Marketable securities – long-term	$	9,826	$	70	$	(7	)	$	9,889

Schedule Of Marketable Securities Classified As Cash Equivalents

Investments in marketable securities classified as cash equivalents of $791,000 at December 31, 2015 and $321,000 at December 31, 2014 consist of the following:

	December 31, 2015
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	791	$	—	$	—	$	791
	$	791	$	—	$	—	$	791

	December 31, 2014
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Recorded Basis
Corporate debt securities and certificates of deposit	$	321	$	—	$	—	$	321
	$	321	$	—	$	—	$	321

XML

Derivatives (Tables)

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedges, Assets [Abstract]

Schedule Of Cash Flow Hedges

The location in the consolidated statements of operations and consolidated statements of comprehensive loss and amounts of gains and losses related to derivative instruments designated as cash flow hedges are as follows:

	Year Ended December 31, 2015
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(185	)	$	(352	)
Research and development	(71		)	(118		)
Selling, general and administrative	(42		)	(93		)
Total	$	(298	)	$	(563	)

	Year Ended December 31, 2014
(In thousands)	Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative			Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss
Cost of revenues	$	(252	)	$	(60	)
Research and development	(76		)	(21		)
Selling, general and administrative	(71		)	(22		)
Total	$	(399	)	$	(103	)

XML

Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2015

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

The Effect of the Reclassification from Comprehensive Income (Loss) to Earnings

The effect of the reclassifications from comprehensive loss to earnings by line items is as follows:

Details about Components of Accumulated Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Statements of Operations
	Year Ended
(In thousands)	2015			2014
Unrealized gains on available-for-sale securities	$	—		$	2		Interest income and other
	—			—			Income tax provision (benefit)
	$	—		$	2		Net of tax
Unrealized losses on foreign exchange forward contracts	$	(352	)	$	(60	)	Cost of revenues
	(118		)	(21		)	Research and development expenses
	(93		)	(22		)	Selling, general and administrative expenses
	(563		)	(103		)	Total before tax
	—			—			Income tax provision (benefit)
	$	(563	)	$	(103	)	Net of tax

Schedule of Accumulated Other Comprehensive Income (Loss)

At December 31, 2015 and December 31, 2014 components of accumulated other comprehensive loss is as follows:

(In thousands)	Foreign Currency Translation Adjustments			Available- for-Sale Securities			Foreign Exchange Forward Contracts			Accumulated Other Comprehensive Loss
Balances at December 31, 2013	$	(456	)	$	32		$	(116	)	$	(540	)
Other comprehensive income (loss) before reclassifications	(464		)	31			(399		)	(832		)
Amounts reclassified from accumulated other comprehensive loss	—			(2		)	103			101
Net current period other comprehensive income (loss)	(464		)	29			(296		)	(731		)
Balances at December 31, 2014	$	(920	)	$	61		$	(412	)	$	(1,271	)
Other comprehensive loss before reclassifications	(625		)	(78		)	(298		)	(1,001		)
Amounts reclassified from accumulated other comprehensive loss	—			—			563			563
Net current period other comprehensive income (loss)	(625		)	(78		)	265			(438		)
Balances at December 31, 2015	$	(1,545	)	$	(17	)	$	(147	)	$	(1,709	)

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements For Marketable Securities And Foreign Exchange Forward Contracts

The following provides information regarding fair value measurements for our marketable securities and foreign exchange forward contracts as of December 31, 2015 and December 31, 2014 according to the three-level fair value hierarchy.

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Balance December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	10,468	$	—	$	10,468	$	—
Corporate debt securities and certificates of deposit	2,113		—		2,113		—
Asset backed securities	699		—		699		—
Equity security	53		53		—		—
Total marketable securities	$	13,333	$	53	$	13,280	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	78	$	—	$	78	$	—

	Fair Value Measurements at December 31, 2014 Using
(In thousands)	Balance December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. government and agency obligations	$	9,139	$	—	$	9,139	$	—
Corporate debt securities and certificates of deposit	3,772		—		3,772		—
Asset backed securities	2,156		—		2,156		—
Equity security	107		107		—		—
Total marketable securities	$	15,174	$	107	$	15,067	$	—
Derivative instruments-liabilities:
Foreign exchange forward contracts	$	352	$	—	$	352	$	—

XML

Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Share-based Compensation [Abstract]

Schedule Of Stock Option Activity

The following is a summary of stock option activity for the year ended December 31, 2015:

	Options Outstanding		Weighted Average Exercise Price Per Share
Outstanding, December 31, 2014	578,901		$	8.30
Granted	141,000		7.18
Exercised	(72,651	)	6.30
Expired	(61,750	)	11.17
Forfeited	(15,000	)	7.13
Outstanding, December 31, 2015	570,500		$	8.00
Exercisable, December 31, 2015	194,127		$	8.51

Schedule Of Stock Option Valuation Assumptions

For stock options granted in the two year period ended December 31, 2015, we utilized the fair value of our common stock on the date of grant and employed the following key assumptions in computing fair value using the Black-Scholes option-pricing model:

	2015	2014
Risk-free interest rates	1.56%	1.55% - 1.69%
Expected life in years	5.01 - 5.11	5.12 - 5.48
Expected volatility	40.82%	42.45% - 46.90%
Dividend yield	0.00%	0.00%
Weighted average fair value on grant date	$2.73	$3.55

Schedule Of Non-Vested Restricted Stock Activity

A summary of activity in non-vested restricted stock units for the year ended December 31, 2015 is as follows:

Non-vested restricted stock units	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2014	53,718		$	7.43
Granted	18,250		7.18
Vested	(15,321	)	7.36
Forfeited	(2,332	)	6.10
Non-vested at December 31, 2015	54,315		$	7.43

Summary Of Pre-tax Equity Based Compensation Expense

(In thousands)	2015		2014
Pre-tax stock-based compensation expense	$	511	$	436
Income tax benefits related to stock-based compensation	$	—	$	—

XML

Net Loss Per Share (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Schedule Of Net Income (Loss) Per Basic And Diluted Shares

The components of net loss per basic and diluted share are as follows:

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2015:
Basic	$	(2,089	)	6,706	$	(0.31	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(2,089	)	6,706	$	(0.31	)

(In thousands except per share amounts)	Net Loss			Weighted Average Shares Outstanding	Per Share Amount
Year Ended 12/31/2014:
Basic	$	(1,487	)	6,576	$	(0.23	)
Dilutive effect of common equivalent shares	—			—	—
Dilutive	$	(1,487	)	6,576	$	(0.23	)

XML

Other Financial Statement Data (Tables)

12 Months Ended

Dec. 31, 2015

Other Financial Statement Data [Abstract]

Schedule Of Inventory Components

Inventories consist of the following:

	December 31,
(In thousands)	2015		2014
Raw materials and purchased parts	$	6,787	$	6,581
Work in process	508		503
Finished goods	5,970		4,573
Total inventories	$	13,265	$	11,657

Schedule Of Equipment And Leasehold Improvements

Equipment and leasehold improvements consist of the following:

	December 31,
(In thousands)	2015			2014
Equipment	$	12,500		$	12,382
Leasehold improvements	1,588			1,615
	14,088			13,997
Accumulated depreciation and amortization	(11,720		)	(11,079		)
	$	2,368		$	2,918

Schedule Of Intangible Assets

Intangible assets consist of the following:

	December 31, 2015							December 31, 2014
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Patents	$	2,513	$	(2,253	)	$	260	$	2,625	$	(2,338	)	$	287
Software	206		(53		)	153		206		(23		)	183
Marketing assets and customer relationships	101		(21		)	80		101		(10		)	91
Non-compete agreements	101		(45		)	56		101		(20		)	81
	$	2,921	$	(2,372	)	$	549	$	3,033	$	(2,391	)	$	642

Schedule Of Amortization Expense For Intangible Assets

Amortization expense for the years ended December 31, 2015 and 2014 is as follows:

	Year Ended December 31,				Weighted Avg. Remaining Life-Years at December 31, 2015
(In thousands)	2015		2014
Patents	$	110	$	113	3.0
Software	29		23		5.2
Marketing assets and customer relationships	12		10		6.8
Non-compete agreements	25		20		2.2
	$	176	$	166

Schedule of Accrued Expenses

Accrued expenses consist of the following:

	December 31,
(In thousands)	2015		2014
Wages and benefits	$	1,014	$	1,715
Warranty liability	584		750
Other	361		647
	$	1,959	$	3,112

Other Noncurrent Liabilities

Other liabilities consist of the following:

	December 31,
(In thousands)	2015		2014
Deferred rent	$	204	$	285
Warranty liability	61		89
Deferred warranty revenue	3		26
	$	268	$	400

Schedule Of Changes In Estimated Warranty Liability

A reconciliation of the changes in our estimated warranty liability is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	839		$	513
Accrual for warranties	441			1,171
Assumed in acquisition	—			5
Warranty revision	(19		)	12
Settlements made during the period	(616		)	(862		)
Balance at end of period	645			839
Current portion of estimated warranty liability	(584		)	(750		)
Long-term estimated warranty liability	$	61		$	89

Schedule Of Changes In Deferred Warranty Revenue

A reconciliation of the changes in our deferred warranty revenue is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Balance at beginning of period	$	475		$	444
Revenue deferrals	353			338
Assumed in acquisition	—			89
Amortization of deferred revenue	(629		)	(396		)
Total deferred warranty revenue	199			475
Current portion of deferred warranty revenue	(196		)	(449		)
Long-term deferred warranty revenue	$	3		$	26

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Schedule Of Income Before Income Taxes

Loss before income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Sources of income (loss) before income taxes:
United States	$	(2,994	)	$	(2,536	)
Foreign	933			1,182
Total loss before income taxes	$	(2,061	)	$	(1,354	)

Schedule Of Provision (Benefit) For Income Taxes

The provision (benefit) for income taxes consists of the following:

	Year Ended December 31,
(In thousands)	2015			2014
Current:
Federal	$	(14	)	$	(10	)
State	4			13
Foreign	—			10
Total current	$	(10	)	$	13
Deferred:
Federal	$	(4	)	$	73
State	1			1
Foreign	41			46
Total deferred	$	38		$	120
Total provision for income taxes	$	28		$	133

Schedule Of A Reconciliation Of The Statutory Rate To The Effective Income Tax Rate

A reconciliation of the statutory rate to the effective income tax rate is as follows:

	Year Ended December 31,
	2015		2014
Federal statutory rate	34.0	%	34.0	%
State income taxes, net of federal benefit	(0.2	)	6.4
U.S. Subpart F income	(1.0	)	(2.6	)
Dividend - foreign affiliate	(28.9	)	—
Stock based compensation	(1.4	)	(1.1	)
Research and experimentation credit	4.6		7.8
Foreign rate difference	17.8		34.1
Reserve for income taxes	0.7		0.7
Valuation allowance	(26.1	)	(86.6	)
Other, net	(0.8	)	(2.5	)
Effective tax rate	(1.3	)%	(9.8	)%

Summary Of A Reconciliation Of The Beginning And Ending Amount Of Gross Unrecognized Tax Benefits ("UTB")

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Year Ended December 31,
(In thousands)	2015			2014
Gross UTB balance at beginning of year	$	1,508		$	1,408
Additions based on tax positions related to the current year	186			165
Additions for tax positions of prior years	289			—
Reductions for tax positions of prior years	(78		)	(48		)
Reductions due to lapse of applicable statute of limitations	(18		)	(17		)
Gross UTB balance at end of year	$	1,887		$	1,508
Net UTB balance at end of year	$	126		$	140

Schedule Of Deferred Tax Assets And Liabilities

Deferred tax assets and liabilities consist of the following:

	December 31, 2015					December 31, 2014
(In thousands)	Assets			Liabilities		Assets			Liabilities
Equipment, leaseholds and intangible amortization, net	$	377		$	367	$	464		$	256
Inventory allowances	797			6		653			—
Accrued expenses	286			—		353			—
Warranty accrual	222			—		289			—
Deferred revenue	686			—		300			—
Accounts receivable allowance	179			—		194			—
Federal and state tax credits	3,319			—		3,175			—
Federal and state net operating loss carry forwards	4,379			—		4,296			—
Foreign net operating loss carry forwards	394			—		419			—
Stock based compensation	331			—		391			—
Unrealized gains and losses - other comprehensive loss	—			35		115			—
Other, net	73			—		137			—
Subtotal	11,043			408		10,786			256
Valuation allowance	(10,644		)	—		(10,500		)	—
Total deferred tax assets and liabilities	$	399		$	408	$	286		$	256

XML

Operating Leases (Tables)

12 Months Ended

Dec. 31, 2015

Leases, Operating [Abstract]

Schedule Of Future Minimum Lease Payments Required Under Non-cancelable Operating Lease Agreements

At December 31, 2015, the future minimum lease payments required under non-cancelable operating lease agreements are as follows:

Year ending December 31,	(In thousands)
2016	$	777
2017	587
2018	529
Total	$	1,893

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Tables)

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Summary Of Revenue By Product Line

The following summarizes our revenue by product line:

(In thousands)	2015		2014
SMT and High Precision 3D OEM Sensors	$	13,022	$	15,493
Semiconductor Sensors	7,677		7,595
SMT Inspection Systems	13,578		18,089
3D Scanning Solutions and Services	6,853		5,306
Total	$	41,130	$	46,483

Summary Of Certain Significant Customer Information

The following summarizes certain significant customer information:

(In thousands)	Significant Customer	Percentage of Revenues
Year ended December 31, 2015	A	10	%
	B	11	%
Year ended December 31, 2014	A	17	%
	B	8	%

Schedule Of Revenue By Geographic Area

Revenue by geographic area is summarized as follows:

	Year Ended December 31,
(In thousands)	2015		2014
United States	$	11,452	$	12,339
Americas	1,424		1,233
Netherlands	4,533		3,813
Other Europe	7,462		7,978
China	2,581		3,665
Japan	4,802		8,460
Other Asia	8,531		8,182
Other	345		813
Total revenues	$	41,130	$	46,483

Schedule Of Long-lived Assets Attributable To Each Geographic Area's Operations

Long-lived assets at December 31, 2015 and 2014 are as follows:

(In thousands)	2015		2014
Long-lived assets:
United States	$	2,782	$	3,245
Europe	2		8
Asia and other	133		307
Total long-lived assets	$	2,917	$	3,560

XML

Quarterly Financial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information

2015	March 31			June 30			September 30			December 31
Revenues	$	9,545		$	10,254		$	9,937		$	11,394
Gross margin	4,561			4,569			4,239			4,772
Income (loss) from operations	(826		)	(655		)	(721		)	39
Net loss	(781		)	(761		)	(514		)	(33		)
Net loss per share - Basic (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)
Net loss per share - Diluted (1)	(0.12		)	(0.11		)	(0.08		)	(0.00)

2014	March 31			June 30			September 30			December 31
Revenues	$	9,835		$	13,263		$	11,657		$	11,728
Gross margin	4,568			5,867			5,296			5,454
Income (loss) from operations	(722		)	(275		)	(514		)	34
Net income (loss)	(809		)	(315		)	(448		)	85
Net income (loss) per share - Basic (1)	(0.12		)	(0.05		)	(0.07		)	0.01
Net income (loss) per share - Diluted (1)	(0.12		)	(0.05		)	(0.07		)	0.01

(1) The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

XML

Business Description And Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($) reporting_unit	Dec. 31, 2014 USD ($)
Business Description And Significant Accounting Policies [Line Items]
Cash held in foreign accounts	$ 701	$ 1,095
Demonstration inventory useful life (in months)	36 months
Accumulated amortization for demonstration inventories	$ 11,720	11,079
Number of reporting units | reporting_unit	1
Recognized foreign currency transactions (losses)	$ 103	130
Advertising expense	$ 410	$ 296
Certain products [Member]
Business Description And Significant Accounting Policies [Line Items]
Warranty period (in years)		3 years
Minimum [Member]
Business Description And Significant Accounting Policies [Line Items]
Estimated useful lives of the equipment and leasehold improvements (in years)	1 year
Warranty period (in years)	1 year
Minimum [Member] | Certain products [Member]
Business Description And Significant Accounting Policies [Line Items]
Warranty period (in years)		1 year
Maximum [Member]
Business Description And Significant Accounting Policies [Line Items]
Estimated useful lives of the equipment and leasehold improvements (in years)	7 years
Warranty period (in years)	3 years
Demonstration Inventories [Member]
Business Description And Significant Accounting Policies [Line Items]
Accumulated amortization for demonstration inventories	$ 1,310	$ 1,181
Leasehold Improvements [Member] | Minimum [Member]
Business Description And Significant Accounting Policies [Line Items]
Estimated useful lives of the equipment and leasehold improvements (in years)	1 year
Leasehold Improvements [Member] | Maximum [Member]
Business Description And Significant Accounting Policies [Line Items]
Estimated useful lives of the equipment and leasehold improvements (in years)	8 years

XML

Acquisition (Narrative) (Details) - USD ($)		1 Months Ended	3 Months Ended	10 Months Ended	12 Months Ended
	Mar. 14, 2014	Mar. 31, 2014	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Purchase of LDI					$ 0	$ 3,108,000
Decrease of amortization expense (less than $300)					176,000	166,000
Laser Design Inc [Member]
Business Acquisition [Line Items]
Purchase of LDI	$ 2,633,000
Liabilities assumed	$ 1,073,000
Purchase price adjustment, decrease allocated to intangible assets		$ 24,000
Purchase price adjustment allocated to goodwill		$ 46,000
Decrease of amortization expense (less than $300)			$ (300)
Goodwill, expected tax deductible period (in years)	15 years
LDI's contribution to revenue since date of acquisition				$ 5,306,000	6,853,000
LDI's contribution to net loss since date of acquisition				537,000	$ 389,000
Acquisition costs			117,000
Expense related to fair value adjustment for acquisition date inventories				$ 222,000		$ 222,000
Laser Design Inc [Member] | Selling, General and Administrative [Member]
Business Acquisition [Line Items]
Acquisition costs			$ 47,000
Laser Design Inc [Member] | Executive Officer [Member]
Business Acquisition [Line Items]
Purchase of LDI	$ 475,000

XML

Acquisition (Schedule of Business Acquisitions, Preliminary Purchase Price Allocation) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Mar. 14, 2014
Business Acquisition [Line Items]
Goodwill	$ 1,366	$ 1,366
Laser Design Inc [Member]
Business Acquisition [Line Items]
Accounts receivable			$ 662
Inventories			551
Equipment and leasehold improvements			1,507
Other assets			91
Intangible assets			573
Identifiable assets acquired			3,384
Accounts payable			640
Accrued expenses and advance customer payments			433
Liabilities assumed			1,073
Net identifiable assets acquired			2,311
Goodwill			797
Purchase price			$ 3,108

XML

Acquisition (Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination) (Details) - USD ($) $ in Thousands		12 Months Ended
	Mar. 14, 2014	Dec. 31, 2015
Computer Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired, Weighted Average Life (in years)		5 years 2 months 14 days
Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired, Weighted Average Life (in years)		3 years 11 days
Marketing Assets/Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired, Weighted Average Life (in years)		6 years 9 months 19 days
Non-compete agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired, Weighted Average Life (in years)		2 years 2 months 14 days
Laser Design Inc [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 573
Intangible assets acquired, Weighted Average Life (in years)	7 years
Laser Design Inc [Member] | Computer Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 206
Intangible assets acquired, Weighted Average Life (in years)	7 years
Laser Design Inc [Member] | Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 165
Intangible assets acquired, Weighted Average Life (in years)	7 years
Laser Design Inc [Member] | Marketing Assets/Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 101
Intangible assets acquired, Weighted Average Life (in years)	9 years
Laser Design Inc [Member] | Non-compete agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 101
Intangible assets acquired, Weighted Average Life (in years)	4 years

XML

Acquisition (Unaudited Pro Forma Consolidated Financial Information) (Details) - Laser Design Inc [Member] - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Revenue	$ 41,130	$ 47,904
Net loss	$ (2,089)	$ (1,292)
Basic and diluted loss per share (in usd per share)	$ (0.31)	$ (0.20)

XML

Marketable Securities (Schedule Of Marketable Securities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Marketable Securities - Short-Term [Member]
Gain (Loss) on Investments [Line Items]
Cost	$ 5,252	$ 5,281
Unrealized Gains	0	4
Unrealized Losses	(3)	0
Fair Value	5,249	5,285
Marketable Securities - Short-Term [Member] | US States Government And Agency Obligations [Member]
Gain (Loss) on Investments [Line Items]
Cost	3,806	3,378
Unrealized Gains	0	2
Unrealized Losses	(2)	0
Fair Value	3,804	3,380
Marketable Securities - Short-Term [Member] | Corporate Debt Securities And Certificates Of Deposit [Member]
Gain (Loss) on Investments [Line Items]
Cost	1,440	1,903
Unrealized Gains	0	2
Unrealized Losses	(1)	0
Fair Value	1,439	1,905
Marketable Securities - Short-Term [Member] | Asset-backed Securities [Member]
Gain (Loss) on Investments [Line Items]
Cost	6
Unrealized Gains	0
Unrealized Losses	0
Fair Value	6
Marketable Securities - Long-Term [Member]
Gain (Loss) on Investments [Line Items]
Cost	8,092	9,826
Unrealized Gains	12	70
Unrealized Losses	(20)	(7)
Fair Value	8,084	9,889
Marketable Securities - Long-Term [Member] | US States Government And Agency Obligations [Member]
Gain (Loss) on Investments [Line Items]
Cost	6,681	5,761
Unrealized Gains	1	3
Unrealized Losses	(18)	(5)
Fair Value	6,664	5,759
Marketable Securities - Long-Term [Member] | Corporate Debt Securities And Certificates Of Deposit [Member]
Gain (Loss) on Investments [Line Items]
Cost	675	1,867
Unrealized Gains	0	1
Unrealized Losses	(1)	(1)
Fair Value	674	1,867
Marketable Securities - Long-Term [Member] | Asset-backed Securities [Member]
Gain (Loss) on Investments [Line Items]
Cost	694	2,156
Unrealized Gains	0	1
Unrealized Losses	(1)	(1)
Fair Value	693	2,156
Marketable Securities - Long-Term [Member] | Equity Security [Member]
Gain (Loss) on Investments [Line Items]
Cost	42	42
Unrealized Gains	11	65
Unrealized Losses	0	0
Fair Value	$ 53	$ 107

XML

Marketable Securities (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($) security	Dec. 31, 2014 USD ($)
Gain (Loss) on Investments [Line Items]
Maximum maturity of debt securities (less than 5 years)	5 years
Maximum time for loss position (in months)	12 months	12 months
Available-for-sale securities, number of equity securities | security	1
Available-for-sale securities, accumulated gross unrealized gain (loss), before tax	$ (11)	$ 67
Proceeds from sale of marketable securities	1,518	5,050
Available-for-sale securities, gross realized gain (loss)	0	2
Marketable securities classified as cash equivalents, recorded basis	791	321
Debt Securities Unrealized Gain Position [Member]
Gain (Loss) on Investments [Line Items]
Fair value	2,321	9,287
Unrealized gain	1	9
Debt Securities Unrealized Loss Position [Member]
Gain (Loss) on Investments [Line Items]
Fair value	10,959	5,780
Unrealized loss	23	7
Marketable Securities - Long-Term [Member]
Gain (Loss) on Investments [Line Items]
Fair value	8,084	9,889
Unrealized gain	12	70
Unrealized loss	20	7
Marketable Securities - Long-Term [Member] | Debt Securities Unrealized Gain Position [Member]
Gain (Loss) on Investments [Line Items]
Unrealized gain	11	65
Marketable Securities - Long-Term [Member] | Equity Security [Member]
Gain (Loss) on Investments [Line Items]
Fair value	53	107
Unrealized gain	11	65
Unrealized loss	$ 0	$ 0

XML

Marketable Securities (Schedule Of Marketable Securities Classified As Cash Equivalents) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Gain (Loss) on Investments [Line Items]
Cost	$ 791	$ 321
Unrealized Gains	0	0
Unrealized Losses	0	0
Recorded Basis	791	321
Corporate Debt Securities And Certificates Of Deposit [Member]
Gain (Loss) on Investments [Line Items]
Cost	791	321
Unrealized Gains	0	0
Unrealized Losses	0	0
Recorded Basis	$ 791	$ 321

XML

Derivatives (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Derivative [Line Items]
Maximum length of time to hedge (in months)	12 months
Foreign exchange gross notional amount	$ 1,800	$ 7,100
Unrealized loss on effective portion of foreign exchange forward contracts, net	147	412
Pretax net unrealized loss recorded in accumulated other comprehensive loss to earnings	90
Foreign exchange forward contracts, liability	$ 78	$ 352
Maximum [Member]
Derivative [Line Items]
Average remaining maturity of foreign currency derivatives (in years)	1 year	1 year

XML

Derivatives (Schedule Of Cash Flow Hedges) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Derivative Instruments, Gain (Loss) [Line Items]
Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative	$ (298)	$ (399)
Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss	(563)	(103)
Cost of Revenues [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative	(185)	(252)
Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss	(352)	(60)
Research and Development [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative	(71)	(76)
Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss	(118)	(21)
Selling, General and Administrative [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Pretax Loss Recognized in Other Comprehensive Loss on Effective Portion of Derivative	(42)	(71)
Pretax Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Loss	$ (93)	$ (22)

XML

Comprehensive Loss (The Effect of the Reclassifications from Comprehensive Income (Loss) to Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Interest income and other									$ 102	$ 123
Cost of revenues									(22,989)	(25,298)
Research and development expenses									(7,602)	(8,789)
Selling, general and administrative expenses									(12,635)	(13,820)
Loss before income taxes									(2,061)	(1,354)
Income tax provision (benefit)									(28)	(133)
Net loss	$ (33)	$ (514)	$ (761)	$ (781)	$ 85	$ (448)	$ (315)	$ (809)	(2,089)	(1,487)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) On Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Interest income and other									0	2
Income tax provision (benefit)									0	0
Net loss									0	2
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Losses On Foreign Exchange Forward Contracts [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cost of revenues									(352)	(60)
Research and development expenses									(118)	(21)
Selling, general and administrative expenses									(93)	(22)
Loss before income taxes									(563)	(103)
Income tax provision (benefit)									0	0
Net loss									$ (563)	$ (103)

XML

Comprehensive Loss (Schedule of Accumulated Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period	$ (1,271)	$ (540)
Other comprehensive income (loss) before reclassifications	(1,001)	(832)
Amounts reclassified from accumulated other comprehensive loss	563	101
Other comprehensive loss, net of tax	(438)	(731)
Balance at the end of period	(1,709)	(1,271)
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period	(920)	(456)
Other comprehensive income (loss) before reclassifications	(625)	(464)
Amounts reclassified from accumulated other comprehensive loss	0	0
Other comprehensive loss, net of tax	(625)	(464)
Balance at the end of period	(1,545)	(920)
Unrealized Gains (Losses) On Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period	61	32
Other comprehensive income (loss) before reclassifications	(78)	31
Amounts reclassified from accumulated other comprehensive loss	0	(2)
Other comprehensive loss, net of tax	(78)	29
Balance at the end of period	(17)	61
Foreign Exchange Forward Contracts [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period	(412)	(116)
Other comprehensive income (loss) before reclassifications	(298)	(399)
Amounts reclassified from accumulated other comprehensive loss	563	103
Other comprehensive loss, net of tax	265	(296)
Balance at the end of period	$ (147)	$ (412)

XML

Fair Value Measurements (Fair Value Measurements For Marketable Securities And Foreign Exchange Forward Contracts) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 13,333	$ 15,174
Derivative instruments-liabilities: Foreign exchange forward contracts	78	352
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	53	107
Derivative instruments-liabilities: Foreign exchange forward contracts	0	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,280	15,067
Derivative instruments-liabilities: Foreign exchange forward contracts	78	352
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Derivative instruments-liabilities: Foreign exchange forward contracts	0	0
US States Government And Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	10,468	9,139
US States Government And Agency Obligations [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
US States Government And Agency Obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	10,468	9,139
US States Government And Agency Obligations [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Corporate Debt Securities And Certificates Of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	2,113	3,772
Corporate Debt Securities And Certificates Of Deposit [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Corporate Debt Securities And Certificates Of Deposit [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	2,113	3,772
Corporate Debt Securities And Certificates Of Deposit [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Asset-backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	699	2,156
Asset-backed Securities [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Asset-backed Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	699	2,156
Asset-backed Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Equity Security [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	53	107
Equity Security [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	53	107
Equity Security [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Equity Security [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 0	$ 0

XML

Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Derivative instruments-liabilities: Foreign exchange forward contracts	$ 78	$ 352

XML

Stock-Based Compensation (Narrative) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($) shares plan $ / shares	Dec. 31, 2014 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | plan	4
Fair value of shares vested	$ 264,000
Shares granted, shares | shares	18,250
Weighted average grant date fair value, granted (in usd per share) | $ / shares	$ 7.18
Equity based compensation expense	$ 511,000	$ 436,000
Unrecognized compensation cost related to non-vested equity based compensation	$ 1,413,000
Unrecognized equity based compensation weighted average period (in years)	2 years 5 months 13 days
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)	4 years
Expiration of stock options from date of grant (in years)	7 years
Period of shares held by employee to tender shares at option price (in months)	6 months
Weighted average remaining contractual term (in years)	5 years 4 days
Aggregate intrinsic value for all options outstanding	$ 276,000
Weighted average remaining contractual term for exercisable options (in years)	3 years 3 months 16 days
Aggregate intrinsic value of exercisable options	$ 118,000
Aggregate intrinsic value of exercised stock options	182,000	263,000
Proceeds from exercise of stock options	458,000	628,000
Fair value of shares vested		209,000
Stock Options And Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity based compensation expense	$ 398,000	$ 356,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance, shares | shares	95,757
Maximum contribution per plan year	$ 6,500
Employees can purchase stock at the percentage rate of the lower of the market price on the first or last day of the offering period (as a percent)	85.00%
Share issuances for compensation purposes, shares | shares	35,845	22,324
Equity based compensation expense	$ 72,000	$ 48,000
Employee Stock Purchase Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payroll deduction for employee stock purchase plan percentage	1.00%
Employee Stock Purchase Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payroll deduction for employee stock purchase plan percentage	10.00%
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)	4 years
Aggregate intrinsic value for all options outstanding	$ 416,000
Fair value of shares vested	$ 129,000	$ 112,000
Restricted stock units to common stock ratio, shares entitled, shares | shares	1
Shares granted, shares | shares	18,250	35,450
Weighted average grant date fair value, granted (in usd per share) | $ / shares	$ 7.18	$ 8.12
Stock Grant Plan For Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for stock based benefits, shares | shares	60,000
Number of shares available for future issuance, shares | shares	28,000
Share issuances for compensation purposes, shares | shares	4,000	4,000
Number of shares granted for non-employee directors upon re-election, shares | shares	1,000
Equity based compensation expense	$ 41,000	$ 32,000
Weighted average grant date fair value (in usd per share) | $ / shares	$ 10.36	$ 8.05
Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | plan	2
Stock Incentive Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | shares	2
Shares of common stock reserved for stock based benefits, shares | shares	778,105
Period of shares issued under plan (in years)	10 years
Number of shares available for future issuance, shares | shares	153,290

XML

Stock-Based Compensation (Schedule Of Stock Option Activity) (Details)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options Outstanding, Outstanding, Beginning of period, shares | shares	578,901
Options Outstanding, Granted, shares | shares	141,000
Options Outstanding, Exercised, shares | shares	(72,651)
Options Outstanding, Expired, shares | shares	(61,750)
Options Outstanding, Forfeited, shares | shares	(15,000)
Options Outstanding, Outstanding, End of period, shares | shares	570,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted-Average Exercise Price Per Share, Outstanding, Beginning of period (in usd per share) | $ / shares	$ 8.30
Weighted-Average Exercise Price Per Share, Granted (in usd per share) | $ / shares	7.18
Weighted-Average Exercise Price Per Share, Exercised (in usd per share) | $ / shares	6.30
Weighted-Average Exercise Price Per Share, Expired (in usd per share) | $ / shares	11.17
Weighted-Average Exercise Price Per Share, Forfeited (in usd per share) | $ / shares	7.13
Weighted-Average Exercise Price Per Share, Outstanding, End of period (in usd per share) | $ / shares	$ 8.00
Options Outstanding, Exercisable, End of period, shares | shares	194,127
Weighted-Average Exercise Price Per Share, Exercisable, End of period (in usd per share) | $ / shares	$ 8.51

XML

Stock-Based Compensation (Schedule Of Stock Option Valuation Assumptions) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rates	1.56%
Expected volatility	40.82%
Dividend yield	0.00%	0.00%
Weighted average fair value on grant date	$ 2.73	$ 3.55
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rates		1.69%
Expected life in years	5 years 1 month 10 days	5 years 5 months 23 days
Expected volatility		46.90%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rates		1.55%
Expected life in years	5 years 4 days	5 years 1 month 13 days
Expected volatility		42.45%

XML

Stock-Based Compensation (Schedule Of Non-Vested Restricted Stock Activity) (Details)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Shares, Non-vested at December 31, 2014 | shares	53,718
Shares, Granted | shares	18,250
Shares, Vested | shares	(15,321)
Shares, Forfeited | shares	(2,332)
Shares, Non-vested at December 31, 2015 | shares	54,315
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted Average Grant Date Fair Value, Non-vested at December 31, 2014 (in usd per share) | $ / shares	$ 7.43
Weighted Average Grant Date Fair Value, Granted (in usd per share) | $ / shares	7.18
Weighted Average Grant Date Fair Value, Vested (in usd per share) | $ / shares	7.36
Weighted Average Grant Date Fair Value, Forfeited (in usd per share) | $ / shares	6.10
Weighted Average Grant Date Fair Value, Non-vested at December 31, 2015 (in usd per share) | $ / shares	$ 7.43

XML

Stock-Based Compensation (Summary Of Pre-tax Equity Based Compensation Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation [Abstract]
Pre-tax stock-based compensation expense	$ 511	$ 436
Income tax benefits related to stock-based compensation	$ 0	$ 0

XML

Net Loss Per Share (Schedule Of Net Income Per Basic And Diluted Shares) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended																12 Months Ended
	Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Net Loss	$ (33)		$ (514)		$ (761)		$ (781)		$ 85		$ (448)		$ (315)		$ (809)		$ (2,089)	$ (1,487)
Weighted Average Shares Outstanding, Basic, shares																	6,706	6,576
Per Share Amount, Basic (in usd per share)	$ 0.00	[1]	$ (0.08)	[1]	$ (0.11)	[1]	$ (0.12)	[1]	$ 0.01	[1]	$ (0.07)	[1]	$ (0.05)	[1]	$ (0.12)	[1]	$ (0.31)	$ (0.23)
Per Share Amount, Dilutive effect of common equivalent shares (in usd per share)																	$ 0.00	$ 0.00
Weighted Average Shares Outstanding, Dilutive, shares																	6,706	6,576
Per Share Amount, Dilutive (in usd per share)	$ 0.00	[1]	$ (0.08)	[1]	$ (0.11)	[1]	$ (0.12)	[1]	$ 0.01	[1]	$ (0.07)	[1]	$ (0.05)	[1]	$ (0.12)	[1]	$ (0.31)	$ (0.23)

[1] The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

XML

Net Loss Per Share (Narrative) (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Earnings per share, potentially dilutive shares (in shares)	587	683

XML

Other Financial Statement Data (Schedule Of Inventory Components) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Other Financial Statement Data [Abstract]
Raw materials and purchased parts	$ 6,787	$ 6,581
Work in process	508	503
Finished goods	5,970	4,573
Total inventories	$ 13,265	$ 11,657

XML

Other Financial Statement Data (Schedule Of Equipment And Leasehold Improvements) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Equipment and leasehold improvements, gross	$ 14,088	$ 13,997
Accumulated depreciation and amortization	(11,720)	(11,079)
Equipment and leasehold improvements, net	2,368	2,918
Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment and leasehold improvements, gross	12,500	12,382
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Equipment and leasehold improvements, gross	$ 1,588	$ 1,615

XML

Other Financial Statement Data (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Product Liability Contingency [Line Items]
Depreciation expense	$ 1,177	$ 1,081
Amortization expense, 2016	163
Amortization expense, 2017	138
Amortization expense, 2018	85
Amortization expense, 2019	62
Amortization expense, 2020	$ 62
Minimum [Member]
Product Liability Contingency [Line Items]
Warranty period (in years)	1 year
Maximum [Member]
Product Liability Contingency [Line Items]
Warranty period (in years)	3 years

XML

Other Financial Statement Data (Schedule Of Intangible Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 2,921	$ 3,033
Accumulated Amortization	(2,372)	(2,391)
Net	549	642
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,513	2,625
Accumulated Amortization	(2,253)	(2,338)
Net	260	287
Computer Software [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	206	206
Accumulated Amortization	(53)	(23)
Net	153	183
Marketing Assets/Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	101	101
Accumulated Amortization	(21)	(10)
Net	80	91
Non-compete agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	101	101
Accumulated Amortization	(45)	(20)
Net	$ 56	$ 81

XML

Other Financial Statement Data (Schedule Of Amortization Expense For Intangible Assets) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 176	$ 166
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 110	113
Intangible assets acquired, Weighted Average Life (in years)	3 years 11 days
Computer Software [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 29	23
Intangible assets acquired, Weighted Average Life (in years)	5 years 2 months 14 days
Marketing Assets/Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 12	10
Intangible assets acquired, Weighted Average Life (in years)	6 years 9 months 19 days
Non-compete agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 25	$ 20
Intangible assets acquired, Weighted Average Life (in years)	2 years 2 months 14 days

XML

Other Financial Statement Data (Schedule of Accrued Expenses) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Other Financial Statement Data [Abstract]
Wages and benefits	$ 1,014	$ 1,715
Warranty liability	584	750
Other	361	647
Accrued expenses	$ 1,959	$ 3,112

XML

Other Financial Statement Data (Schedule of Other Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Other Financial Statement Data [Abstract]
Deferred rent	$ 204	$ 285
Warranty liability	61	89
Deferred warranty revenue	3	26
Other liabilities	$ 268	$ 400

XML

Other Financial Statement Data (Schedule Of Changes In Estimated Warranty Liability) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 839	$ 513
Accrual for warranties	441	1,171
Assumed in acquisition	0	5
Warranty revision	(19)	12
Settlements made during the period	(616)	(862)
Balance at end of period	645	839
Current portion of estimated warranty liability	(584)	(750)
Long-term estimated warranty liability	$ 61	$ 89

XML

Other Financial Statement Data (Schedule Of Changes In Deferred Warranty Revenue) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Movement in Extended Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 475	$ 444
Revenue deferrals	353	338
Assumed in acquisition	0	89
Amortization of deferred revenue	(629)	(396)
Total deferred warranty revenue	199	475
Current portion of deferred warranty revenue	(196)	(449)
Long-term deferred warranty revenue	$ 3	$ 26

XML

Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2015	Dec. 31, 2014	Mar. 14, 2014
Goodwill [Line Items]
Goodwill impairment test inputs, discount rate (as a percent)		15.00%	15.00%
Goodwill impairment test inputs, terminal growth rate (as a percent)		600.00%	600.00%
Goodwill		$ 1,366	$ 1,366
Laser Design Inc [Member]
Goodwill [Line Items]
Goodwill acquired			$ 797
Goodwill increase	$ 46
Goodwill				$ 797

XML

Income Taxes (Schedule Of Income Before Income Taxes) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Sources of income (loss) before income taxes: United States	$ (2,994)	$ (2,536)
Sources of income (loss) before income taxes: Foreign	933	1,182
Loss before income taxes	$ (2,061)	$ (1,354)

XML

Income Taxes (Schedule Of Provision (Benefit) For Income Taxes) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Current:
Federal	$ (14)	$ (10)
State	4	13
Foreign	0	10
Total current	(10)	13
Deferred:
Federal	(4)	73
State	1	1
Foreign	41	46
Total deferred	38	120
Total provision for income taxes	$ 28	$ 133

XML

Income Taxes (Schedule Of A Reconciliation Of The Statutory Rate To The Effective Income Tax Rate) (Details)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Federal statutory rate (as a percent)	34.00%	34.00%
State income taxes, net of federal benefit (as a percent)	(0.20%)	6.40%
U.S. Subpart F income (as a percent)	(1.00%)	(2.60%)
Dividend - foreign affiliate (as a percent)	(28.90%)	(0.00%)
Stock based compensation (as a percent)	(1.40%)	(1.10%)
Research and experimentation credit (as a percent)	4.60%	7.80%
Foreign rate difference (as a percent)	17.80%	34.10%
Reserve for income taxes (as a percent)	0.70%	0.70%
Valuation allowance (as a percent)	(26.10%)	(86.60%)
Other, net (as a percent)	(0.80%)	(2.50%)
Effective tax rate (as a percent)	(1.30%)	(9.80%)

XML

Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax [Line Items]
Foreign rate difference (as a percent)	17.80%	34.10%
Dividend - foreign affiliate (as a percent)	28.90%	0.00%
Accrued interest and penalties	$ 1	$ 6
Change in liability for uncertain tax positions	14	10
Estimated gross penalties and interest	5	6
Valuation allowance	$ 10,644	10,500
Need for valuation allowance based on history of cumulative losses	3 years
Increase in valuation allowance	$ 144
Research & Development tax credits	3,498
Deferred tax assets, operating loss carryforwards, domestic	11,875
Deferred tax assets, operating loss carryforwards, foreign	394	419
Cash payments for income taxes, net of refunds received	16	$ 6
Foreign earnings repatriated	3,600
Amount of foreign earnings repatriated previously taxed	1,900
Deferred tax liability not recognized, amount of unrecognized deferred tax liability, undistributed earnings of foreign subsidiaries	2,000
CyberOptics Ltd. [Member]
Income Tax [Line Items]
Deferred tax assets, operating loss carryforwards, foreign	58
Deferred tax asset, net operating loss carryforwards, reduction	$ 6

XML

Income Taxes (Summary Of A Reconciliation Of The Beginning And Ending Amount Of Gross Unrecognized Tax Benefits ("UTB")) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Gross UTB balance at beginning of year	$ 1,508	$ 1,408
Additions based on tax positions related to the current year	186	165
Additions for tax positions of prior years	289	0
Reductions for tax positions of prior years	(78)	(48)
Reductions due to lapse of applicable statute of limitations	(18)	(17)
Gross UTB balance at end of year	1,887	1,508
Net UTB balance at end of year	$ 126	$ 140

XML

Income Taxes (Schedule Of Deferred Tax Assets And Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Assets
Equipment, leaseholds and intangible amortization, net	$ 377	$ 464
Inventory allowances	797	653
Accrued expenses	286	353
Warranty accrual	222	289
Deferred revenue	686	300
Accounts receivable allowance	179	194
Federal and state tax credits	3,319	3,175
Federal and state net operating loss carry forwards	4,379	4,296
Foreign net operating loss carry forwards	394	419
Stock based compensation	331	391
Unrealized gains and losses - other comprehensive loss	0	115
Other, net	73	137
Subtotal	11,043	10,786
Valuation allowance	(10,644)	(10,500)
Total deferred tax assets	399	286
Liabilities
Equipment, leaseholds and intangible amortization, net	367	256
Inventory allowances	6	0
Unrealized gains and losses - other comprehensive loss	35	0
Subtotal	408	256
Total deferred tax liabilities	$ 408	$ 256

XML

Operating Leases (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($) ft² renewal_option	Dec. 31, 2014 USD ($)
Operating Leased Assets [Line Items]
Rent expense | $	$ 1,218	$ 1,299
SINGAPORE
Operating Leased Assets [Line Items]
Mixed office and warehouse facility, square footage	19,805
Period for recognizing rental expense (in years)	3 years
Lease extension period (in years)	1 year
Renewal options, number | renewal_option	1
Renewal options, term (in years)	3 years
Golden Valley [Member] | MINNESOTA
Operating Leased Assets [Line Items]
Mixed office and warehouse facility, square footage	50,724
Lease term (in months)	90 months
Renewal options, number | renewal_option	2
Renewal options, term (in years)	3 years
Bloomington [Member] | MINNESOTA
Operating Leased Assets [Line Items]
Mixed office and warehouse facility, square footage	10,165

XML

Operating Leases (Schedule Of Future Minimum Lease Payments Required Under Non-cancelable Operating Lease Agreements) (Details) $ in Thousands	Dec. 31, 2015 USD ($)
Leases, Operating [Abstract]
2016	$ 777
2017	587
2018	529
Total	$ 1,893

XML

401(K) and Other Defined Contribution Plans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Matching contributions to employees	$ 300	$ 227
CyberOptics Ltd. [Member]
Defined Benefit Plan Disclosure [Line Items]
Matching contributions to employees	$ 33	$ 35

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Summary Of Revenue By Product Line) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Product Information [Line Items]
Revenues	$ 11,394	$ 9,937	$ 10,254	$ 9,545	$ 11,728	$ 11,657	$ 13,263	$ 9,835	$ 41,130	$ 46,483
SMT and High Precision 3d OEM Sensors [Member]
Product Information [Line Items]
Revenues									13,022	15,493
Semiconductor Sensors [Member]
Product Information [Line Items]
Revenues									7,677	7,595
SMT Inspection Systems [Member]
Product Information [Line Items]
Revenues									13,578	18,089
3D Scanning Solutions and Services [Member]
Product Information [Line Items]
Revenues									$ 6,853	$ 5,306

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Summary Of Certain Significant Customer Information) (Details)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Significant Customer A [Member]
Product Information [Line Items]
Percentage of Revenues	10.00%	17.00%
Significant Customer B [Member]
Product Information [Line Items]
Percentage of Revenues	11.00%	8.00%

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Narrative) (Details)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Revenue, Major Customer [Line Items]
Revenue, export sales percentage	72.00%	73.00%
LaserAlign Customer [Member]
Revenue, Major Customer [Line Items]
Percentage of revenues	14.00%	20.00%

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Schedule Of Revenue By Geographic Area) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Revenue, Major Customer [Line Items]
Revenues	$ 11,394	$ 9,937	$ 10,254	$ 9,545	$ 11,728	$ 11,657	$ 13,263	$ 9,835	$ 41,130	$ 46,483
United States [Member]
Revenue, Major Customer [Line Items]
Revenues									11,452	12,339
Americas [Member]
Revenue, Major Customer [Line Items]
Revenues									1,424	1,233
Netherlands [Member]
Revenue, Major Customer [Line Items]
Revenues									4,533	3,813
Other Europe [Member]
Revenue, Major Customer [Line Items]
Revenues									7,462	7,978
China [Member]
Revenue, Major Customer [Line Items]
Revenues									2,581	3,665
Japan [Member]
Revenue, Major Customer [Line Items]
Revenues									4,802	8,460
Other Asia [Member]
Revenue, Major Customer [Line Items]
Revenues									8,531	8,182
Other [Member]
Revenue, Major Customer [Line Items]
Revenues									$ 345	$ 813

XML

Revenue Concentrations, Significant Customers, and Geographic Areas (Schedule Of Long-lived Assets Attributable To Each Geographic Area's Operations) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Total long-lived assets	$ 2,917	$ 3,560
United States [Member]
Property, Plant and Equipment [Line Items]
Total long-lived assets	2,782	3,245
Europe [Member]
Property, Plant and Equipment [Line Items]
Total long-lived assets	2	8
Asia And Other [Member]
Property, Plant and Equipment [Line Items]
Total long-lived assets	$ 133	$ 307

XML

Share Repurchase (Details)	Aug. 31, 2015 USD ($)
Disclosure of Repurchase Agreements [Abstract]
Stock repurchase program, authorized amount	$ 2,000,000

XML

Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended																12 Months Ended
	Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 11,394		$ 9,937		$ 10,254		$ 9,545		$ 11,728		$ 11,657		$ 13,263		$ 9,835		$ 41,130	$ 46,483
Gross margin	4,772		4,239		4,569		4,561		5,454		5,296		5,867		4,568		18,141	21,185
Income (loss) from operations	39		(721)		(655)		(826)		34		(514)		(275)		(722)		(2,163)	(1,477)
Net loss	$ (33)		$ (514)		$ (761)		$ (781)		$ 85		$ (448)		$ (315)		$ (809)		$ (2,089)	$ (1,487)
Net income (loss) per share - Basic (in usd per share)	$ 0.00	[1]	$ (0.08)	[1]	$ (0.11)	[1]	$ (0.12)	[1]	$ 0.01	[1]	$ (0.07)	[1]	$ (0.05)	[1]	$ (0.12)	[1]	$ (0.31)	$ (0.23)
Net income (loss) per share - Diluted (in usd per share)	$ 0.00	[1]	$ (0.08)	[1]	$ (0.11)	[1]	$ (0.12)	[1]	$ 0.01	[1]	$ (0.07)	[1]	$ (0.05)	[1]	$ (0.12)	[1]	$ (0.31)	$ (0.23)

[1] The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.