10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File No. 000-51072

CASCADE MICROTECH, INC.

(Exact name of registrant as specified in its charter)

Oregon	93-0856709
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2430 N.W. 206th Avenue Beaverton, Oregon	97006
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (503) 601-1000

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant 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  ¨    No  ¨

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of common stock outstanding as of July 30, 2009 was 13,323,275.

CASCADE MICROTECH, INC.

INDEX TO FORM 10-Q

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) – June 30, 2009 and December 31, 2008	2
	Condensed Consolidated Statements of Operations (unaudited) – Three and Six Months Ended June 30, 2009 and 2008	3
	Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 6.	Exhibits	21
Signatures		22

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Cascade Microtech, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, In thousands)

	June 30, 2009			December 31, 2008
Assets
Current Assets:
Cash and cash equivalents	$	7,707		$	3,750
Short-term marketable securities		21,720			28,795
Accounts receivable, net of allowances of $1,025 and $1,029		9,009			12,801
Inventories		17,930			19,079
Prepaid expenses and other		862			1,367
Taxes receivable		945			1,003
Deferred income taxes		94			99
Assets held for sale		—			400
Total Current Assets		58,267			67,294
Long-term marketable securities		4,251			2,465
Fixed assets, net of accumulated depreciation of $16,379 and $14,769		13,353			13,580
Purchased intangible assets, net of accumulated amortization of $1,457 and $1,166		2,134			2,425
Deferred income taxes		262			237
Other assets, net of accumulated amortization of $2,861 and $3,397		2,477			2,455
Total Assets	$	80,744		$	88,456
Liabilities and Shareholders’ Equity
Current Liabilities:
Current portion of capital leases	$	11		$	19
Accounts payable		2,829			4,110
Deferred revenue		1,021			1,120
Accrued liabilities		2,121			3,776
Total Current Liabilities		5,982			9,025
Capital leases, net of current portion		34			62
Deferred revenue		176			313
Other long-term liabilities		2,419			2,356
Total Liabilities		8,611			11,756
Shareholders’ Equity:
Common stock, $0.01 par value. Authorized 100,000 shares; issued and outstanding: 13,321 and 13,164		133			132
Additional paid-in capital		84,405			83,213
Accumulated other comprehensive income		50			69
Accumulated deficit		(12,455	)		(6,714	)
Total Shareholders’ Equity		72,133			76,700
Total Liabilities and Shareholders’ Equity	$	80,744		$	88,456

See accompanying Notes to Condensed Consolidated Financial Statements.

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Cascade Microtech, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, In thousands, except per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Revenue	$	12,616		$	19,287		$	24,085		$	40,046
Cost of sales		7,835			10,889			15,449			21,865
Gross profit		4,781			8,398			8,636			18,181
Operating expenses:
Research and development		1,818			2,826			3,811			5,732
Selling, general and administrative		5,186			7,335			10,581			14,214
Amortization of purchased intangibles		145			649			291			1,297
		7,149			10,810			14,683			21,243
Loss from operations		(2,368	)		(2,412	)		(6,047	)		(3,062	)
Other income (expense):
Interest income, net		103			227			201			490
Other, net		440			(183	)		(115	)		256
		543			44			86			746
Loss before income taxes		(1,825	)		(2,368	)		(5,961	)		(2,316	)
Benefit for income taxes		(249	)		(510	)		(220	)		(442	)
Net loss	$	(1,576	)	$	(1,858	)	$	(5,741	)	$	(1,874	)
Basic and diluted net loss per share	$	(0.12	)	$	(0.14	)	$	(0.43	)	$	(0.14	)
Shares used in basic and diluted per share calculations:		13,306			13,046			13,273			13,016

See accompanying Notes to Condensed Consolidated Financial Statements.

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Cascade Microtech, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, In thousands)

	For the Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(5,741	)	$	(1,874	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,190			3,038
Stock-based compensation, net		932			1,363
(Gain) loss on disposal of long-lived assets		(14	)		82
Loss on disposal of assets held for sale		40			—
Deferred income taxes		(20	)		(223	)
(Increase) decrease in:
Accounts receivable, net		3,792			4,420
Inventories, net		1,149			(1,530	)
Prepaid expenses and other		501			(117	)
Increase (decrease) in:
Accounts payable		(1,281	)		19
Deferred revenue		(236	)		(185	)
Accrued and other long-term liabilities		(1,617	)		(752	)
Net cash provided by (used in) operating activities		(305	)		4,241
Cash flows from investing activities:
Purchase of marketable securities		(10,554	)		(27,997	)
Proceeds from sale of marketable securities		15,824			26,602
Purchase of fixed assets		(1,444	)		(1,677	)
Investment in patents and other assets		(185	)		(386	)
Cash paid for acquisitions, net of cash acquired		—			(1,000	)
Proceeds from disposal of fixed assets		16			—
Proceeds from sale of assets held for sale		360			—
Net cash provided by (used in) investing activities		4,017			(4,458	)
Cash flows from financing activities:
Principal payments on capital lease obligations		(16	)		(9	)
Excess (reversal of) tax benefits related to stock option exercises		(23	)		47
Withholding taxes paid on net settlement of vested restricted stock units		(37	)		(28	)
Proceeds from issuances of common stock		321			1,057
Net cash provided by financing activities		245			1,067
Increase in cash and cash equivalents		3,957			850
Cash and cash equivalents:
Beginning of period		3,750			4,900
End of period	$	7,707		$	5,750
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1		$	1
Cash paid (refunds received) for income taxes, net		(106	)		311
Supplemental disclosure of non-cash information:
Equipment acquired with capital lease	$	—		$	5
Increase in asset retirement obligation		25			—

See accompanying Notes to Condensed Consolidated Financial Statements.

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CASCADE MICROTECH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial information included herein has been prepared by Cascade Microtech, Inc. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2008 is derived from our 2008 Annual Report on Form 10-K. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. The financial information for the second quarter of 2009 includes an immaterial adjustment for foreign currency re-measurement related to 2008, which increased other income by $0.3 million for the three and six-month periods ended June 30, 2009. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2008 Annual Report on Form 10-K. The results of operations for the interim period presented are not necessarily indicative of the results to be expected for the full year.

Note 2. Inventories

Inventories are stated at the lower of standard cost, which approximates cost computed on a first-in, first-out basis, or market, and include materials, labor and manufacturing overhead. Demonstration goods, which are included as a component of finished goods, represent inventory that is used for customer demonstration purposes. This inventory is typically sold after 12 to 18 months. We analyze the carrying value of our inventory quarterly, considering a combination of factors including, but not limited to, the following: forecasted sales or usage, historical usage rates, estimated service period, product end-of-life dates, estimated current and future market values, service inventory requirements and new product introductions. We estimate market value based on factors including, but not limited to, replacement cost and estimated resale value. Inventory reserve charges totaled $284,000 and $467,000, respectively, in the three and six-month periods ended June 30, 2009 and $12,000 and $82,000, respectively, in the comparable periods of 2008.

Inventories consisted of the following (in thousands):

	June 30, 2009		December 31 2008
Raw materials	$	10,468	$	10,819
Work-in-process		1,265		1,466
Finished goods		6,197		6,794
	$	17,930	$	19,079

Note 3. Net Loss Per Share

Since we were in a loss position for the three and six-month periods ended June 30, 2009 and 2008, there was no difference between the number of shares used to calculate basic and diluted net loss per share for those periods. Potentially dilutive securities (in thousands) that are not included in the diluted per share calculations because they would be anti-dilutive totaled 1,540 for the three and six-month periods ended June 30, 2009, and 1,600 for the three and six-month periods ended June 30, 2008.

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Note 4. Comprehensive Income (Loss)

Comprehensive income (loss) includes unrealized holding gains and losses on our available-for-sale marketable securities, which are included as a separate component of shareholders’ equity until realized. Unrealized holding gains (losses) were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Unrealized holding gains (losses)	$	(35	)	$	(85	)	$	(19	)	$	10

Note 5. Product Warranty

We estimate a liability for costs to repair or replace products under warranties for a period of approximately twelve months when the related product revenue is recognized. The products are sold without a right of return or price protection rights. The liability for product warranties is calculated as a percentage of sales. The percentage is based on historical actual product repair costs. The liability for product warranties is included in accrued liabilities on our consolidated balance sheet. Product warranty activity was as follows (in thousands):

	Six Months Ended June 30,
	2009			2008
Warranty accrual, beginning of period	$	313		$	501
Reductions for warranty charges		(292	)		(336	)
Additions to warranty reserve		231			317
Warranty accrual, end of period	$	252		$	482

Note 6. Patents and Purchased Intangibles Assets

Internally Developed Patents

Included in other long-term assets on our balance sheet were internally developed patents as follows: (in thousands):

	June 30, 2009			December 31 2008
Patents	$	4,819		$	5,395
Accumulated amortization		(2,861	)		(3,397	)
	$	1,958		$	1,998

Purchased Intangible Assets

Purchased intangible assets, net included the following:

	June 30, 2009			December 31, 2008
Customer relationships	$	2,465		$	2,465
Accumulated amortization		(975	)		(772	)
		1,490			1,693
Other		1,126			1,126
Accumulated amortization		(482	)		(394	)
		644			732
Total purchased intangible assets, net	$	2,134		$	2,425

Amortization expense of internally developed patents and purchased intangible assets totaled $0.5 million and $1.5 million, respectively, in the six-month periods ended June 30, 2009 and 2008. Of the amortization expense, $225,000 and $244,000, respectively, was for internally developed patents and was included as a component of selling, general and administrative expense.

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Note 7. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2009		December 31, 2008
Accrued compensation and benefits	$	1,330	$	2,037
Accrued warranty		252		313
Accrued materials returns		111		210
Other		428		1,216
	$	2,121	$	3,776

Note 8. Stock-Based Compensation and Stock-Based Plans

Stock-based compensation was included in our statement of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Cost of sales	$	74	$	105	$	159	$	214
Research and development		71		95		131		211
Selling, general and administrative		391		524		642		938
	$	536	$	724	$	932	$	1,363

Stock Incentive Plans

Effective January 29, 2009, we offered our U.S. employees, other than current members of our Board of Directors and our executive officers (the “Eligible Employees”), the ability to exchange outstanding stock options with an exercise price equal to or greater than $7.00 per share (the “Eligible Options”) for a lesser number of restricted stock units (the “Option Exchange”). Eligible Employees had until February 27, 2009 to exchange Eligible Options at a ratio of 5 options for every 1 restricted stock unit (“RSU”). Each RSU represents a contingent right to receive one share of our common stock upon vesting. The vesting is contingent on continued employment and will occur in four equal annual installments on the first through fourth anniversaries of the grant date, with full vesting occurring on the fourth anniversary of the grant date. A total of 77 employees participated in the Option Exchange, and a total of 169,590 stock options with a fair value of $70,000 were exchanged for a total of 33,918 RSUs with a fair value of $83,000, resulting in $13,000 of incremental expense to be recognized over the vesting period.

On May 15, 2009, our shareholders approved an amendment to our 2000 Stock Incentive Plan, increasing the number of shares of our common stock reserved for issuance thereunder from 2,400,000 shares to 3,000,000 shares.

Stock option activity for the first six months of 2009 was as follows:

	Options Outstanding		Weighted Average Exercise Price
Outstanding at December 31, 2008	1,013,220		$	10.22
Granted	309,080			3.11
Exercised	—			—
Forfeited	(322,532	)		11.47
Outstanding at June 30, 2009	999,768			7.62

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Restricted stock unit activity for the first six months of 2009 was as follows:

	Restricted Stock Units		Weighted Average Grant Date Per Share Fair Value
Outstanding at December 31, 2008	424,762		$	7.36
Granted	112,018			5.84
Vested	(51,014	)		2.85
Forfeited	(6,350	)		4.84
Outstanding at June 30, 2009	479,416			7.52

As of June 30, 2009, total unrecognized stock-based compensation related to outstanding, but unvested options and restricted stock units was $3.4 million, which will be recognized over the weighted average remaining vesting period of 1.8 years.

Employee Stock Purchase Plan

In January 2009, pursuant to the terms of our 2004 Employee Stock Purchase Plan (“ESPP”), and upon approval by our Board of Directors, the number of shares of our common stock available for purchase under the 2004 ESPP was increased from 500,000 to 600,000. In addition, the Board of Directors authorized an amendment of the 2004 ESPP to reduce the offering period of the plan from two-years to six-months, and changed the Enrollment Date to the first trading day on or after May 1 and November 1 of each year. This amendment was effective as of May 1, 2009. The modification of the ESPP resulted in an immaterial amount of incremental compensation expense in the first quarter of 2009.

Employees purchased 120,482 shares in the first six months of 2009 for $321,000 under the 2004 ESPP.

Note 9. Significant Customer and Segment Reporting

The segment data below is presented in the same manner that management currently organizes the segments for assessing certain performance trends. Our Chief Operating Decision Maker monitors the revenue streams and the gross profit of our Systems sales and our Probes and Sockets sales. We do not track our operating expenses or assets on a segment level, and, accordingly, that information is not provided. Revenue and gross profit information by segment was as follows (dollars in thousands):

Three Months Ended June 30, 2009	Systems			Probes and Sockets			Total
Revenue	$	6,194		$	6,422		$	12,616
Gross Profit	$	2,081		$	2,700		$	4,781
Gross Margin		33.6	%		42.0	%		37.9	%
Three Months Ended June 30, 2008
Revenue	$	9,824		$	9,463		$	19,287
Gross Profit	$	3,133		$	5,265		$	8,398
Gross Margin		31.9	%		55.6	%		43.5	%

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Six Months Ended June 30, 2009	Systems			Probes and Sockets			Total
Revenue	$	12,317		$	11,768		$	24,085
Gross Profit	$	4,166		$	4,470		$	8,636
Gross Margin		33.8	%		38.0	%		35.9	%
Six Months Ended June 30, 2008
Revenue	$	20,384		$	19,662		$	40,046
Gross Profit	$	7,034		$	11,147		$	18,181
Gross Margin		34.5	%		56.7	%		45.4	%

The segment data provided is prepared in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” and is not meant to represent stand-alone divisional information. In preparing this financial information, certain expenses were allocated between the segments based on management estimates, while others were based on specific factors such as headcount. These factors can have a significant impact on the amount of gross profit for each segment. While we believe we have applied a reasonable methodology, assignment of other reasonable cost allocations to each segment could result in materially different segment gross margins.

No customer accounted for 10% or greater of our total revenue in the three or six-month periods ended June 30, 2009 or 2008.

Note 10. Fair Value Measurements

Effective January 1, 2009, we adopted the provisions of SFAS No. 157, “Fair Value Measurements,” for our non-financial assets and liabilities. The adoption of these provisions of SFAS No. 157 did not have any effect on our results of operations, financial position or cash flows.

Effective June 30, 2009, we adopted the provisions of FSP No. FAS157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This FSP provides additional guidance for estimating fair value in accordance with SFAS No. 157 and emphasizes that, even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. This FSP amends SFAS No. 157 to require disclosure in interim and annual periods regarding the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. It also requires that entities define major categories of equity and debt securities in accordance with paragraph 19 of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Since this FSP pertains primarily to footnote disclosures, the adoption did not have any effect on our financial position, results of operations or cash flows.

Various inputs are used in determining the fair value of our assets and liabilities that are required to be measured at fair value and are summarized into three broad categories:

• Level 1 – quoted prices in active markets for identical securities;

• Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and

• Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

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Following are the disclosures related to our financial assets (in thousands):

	June 30, 2009
	Fair Value		Input Level
Marketable securities - municipal obligations	$	25,971	Level 2
Forward purchase contracts for Japanese Yen	$	934	Level 2

The fair value of our marketable securities is determined based on quoted market prices for similar securities. The fair value of our forward contracts is based on quoted market prices for similar securities and is used for the purpose of determining any gain or loss on our forward positions. We do not record the value of the forward contracts on our balance sheet. We record the net unrealized gain or loss as component of other income (expense), net on a quarterly basis.

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Note 11. Completion of Tax Audit

In April 2009, the Internal Revenue Service (“IRS”) completed its audit of our 2006 and 2007 federal tax returns. As a result of the audit, we released tax contingencies that resulted in a net tax benefit of approximately $149,000. The tax benefit was recorded in the second quarter of 2009 in accordance with FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.”

Note 12. Accounting Pronouncements Issued Not Yet Adopted

SFAS No. 168

In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168 “FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162.” SFAS No. 168 will become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. On the effective date, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. As we believe that our accounting practices are consistent with the Codification, we do not believe that the adoption of SFAS No. 168 will have a material effect on our financial position, results of operations or cash flows.

SFAS No. 167

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” SFAS No. 167 improves financial reporting by enterprises involved with variable interest entities. SFAS No. 167 is effective as of the beginning of an entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. We do not have any entities that fall under the guidance of SFAS No. 167 and, accordingly, the adoption of SFAS No. 167 will not have any effect on our financial position, results of operations or cash flows.

SFAS No. 166

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140.” SFAS No. 166 improves the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. SFAS No. 166 also amends certain provisions of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 166 is effective as of the beginning of an entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. SFAS No. 166 must be applied to transfers occurring on or after the effective date. While we are still analyzing the effects of the adoption of SFAS No. 166, we do not believe that the adoption of SFAS No. 166 will have a material effect on our financial position, results of operations or cash flows.

Note 13. Subsequent Events

We have considered all events that have occurred subsequent to June 30, 2009 and through August 4, 2009, the issuance date of the financial statements as of and for the periods ended June 30, 2009.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements and Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact made in this Quarterly Report on Form 10-Q are forward-looking, including, but not limited to, statements regarding industry prospects; future results of operations or financial position; our expectations and beliefs regarding future revenue growth; the future capabilities and functionality of our products and services, our strategies and intentions regarding acquisitions; the outcome of any litigation to which we are a party; our accounting and tax policies; our future strategies regarding investments, product offerings, research and development, market share, and strategic relationships and collaboration; our dividend policies; and our future capital requirements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology, including “intend,” “could,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate” “predict,” “potential,” “future,” or “continue,” the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those expressed or implied in such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks included in Item 1A to our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 10, 2009. These risk factors have not significantly changed since they were filed with our Form 10-K and included the following:

• Our operating results have fluctuated in the past and are likely to fluctuate in the future, which could cause us to miss analyst expectations about these results and cause the trading price of our common stock to decline.

• The cyclicality of the semiconductor industry affects our financial results, and, as a result, we may experience reduced sales or operating losses in a semiconductor industry downturn.

• As a result of rapid macroeconomic deterioration, some of our customers may experience sudden and unexpected changes in their financial condition, resulting in bad debts.

• Consolidation of our customer base due to the poor economic environment could adversely affect our revenues and results of operations.

• Because we generally do not have a sufficient backlog of unfilled orders to meet our quarterly revenue targets, revenue in any quarter is substantially dependent upon customer orders received and fulfilled in that quarter.

• As is the case with other companies in our industry, many of our customers defer purchasing decisions until late each quarter. As a result, we are significantly dependent upon the sale of our products in the third month of each quarter, and, if we do not generate enough revenue in the third month of each quarter to meet the earnings expectations of analysts or investors, the price of our common stock could decline.

• We continue to devote significant effort and resources to the growth and development of our production probe cards and test sockets products, which has had, and could continue to have, an adverse effect on our operating margins.

• If we do not keep pace with technological developments in the semiconductor industry, especially the trend toward faster, smaller and lower cost chips, our revenue and operating results could suffer as potential customers decide to adopt our competitors’ products.

• We may make future acquisitions, which may be costly, difficult to integrate with our operations, divert management resources and dilute shareholder value.

• Intense competition in the semiconductor wafer probing business may reduce demand for our products and reduce our sales.

• We obtain some of the materials, components and subassemblies used in our products from a single source or a limited group of suppliers. If these suppliers declare bankruptcy or are unable to provide us with these materials, components or subassemblies in adequate quantities and on a timely basis, we may be unable to manufacture our products or meet our customers’ needs.

• We have long-lived assets, including fixed assets and intangible assets, recorded on our balance sheet. In view of the current turbulent economic environment and the decline in our revenues, the fair value of certain long-lived assets may be reduced below their carrying value. If there has been an impairment of long-lived assets, we would be required to record non-cash asset impairment charges in future periods, which would adversely impact our results of operations.

12

• We face economic, political and other risks associated with our international sales and operations, which could materially harm our operating results.

• We rely on independent manufacturers’ representatives and distributors for a significant portion of our revenue, and a disruption in our relationship with our manufacturers’ representatives or distributors would have a material adverse effect on our revenue.

• Failure to retain key managerial, technical, and sales and marketing personnel or to attract new key personnel could harm our business.

• Our customers’ evaluation processes can lead to lengthy sales cycles, during which we may incur significant costs that may not result in sales.

• If our products contain defects, our reputation would be damaged, and we could lose customers and revenue and incur warranty expenses.

• If we fail to protect our proprietary technology and rights, competitors may be able to use our technologies, which would weaken our competitive position and could reduce our sales.

• Intellectual property infringement claims by or against us may result in litigation, the cost of which could be substantial and could prevent us from selling our products.

• Our growth could strain our personnel and infrastructure resources, and, if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan.

• Our success depends on our continued investment in research and development, the level and effectiveness of which could reduce our profitability.

• We manufacture most of our products at our Oregon and Minnesota facilities, and any disruption in the operations of these facilities could harm our business.

• We rely on suppliers and contract manufacturers for the products we sell.

• Reorganization could also result in significant disruption of our business and our relationships with our employees, suppliers and customers could be adversely affected.

• We may fail to comply with environmental regulations, which could result in significant costs and harm our business.

• Product liability claims may be asserted against us, resulting in costly litigation for which we may not have sufficient liability insurance.

• We rely on a small number of customers for a significant portion of our revenue, and the termination of any of these relationships would adversely affect our business.

• Our employment costs in the short-term are, to a large extent, fixed, and therefore, any shortfall in sales would harm our operating results.

• Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.

• Our officers and directors and their affiliates will control the outcome of matters requiring shareholder approval.

• The anti-takeover provisions of our charter documents and Oregon law may inhibit a takeover or change in our control that our shareholders may consider beneficial.

• If our stock price is volatile, securities class action litigation may be brought against us, which could result in substantial costs.

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General

We design, develop and manufacture advanced wafer probing and test socket solutions for the electrical measurement and testing of high performance chips. We design, manufacture and assemble our products in Oregon and Minnesota, with global sales, service and support centers in North America, Germany, Japan, Taiwan, China and Singapore.

Engineering probe stations address the need for precise and accurate measurement of semiconductor electrical characteristics during chip design or when optimizing the chip fabrication process. Our engineering probe stations are highly configurable and are typically sold with various accessories, including our analytical probes, as well as accessories from third parties. In addition, we design and build custom engineering probe stations to address the specific requirements of our customers.

Our analytical probes are sold to serve as components of our engineering probe stations, or less often, to serve as components of test equipment manufactured by third parties. Our production probe cards are designed and sold for production test applications, ranging from very low current parametric testing to sophisticated, high speed radio frequency testing. Our test sockets are designed and sold for both production and engineering test applications, typically for high speed digital and radio frequency testing.

We also generate revenue through the sales of service contracts to our customers.

Overview

Revenues decreased to $24.1 million in the first six months of 2009 compared to $40.0 million in the first six months of 2008, as uncertainty in the world economic environment impacted demand for semiconductors and semiconductor equipment. However, revenues increased to $12.6 million in the second quarter of 2009 compared to $11.5 million in the first quarter of 2009 as a result of increased sales of probes and sockets in the production market. The increase in probes and sockets sales resulted in an overall increase in gross margin to 37.9% in the second quarter of 2009 compared to 33.6% in the first quarter of 2009 as fixed overhead costs related to the production of probes and sockets were recovered.

Outlook for the Remainder of 2009

Based on the results for first six months of 2009 and our current forecast, we expect an overall decline in revenue for 2009 compared to 2008. However, we saw a mild recovery in the market place with increases in revenues and backlog, particularly in probes and sockets, at the end of the second quarter of 2009. We expect this mild recovery to continue through the third and fourth quarters of 2009. Though mild revenue growth through the end of 2009 as compared to the first two quarters of 2009 is expected, continued uncertainty in global economic conditions makes it difficult to predict product demand and other related matters, and makes it more likely that our actual results could differ materially from expectations.

Critical Accounting Policies and the Use of Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of condensed 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 our estimates, including those related to revenue recognition, bad debts, inventory, lives and recoverability of equipment and other long-lived assets, warranty obligations, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be 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. Actual results may differ from these estimates under different assumptions or conditions.

We reaffirm the critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 10, 2009.

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Results of Operations

The following table sets forth our consolidated statement of operations data for the periods indicated as a percentage of revenue.⁽¹⁾

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2009		2008		2009		2008
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	62.1		56.5		64.1		54.6
Gross profit	37.9		43.5		35.9		45.4
Operating expenses:
Research and development	14.4		14.7		15.8		14.3
Selling, general and administrative	41.1		38.0		43.9		35.5
Amortization of purchased intangibles	1.1		3.4		1.2		3.2
Total operating expenses	56.7		56.0		61.0		53.0
Loss from operations	(18.8	)	(12.5	)	(25.1	)	(7.6	)
Other income, net	4.3		0.2		0.4		1.9
Loss before income taxes	(14.5	)	(12.3	)	(24.7	)	(5.8	)
Benefit for income taxes	(2.0	)	(2.6	)	(0.9	)	(1.1	)
Net loss	(12.5	)%	(9.6	)%	(23.8	)%	(4.7	)%

(1) Percentages may not add due to rounding.

The following tables summarize revenue and gross profit for each of our segments (dollars in thousands):

Three Months Ended June 30, 2009	Systems			Probes and Sockets			Total
Revenue	$	6,194		$	6,422		$	12,616
Gross Profit	$	2,081		$	2,700		$	4,781
Gross Margin		33.6	%		42.0	%		37.9	%
Three Months Ended June 30, 2008
Revenue	$	9,824		$	9,463		$	19,287
Gross Profit	$	3,133		$	5,265		$	8,398
Gross Margin		31.9	%		55.6	%		43.5	%
Six Months Ended June 30, 2009	Systems			Probes and Sockets			Total
Revenue	$	12,317		$	11,768		$	24,085
Gross Profit	$	4,166		$	4,470		$	8,636
Gross Margin		33.8	%		38.0	%		35.9	%
Six Months Ended June 30, 2008
Revenue	$	20,384		$	19,662		$	40,046
Gross Profit	$	7,034		$	11,147		$	18,181
Gross Margin		34.5	%		56.7	%		45.4	%

The segment data provided is prepared in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” and is not meant to represent stand-alone divisional information.

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Revenue

Revenue decreased $6.7 million, or 34.6%, to $12.6 million in the three-month period ended June 30, 2009 compared to $19.3 million in the same period of 2008 and decreased $15.9 million, or 39.9%, to $24.1 million in the six-month period ended June 30, 2009 compared to $40.0 million in the same period of 2008.

Systems

Systems revenue decreased $3.6 million, or 37.0%, to $6.2 million in the three-month period ended June 30, 2009 compared to $9.8 million in the same period of 2008 and decreased $8.1 million, or 39.6%, to $12.3 million in the six-month period ended June 30, 2009 compared to $20.4 million in the same period of 2008.

Certain financial information which contributed to Systems revenue results was as follows:

	Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008		Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Percentage decrease in unit sales	31.3	%	34.4	%
Percentage decrease in average sales price	14.2	%	16.4	%

We realized decreased unit sales in the three and six-month periods ended June 30, 2009 compared to the same periods of 2008 due to a significant slow-down in the semiconductor and semiconductor equipment markets that began in the third quarter of 2008. Average sales prices in the first six months of 2009 compared to the first six months of 2008 were negatively affected by sales mix, as fewer high-end 300mm systems were sold in relation to total system sales. Average sales price includes the sales price of any analytical probes, probe cards and accessories purchased with an engineering probe station.

Probes and Sockets

Probes and Sockets revenue decreased $3.1 million, or 32.1%, to $6.4 million in the three-month period ended June 30, 2009 compared to $9.5 million in the same period of 2008 and decreased $7.9 million, or 40.1%, to $11.8 million in the six-month period ended June 30, 2009 compared to $19.7 million in the same period of 2008. These decreases were primarily the result of lower unit sales driven by the overall decrease in worldwide semiconductor production.

Cost of Sales and Gross Margin

Cost of sales includes purchased materials, fabrication, assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, royalties and provision for inventory valuation reserves.

Cost of sales decreased $3.1 million, or 28.0%, to $7.8 million in the three-month period ended June 30, 2009 compared to $10.9 million in the same period of 2008 and decreased $6.5 million, or 29.3%, to $15.4 million in the six-month period ended June 30, 2009 compared to $21.9 million in the same period of 2008.

Systems

Systems gross margin increased to 33.6% in the three-month period June 30, 2009 from 31.9% in the same period of 2008. The increase in gross margin is primarily attributable to decreases in salaries, benefits and overhead costs. Decreases in production cost relative to sales were offset by an increase in inventory reserve charges and changes in margin due to product mix. We sold fewer 300mm systems in relation to total system sales, which typically yield higher gross margins than non-300mm systems due to their higher average sales prices and sales of accessories.

Systems gross margin decreased to 33.8% in the six-month period June 30, 2009 from 34.5% in the same period of 2008. The decrease is primarily attributable to an increase in inventory reserve charges and a shift in product mix to fewer 300mm systems in relation to total system sales. These changes were offset by decreases in salaries, benefits and overhead costs.

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Probes and Sockets

The gross margin in Probes and Sockets decreased to 42.0% and 38.0%, respectively, in the three and six-month periods ended June 30, 2009 from 55.6% and 56.7%, respectively, in the same periods of 2008. The decreases in gross margin were primarily due to the decreases in sales volume as production costs for Probes and Sockets have a higher component of fixed overhead than Systems. As sales volumes decline, unallocated fixed overhead costs recorded as a period expense in cost of sales increase.

Research and Development

Research and development costs are expensed as incurred and include compensation and related expenses for personnel, materials, consultants and overhead. From time to time, we enter into arrangements that provide for the reimbursement of research and development expenses. Such reimbursements are netted against gross research and development expenses.

Research and development expenses decreased $1.0 million, or 35.7%, to $1.8 million in the three-month period ended June 30, 2009 compared to $2.8 million in the same period of 2008 and decreased $1.9 million, or 33.5%, to $3.8 million in the six-month period ended June 30, 2009 compared to $5.7 million in the same period of 2008.

The decreases were primarily due to the following:

	Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008		Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Decrease in wages and benefits due to lower headcount	$	633,000	$	1,304,000
Decrease in travel, meals and entertainment expenses		81,000		101,000
Decrease in production costs allocated to R&D		66,000		167,000
Decrease in severance costs		54,000		54,000
Decrease in supplies expense		52,000		46,000
Decrease in occupancy expenses		45,000		102,000
Decrease in stock-based compensation		24,000		80,000
Other, net		45,000		46,000
	$	1,000,000	$	1,900,000

Selling, General and Administrative

Selling, general and administrative, or SG&A, expense includes compensation and related expenses for personnel, travel, outside services, manufacturers’ representative commissions, internally developed patent and trademark amortization and overhead incurred in our sales, marketing, customer support, management, legal and other professional and administrative support functions, as well as costs to operate as a public company.

SG&A expense decreased $2.1 million, or 29.3%, to $5.2 million in the three-month period ended June 30, 2009 compared to $7.3 million in the same period of 2008 and decreased $3.6 million, or 25.6%, to $10.6 million in the six-month period ended June 30, 2009 compared to $14.2 million in the same period of 2008.

17

The decreases were primarily due to the following:

	Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008		Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Decrease in wages and benefits due to lower headcount	$	639,000	$	944,000
Decrease in accounting and consulting fees		219,000		562,000
Decrease in internal and external sales commissions		246,000		431,000
Decrease in travel, meals and entertainment expenses		299,000		483,000
Decrease in occupancy expenses		154,000		274,000
Decrease in advertising and sales materials		150,000		248,000
Decrease in stock-based compensation		133,000		296,000
Decrease in executive incentive compensation		115,000		150,000
Other, net		145,000		212,000
	$	2,100,000	$	3,600,000

Amortization of Purchased Intangibles

Amortization of purchased intangibles includes amortization related to our prior acquisitions. Amortization expense decreased $0.5 million to $0.1 million in the three-month period ended June 30, 2009 compared to $0.6 million in the same period of 2008 and decreased $1.0 million to $0.3 million in the six-month period ended June 30, 2009 compared to $1.3 million in the same period of 2008 due to the asset impairment charge recorded in the fourth quarter of 2008. Net purchased intangibles totaled $2.1 million at June 30, 2009.

Other Income (Expense)

Other income (expense) typically includes interest income, interest expense, gains and losses on foreign currency forward contracts and re-measurement related foreign currency gains and losses. Other income (expense) can also include other miscellaneous non-operating gains and losses.

Other income (expense) was comprised of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Interest income, net	$	103		$	227		$	201		$	490
Re-measurement related foreign currency gains (losses)		585			3			(17	)		(180	)
Gains (losses) on foreign currency forward contracts		(150	)		(223	)		(114	)		387
Other		5			37			16			49
	$	543		$	44		$	86		$	746

Interest income represents interest earned on cash and cash equivalents and investments in marketable securities. The decreases in the three and six-month periods ended June 30, 2009 compared to the same periods of 2008 were primarily due to a decrease in interest rates on investments. Re-measurement related foreign currency gains and losses primarily result from a combination of changes in foreign currency exchange rates and the net value of monetary assets and liabilities denominated in Yen, Euro and other foreign currencies. The second quarter of 2009 includes an adjustment for foreign currency re-measurement related to 2008, which increased other income by $0.3 million for the three and six-month periods ended June 30, 2009.

Income Taxes

The benefit for income taxes totaled $0.2 million, or 3.7%, and $0.4 million, or 19.1%, of loss before income taxes, in the first six months of 2009 and 2008, respectively. The income tax benefit for the first six months of 2009 was primarily attributable to the release of tax contingencies as a result of the Internal Revenue Service (“IRS”) completing its audit of our 2006 and 2007 federal tax returns in April 2009. We continued to record a valuation allowance against certain deferred tax assets generated from our net loss in the first six months of 2009. The income tax benefit in the first six months of 2009 differs from the statutory rate due to losses not benefited in certain tax jurisdictions.

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Liquidity and Capital Resources

Net cash used in operating activities in the first six months of 2009 was $0.3 million and consisted of our net loss of $5.7 million, offset by net non-cash expenses of $3.1 million and net changes in our operating assets and liabilities as described below.

Accounts receivable, net decreased by $3.8 million to $9.0 million at June 30, 2009, compared to $12.8 million at December 31, 2008. The decrease in accounts receivable was primarily due to lower sales in the second quarter of 2009 compared to the fourth quarter of 2008.

Inventories decreased by $1.2 million to $17.9 million at June 30, 2009, compared to $19.1 million at December 31, 2008. The decrease in inventory is attributable to an increase in inventory related reserves of $0.5 million, scrap adjustments of $0.3 million, and an overall decrease in inventory purchasing. We believe that our inventory reserves at June 30, 2009 are adequate. However, if our actual results are significantly different than our current expectations for the remainder of 2009, we may be required to increase reserves for inventory in future periods.

Accounts payable and other accrued liabilities decreased by $2.9 million to $5.0 million at June 30, 2009, compared to $7.9 million at December 31, 2008 primarily due to an overall decrease in inventory purchases, operating expenses and accrued compensation and benefits.

Fixed asset purchases of $1.4 million in the first six months of 2009 were primarily for socket production related equipment and sustaining on-going capital requirements. We anticipate fixed asset additions for the remainder of 2009 of approximately $1.5 million, primarily for tools and equipment related to the production and design of production probes cards.

Assets held for sale at December 31, 2008 were sold for $360,000 in the first quarter of 2009. The loss of $40,000 upon sale of these assets was included as a component of selling, general and administrative expenses.

Proceeds from the issuance of common stock of $0.3 million represented the sale of stock pursuant to our employee stock purchase plan.

We anticipate meeting our cash requirements for the next 12 months and for the foreseeable future from existing cash, short-term marketable securities and long-term marketable securities, which totaled $33.7 million at June 30, 2009. We have, from time to time, evaluated, and continue to evaluate, opportunities for acquisition and expansion. Any such transactions, if consummated, may use a portion of our cash and marketable securities.

Accounting Pronouncements Issued Not Yet Adopted

See Note 12 of Notes to Condensed Consolidated Financial Statements.

Contractual Commitments

The following is a summary of our contractual commitments and obligations as of June 30, 2009 (in thousands):

	Payments Due By Period
Contractual Obligation	Total		Remainder of 2009		2010 and 2011		2012 and 2013		2014 and beyond
Operating Leases	$	15,490	$	1,360	$	5,362	$	4,725	$	4,043
Capital Leases		47		7		26		14		—
Purchase Order Commitments		3,281		3,211		70		—		—
	$	18,818	$	4,578	$	5,458	$	4,739	$	4,043

Purchase order commitments primarily represent open orders for inventory.

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Seasonality

Typically, our revenue is lower in our fiscal first quarter than in our fiscal fourth quarter preceding it. In addition, as is typical in our industry, we recognize a large percentage of our quarterly revenue in the last month of the quarter. However, our seasonality can be affected by general economic trends and it should not be expected that historical revenue patterns will continue.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our reported market risks or risk management policies since the filing of our 2008 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 10, 2009.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Limitation on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all occurrences of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the control systems will detect all control issues, including instances of fraud, if any.

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Part II – Other Information

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2008 includes a detailed discussion of our risk factors. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K. Accordingly, the information in this Form 10-Q should be read in conjunction with the risk factors and information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 10, 2009. See also Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this report under the heading “Forward Looking Statements and Risk Factors.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceeds

We filed a registration statement on Form S-1, File No. 333-113256 for an initial public offering of common stock, which was declared effective by the Securities and Exchange Commission on December 15, 2004. In that offering, we sold an aggregate of 3.3 million shares of our common stock with net offering proceeds of $41.6 million. No payments were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities or to any affiliates.

As of June 30, 2009, we had used approximately $5.5 million of those proceeds for the repayment of indebtedness and $20.0 million, net of cash acquired, for our acquisitions of the eVue product line, Gryphics, Inc. and certain assets of Synatron GmbH.

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of our shareholders was held on May 15, 2009, at which the following actions were taken:

1. The shareholders elected two Class II directors to the Board of Directors. The voting results were as follows:

Name	No. of Shares Voting For	No. of Shares Withheld Voting
Keith L. Barnes, Class II	10,839,054	1,704,603
Geoff Wild, Class II	10,837,207	1,706,450

2. The shareholders approved an amendment to the Cascade Microtech, Inc. 2000 Stock Incentive Plan to increase the shares reserved for issuance thereunder from 2,400,000 to 3,000,000 as follows:

No. of Shares Voting For:	No. of Shares Voting Against:	No. of Shares Abstaining:	No. of Broker Non-Votes:
7,991,310	1,785,086	487,975	2,279,286

Item 6. Exhibits

The following exhibits are filed herewith or incorporated by reference hereto and this list is intended to constitute the exhibit index:

10.1	Cascade Microtech, Inc. 2000 Stock Incentive Plan, as amended. Incorporated by reference to Form 8-K as filed with the Securities and Exchange Commission on May 20, 2009.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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SIGNATURES

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

Date: August 4, 2009	CASCADE MICROTECH, INC. (Registrant)
	By:	/s/    GEOFF WILD
		Geoff Wild
		Director, President
		and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/    STEVEN SIPOWICZ
		Steven Sipowicz
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Geoff Wild, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cascade Microtech, Inc.;

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 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 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: August 4, 2009

/s/    Geoff Wild

Geoff Wild

Director, President and Chief Executive Officer

Cascade Microtech, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Steven Sipowicz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cascade Microtech, Inc.;

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 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 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: August 4, 2009

/s/    Steven Sipowicz

Steven Sipowicz

Chief Financial Officer and Treasurer

Cascade Microtech, Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Cascade Microtech, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Geoff Wild, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,:

(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 result of operations of the Company.

/s/    Geoff Wild

Geoff Wild

Chief Executive Officer

Cascade Microtech, Inc.

August 4, 2009

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Cascade Microtech, Inc. and will be retained by Cascade Microtech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Cascade Microtech, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Sipowicz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,:

(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 result of operations of the Company.

/s/    Steven Sipowicz

Steven Sipowicz

Chief Financial Officer

Cascade Microtech, Inc.

August 4, 2009

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Cascade Microtech, Inc. and will be retained by Cascade Microtech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.