768411--3/12/2007--CYBEROPTICS

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The market for capital equipment for the electronics industry in which we operate is cyclical and we cannot predict with precision when market downturns will occur. World events beyond our control may effect our operations. We are dependent upon two customers for a significant amount of our revenue. We are dependent upon a single product line in our systems business for over a quarter of our revenue. We generate more than three quarters of our revenue (approximately 85% in 2006) from export sales that are subject to risks of international operations Because we price our products in US dollars, our products may have difficulty competing in periods of increasing strength of the dollar. Our products could become obsolete. We compete in the electronics assembly sensor market with larger companies The market for surface mount capital equipment has become very price competitive. Our systems products carry lower margins. Competitors in Asia may be able to compete favorably with us based on lower production and employee costs We are dependent upon outside suppliers for components of our products, and delays in or unavailability of those components would adversely effect our results. Our operations could be effected by lead-free regulations. Our growth has been dependent on technical innovation and is affected by the timing and success of product introductions. Although our results are cyclical, our objective is to grow revenue and profitability over the long term. Our growth has been in the past, and we anticipate that it will be in the future, dependent upon our ability to introduce new and innovative products. The accuracy of our financial reporting is dependent on continued maintenance of adequate internal controls.

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768411--3/12/2007--CYBEROPTICS_CORP