<PAGE>
Filed Pursuant to Rule 424(b)(4)
File No. 33-61729
1,250,000 Shares
[LOGO OF CYBEROPTICS]
Common Stock
------------
Of the 1,250,000 shares offered hereby, 1,200,000 shares are being issued and
sold by CyberOptics Corporation ("CyberOptics" or the "Company") and 50,000
shares are being sold by a stockholder of the Company (the "Selling
Stockholder"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholder. See "Principal and Selling Stockholders."
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "CYBE." On September 18, 1995, the last reported sale price, as quoted
on the Nasdaq National Market, was $34.50 per share. See "Price Range of Common
Stock" and "Dividend Policy."
------------
SEE "RISK FACTORS" ON PAGE 5 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDER
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................... $33.25 $1.92 $31.33 $31.33
--------------------------------------------------------------------------------
Total(2).................... $41,562,500 $2,400,000 $37,596,000 $1,566,500
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Before deducting estimated offering expenses of $210,000, all of which will
be paid by the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 187,500 shares of Common Stock solely to cover over-
allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$47,796,875, $2,760,000 and $43,470,375, respectively. See "Underwriting."
------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale and when, as and if delivered to and accepted by them,
and subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the certificates for the shares of Common
Stock will be made at the offices of Alex. Brown & Sons Incorporated,
Baltimore, Maryland on or about September 22, 1995.
Alex. Brown & Sons
INCORPORATED
Robertson, Stephens & Company
Piper Jaffray Inc.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 19, 1995.
<PAGE>
[INSERT PHOTO OF CYBERSCAN LV]
The CyberScan LV, a multi-purpose inspection
system, records, analyzes and displays
dimensions with sub-micron precision.
[INSERT GRAPHICS
OF 3-D IMAGES]
3-D images of solder paste used to check
quality of fine pitch (A) and Ball Grid Array
(B) component sites.
[INSERT GRAPHICS
OF 3-D IMAGES]
(A)(B)
[INSERT PHOTO OF CYBERSENTRY]
CyberSentry provides automated
inspection to identify solder paste
printing problems before yield is
affected, without slowing down the
manufacturing process.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MARKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and financial statements and notes
thereto appearing elsewhere and incorporated by reference in this Prospectus.
Unless otherwise indicated, all information in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised.
THE COMPANY
CyberOptics Corporation ("CyberOptics" or the "Company") designs,
manufactures and markets intelligent non-contact sensors and integrated systems
that measure the minute characteristics, dimensions and distances required for
process and quality control in the automated assembly of complex manufactured
goods. Utilizing proprietary laser and optics technology combined with advanced
software and electronics, the Company's products enable manufacturers to
increase operating efficiencies, product yields and quality by measuring the
characteristics and placement of components both during and after the
manufacturing process. Currently, the Company's products are used primarily for
process and quality control in the electronics industry.
The electronics industry is experiencing rapid growth which has fueled demand
for capital equipment, including equipment sold by the Company and the
Company's original equipment manufacturer ("OEM") customers. The trend toward
miniaturization in the electronics industry, together with competitive
requirements to improve productivity and quality, have required the development
of process control and inspection technologies that are integrated into the
manufacturing process and rely on sophisticated hardware and software
solutions.
The Company's products are used for process control in the automated assembly
of printed circuit boards ("PCBs") using advanced manufacturing technologies
such as surface mount technology ("SMT"). The Company's in-line process control
products and systems ensure the proper deposition of solder paste on PCBs;
ensure accurate component placement at high production speeds; identify
defective or damaged leads and lead coplanarity before component placement; and
detect broken and worn drill bits used in drilling holes in PCBs. The Company's
off-line inspection systems measure distances to test objects at high speeds;
produce precise two- and three-dimensional analyses of complex surfaces; and
make height and registration measurements of printed solder paste. These
products rely on complex optical technologies combined with sophisticated
software and hardware solutions to provide data in one, two and three
dimensions and with resolution as small as 0.1 microns.
The Company sells its products worldwide to many of the leading manufacturers
of electronics and electronics equipment, including Philips Electronics N.V.,
AT&T Corp., Excellon Industries Inc., Fuji Machine Manufacturing Co., Ltd.,
International Business Machines Corporation, Juki Corporation, Matsushita
Electric Industrial Co., Ltd., Motorola, Inc., Siemens A.G., and Yamaha Motor
Co., Ltd. In 1994 and during the first six months of 1995, sales outside the
United States accounted for 57% and 60%, respectively, of the Company's sales
revenue.
The Company's business strategy is to continue to integrate multiple
technologies and engineering disciplines to develop sophisticated process
control and inspection products for the electronics manufacturing market; to
develop and maintain long-term, strategic relationships that enable the Company
to anticipate developments in the electronics markets; to leverage its core
competence in optics technology and system integration to develop sensors and
systems for the specific applications needed by its customers; to focus on
rapidly expanding worldwide markets that require precision, quality and reduced
product development times; and to adapt non-contact process control and
inspection technologies for use in other automated manufacturing processes.
The Company was incorporated in Minnesota in 1984. Its principal executive
office is locatedat 2505 Kennedy Street Northeast, Minneapolis, Minnesota
55413, and its telephone number is(612) 331-5702.
3
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company............. 1,200,000 shares
Common Stock offered by the Selling Stockholder. 50,000 shares
Common Stock to be outstanding after the
offering....................................... 5,598,156 shares(1)
Use of proceeds................................. For working capital
associated with expanded
sales, research and
development and other general
corporate purposes. See "Use
of Proceeds."
Nasdaq National Market symbol................... CYBE
</TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------ --------------
1990 1991 1992 1993 1994 1994 1995
------ ------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................. $4,608 $7,803 $8,425 $11,621 $15,276 $6,377 $11,796
Gross margin............. 2,627 4,543 5,037 7,090 8,672 3,856 6,361
Income from operations... 269 1,108 447 1,080 2,042 676 2,248
Net income............... 283 829 339 943 1,524 510 1,598
Net income per share..... $ 0.07 $ 0.20 $ 0.08 $ 0.22 $ 0.35 $ 0.12 $ 0.34
Weighted average common
and common equivalent
shares outstanding...... 4,042 4,134 4,271 4,328 4,404 4,308 4,676
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 8,438 $45,824
Total assets........................................... 12,384 49,770
Long-term debt......................................... -0- -0-
Stockholders' equity................................... 9,200 46,586
</TABLE>
--------
(1) Based on the number of shares outstanding as of July 31, 1995. Does not
include 461,151 shares that may be issued upon exercise of options
outstanding as of such date.
(2) Adjusted to reflect the sale of 1,200,000 shares offered by the Company
hereby and the application of the estimated net proceeds thereof. See "Use
of Proceeds."
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Common Stock offered in this Prospectus.
Industry Concentration and Cyclicality. Substantially all of the Company's
revenue is directly or indirectly related to capital expenditures in the
electronics industry. This industry is highly cyclical and has historically
experienced periodic downturns which often have had a severe effect on capital
expenditures. For the foreseeable future, the Company's operations will
continue to be dependent on the capital expenditures in this industry which,
in turn, is largely dependent on the market demand for products containing
integrated circuits. Although the Company's products have been, and continue
to be, used in a variety of industries outside the electronics industry, the
Company's current product development and marketing is focused on electronics
and its business and results of operations would be significantly and
adversely affected by a slowdown in this industry.
Dependence Upon Principal Customers. For the year ended December 31, 1994
and the six-month period ended June 30, 1995, one of the Company's customers,
Philips Electronics N.V. ("Philips"), accounted for approximately 14% and 29%,
respectively, of the Company's revenue. In addition, the Company's five
principal customers (including Philips), in the aggregate, accounted for
approximately 44% and 53%, respectively, of the Company's revenue for such
periods. The loss of, or a significant curtailment of purchases by, any one or
more of these customers would have a material adverse effect on the Company's
results of operations. The Company anticipates that a significant portion of
its sales will continue to be concentrated in a small number of customers.
Dependence on Outside Contractors and Suppliers. The Company currently
contracts with third party assembly houses for a substantial portion of the
purchase and assembly of components of its products. Although the Company
endeavors to inspect and internally test most components prior to final
assembly, reliance on outside contractors reduces its control over quality and
delivery schedules. The failure by one or more of these subcontractors to
deliver quality components in a timely manner could have a material adverse
effect on the Company's results of operations. In addition, a number of the
components used in the Company's products are available from only a single
supplier or from a limited number of suppliers. Some of these components have
relatively long order cycles, in some cases over one year, and the timely
availability of these components to the Company is dependent on the Company's
ability to develop accurate forecasts of customer volume requirements. Any
interruption in or termination of supply of these components, or material
change in the purchase terms, including pricing, of any of these components,
or a reduction in their quality or reliability, could have a material adverse
effect on the Company's business and results of operations. See "Business--
Manufacturing."
Management of Growth. The Company's business has grown rapidly over the past
several years. A continuing period of rapid growth could place a significant
strain on the Company's management, operations and other resources. The
Company's future success will depend on the ability of its officers and key
employees to manage growth successfully through maintenance of appropriate
operational, financial and management information systems and to attract,
retain, motivate and effectively manage its employees. Currently, the
Company's facilities are near capacity and the Company is in the process of
identifying a new facility to provide additional capacity. If the Company is
unable to manage growth effectively, the quality of the Company's products,
its ability to retain key personnel and its results of operations could be
materially and adversely affected. See "Business--Employees" and "--
Properties."
Proprietary Technology and Intellectual Property. The Company relies heavily
on its proprietary hardware designs and software technology. Although the
Company uses a variety of methods to protect its technology, it relies most
heavily on patents and trade secrets. There can be no assurance
5
<PAGE>
that the steps taken by the Company will be adequate to deter misappropriation
of its technology, that any patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide a competitive advantage to the Company. In addition, there
remains the possibility that others will "reverse engineer" the Company's
products in order to determine their method of operation and introduce
competing products or that others will develop competing technology
independently. Any such adverse circumstances could have a material adverse
effect on the Company's results of operations. Further, some of the markets in
which the Company competes are characterized by the existence of a large
number of patents and frequent litigation for financial gain that is based on
patents with broad, and often questionable, application. As the number of its
products increases, the markets in which its products are sold expands, and
the functionality of those products grows and overlaps with products offered
by competitors, the Company believes that it may become increasingly subject
to infringement claims. Although the Company does not believe any of its
products or proprietary rights infringe the rights of third parties, there can
be no assurances that infringement claims will not be asserted against the
Company in the future or that any such claims will not require the Company to
enter into royalty arrangements or result in costly litigation. See
"Business--Proprietary Protection."
Dependence on Key Personnel. The Company is highly dependent upon the
technical expertise, management and leadership of Dr. Steven K. Case,
President, Chief Executive Officer and a director of the Company, as well as
other members of the Company's senior management team, many of whom would be
difficult to replace. Although the Company has a $5,000,000 key-man insurance
policy on Dr. Case and has retained other experienced and qualified senior
managers, the loss of the services of Dr. Case or other key personnel would
have a material adverse effect on the Company.
Technological Change and New Product Development. The market for the
Company's products is characterized by rapidly changing technology.
Accordingly, the Company believes that its future success will depend upon its
ability to continue to develop and introduce new products with improved price
and performance. In order to develop such new products successfully, the
Company is dependent upon close relationships with its customers and their
willingness to share information about their requirements and participate in
joint development efforts with the Company. There can be no assurance that the
Company's customers will continue to provide it with timely access to such
information or that the Company will be able to develop and market such new
products successfully and respond effectively to technological changes or new
product announcements by others. See "Business--Products" and "--Research and
Development."
Competition. The Company competes with other vendors of optical sensors,
with vendors of machine vision systems, and with the internal engineering
efforts of the Company's current or prospective customers, many of which may
have greater financial and other resources than the Company. There can be no
assurance that the Company will be able to compete successfully in the future
or that the Company will not be required to incur significant costs in
connection with its engineering research, development, marketing and customer
service efforts to remain competitive. Moreover, the Company's principal
customers operate within the electronics industry, which is highly competitive
and highly dependent upon its suppliers' ability to provide high quality, cost
efficient products. Competitive pressures may result in price erosion or other
factors which will adversely affect the Company's financial performance. See
"Business--Competition."
Quarterly Fluctuations. The Company has experienced quarterly fluctuations
in operating results and anticipates that these fluctuations will continue.
These fluctuations have been caused by various factors, including the capital
procurement practices of its customers and the electronics industry generally,
the timing and acceptance of new product introductions and enhancements, and
the timing of product shipments and marketing. Future operating results may
fluctuate as a result of these and other factors, including the Company's
ability to continue to develop innovative products, the
6
<PAGE>
introduction of new products by the Company's competitors, the Company's
product and customer mix, the level of competition and overall trends in the
economy. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Comparisons."
International Revenue. In the years ended December 31, 1992, 1993, and 1994
and the six months ended June 30, 1995, sales of the Company's products to
customers outside the United States accounted for approximately 35%, 39%, 57%
and 60%, respectively, of the Company's revenue. The Company anticipates that
international revenue will continue to account for a significant portion of
its revenues. The Company's operating results are subject to the risks
inherent in international sales, including various regulatory requirements,
political and economic changes and disruptions, transportation delays,
difficulties in staffing and managing foreign sales operations, and
potentially adverse tax consequences. In addition, fluctuations in exchange
rates may render the Company's products less competitive relative to local
product offerings. There can be no assurance that these factors will not have
a material adverse effect on the Company's future international sales and,
consequently, on the Company's operating results. See "Business--Sales and
Marketing."
Possible Volatility of Stock Price. The Company believes that factors such
as the announcement of new products by the Company or its competitors, market
conditions in the electronics and precision measurement industries generally
and quarterly fluctuations in financial results could cause the market price
of the Common Stock to vary substantially. In recent years, the stock market
has experienced price and volume fluctuations that have particularly affected
the market prices for many high technology companies and which often have been
unrelated to the operating performance of such companies. The market
volatility may adversely affect the market price of the Company's Common
Stock. See "Price Range of Common Stock."
Anti-takeover Considerations. The effect of Section 302A.671 of the
Minnesota Business Corporation Act and the ability of the Board of Directors
to issue preferred stock without stockholder approval may have the effect of
delaying or preventing a change in control or merger of the Company, which
could operate to the detriment of other stockholders.
7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company hereby are estimated to be $37,386,000. The Company
intends to use the net proceeds for working capital associated with expanded
sales, research and development and other general corporate purposes. The
Company may use a portion of the net proceeds for the acquisition of
businesses, technologies or products complementary to the Company's business,
although no such acquisition is being negotiated or planned as of the date of
this Prospectus. Pending such uses, the net proceeds are expected to be
invested in short-term, investment grade securities.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholder. See "Principal and Selling Stockholders."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted in the Nasdaq National Market under the
symbol CYBE. The following table sets forth, for the periods indicated, the
high and low sale prices of the Company's Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1993:
First Quarter.............................................. $6.00 $4.25
Second Quarter............................................. 5.75 4.25
Third Quarter.............................................. 6.50 4.75
Fourth Quarter............................................. 7.63 5.63
1994:
First Quarter.............................................. 6.38 5.50
Second Quarter............................................. 5.88 5.00
Third Quarter.............................................. 6.50 4.63
Fourth Quarter............................................. 8.63 5.75
1995:
First Quarter.............................................. 11.38 7.50
Second Quarter............................................. 25.50 11.00
Third Quarter (through September 18, 1995)................. 35.75 20.88
</TABLE>
As of September 18, 1995, there were 315 holders of record of the Company's
Common Stock and the Company estimates that there were approximately 3,000
beneficial holders. The last reported sales price of the Common Stock on the
Nasdaq National Market on September 18, 1995 was $34.50.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its Common Stock.
The Company currently intends to retain earnings for use in the operation and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.
8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1995, as adjusted to reflect the sale of 1,200,000 shares of Common Stock
offered by the Company hereby and the anticipated use of the net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............................................. $ -0- $ -0-
------ -------
Stockholders' equity:
Preferred Stock, no par value, 5,000,000 shares
authorized,
no shares issued or outstanding.......................... -0- -0-
Common Stock, no par value, 10,000,000 shares authorized;
4,315,321 shares issued and outstanding;
5,515,321 shares issued and outstanding, as adjusted (1). 4,354 41,740
Retained earnings......................................... 4,846 4,846
------ -------
Total stockholders' equity.............................. 9,200 46,586
------ -------
Total capitalization................................... $9,200 $46,586
====== =======
</TABLE>
--------
(1) Does not include 486,129 shares that may be issued upon exercise of options
outstanding as of June 30, 1995. See Note 6 of Notes to Financial
Statements.
9
<PAGE>
SELECTED FINANCIAL DATA
The balance sheet data at December 31, 1990, 1991, 1992, 1993 and 1994 and
the statement of income data for the years then ended are derived from and
should be read in conjunction with the more detailed financial statements of
the Company and the notes thereto, which have been audited by Price Waterhouse
LLP at December 31, 1990, 1991, 1992 and 1993 and for the years then ended, and
by Coopers & Lybrand L.L.P. at December 31, 1994 and for the year then ended.
The reports on the financial statements at December 31, 1993 and 1994 and for
the three years then ended are included elsewhere and incorporated by reference
in this Prospectus, and should be read in conjunction with the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which follows this section. The balance sheet data at June 30,
1995 and the statement of income data for the six months ended June 30, 1994
and 1995 are derived from the unaudited financial statements of the Company
included elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements have been prepared on a basis consistent with
the audited financial statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for such periods. Results for the
six-month period ended June 30, 1995 are not necessarily indicative of the
results that may be expected for any subsequent period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ ----------------
1990 1991 1992 1993 1994 1994 1995
------ ------ ------ ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................ $4,608 $7,803 $8,425 $11,621 $15,276 $ 6,377 $11,796
Cost of revenues........ 1,981 3,260 3,388 4,531 6,604 2,521 5,435
------ ------ ------ ------- ------- ------- -------
Gross margin........... 2,627 4,543 5,037 7,090 8,672 3,856 6,361
Research and development
expenses............... 686 958 1,631 2,410 2,749 1,382 1,770
Selling, general and
administrative
expenses............... 1,673 2,477 2,959 3,600 3,881 1,798 2,343
------ ------ ------ ------- ------- ------- -------
Income from operations. 269 1,108 447 1,080 2,042 676 2,248
Interest income......... 119 111 57 43 72 34 59
------ ------ ------ ------- ------- ------- -------
Income before income
taxes................. 388 1,219 504 1,123 2,114 710 2,307
Provision for income
taxes.................. 105 390 165 180 590 200 709
------ ------ ------ ------- ------- ------- -------
Net income............. $ 283 $ 829 $ 339 $ 943 $ 1,524 $ 510 $ 1,598
====== ====== ====== ======= ======= ======= =======
Net income per share.... $ 0.07 $ 0.20 $ 0.08 $ 0.22 $ 0.35 $ 0.12 $ 0.34
====== ====== ====== ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding..... 4,042 4,135 4,271 4,328 4,404 4,308 4,676
====== ====== ====== ======= ======= ======= =======
<CAPTION>
DECEMBER 31,
------------------------------------ JUNE 30,
1990 1991 1992 1993 1994 1995
------ ------ ------ ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $3,078 $3,763 $4,249 $ 5,548 $ 6,902 $ 8,438
Total assets............ 3,964 5,308 5,717 6,901 8,823 12,384
Long-term debt.......... -0- -0- -0- -0- -0- -0-
Stockholders' equity.... 3,383 4,259 4,840 6,073 7,478 9,200
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF
OPERATIONS
OVERVIEW
The Company was founded in 1984 by Dr. Steven Case, a tenured professor
researching and teaching optical engineering at the University of Minnesota,
to commercialize technology for non-contact three-dimensional sensing systems.
During the first year and one-half of its existence, the Company performed
primarily custom contracting work through Dr. Case. In 1985, the Company
received a $1.5 million development grant from the Defense Advanced Research
Projects Agency to develop sensor systems. The Company introduced its first
commercial product, the Point Range Sensor, in 1986 and began producing full
non-contact profiling systems used in metrology, CAD-CAM and electronics
inspection in 1987. The Company continued to expand its line of products and
sensing systems for general applications through 1991.
Since 1992, the Company has made significant investments in the development
of new technology and products designed specifically for applications in the
electronics industry. Designed primarily for applications in the rapidly
growing surface mount market, these products measure screen printed solder
paste, align electronic components and measure electronic component lead
coplanarity during automated assembly of circuit boards. The Company's revenue
has been significantly affected by the timing of the introduction of these
products and the acceptance and shipment of versions of these products by OEM
and end user customers.
RESULTS OF OPERATIONS
The following table sets forth certain financial data (1) expressed as a
percentage of revenue for the years ended December 31, 1992, 1993 and 1994 and
for the six months ended June 30, 1994 and 1995 and (2) expressed as a
percentage increase from the previous period's results:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES PERCENTAGE INCREASE
---------------------------- --------------------------
SIX
MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
---------------- ---------- --------------- ----------
1993 1994 1995
1992 1993 1994 1994 1995 TO 1992 TO 1993 TO 1994
---- ---- ---- ---- ---- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... 100% 100% 100% 100% 100% 38% 31% 85%
Gross margin................ 60 61 57 60 54 41 22 65
Research and development
expenses................... 19 21 18 22 15 48 14 28
Selling, general and
administrative expenses.... 35 31 25 28 20 22 8 30
Income from operations...... 5 9 13 11 19 142 89 233
Net income.................. 4 8 10 8 14 178 62 213
</TABLE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 TO THE SIX MONTHS ENDED JUNE 30,
1994
Revenues. Revenues increased 85% to $11.8 million during the six months
ended June 30, 1995, from $6.4 million during the comparable period in 1994,
as both sensor revenue and system revenue improved. Sensor revenue increased
88% during the first six months of 1995 when compared to the same period last
year. The primary reasons for this increase were increased unit shipments of
LaserAlign (principally to Philips) and an increase in unit shipments of other
OEM sensor products to existing customers. Sensor revenue represented 67% of
total revenue ($7.9 million) for the first six months of 1995 compared to 65%
of revenue ($4.2 million) in the first six months of 1994. System revenue
increased 77% during the first six months of 1995 compared to the same period
in 1994.
11
<PAGE>
This increase is due principally to revenue from the current version of the
CyberSentry product, which began shipping in March 1995. System revenue
accounted for 33% of revenue ($3.9 million) for the first six months of 1995
compared to 35% of revenue ($2.2 million) for the same period last year.
International revenue totaled $7.1 million in the 1995 period, or 60% of total
revenue, compared to $3.4 million or 54% in the 1994 period.
Cost of Revenues. Cost of revenues increased 116% to $5.4 million during the
six months ended June 30, 1995, from $2.5 million during the comparable period
in 1994 and increased as a percentage of revenue to 46% during the 1995 period
from 40% during the 1994 period. This increase in the cost of revenue as a
percentage of revenue is due to expenditures in manufacturing related to
start-up expenses and increasing capacity for the LaserAlign sensor and the
production of the CyberSentry products. In addition the Company increased its
reserves for inventory obsolescence and warranty accrual by $100,000 and
$50,000, respectively in the second quarter of 1995. The Company believes
these increases are appropriate and are roughly proportionate to increases in
inventory and revenue.
Research and Development Expenses. Research and development expenses
increased 28% to $1.8 million during the six months ended June 30, 1995, from
$1.4 million during the comparable period in 1994, but decreased as a
percentage of revenue to 15% during the 1995 period from 22% during the period
in 1994. Research and development efforts in the first six months of 1995
focused primarily on the completion of CyberSentry, CyberGage and CyberScan
LV. The Company intends to continue to increase research and development
expenditures in future periods, but does not anticipate that these expenses
will increase substantially as a percentage of revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 30% to $2.3 million during the six months
ended June 30, 1995, from $1.8 million during the comparable period in 1994,
but decreased as a percentage of revenue to 20% during the 1995 period from
28% during the 1994 period. The increase in selling, general and
administrative expenses can be attributed to the growth in resources to
support increased revenue. The decrease as a percentage of revenue is due
primarily to the large increase in revenue, but is also attributable to the
high percentage of sensor sales to OEM customers, which are made primarily by
the Company rather than through distributors.
Effective Tax Rate. The Company applied an effective tax rate of 31% for the
first six months of 1995, compared to 28% in 1994. Benefits from the Company's
foreign sales corporation and the use of the research and development tax
credit will be primarily responsible for reducing the effective tax rate below
the statutory federal rate in 1995. Although the Company anticipates that its
effective tax rate will continue to benefit from sales through its foreign
sales corporation, the research and development credit expired as of June 30,
1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Revenues. Revenues increased 31% to $15.3 million in 1994 from $11.6 million
in 1993, primarily as a result of increased sales of new sensor products to
OEMs. Revenue from sensor products increased $3.8 million or 68% during 1994
compared to 1993. The Company's LaserAlign and Laser Lead Locator sensors
contributed $6.4 million in revenue in 1994 compared to $3.4 million in 1993,
reflecting both additional OEM customers and increased sales to previous
customers. System revenue decreased $100,000 or 2% during 1994 as compared to
1993. The slight decrease in systems revenue in 1994 reflected decreased
domestic demand for the Company's scanning station products and a delay in the
introduction of the CyberSentry product. Originally planned for release in the
spring of 1994, CyberSentry was delayed until 1995 in order to improve its
precision and speed. International revenue totaled $8.6 million in 1994 or 57%
of total revenue compared to $4.5 million or 39% of revenue in 1993. Sales of
the Company's products in Western Europe, Japan and the other parts of the Far
East
12
<PAGE>
increased significantly during this period. These international markets
account for the vast majority of the production capability of capital
equipment for the manufacture of electronics--the primary market for the
LaserAlign and Laser Lead Locator products.
Cost of Revenues. Cost of revenues increased 46% to $6.6 million in 1994
from $4.5 million in 1993, and increased as a percentage of revenue to 43% in
1994 from 39% in 1993. The increase in cost as a percentage of revenue in 1994
is a result of start-up and rework costs for new product lines, including
CyberSentry which was introduced in final form in 1995, and to a lesser extent
changes in product mix and increases in manufacturing overhead to support
higher production volumes. See "Quarterly Comparisons" for further discussion
of trends in the Company's gross margins.
Research and Development Expenses. Research and development expenses
increased 14% to $2.7 million in 1994 compared to $2.4 million in 1993, but
decreased as a percentage of revenue to 18% in 1994 from 21% in 1993. The
increased expenditures in 1994 reflect primarily the development of additional
models of the Company's LaserAlign and continued development on the
CyberSentry and CyberGage products which were introduced in the first half of
1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8% to $3.9 million in 1994 from $3.6 million
in 1993, but decreased as a percentage of revenue to 25% in 1994 from 31% in
1993. The decrease in these expenses as a percentage of revenue is due to the
large increase in sensor revenue from OEM customers.
Effective Tax Rate. The Company's effective tax rate was 27.9% and 16.0% for
1994 and 1993, respectively. This tax rate is below the statutory federal rate
primarily due to benefits from the Company's foreign sales corporation and
utilization of research and development credits. In 1993, the Company
benefitted by the reinstatement of the research and development credit by the
Omnibus Budget Reconciliation Act of 1993. This Act, which was passed into law
in August 1993, allowed the Company to claim a tax credit of approximately
$80,000, or $0.02 per share, in the second half of 1993 for research
activities conducted during the second half of 1992. The reinstated credit
also permitted approximately $180,000 to be recorded in 1993 for that year's
development activities.
COMPARISON OF YEAR ENDED DECEMBER 31, 1993 TO YEAR ENDED DECEMBER 31, 1992
Revenues. Revenues increased 38% to $11.6 million in 1993 from $8.4 million
in 1992. Sensor revenue increased $2.5 million or 100% in 1993 compared to
1992 due to the introduction of the LaserAlign and Laser Lead Locator products
in late 1992. System revenue increased $700,000 or 13% as a result of
increased domestic and international demand for scanning station products as
electronics manufacturers invested in equipment to meet increased demand for
computer-related products. International revenue totaled $4.5 million in 1993
or 39% of total revenue compared to $2.9 million or 35% of revenue in 1992.
Cost of Revenues. Cost of revenues increased 34% to $4.5 million in 1993
from $3.4 million in 1992, but decreased as a percentage of revenue to 39% in
1993 from 40% in 1992. The decrease in cost as a percentage of revenue was due
to product mix and lower costs on purchased parts resulting from higher
purchasing volume.
Research and Development Expenses. Research and development expenses
increased 48% to $2.4 million during 1993 from $1.6 million during 1992 and
increased as a percentage of revenue to 21% during 1993 from 19% during 1992.
The increase in research and development expenses represents a full year's
development expense on CyberSentry and CyberGage development efforts, which
were commenced in late 1992, as well as continued development on the Laser
Lead Locator and LaserAlign products.
13
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 22% to $3.6 million in 1993 from $3.0
million in 1992, but decreased as a percentage of revenue to 31% in 1993 from
35% in 1992. The decrease as a percentage of revenue was primarily a result of
increased sales of LaserAlign and Laser Lead Locator to original equipment
manufacturers which require less sales support per unit sold. This decrease
was partially offset by the increased costs of operating a sales office in
Munich, Germany. The depressed economic conditions in Germany in 1993 led to
lower than expected revenue and as a result, the Company closed this office in
the fourth quarter of 1993.
Effective Tax Rate. The Company's tax rate declined to 16.0% in 1993 from
32.7% in 1992. The Company was fully taxed in 1992, while in 1993 it received
the benefit of the research and development tax credits described above.
QUARTERLY COMPARISONS
The following table sets forth certain quarterly financial data, for the
first two quarters in 1995 and the four quarters in each of fiscal years 1994
and 1993 as well as certain of such information expressed as a percentage of
revenue for the same period. This quarterly information is unaudited, but has
been prepared on the same basis as the annual financial statements and, in
management's opinion, reflects all adjustments, consisting only of normal
recurring adjustments, required for a fair presentation of the information for
the periods presented. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1993 1993 1993 1993 1994 1994 1994 1994 1995 1995
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............. $2,597 $2,956 $2,790 $3,278 $3,132 $3,245 $4,346 $4,553 $4,556 $7,240
Gross margin.......... 1,541 1,837 1,695 2,017 1,907 1,949 2,392 2,424 2,507 3,854
Income from
operations........... 190 444 250 196 384 292 673 693 681 1,567
Net income............ 134 295 296 218 272 238 484 530 497 1,101
Net income per share.. 0.03 0.07 0.07 0.05 0.06 0.06 0.11 0.12 0.11 0.24
AS A PERCENTAGE OF REVENUES:
Gross margin.......... 59% 62% 61% 62% 61% 60% 55% 53% 55% 53%
Income from
operations........... 7 15 9 6 12 9 15 15 15 22
Net income............ 5 10 11 7 9 7 11 12 11 15
</TABLE>
The Company has experienced quarterly fluctuations in operating results and
anticipates that these fluctuations will continue. These fluctuations have
been caused by various factors, including the buying patterns of the Company's
target market, the number and timing of new product introductions and
enhancements, the timing of product shipments and marketing. Future operating
results may fluctuate as a result of these and other factors, including the
Company's ability to continue to develop innovative products, the introduction
of new products by the Company's competitors, the Company's product and
customer mix, the level of competition and overall trends in the economy.
Revenues generally increased from quarter to quarter during the 10 quarters
presented. Gross margin remained relatively constant as a percentage of
revenue until the quarter ended September 30, 1994. The decrease in gross
margin during this period was due to the Company redesigning
14
<PAGE>
certain features of its CyberSentry product starting in the third quarter of
1994 in order to increase its precision and speed. It had begun manufacturing
CyberSentry before such time and the redesign caused certain components in the
Company's inventory to become obsolete, all of which were charged against cost
of revenue during the redesign period. In addition, certain costs of reworking
the CyberSentry product and start-up costs associated with the CyberGage and
CyberScan LV increased cost of revenue during these periods. The Company does
not anticipate incurring similar cost of revenue charges in future periods.
Nevertheless, because of the increased percentage of sales represented by
certain OEM products, the Company does not anticipate that gross margins as a
percentage of revenue will fully recover to historical levels.
All of the Company's increases in revenue have resulted from increases in
units shipped and new product introductions. The Company believes that
inflation has had no appreciable effect on operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $977,000 of cash during the first six months of 1995. The
Company used $982,000 of cash in operations during the six-month period,
primarily to finance a $2.6 million increase in accounts receivable and a $2.2
million increase in inventory. The increase in accounts receivable is due to
the increase in shipment levels and the timing of end of period shipments.
Inventory increases are primarily due to increased levels of shipments and
orders. These working capital requirements were offset by net income of $1.6
million, non-cash expenses of $364,000, and an increase in current liabilities
of $1.8 million.
The Company used $119,000 in investing activities in the first six months of
1995, as $357,000 was expended for the purchase of capital equipment offset by
$250,000 generated from net maturities of short-term investments. Financing
activities, consisting of sale of common stock upon exercise of employee
options, generated $124,000 of cash during the first six months of 1995.
The Company consumed $350,000 of cash during the year ended December 31,
1994. Operating activities generated $857,000 of cash in 1994, primarily due to
net income for the year of $1.5 million, non-cash expenses of $492,000 and
increases in current liabilities and accrued expenses of $517,000. These
amounts were partially offset by cash required for increases in accounts
receivable and inventory of $885,000 and $703,000, respectively, resulting from
the increased size of the Company's overall operations.
Investing activities required $1.1 million in cash in 1994, $740,000 of which
represented net purchases of short-term investments. The Company also made
additions to furnishings and equipment of $281,000 and capitalized patent costs
of $64,000. The Company also consumed cash in financing activities during 1994
due to the application of $235,000 of cash to repurchase common stock in open
market transactions. This amount was partially offset by proceeds received from
the exercise of stock options and from stock issued under the Employee Stock
Purchase Plan of $113,000.
During the second quarter of 1995, the Company established a $2 million line
of credit. To date, the Company has not drawn any funds on this line and it has
no debt outstanding. Currently, the Company has no material outstanding capital
expenditure commitments, although it anticipates an investment of approximately
$750,000 in furniture, fixtures and equipment in connection with its new office
facilities.
The Company believes current working capital and anticipated funds from
operations, together with the net proceeds from the offering made hereby, will
be adequate for anticipated operating needs.
15
<PAGE>
BUSINESS
GENERAL
CyberOptics designs, manufactures and markets intelligent, non-contact
sensors and integrated systems that measure the minute characteristics,
dimensions and distances required for process and quality control in the
automated assembly of complex manufactured goods. Utilizing proprietary laser
and optics technology combined with advanced software and electronics, the
Company's products enable manufacturers to increase operating efficiencies,
product yields and quality by measuring the characteristics and placement of
components both during and after the manufacturing process. The Company offers
individual sensors that provide data in one, two or three dimensions, as well
as complete, non-contact three-dimensional profiling systems, that allow
manufacturers to inspect product features as small as 0.1 microns.
Currently, the Company's products are used primarily for process and quality
control in the electronics industry. Customers in this industry use the
Company's products to make critical dimensional measurements of components and
materials during the assembly of circuit boards. The electronics industry is
experiencing rapid growth, which has fueled demand for capital equipment,
including equipment sold by the Company and the Company's OEM customers.
BACKGROUND
In response to worldwide competitive pressures and the rapid pace of
technological innovation, the electronics industry has led other manufacturing
industries in the implementation of automated manufacturing processes and
advanced manufacturing technologies. The demand for electronic systems with
more functionality, higher performance, greater reliability and lower costs has
forced electronics producers to radically redesign the manufacturing process.
In the early 1980s, automated electronic manufacturing was dominated by
through-hole assembly, in which electronic components, such as integrated
circuits, are inserted with pins or leads through pre-drilled holes in a PCB
and then soldered to the circuit board. Because the components used in the
through-hole process are relatively large, process control is accomplished
using mechanical alignment tools and quality is controlled by simple operator
inspection.
Improvements during the 1980s and 1990s in integrated circuit design and
fabrication has allowed dramatic miniaturization of individual components and
has encouraged equally dramatic changes in the methods of making
interconnections between components and circuit boards. The fastest growing
electronic manufacturing processes today utilize SMT, in which a slurry of
solder paste is screened over portions of the circuit board, components are
placed precisely over the solder paste and heat is applied to melt the solder
and form both the mechanical and electrical connection with the board. As
manufacturers strive to further reduce the distance between components, newer
interconnection technologies, such as ball grid array and flip chip, have also
been developed. Because of their fragility and size, mechanical alignment of
the miniature components placed with these technologies is becoming undesirable
and visual inspection, while still possible with magnification, is not
practical or cost-effective for high speed manufacturing processes.
The same competitive pressures that forced miniaturization and mandated
automation have required manufacturers to apply increasingly stringent
standards for quality and consistency of components produced. The International
Standards Organization ("ISO") 9000 series standards are rapidly becoming
requirements for manufacturing worldwide. Effective control of the
manufacturing process is essential to ensure compliance with these consistency
standards.
16
<PAGE>
The pressures on electronics manufacturers to improve productivity and
quality while working with smaller parts has required integration of process
control technologies directly into the manufacturing process. To be effective,
electronics manufacturing process control increasingly must provide real-time
measurement of all three dimensions of the electronic components being placed
on the PCB. These process control technologies must also strike an appropriate
balance between the need for high speeds and moderate cost. Machine vision
systems, which use cameras and software-based image processing to gather and
analyze two-dimensional data in a horizontal plane, provide generalized
solutions but are inadequate in many applications requiring three-dimensional
measurement. This inability to measure certain critical dimensions such as
material thickness and component lead heights often results in higher levels of
manufacturing defects and scrap.
THE CYBEROPTICS SOLUTION
The Company's intelligent sensors and systems apply proprietary optics
technology and software with integrated microprocessors to provide non-contact
process control and inspection that reduces the waste and increases the speed
of contemporary manufacturing. The Company's products allow manufacturers to
identify manufacturing flaws in minute components during the production process
without touching or deforming the component inspected.
CyberOptics has developed products that are specifically designed to measure
the dimensions, including thickness and lead height, that are critical to
detecting flaws during the surface mount manufacturing of printed circuit
boards. The Company's SMT products are integrated directly into the assembly
line and are capable of detecting manufacturing flaws without slowing the
circuit board assembly process. Because they are designed to perform specific
functions, these products provide high precision without the extraneous
features that result in high component costs to OEMs. The Company's SMT process
control products inspect the placement of solder paste on the circuit board
while it is moving through the production line, precisely align components for
placement while they are being moved from the component bin to the circuit
board, and inspect the lead alignment of components.
The Company also offers a range of other products that are used for off-line
inspection and quality control by manufacturers in electronics and other
industries. These products can be purchased at the sensor level for integration
into existing product lines or as complete systems for use in the quality
control laboratory.
A number of the world's leading producers of microelectronics manufacturing
systems, including Philips, Yamaha, Fuji, Juki, Siemens and Excellon,
incorporate CyberOptics sensors and systems into the products they sell. In
addition, the Company's products are used by many of the leading manufacturers
of electronics goods, including AT&T and IBM, to inspect the components of
their products.
17
<PAGE>
CYBEROPTICS STRATEGY
The Company's objective is to be a leading worldwide supplier of intelligent
non-contact sensors and integrated systems that dramatically improve the
performance, quality, reliability, yield, and cost of automated manufacturing
processes.
Key elements of the Company's strategy include:
. Provide Leading-Edge Technology. The Company focuses on producing
sophisticated systems utilizing its advanced optics technology,
proprietary software and integrated microprocessors. Combining multiple
technologies and engineering disciplines, including optical physics,
electronics design, and operating and applications software design, the
Company produces sophisticated products with proprietary technology that
creates a barrier to entry by competitors. The Company maintains a large
research and development staff dedicated to continued development and
implementation of leading-edge process control technology.
. Enhance Strategic OEM Relationships. The Company maintains long-term
alliances with high-growth OEMs of complex, leading-edge products which
require flexible, value-added process and quality control systems. The
Company's goal is to provide OEM partners with technologically advanced
and innovative solutions that anticipate market developments and that
continue to be integrated by each OEM through the life cycle of its
product family.
. Establish Optimal Solutions for Specific Applications. The Company
leverages its core competence in optics technology and system integration
to develop sensors and systems for specific applications demanded by its
customers. The Company introduces its technology to customers through its
range sensors and scanning stations and then refines its core technology
through interaction with customers to develop specific products that
provide optimal solutions for specific applications.
. Focus on Expanding Markets. The Company offers proprietary products
focused on rapidly expanding markets, such as the microelectronics
market, that require precision, quality and reduced product development
times. The Company seeks to adapt the non-contact inspection and process
control technology it develops for one application to other markets,
including reverse-CAD, metal fabrication, and machining, on an
opportunistic basis.
PRODUCTS
CyberOptics has developed intelligent, non-contact sensors and systems for
in-line process control and inspection as well as sensors and scanning
stations for quality control and inspection. The Company's products enable
manufacturers to increase operating efficiencies, product yields and quality
in a variety of industries. Although a majority of the Company's revenue is
generated through sales of its in-line process control products for SMT, the
Company also offers several specialized products for through-hole process
control and more generalized products for inspection and quality control.
In addition to proprietary hardware designs that combine precision optics,
various light sources, and multiple detectors, the Company's products
incorporate high value-added software that controls the hardware, filters and
converts raw data into application specific information, and automatically
communicates this information to a host processor for ultimate use in process
control. Software represents approximately 50% of the CyberOptics research and
development effort and distinguishes Cyberoptics' intelligent sensors and
systems from simpler data-gathering detectors.
18
<PAGE>
IN-LINE PROCESS CONTROL--SMT. The following diagram illustrates the
integration of the Company's in-line SMT products into the principal stages of
the surface mount PCB assembly process:
LOGO
CyberSentry. The CyberSentry system measures the deposition of solder paste
after the first step of the surface mount assembly process. Because of the
small size of the component that must be placed on each pad of solder paste and
the density of component placement 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.
Introduced in its current format in the first quarter of 1995, the
CyberSentry system is designed to be installed in existing automated production
lines and to strike a balance between inspection of 100% of each circuit board
and the off-line measurement devices used in quality control laboratories. The
CyberSentry incorporates a sensor extended on a mechanical robot arm over the
production line that measures the height, area and volume of solder paste pads.
The CyberSentry can be retrofitted and integrated into most SMT production
lines, providing real time process control immediately after a PCB leaves the
screen printer and before component placement commences.
LaserAlign. After solder paste has been inspected and measured, extremely
small surface mount components are placed on the solder pads by component
placement machines. CyberOptics' LaserAlign sensors are incorporated into the
heads of component placement machines to ensure accurate component placement at
high production speeds. Various high speed component placement machine types
utilize between one and sixteen 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 quickly and accurately aligns each component as it is being
transported by the pick-and-place arm for surface mount assembly. Using non-
contact technology, LaserAlign facilitates orientation and placement of
components at much higher speeds than can be achieved using conventional
process control systems.
19
<PAGE>
Laser Lead Locator. Following placement of the smallest leadless components,
more sophisticated components, including microprocessor chips, are applied to
the printed circuit boards by fine pitch component placement machines. These
components have leads on all sides that are soldered to the circuit board.
Since all of these surface mount leads must make contact with the solder
paste, lead coplanarity is a critical quality factor. Misaligned, bent or
damaged leads will result in missed connections, open circuits and ultimately
a defective end product.
The Laser Lead Locator ensures the coplanarity of component leads. The Laser
Lead Locator, which is incorporated directly into fine pitch component
placement machines, inspects components immediately before placement on the
circuit board to identify defective or damaged leads and determines if all
lead tips lie within the same plane. Components meeting these parameters are
placed on the printed circuit board. Parts falling outside the specified
tolerances are rejected before placement, saving both time and money.
PROCESS CONTROL--THROUGH-HOLE. A substantial number of circuit boards are
made with through-hole technology using high speed drills to fabricate printed
circuit boards. These drills are highly automated and contain multiple drill
heads that cannot be constantly monitored by attendants. CyberOptics
manufactures two process control sensors for measuring characteristics of
drill bits used in drilling holes in printed circuit boards. The first of
these, the ADM, was completed in the third quarter of 1989 and is used to
ensure that drill bits are not damaged and that holes are drilled with the
proper size. The second sensor, the LTC, was completed in May 1990 and is used
to detect broken drill bits so that all of the preprogrammed holes in the
circuit board are properly drilled. Both sensors are sold under an exclusive
arrangement to a manufacturer of drilling machines for incorporation into its
products.
OFF-LINE INSPECTION SENSORS AND SYSTEMS. The Company built its commercial
business with laser sensors designed to precisely measure, without contact,
the distance to a point on an object. These sensors have been refined and
combined with software and processing capability and are sold as both single
sensors for incorporation into the equipment of customers and as complete
inspection systems for use in the quality control laboratory and off-line
process control.
The Company's off-line sensors and systems are used in a broad array of
applications in a number of different industries. Included among such
applications is the measurement of the score in a beverage can lid, collection
of three-dimensional digital data for use in a CAD-CAM system, measurement of
the thickness of resistive inks applied in the manufacture of hybrid
electronic circuits and measurement of the bend angles of suspension arms for
disc drives.
PRS and CyberGage. The Company offers two lines of range sensors designed to
measure distance to a point on a test object. The Point Range Sensor ("PRS"),
was the Company's first commercial product and is currently offered in seven
models that provide varying resolutions and are designed for optimal function
at varying standoff distances. The CyberGage sensor is a new series of range
sensors that gather data up to 40 times faster than the PRS product line and
is sold with a video camera view port that allows the user to integrate laser
sensing and video in the same sensor. The Company believes this is the first
product available with both laser sensing and video capabilities.
CyberScan and CyberScan LV. CyberScan stations are complete height profiling
systems capable of producing precise, two- and three-dimensional analysis of
complex surfaces. These stations incorporate the Company's CyberGage sensor or
PRS mounted over a computer-controlled mechanical table with a personal
computer and the Company's proprietary software. The recently introduced
CyberScan LV series of scanning stations, which incorporate the CyberGage
sensors and video cameras, offers a unique quilting feature that allows the
user to view and select test sites over a large area of a test object.
20
<PAGE>
Laser Section Microscope (LSM). The LSM is a low cost instrument for making
height and registration measurement of screen printed solder paste during the
assembly of electronic circuit boards. One of the principal advantages of the
LSM is its ease of use--unskilled operators can make non-contact measurements
with only minimal training.
MARKETS AND CUSTOMERS
A majority of the Company's products are currently sold in the
microelectronics market, particularly the portion servicing manufacturers using
SMT. The value of automation is high in this market because the products
produced, such as semiconductor chips, hybrid circuits and printed circuit
boards, have high unit costs and are manufactured at speeds too high for
effective human intervention. Moreover, the trend in these industries toward
smaller devices with higher circuit densities and smaller circuit paths
requires manufacturing and testing equipment capable of extremely accurate
alignment and multi-dimensional measurement such as achieved using non-contact
optical sensors. Customers in these industries, moreover, also employ
knowledgeable engineers who are competent to work with computer-related
equipment. The Company's Laser Lead Locator and LaserAlign products are sold to
OEMs serving this market and the CyberSentry, LSM, CyberGage, and CyberScan
systems are most often sold to manufacturers in this market. In addition, the
Company's more generalized products, including the PRS, CyberGage and CyberScan
products, are used in the general metrology and gauging, precision plastic
manufacturing and computer aided design and manufacturing markets.
The following is a list of certain of the Company's customers that it
believes are representative of its customer base.
AT&T Corporation Motorola, Inc.
Excellon Industries Inc. Philips Electronics, N.V.
Fuji Machine Manufacturing Co., Ltd. Siemens A.G.
International Business Machines CorporationUniversal Instruments Corp.
Juki Corporation Yamaha Motor Co., Ltd.
Matsushita Electric Industrial Co., Ltd. Zevatech, Inc.
SALES AND MARKETING
The Company sells its products worldwide through a combination of direct
sales staff and independent distributors. The Company maintains a direct sales
staff at its headquarters in Minneapolis, Minnesota that call on large house
accounts and that sell to OEM customers. The Company also has agreements with
seven stocking distributors in the United States who focus primarily on
products sold to end-users. Most sales to international end-users of sensors
and systems are made through 13 representatives and distributors covering
Western Europe and the Pacific Rim.
The following table sets forth the percentage of the Company's total product
sales (including sales delivered through distributors) by location during the
past three years:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS
---------------- ENDED JUNE 30,
1992 1993 1994 1995
---- ---- ---- --------------
<S> <C> <C> <C> <C>
United States............................... 65% 61% 43% 40%
Asia........................................ 13% 27% 30% 21%
Europe...................................... 18% 8% 26% 37%
Other....................................... 4% 4% 1% 2%
</TABLE>
Substantially all of the Company's export sales are negotiated, invoiced and
paid in United States dollars.
21
<PAGE>
The Company markets its products through appearances at industry trade shows,
advertising in industry journals and articles published in industry and
technical journals. In addition, the Company's strategic relationships with
customers serve as highly visible references.
BACKLOG
CyberOptics products are typically shipped two weeks to four months after the
receipt of an order. Since 1993, however, certain OEM customers have placed
orders for delivery over as many as 12 months. Product backlog was $6,419,000
at June 30, 1995 of which approximately $5.6 million is deliverable in the
third quarter of 1995, as compared with $2,775,000 at June 30, 1994 of which
$2.1 million was deliverable in the third quarter of 1994. Although the
Company's business is generally not of a seasonal nature, its sales may vary
based on the capital procurement practices in the electronics industry.
Historically, the Company's quarterly revenue has been largest in the last
quarter of the year. The Company's 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 the Company's performance in the
future.
RESEARCH AND DEVELOPMENT
The Company distinguishes its products primarily on the basis of its unique
technology and on the Company's ability to synthesize several different
technical disciplines to address industry needs. CyberOptics was founded by
research scientists and has retained relationships with academic institutions
to ensure that the most current information on technological developments is
obtained. In addition, the Company actively seeks ongoing strategic customer
relationships with leading product innovators in the markets it serves and
actively investigates the needs of, and seeks input from, these customers to
identify opportunities to improve the manufacturing process. The Company
provides direct interaction between its engineers and scientists and these key
accounts to ensure adoption of current technologies. In many instances, the
Company provides the outsourced research and development for these customers
through funded development contracts that provide the customer with an
exclusive selling period but allow the Company to retain technology and
distribution rights. Payments by these customers for funded research and
development during 1992, 1993, 1994 and the first six months of 1995 were
$291,000, $50,000, $222,000, and $120,000, respectively.
CyberOptics believes that continued and timely development of new products
and enhancements to existing products is essential to maintaining its
competitive position. The Company has committed and expects to continue to
commit substantial resources to its research and development effort, which
plays a critical role in maintaining and advancing its position as a leading
provider of optical sensors and systems. CyberOptics' current research and
development efforts are directed to increasing performance of its LaserAlign
and CyberSentry products for use in process automation in electronics circuit
board assembly and completion of its CyberGage and CyberScan LV products for
general metrology and gauging applications. There can be no assurances that
such efforts, or any other research and development efforts of the Company,
will be successful in producing products that respond effectively to
technological changes or new product announcements by others.
Research and development expenses were $1.6 million, $2.4 million, $2.7
million, and $1.8 million for the years ended December 31, 1992, 1993, 1994 and
the six months ending June 30, 1995, respectively. These amounts represented
19.4%, 20.7%, 18.0% and 15.0% of revenues, respectively. Research and
development expenses consist primarily of salaries, project materials and other
costs associated with CyberOptics' ongoing product development and enhancement
efforts.
22
<PAGE>
MANUFACTURING
Much of the Company's product manufacturing, consisting primarily of circuit
board manufacturing, component placement and soldering, lens manufacturing and
machined parts production, is contracted with outside vendors. Company
personnel inspect incoming parts, assemble sensors, calibrate and perform final
quality control testing of finished products. The Company believes that its
products are not suited for the large production runs that would justify the
capital investment necessary for complete internal manufacturing. The Company
believes that outsourcing much of its manufacturing allows it to focus more of
its resources on research and development, marketing, sales and customer
support.
A variety of components used in the Company's products are available only
from single sources and involve relatively long order cycles, in some cases
over one year. Although the Company has located alternative sources for most of
such components, use of those alternative components could require substantial
rework of the Company's product designs, resulting in periods during which it
could not satisfy customer orders. Further, although the Company believes it
has identified alternative assembly contractors for most of its subassemblies,
an actual change in such contractors would likely require a period of training
and test. Accordingly, an interruption in a supply relationship or the
production capacity of one or more of such contractors could result in the
Company's inability to deliver one or more products for a period of several
months.
COMPETITION
Although the Company believes that its products are unique, competitors offer
technologies and systems that are capable of certain of the visual inspection
and alignment functions performed by the Company's products. The Company faces
competition from a number of companies in the machine vision, image processing
and inspection systems market, some of which have greater manufacturing and
marketing capabilities, and greater financial, technological and personnel
resources. Potential competitors in these markets include Cognex Corporation,
Robotic Visions Systems, Inc., Synthetic Vision Systems, Inc., ICOS Systems,
GmbH, and Keyence Incorporated. In addition, the Company may compete with the
internal development efforts of its current and prospective customers. The
Company believes that its sensors offer several advantages over competitive
optical sensors in terms of speed, flexibility, cost and ease of control. The
Company's OEM products are typically very specialized in their applications.
The Company believes that its OEM products compete favorably with other product
alternatives based on the speed and accuracy of their performance, their price
and certain technological advantages.
Although the Company believes its current products offer several advantages
in terms of price and suitability for specific applications and although the
Company has attempted to protect the proprietary nature of such products, it is
possible that any of the Company's products could be duplicated by other
companies in the same general market. There can be no assurances that the
Company would be able to compete with similar products produced by a
competitor.
EMPLOYEES
As of June 30, 1995, the Company had 145 full-time employees including 23 in
sales and marketing and customer service, 64 in manufacturing, 46 in research,
development and engineering and 12 in finance and administration at its
headquarters in Minneapolis, Minnesota. To date, the Company has been
successful in attracting and retaining qualified technical personnel, although
there can be no assurance that this success will continue. None of the
Company's employees are covered by collective bargaining agreements or are
members of a union. The Company has never experienced a work stoppage and
believes that its relations with its employees are excellent.
23
<PAGE>
PROPRIETARY PROTECTION
The Company relies on the technical expertise and know-how of its personnel
and trade secret protection, as well as on patents, to maintain its competitive
position. The Company attempts to protect its intellectual property by
restricting access to its proprietary methods by a combination of technical and
internal security measures. In addition, the Company makes 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 the proprietary technology of the Company.
The Company holds nine patents on a number of its technologies, including
those used in its Laser Lead Locator, LaserAlign and point range sensors. In
addition the Company has filed applications for letters patent on features of a
number of other products. The Company protects the proprietary nature of its
software primarily through copyright and license agreements, but also through
close integration with its hardware offerings. It is the Company's policy to
protect the proprietary nature of its new product developments whenever they
are likely to become significant sources of revenue. No guarantee can be given
that the Company will be able to obtain patent or other protection for other
products.
Although it is not currently subject to any such claims, as the number of its
products increases and the functionality of those products expands, the Company
believes that it will become increasingly vulnerable to infringement claims. In
some geographic markets, it is the practice of companies to engage in "patent
flooding" by seeking patent protection for multiple functional applications
that are incremental rather than technological advances. Such patent flooding
could limit the Company's ability to sell its products in those markets for
some applications without obtaining license rights. Further, certain
individuals have claimed United States patent protection of extremely broad
techniques and have notified customers of the Company that any use of products
that employ such techniques would be infringing and require a license. Although
the Company believes that none of the products purchased by such customers
employ such techniques, and none of the Company's products are the subject of
any such infringement claim, there can be no assurance that third parties will
not assert infringement claims against the Company in the future or that any
such assertion will not require the Company to enter into a royalty arrangement
or result in costly litigation.
GOVERNMENT REGULATION
Many of the Company's products contain lasers which 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. The Company's products are generally not harmful to human tissue,
but could result in injury if directed into the eyes of an individual or
otherwise misused. The Company is not aware of any incident involving injury or
a claim of injury from its products and believes that its sensors and sensor
systems comply with all applicable laws for the manufacture of laser devices.
PROPERTIES
The Company leases approximately 30,000 square feet of office, warehouse,
laboratory and demonstration space at its corporate offices at 2505 Kennedy
Street NE, Minneapolis, Minnesota. The lease expires in October 1999 and is
cancelable in October 1997. The lease requires the Company to pay rent at rates
from $6.50 to $7.50 per square foot per year plus property taxes and other
operational expenses.
24
<PAGE>
As of September 1, 1995, the Company executed a lease agreement for 70,000
square feet of mixed office and warehouse space in a new office facility to be
built to its specifications in Minneapolis, Minnesota. The lease, which is on a
triple net basis for a ten year term with two renewal options, provides for
rental payments at approximately $7.50 per square foot initially, increasing to
$8.50 per square foot. The Company anticipates that the property will be
completed and available for occupancy in Spring 1996 and will list its current
leased facility with a broker for sublease after such time.
LEGAL PROCEEDINGS
From time to time the Company may be involved in litigation relating to
claims arising from its operations in the normal course of business. The
Company is not a party to any pending legal proceedings as of the date of this
Prospectus.
25
<PAGE>
MANAGEMENT
The following table sets forth the executive officers and directors of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dr. Steven K. Case...... 46 President, Chief Executive Officer and Director
Kent O. Lillemoe........ 36 Vice President--Finance and Administration
Dr. Jeffrey A. Jalkio... 34 Vice President--Research
John D. Beagan.......... 53 Vice President--Operations and Development
Carl D. Moe............. 48 Vice President--Sales and Marketing
Alex B. Cimochowski..... 56 Director
Erwin A. Kelen.......... 60 Director
George E. Kline......... 59 Director
Dr. P. June Min......... 59 Director
Steven M. Quist......... 49 Director
</TABLE>
Steven K. Case, PhD., has been President and a director of the Company since
its formation in January 1984. Until 1994, Dr. Case was also a part-time
professor in the Electrical Engineering Department of the University of
Minnesota and has taught optics courses as a professor at the University of
Minnesota on either a full or part-time basis since 1979.
Kent O. Lillemoe started as the Company's controller in September 1985, was
elected Treasurer in January 1987 and was elected Vice President--Finance and
Administration in April 1991. Mr. Lillemoe is a certified public accountant.
Jeffrey A. Jalkio, PhD., started as a Research Engineer for the Company in
May 1987, became Director of Research and Development in July 1988 and was
elected Vice President--Research in February 1992.
John D. Beagan started as Director of Manufacturing for the Company in
September 1993, and became Vice President--Operations and Development in
February 1995. Mr. Beagan held executive officer positions in the
manufacturing, development and customer service areas of Computer Network
Technology Corporation, a manufacturer of mainframe network products, from 1987
to 1993.
Carl D. Moe started as Director of Sales and Marketing for the Company in
October 1992, and became Vice President--Sales and Marketing in February 1995.
Mr. Moe was President of the Danbury Group, a consulting firm specializing in
market development of technology based products from 1988 until joining the
Company.
Alex B. Cimochowski, a director of the Company since May 1984, has been Chief
Executive Officer of Delphax Systems, a manufacturer of high speed laser
printers, since November 1988.
Erwin A. Kelen, a director of the Company since February 1995, has been a
private investor since 1990. From 1984 to 1990, Mr. Kelen was President of
Datamyte Corporation, a subsidiary of Allen Bradley Co. Mr. Kelen is also a
director of Printronix, Inc., Insignia Systems, Inc. and Computer Network
Technology Corporation.
George E. Kline, a director of the Company since June 1986, has been a
private investor and financial consultant for more than five years. Mr. Kline
is also a director of Applied Biometrics, Inc., IVI Publishing, Inc., Pet Food
Warehouse, Inc., Health Fitness Physical Therapy, Inc. and Rimage Corporation.
26
<PAGE>
P. June Min PhD., a director of the Company since February 1995, has been
Vice Chairman of Anam Industrial Co., Ltd. since May 1995 and Chairman and
Chief Executive Officer of Intellect, Inc., a consulting firm, since May 1990.
He was Vice President, and the Chief Executive Officer of the Semiconductor
Division of Daewoo Corporation, a company headquartered in Korea, from November
1993 to April 1995. Dr. Min was also Chairman and Chief Executive Officer of
CyberTech, Inc., a computer simulation company, from September 1992 to August
1993; Chairman and Chief Executive Officer of Liberty Systems, Inc., an
engineering design house, from September 1988 to June 1992; President and Chief
Executive Officer of Western Digital Korea, Ltd. from October 1987 to April
1990. Before that time, Dr. Min was the founder and chief executive officer of
Goldstar Semiconductor.
Steven M. Quist, a director of the Company since June 1991, is President of
the Rosemount Measurement Division of Rosemount Inc., a subsidiary of Emerson
Electric Co., and has been an employee of Rosemount Inc. since 1970.
27
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of July 31, 1995, and as adjusted to
reflect the sale of the shares of Common Stock in this offering, certain
information with respect to beneficial ownership of the Company's Common Stock
by (i) each person or entity known by the Company to own beneficially more than
5% of the Company's Common Stock, (ii) each director of the Company, (iii) all
executive officers and directors as a group and (iv) the Selling Stockholder.
Except as indicated by footnote, the persons or entities named in the table
below have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES
OWNED BEFORE BENEFICIALLY
THE OFFERING OWNED AFTER THE
(1) SHARES OFFERING
--------------- BEING ---------------
NUMBER PERCENT OFFERED NUMBER PERCENT
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Steven K. Case......................... 341,988 7.7% 50,000 291,988 5.2%
2505 Kennedy Street NE
Minneapolis, MN 55413
Robert Fleming Inc.(2)................. 235,797 5.4% -- 235,797 4.2%
1285 Avenue of the Americas
16th Floor
New York, NY 10019
Alex B. Cimochowski(3)................. 44,671 1.0% -- 44,671 *
George E. Kline(4)..................... 25,800 * -- 25,800 *
Steven M. Quist........................ 14,200 * -- 14,200 *
Erwin A. Kelen......................... 11,375 * -- 11,375 *
P. June Min............................ 8,000 * -- 8,000 *
All executive officers and directors as
a group
(10 persons).......................... 560,592 12.4% 50,000 510,592 8.9%
</TABLE>
--------
*Less than 1%
(1) Includes 22,500 shares for Dr. Case, 19,200 shares for Mr. Cimochowski,
13,200 shares for Mr. Quist, 7,375 shares for Mr. Kelen, 8,000 shares for
Dr. Min and 111,150 shares for all officers and directors as a group,
purchasable upon exercise of options exercisable within 60 days of July 31,
1995.
(2) Based on the Schedule 13G filed by such stockholder on February 14, 1995.
(3) Includes 1,650 shares owned by Mr. Cimochowski's spouse, the beneficial
ownership of which Mr. Cimochowski disclaims.
(4) Includes 22,500 shares held by Venture Management Pension Plan and Trust of
Minneapolis, Minnesota, of which Mr. Kline is trustee and sole beneficiary
and 3,300 shares owned by Mr. Kline's spouse. Mr. Kline disclaims
beneficial ownership of shares held by his spouse.
28
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part), the Underwriters named below have severally agreed to
purchase from the Company and the Selling Stockholder the following number of
shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated................................. 416,668
Robertson, Stephens & Company, L.P.............................. 416,666
Piper Jaffray Inc............................................... 416,666
---------
Total....................................................... 1,250,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company and the Selling Stockholder have been advised by the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus.
The Underwriters may allow a concession not in excess of $.10 per share to
certain dealers. After the offering, the offering price and other selling terms
may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days from the date of this Prospectus, to purchase up to 187,500
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 1,250,000 and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 1,250,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholder against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company and its officers and directors, including the Selling
Stockholder, have agreed not to offer, sell or otherwise dispose of any
additional shares of Common Stock for a period of 90 days after the date of
this Prospectus without the prior written consent of the Underwriters, except
that the Company may issue, and grant options to purchase, shares of Common
Stock under its existing stock plans.
The rules of the Securities and Exchange Commission (the "Commission")
generally prohibit the Underwriters and other members of the selling group, if
any, from making a market in the Company's Common Stock during the "cooling-
off" period immediately preceding the commencement of sales in the offering.
The Commission has, however, adopted an exemption from these rules that permits
passive market making under certain conditions. These rules permit an
Underwriter or other member of the selling group, if any, to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected
29
<PAGE>
with the offering and that its net purchases on any one trading day not exceed
prescribed limits. Pursuant to these exemptions, certain Underwriters and other
members of the selling group, if any, may engage in passive market making in
the Company's Common Stock during the cooling-off period.
VALIDITY OF SHARES
The validity of the Common Stock offered hereby will be passed upon for the
Company by Dorsey & Whitney P.L.L.P., Minneapolis, Minnesota and certain legal
matters will be passed upon for the Underwriters by Piper & Marbury L.L.P.,
Baltimore, Maryland. Thomas Martin, a partner in Dorsey & Whitney P.L.L.P., is
Secretary of the Company and the holder of 2,014 shares of the Company's Common
Stock.
EXPERTS
The financial statements of the Company included and incorporated by
reference in the registration statement as of December 31, 1994 and for the
year then ended have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with respect thereto, and are
included and incorporated by reference herein in reliance upon the authority of
said firm as experts in accounting and auditing. The financial statements of
the Company as of December 31, 1993 and for the two years then ended included
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549-1004; and at the
Commission's regional offices at Northwestern Atrium Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661 and Suite 1300, Seven World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Common Stock. This Prospectus does not contain all the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement, including the exhibits thereto. The Registration
Statement may be inspected by anyone without charge at the principal office of
the Commission in Washington, D.C., and copies of all or any part of it may be
obtained from the Commission upon payment of the prescribed fees.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated into this Prospectus by reference:
(a) Annual Report on Form 10-KSB for the year ended December 31, 1994;
30
<PAGE>
(b) Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1995 and June 30, 1995; and
(c) Registration Statement on Form 8-A dated February 12, 1988.
All other documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering of the shares of Common Stock shall be
deemed incorporated herein by reference and to be a part hereof from the
respective dates of filing such documents.
Any statement contained herein or in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
document subsequently filed with the Commission which also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The Company will
provide without charge to each person to whom a copy of this Prospectus is
delivered, upon oral or written request of such person, a copy of any or all
documents listed above which are incorporated by reference in this Prospectus,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Written requests for such
copies should be directed to Kent O. Lillemoe, Vice President--Finance and
Administration, CyberOptics Corporation, 2505 Kennedy Street NE, Minneapolis,
MN 55413. Telephone requests may be directed to the Company at (612) 331-5702.
31
<PAGE>
CYBEROPTICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants as of December 31, 1994 and for the
year then ended......................................................... F-2
Report of Independent Accountants as of December 31, 1993 and for the two
years then ended........................................................ F-3
Balance Sheets as of December 31, 1993 and 1994 and June 30, 1995........ F-4
Statements of Income for the years ended December 31, 1992, 1993 and 1994
and for the six months ended June 30, 1994 and 1995..................... F-5
Statements of Stockholders' Equity for the years ended December 1992,
1993 and 1994 and for the six months ended June 30, 1995................ F-6
Statements of Cash Flows for the years ended December 31, 1992, 1993 and
1994 and for the six months ended June 30, 1994 and 1995................ F-7
Notes to the Financial Statements........................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of CyberOptics Corporation
We have audited the accompanying balance sheet of CyberOptics Corporation as
of December 31, 1994, and the related statements of income, stockholders'
equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CyberOptics Corporation as of
December 31, 1994, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Minneapolis, Minnesota
January 25, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of CyberOptics Corporation
In our opinion, the accompanying balance sheet and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of CyberOptics Corporation at
December 31, 1993, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit 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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
February 1, 1994
F-3
<PAGE>
CYBEROPTICS CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
ASSETS 1993 1994 1995
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents............................ $1,778 $1,428 $ 451
Short-term investments............................... 440 1,180 930
Accounts receivable, less allowance for doubtful
accounts of $30, $50 and $70, respectively.......... 2,152 2,964 5,497
Inventories.......................................... 1,757 2,335 4,341
Other current assets................................. 249 340 403
------ ------ -------
Total current assets............................. 6,376 8,247 11,622
Equipment and furnishings, net....................... 406 478 685
Capitalized patent costs, less accumulated
amortization of $107, $193 and $226, respectively... 119 98 77
------ ------ -------
Total assets..................................... $6,901 $8,823 $12,384
====== ====== =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Accounts payable..................................... $ 332 $ 572 $ 1,459
Income taxes payable................................. 39 212 721
Accrued expenses..................................... 457 561 1,004
------ ------ -------
Total current liabilities........................ 828 1,345 3,184
Commitments
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, none outstanding......................
Common stock, no par value, 10,000,000 shares
authorized, 4,249,420, 4,235,141 and 4,315,321
shares issued and outstanding, respectively....... 4,349 4,230 4,354
Retained earnings.................................. 1,724 3,248 4,846
------ ------ -------
Total stockholders' equity....................... 6,073 7,478 9,200
------ ------ -------
Total liabilities and stockholders' equity....... $6,901 $8,823 $12,384
====== ====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
CYBEROPTICS CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER SIX MONTHS
31, ENDED JUNE 30,
---------------------- --------------
1992 1993 1994 1994 1995
------ ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $8,425 $11,621 $15,276 $6,377 $11,796
Cost of revenues..................... 3,388 4,531 6,604 2,521 5,435
------ ------- ------- ------ -------
Gross margin............................. 5,037 7,090 8,672 3,856 6,361
Research and development expenses........ 1,631 2,410 2,749 1,382 1,770
Selling, general and administrative
expenses................................ 2,959 3,600 3,881 1,798 2,343
------ ------- ------- ------ -------
Income from operations............... 447 1,080 2,042 676 2,248
Interest income.......................... 57 43 72 34 59
------ ------- ------- ------ -------
Income before income taxes........... 504 1,123 2,114 710 2,307
Provision for income taxes............... 165 180 590 200 709
------ ------- ------- ------ -------
Net income........................... $ 339 $ 943 $ 1,524 $ 510 $ 1,598
====== ======= ======= ====== =======
Net income per share..................... $ 0.08 $ 0.22 $ 0.35 $ 0.12 $ 0.34
====== ======= ======= ====== =======
Weighted average common and common
equivalent shares outstanding........... 4,271 4,328 4,404 4,308 4,676
====== ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
CYBEROPTICS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1991........... 4,019,931 $3,817 $ 442 $4,259
Tax benefit from exercise of stock
options............................. 30 30
Exercise of stock options and
warrants net of shares exchanged as
payment and subsequently retired.... 143,478 213 213
Net income........................... 339 339
--------- ------ ------ ------
Balance, December 31, 1992........... 4,163,409 4,060 781 4,841
Tax benefit from exercise of stock
options............................. 4 4
Exercise of stock options and
warrants............................ 71,565 219 219
Issuance of common stock under
Employee Stock Purchase Plan........ 14,446 66 66
Net income........................... 943 943
--------- ------ ------ ------
Balance, December 31, 1993........... 4,249,420 4,349 1,724 6,073
Tax benefit from exercise of stock
options............................. 3 3
Exercise of stock options net of
shares exchanged as payment and
subsequently retired................ 8,606 19 19
Issuance of common stock under
Employee Stock Purchase Plan........ 20,615 94 94
Repurchase of common stock........... (43,500) (235) (235)
Net income........................... 1,524 1,524
--------- ------ ------ ------
Balance, December 31, 1994........... 4,235,141 4,230 3,248 7,478
Exercise of stock options net of
shares exchanged as payment and
subsequently retired (Unaudited).... 80,180 124 124
Net income (Unaudited)............... 1,598 1,598
--------- ------ ------ ------
Balance, June 30, 1995 (Unaudited)... 4,315,321 $4,354 $4,846 $9,200
========= ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
CYBEROPTICS CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
--------------------------- -------------
1992 1993 1994 1994 1995
------- -------- -------- ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income....................... $ 339 $ 943 $ 1,524 $ 510 $1,598
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation and amortization.. 218 247 295 135 183
Provision for losses on
accounts receivable........... 30 15 73 20
Provision for losses on
inventories................... 56 235 124 27 161
Deferred income taxes.......... (30) (27) (67)
Tax benefit from exercise of
stock options................. 30 4 3
Changes in operating assets and
liabilities:
Accounts receivable.......... (240) (334) (885) (77) (2,553)
Inventories.................. (521) (255) (703) (426) (2,167)
Other current assets......... (55) (14) (24) (25) (63)
Accounts payable............. (42) (150) 239 389 887
Income taxes payable......... (235) (39) 174 55 509
Accrued expenses............. 105 140 104 65 443
------- -------- -------- ----- ------
Net cash (used) provided by
operating activities...... (345) 765 857 653 (982)
------- -------- -------- ----- ------
Cash flows from investing
activities:
Maturities of short-term
investments..................... 850 955 993 1,057
Purchase of short-term
investments..................... (608) (440) (1,733) (756) (807)
Additions to equipment and
furnishings..................... (223) (131) (281) (178) (357)
Additions to patents............. (92) (50) (64) (34) (12)
------- -------- -------- ----- ------
Net cash (used) provided by
investing activities...... (73) 334 (1,085) (968) (119)
------- -------- -------- ----- ------
Cash flows from financing
activities:
Repurchase of common stock....... (235) (140)
Proceeds from exercise of stock
options and warrants............ 213 219 19 8 124
Proceeds from issuance of common
stock under Employee Stock
Purchase Plan................... 66 94
------- -------- -------- ----- ------
Net cash provided (used) by
financing activities...... 213 285 (122) (132) 124
------- -------- -------- ----- ------
Increase (decrease) in cash and
cash equivalents.................. (205) 1,384 (350) (447) (977)
Cash and cash equivalents--
beginning of period............... 599 394 1,778 1,778 1,428
------- -------- -------- ----- ------
Cash and cash equivalents--end of
period............................ $ 394 $ 1,778 $ 1,428 $1331 $ 451
======= ======== ======== ===== ======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-7
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
NOTE 1--BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Business
CyberOptics Corporation designs and manufactures intelligent sensors and
systems for high-precision, non-contact dimensional measurement and process
control.
Revenue Recognition
Revenue is recognized upon shipment. The Company provides for estimated
warranty costs concurrent with the recognition of revenue.
Cash and Cash Equivalents, and Short-Term Investments
Cash and cash equivalents are carried at cost which approximates market and
consists of cash and money market accounts. At December 31, 1994, over one
million dollars of cash equivalents were concentrated in one money market
account. Short-term investments generally consist of treasury bills and short-
term mutual bonds with original maturities of 3 to 18 months. Short-term
investments will be held to their maturity and are carried at amortized cost.
Unrealized holding gains and losses were not significant.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
using the first-in, first-out (FIFO) method.
Patents
Patents consist of legal and patent registration costs for protection of the
Company's proprietary sensor technologies. The Company amortizes such
expenditures over a three-year period on a straight-line basis.
Equipment and Furnishings
Equipment and furnishings are stated at cost. Significant additions or
improvements extending asset lives are capitalized, while repairs and
maintenance are charged to expense as incurred. Depreciation is recorded using
the straight-line method over the estimated useful lives of the assets, ranging
from three to five years. Gains or losses on dispositions are included in
current operations.
Income Taxes
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 using currently enacted tax rates in effect for the years in
which the differences are expected to reverse. Income tax expense is the sum of
the tax currently payable and the change in the deferred tax assets and
liabilities during the period.
Net Income per Share
Net income per common and common equivalent shares has been computed using
the weighted average shares outstanding plus common stock equivalents for each
period. Common equivalent shares include dilutive options and warrants using
the treasury stock method.
F-8
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
Use of Estimates
The preparation of the Company's 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, and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Interim Periods
The balance sheet at June 30, 1995 and the statements of income and cash
flows for the six-month periods ended June 30, 1994 and 1995, and the statement
of stockholders' equity for the six-month period ended June 30, 1995, together
with the related notes, are unaudited, but, in the opinion of management of the
Company, include all adjustments (which consist only of accruals of a normal
recurring nature) necessary to present fairly, in all material respects, the
financial condition at June 30, 1995 and the results of operations and cash
flows for the Company for the six-month periods ended June 30, 1994 and 1995.
NOTE 2--OTHER FINANCIAL STATEMENT DATA
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1993 1994 1995
------ ------ --------
<S> <C> <C> <C>
Raw materials and purchased parts.................. $1,362 $1,902 $2,876
Work in process.................................... 269 406 1,417
Finished goods..................................... 126 27 48
------ ------ ------
$1,757 $2,335 $4,341
====== ====== ======
</TABLE>
Equipment and furnishings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1993 1994 1995
------ ------- --------
<S> <C> <C> <C>
Equipment and furnishings...................... $1,323 $ 1,604 $ 1,961
Less accumulated depreciation.................. (917) (1,126) (1,276)
------ ------- -------
$ 406 $ 478 $ 685
====== ======= =======
</TABLE>
Other accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31,
--------- JUNE 30,
1993 1994 1995
---- ---- --------
<S> <C> <C> <C>
Accrued wages and benefits............................. $221 $313 $ 666
Accrued lease expense.................................. 114 84 70
Other accrued expenses................................. 122 164 268
---- ---- ------
$457 $561 $1,004
==== ==== ======
</TABLE>
F-9
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
NOTE 3--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal............................................... $188 $206 $643
State................................................. 7 1 14
Deferred................................................ (30) (27) (67)
---- ---- ----
$165 $180 $590
==== ==== ====
</TABLE>
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Inventories.............................................. $22 $ 49 $ 41
Vacation accrual......................................... 20 27 36
Accounts receivable allowances........................... 10 11 52
Warranty accrual......................................... 10 15 22
R&D credit carryforward.................................. 17
Other, net............................................... (2) (15) (14)
--- ---- ----
Deferred tax asset included in other current assets...... $60 $ 87 $154
=== ==== ====
</TABLE>
A reconciliation of the statutory rate to the effective income tax rate is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE
DECEMBER 31, 30,
-------------------- ------------
1992 1993 1994 1994 1995
----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Federal statutory rate..................... 34.0% 34.0% 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State income taxes, net of federal
benefit................................. 0.9% 0.1% 0.7% 0.9% 1.0%
Benefits of current period tax credits... (7.9%) (18.4%) (7.9%) (7.8%) (5.3%)
Other, net............................... 5.7% 0.3% 1.1% 1.1% 1.0%
----- ------ ----- ----- -----
Effective rate............................. 32.7% 16.0% 27.9% 28.2% 30.7%
===== ====== ===== ===== =====
</TABLE>
The benefit of current period tax credits in 1993 of 18.4% includes the
impact of the reinstatement of the tax law which allows the Company to claim
tax credits for its research and development activities retroactive to July
1992. As a result, the 1993 tax provision includes 18 months of research and
development tax credit compared to six months in 1992. The research and
development tax credit expired as of June 30, 1995. Cash payments of income
taxes for the years ended December 31, 1992, 1993, and 1994, were approximately
$399, $294 and $480, respectively.
F-10
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
NOTE 4--OPERATING LEASES
The Company leases office, warehouse and manufacturing facilities under an
operating lease that is cancelable October 31, 1997. This lease generally
requires the Company to pay insurance, property taxes and other expenses
related to the leased property. Total rental expenses for the years ended
December 31, 1992, 1993 and 1994, were approximately $149, $241 and $255,
respectively. Total rent expense for the six months ended June 30, 1994 and
1995, were approximately $127 and $145, respectively.
Future minimum rental payments required under this lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
1995................................................................ $179
1996................................................................ 179
1997................................................................ 235
----
$593
====
</TABLE>
NOTE 5--STOCKHOLDERS' EQUITY
On February 14, 1992, the Company's Board of Directors approved a 3-for-2
stock split payable on March 13, 1992. All share and per share amounts in these
financial statements and notes have been adjusted to reflect this split. In
connection with the public offering of common stock in December 1987, the
Company issued common stock warrants for the purchase of 66,000 shares of
unissued common stock. The warrants were exercised in 1992 at $2.00 per share.
During the second quarter of 1994, the Company's Board of Directors
authorized the repurchase of up to 100,000 shares of CyberOptics' common stock.
As of June 30, 1995, the Company has repurchased 43,500 shares in open market
transactions. These shares were repurchased under a share repurchase program to
provide for issuance of shares under the Company's stock option plans and
Employee Stock Purchase Plan.
NOTE 6--BENEFIT PLANS
Stock Option Plans
The Company has two stock option plans that reserve 610,129 shares of common
stock in the aggregate for issuance to employees, directors, officers and
others. Canceled options are available for future grant under both plans.
Options are granted at an option price per share equal to or greater than fair
value at the date of grant. Generally, options vest over a four-year period and
expire five years after the date of grant. The plans allow for option holders
to redeem shares of the Company's common stock as consideration for the option
price. Options exercised by tendering shares are shown at the net amount in the
Statements of Stockholders' Equity.
F-11
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
The following is a summary of stock option plan activity:
<TABLE>
<CAPTION>
OPTION PRICE
RANGE PER SHARE OPTIONS
---------------- -------
<S> <C> <C> <C>
Outstanding at December 31, 1991...................... $1.21 $ 5.50 323,257
Granted............................................. $4.38 $ 9.67 149,800
Exercised........................................... $1.21 $ 2.65 (77,478)
Canceled............................................ $2.65 $ 5.75 (9,771)
------- -------- -------
Outstanding at December 31, 1992...................... $2.12 $ 9.67 385,808
Granted............................................. $5.00 $ 6.00 190,000
Exercised........................................... $2.21 $ 4.57 (71,565)
Canceled............................................ $2.35 $ 9.67 (39,742)
------- -------- -------
Outstanding at December 31, 1993...................... $2.12 $ 9.67 464,501
Granted............................................. $5.00 $ 7.13 68,400
Exercised........................................... $2.21 $ 5.00 (12,536)
Canceled............................................ $2.35 $ 6.00 (26,538)
------- -------- -------
Outstanding at December 31, 1994...................... $2.12 $ 9.67 493,827
Granted............................................. $9.25 $ 15.00 90,850
Exercised........................................... $2.65 $ 6.00 (91,973)
Canceled............................................ $5.50 $ 6.00 (6,575)
------- -------- -------
Outstanding at June 30, 1995.......................... 486,129
=======
Exercisable at June 30, 1995.......................... 178,700
=======
</TABLE>
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan available to eligible
employees. Under terms of the plan, eligible employees may designate from 1 to
10% of their compensation to be withheld through payroll deductions for the
purchase of common stock at 85% of the lower of the market price on the first
or last day of the offering period. Under the plan, 200,000 shares of common
stock have been reserved for issuance. As of December 31, 1994, 35,061 shares
have been issued under this plan.
401(k) Plan
The Company has a savings plan pursuant to Section 401(k) of the Internal
Revenue Code ("the Code") whereby eligible employees may contribute up to 15%
of their earnings, not to exceed amounts allowed under the Code. In addition,
the Company may also make contributions at the discretion of the Board of
Directors. During 1992, 1993 and 1994, the Company provided for matching
contributions totaling $34, $37, and $43, respectively. During the six months
ended June 30, 1994 and 1995, the Company provided $20 and $28 for matching
contributions.
F-12
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)
NOTE 7--MAJOR CUSTOMER AND EXPORT SALES
The following summarizes significant customers:
<TABLE>
<CAPTION>
SIGNIFICANT PERCENTAGE
CUSTOMER REVENUES OF REVENUES
----------- -------- -----------
<S> <C> <C> <C>
Year ended December 31, 1993............. A $1,682 14%
Year ended December 31, 1994............. B 2,115 14%
A 1,894 12%
Six months ended June 30, 1994........... A 1,208 19%
C 754 12%
Six months ended June 30, 1995........... B 3,405 29%
</TABLE>
Export sales amounted to 35 percent, 39 percent and 57 percent for 1992, 1993
and 1994, respectively, and 54 percent and 60 percent for the six months ended
June 30, 1994 and 1995. Substantially all of the Company's export sales are
negotiated, invoiced and paid in U.S. dollars. Foreign sales by geographic area
are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER SIX MONTHS ENDED
31, JUNE 30,
-------------------- -----------------
1992 1993 1994 1994 1995
------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
North America............................ $ 345 $ 406 $ 141 $ 65 $ 87
Europe................................... 1,514 951 3,895 1,164 4,372
Asia..................................... 1,066 3,155 4,555 2,070 2,488
Other.................................... 45 144 118
------ ------ ------ -------- --------
$2,925 $4,512 $8,636 $ 3,443 $ 7,065
====== ====== ====== ======== ========
</TABLE>
NOTE 8--BANK LINE OF CREDIT
On May 26, 1995, the Company entered into an unsecured revolving line of
credit which provides for borrowings up to $2,000. Amounts outstanding under
this agreement would bear interest, payable monthly, at prime or LIBOR plus
2.25%. As of June 30, 1995, the Company has not borrowed against this line of
credit. The line of credit expires May 31, 1996 and contains covenants
including not incurring other forms of debt or liens other than for this line
or other credit facilities of the lender.
F-13
<PAGE>
CyberOptics LaserAlign sensor mounts on
the moving head of a SMT placement
machine. Non-contact component alignment
is accomplished while the component is
moving between the supply and placement
site to increase manufacturing speed.
[INSERT PHOTO OF LASERALIGN SENSOR]
This diagram shows how a
component is lifted into the
LaserAlign sensor for mesurement
and subsequent placement on the
circuit board.
[INSERT DIAGRAM OF LASERALIGN SENSOR]
(1) Vacuum pick-up quill
lifts component from
supply into sensor.
[INSERT PHOTO OF LASER LEAD (2) Sensor determines
LOCATORS] component orientation
and component is
aligned en route to
circuit board where
component is placed
Diagram shows how lasers locate
leads and determine coplanarity of
integrated circuits.
A multi-leaded component is shown moving
through the Laser Lead Locator. The
sensor is mounted within a high precision
component placement machine to ensure
production quality and increase placement
accuracy.
[INSERT DIAGRAM OF LASER LEAD LOCATORS]
(1) Component is lifted
from supply by vacuum
pick-up quill and
moved to sensor.
(2) Laser beam focus on
leads, detecting
imperfections
(3) Good components are
placed on circuit
board. Bad components
are discarded.
^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
^ ^ ^ ^
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPEC-
TUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JU-
RISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 8
Price Range of Common Stock............................................... 8
Dividend Policy........................................................... 8
Capitalization............................................................ 9
Selected Financial Data................................................... 10
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 11
Business.................................................................. 16
Management................................................................ 26
Principal and Selling Stockholders........................................ 28
Underwriting.............................................................. 29
Validity of Shares........................................................ 30
Experts................................................................... 30
Available Information..................................................... 30
Incorporation of Certain Information by Reference......................... 30
Financial Statements...................................................... F-1
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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1,250,000 Shares
LOGO
Common Stock
-----------
PROSPECTUS
-----------
Alex. Brown & Sons
INCORPORATED
Robertson, Stephens & Company
Piper Jaffray Inc.
SEPTEMBER 19, 1995
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--------------------------------------------------------------------------------
