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Minnesota
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41-1472057
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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5900 Golden Hills Drive
MINNEAPOLIS, MINNESOTA
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55416
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(Address of principal executive offices)
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(Zip Code)
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(763) 542-5000
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(Registrant’s telephone number, including area code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller Reporting Company
þ
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PART I
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ITEM 1.
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DESCRIPTION OF BUSINESS
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3
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ITEM 1A.
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RISK FACTORS
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14
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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19
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ITEM 2.
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PROPERTIES
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19
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ITEM 3.
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LEGAL PROCEEDINGS
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19
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ITEM 4.
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MINE SAFETY DISCLOSURES
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19
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PART II
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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20
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ITEM 6.
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SELECTED FINANCIAL DATA (Not Applicable)
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20
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ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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21
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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29
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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30
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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58
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ITEM 9A.
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CONTROLS AND PROCEDURES
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58
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ITEM 9B.
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OTHER INFORMATION
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58
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PART III
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE MATTERS
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59
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ITEM 11.
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EXECUTIVE COMPENSATION
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59
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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59
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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59
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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59
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PART IV
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ITEM 15.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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60
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SIGNATURES
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62
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December 31,
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2014
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2013
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Asia
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44
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%
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48
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%
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Europe
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25
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%
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26
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%
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Other export sales (1)
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4
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%
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4
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%
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•
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Development of our MRS technology, a high speed metrology grade 3D measurement capability using commercially available components and proprietary algorithms that we believe will solve many of the reflecting issues impacting all triangulation sensor technologies.
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Development of our first 3D AOI system, the SQ3000. This system is designed to expand our presence in markets requiring high precision measurement and inspection. Identifying defects on circuit boards has become highly challenging and critical due to smaller electronics packaging, increasing component density, combined with smaller and more complex solder joints. The SQ3000 is being designed to maximize ROI and line utilization with multi-view 3D sensors that capture and transmit data simultaneously, and in parallel, enabling what we believe, is the fastest 3D AOI inspection currently available. We believe the combination of our MRS technology and sophisticated 3D fusing algorithms offers microscopic image quality at production speeds. We anticipate formal launch of the SQ3000 late in the first quarter of 2015.
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Development of our first system for post-singulation inspection of memory modules, the MX600. This system is based on our 2D SIM sensor technology and Ai
2
image recognition software. The inspection requirements for this application are similar to AOI for circuit board production. In February 2015, we received a $1.0 million order from one of the world’s top four memory manufacturers
for our newly-developed MX600 system
due to its superior speed, inspection performance and low level of false calls.
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Development of a new 3D scanning system, the CyberGage 360, that incorporates our new MRS technology. We believe this system will be used to inspect and measure a wide range of components and manufactured parts in the general industrial market. We anticipate formal launch of the CyberGage 360 in the second quarter of 2015. We believe the unique performance characteristics of MRS that inhibit reflections, particularly critical for shiny objects, and enable very accurate measurements at fast speeds, will give CyberGage 360 a competitive advantage in the marketplace for 3D scanning solutions.
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•
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Continued development of our WaferSense line of products by introducing a particle sensor in a reticle shaped form factor (ReticleSense). The wireless, real-time capability of ReticleSense allows users to quickly identify geographic particle sources in reticle environments. In early 2015, we launched a ReticleSense Airborne Particle Sensor with a quartz housing (APSRQ) for use in semiconductor tools that handle quartz reticles. Designed and developed specifically for use with scanners in the semiconductor fabs, the ReticleSense APSRQ has all of the necessary alignment marks and bar codes for compatibility with ASML, Nikon and Canon scanners. The APSRQ can be loaded directly into a scanner just like a quartz reticle and travel the entire reticle path to detect in real-time when and where particles occur. By extending the line to include a quartz airborne particle sensor, we’re helping our customers exceed manufacturing quality and productivity standards in the Photo Lithography scanner environment.
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We are currently in the process of introducing a number of products based upon our new 3D MRS technology and the failure of this technology to perform up to our expectations would materially adversely affect our anticipated operating results.
We believe our MRS technology is unique in the marketplace based upon its ability to inhibit reflections and offer microscopic quality images at production line speeds, and we have high expectations about the prospect for longer-term sales of products based on this technology. We have incorporated the MRS technology into several of the products that we are currently introducing or are about to introduce, including our new 3D AOI offering, the SQ3000, the CyberGage 360 product we intend to launch for the 3D scanning market in the second quarter, and products for OEM customers, including KLA-Tencor. We also expect to use this technology in the next generation of other inspection products and in products for new applications. Although we believe the MRS technology has performed well in pre-release or “beta” versions of some of these products, it has not been used by customers in a commercially released form that has been purchased by the customer, and has not been used long-term in a full-scale production environment. New technologies often encounter issues in application and new products often contain operational issues that are resolved only after use. If the performance of the MRS technology does not meet our expectations, if the products we are introducing based upon the MRS technology do not operate up to specifications, or if the market otherwise does not find this technology attractive, our operating results for the current year, and our expectations for longer term growth, would be materially adversely affected.
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Our business has been and will continue to be significantly impacted by the global economy and uncertainty in the outlook for the global economy makes it more likely that our actual results will differ materially from expectations
. In 2009, the world economy experienced the worst economic recession since the great depression of the 1930’s. The severe economic conditions were brought about by extreme disruptions in global credit and financial markets including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. These economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. Further political instability or uncertainty could cause new tightening of credit in financial markets, may lead consumers and businesses to postpone spending, and may cause our customers to cancel, decrease or delay their existing and future orders with us. In addition, financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable defaults and inventory challenges. The OEMs to which we sell our sensors supply SMT manufacturers, and those manufacturers, as well as the circuit board manufacturers that purchase our SMT inspection system products directly, are largely dependent on continued demand for consumer and commercial electronics, including cell phones, smart phones and computers. Demand for electronics is a function of the health of the economies in the United States and around the world. Sales of our semiconductor products and 3D scanning solutions are also dependent upon the health of the global economy. Our results would be adversely affected in the future, if these economies were to move into recession.
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World events beyond our control may affect our operations.
Our operations and markets could be negatively affected by world events that effect economies and commerce in the specific countries, such as China, Singapore and Japan, in which we do business. Natural disasters, such as the tsunami and earthquake that hit Japan and the floods that hit Thailand in 2011, have affected travel patterns and accessibility in these countries in the past and other natural occurrences, such as a bird flu outbreak, could affect the business we do in these countries in the future. Terrorist activity or other armed conflicts that could occur in countries in which we do business, labor disputes that impact complex international shipping arrangements, or other unanticipated actions by local populations could affect our ability to do business in specific geographies. Many of the countries in which we do business can be affected by economic forces that are different from the forces that affect the United States and change the amount of business we conduct.
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Our operating results have varied, and will likely continue to vary significantly, from quarter to quarter, causing volatility in our stock price.
Our quarterly operating results have varied in the past and will likely continue to vary significantly from quarter to quarter, causing volatility in our stock price. Some of the factors that may influence our operating results and subject our stock to price and volume fluctuations include changes in customer demand for our sensors, inspection systems and 3D scanning solutions, which is influenced by economic conditions in these industries and the overall health of the global economy, demand for products that use circuit boards and semiconductors, market acceptance of our products and those developed by our customers, competition, seasonal variations in customer demand, the timing, cancellation or delay of customer orders, shipments and acceptance, product development costs, including increased research, development, engineering and marketing expenses associated with our introduction of new products and product enhancements.
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The markets for capital equipment in the electronics assembly and semiconductor industries in which we operate are cyclical and we cannot predict with precision when market downturns will occur.
We operate in a cyclical market–the electronics assembly capital equipment market–that periodically adjusts independent of global economic conditions. We have been unable to predict with accuracy the timing or magnitude of periodic downturns in this market. These downturns, particularly the severe downturns in electronics production markets from 2001 through 2003, and from 2008 through 2009, have severely affected our operations and generated several years of unprofitable operations. Ultimately, we have difficulty determining the duration or severity of any market downturns, the strength of any subsequent recoveries, and the long-term impact that the market may have on our business.
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Our operating results and financial position could be negatively affected by acquisitions, including our recent acquisition of Laser Design, Inc.
On March 14, 2014, we acquired substantially all of the assets of Laser Design, Inc. (LDI), a 3D metrology company located in Minneapolis, Minnesota, for aggregate consideration of $3.1 million cash, plus the assumption of certain current liabilities. If the LDI business does not perform as anticipated, we may be forced to incur additional expense to enhance its development, sales or marketing capabilities, negatively impacting our earnings and financial position. In addition, we may be unable to successfully complete integration of LDI or other businesses that we choose to acquire in the future in a cost-effective and non-disruptive manner. Business acquisitions present a number of risks, including:
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diversion of management’s attention from daily operational matters, current products and customers;
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lack of synergy, or the inability to realize expected synergies;
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failure to commercialize or meet the expected performance of the new technology or business;
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failure to retain key employees and customer or supplier relationships;
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lower-than-expected market opportunities or market acceptance of any new products; and
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unexpected reduction of sales of existing products by new products.
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Sales to our two largest OEM customers constituted a significant portion of our revenue in 2014 and loss of either of these customers, or a decline in the customer’s business, would have a materially adverse impact on our results of operations.
Sales to our two principal OEM sensor customers constituted 25% of our total revenue in 2014. Although we do not anticipate any impact on the level of business we conduct with them, our two largest OEM customers have completed or are nearing completion of business combination transactions that could impact our business relationships. If the order rates of these customers are negatively impacted by global economic events beyond their control, competitive factors, or if they or new owners or management choose sensors or inspection systems manufactured by other suppliers, or otherwise terminate their relationships with us, our long-term results of operations would be significantly adversely affected.
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We generate approximately three quarters of our revenue from export sales that are subject to risks of international operations
. Our export sales are subject to many of the risks of international operations including:
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currency controls and fluctuations in currency exchange rates;
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changes in local market business requirements and increased cost and development time required to modify and translate our products for local markets;
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inability to recruit qualified personnel in a specific country or region;
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difficulty in establishing and maintaining relationships with local vendors;
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differing foreign technical standards;
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differing regulatory requirements;
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export restrictions and controls, tariffs and other trade barriers;
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reduced protection for intellectual property rights;
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changes in political and economic conditions;
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potentially adverse tax assessments; and
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terrorism, disease, or other events that may affect local economies and access.
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Our development and assembly operations in Singapore, and our sales operations in Asia, are subject to unique risks because of the remote nature of the operations.
Our Singapore development and manufacturing operations, and our Asian sales operations, present a number of risks related to the retention of personnel, management of product development and operations, management and access to customer and distributor interactions, control over administrative and business processes, regulatory and legal issues we may encounter and other matters relating to foreign operations. We cannot be certain that we will be able to retain software development and management personnel in Singapore, and sales personnel in other territories, who are reliable and who will accept employment terms that are attractive. Although most components for our system products are more readily available in Singapore, some of the hardware components used in our system products necessary for manufacture in Singapore may be difficult to import at efficient rates. Our financial performance, ability to serve our customers and ability to manufacture and sell products could be negatively impacted if we are unable to retain our Asian based employees, if it costs more than expected to retain these employees or hire other experienced employees in a timely manner, if we are unable to manage these employees appropriately, or if we are unable to locate suitable sources of supply for our products manufactured in Asia.
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We price our products in U.S. dollars, and as a result, our products may have difficulty competing in periods of increasing strength of the dollar.
Most of our international export sales are negotiated, invoiced and paid in U.S. dollars, and accordingly, currency fluctuations do not affect our revenue per unit. However, significant fluctuations in the value of the U.S. dollar relative to other currencies could have an impact on the price competitiveness of our products relative to foreign competitors, which could impact the willingness of customers to purchase our products and have an impact on our results of operations.
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Because of our significant operations in Singapore, our costs are negatively impacted when the U.S. dollar weakens relative to the Singapore dollar.
A significant portion of our cost of revenues, research and development and sales and marketing costs are denominated in the Singapore dollar. In addition, other sales and marketing costs are denominated in British Pounds Sterling and the Chinese Yuan, resulting from our sales offices located in the UK and China. Our costs will increase, and our results will be negatively impacted in future periods, if the U.S. dollar weakens relative to the currencies of these countries.
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We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies associated with our subsidiary in Singapore, which may result in losses.
At December 31, 2014, our open foreign exchange forward contracts were in an unrealized loss position equal to $352,000 on a pre-tax basis due to a strengthening of the U.S. dollar in relation to the Singapore dollar in 2014. If the exchange rate between the U.S. dollar and the Singapore dollar were to remain unchanged over the next twelve months, we would realize this loss through our consolidated statement of operations. However, because we do not fully hedge all of our future anticipated cash flows in Singapore dollars, the portion of our costs that we do not hedge would be lower in relation to recent quarters. If the U.S. dollar were to weaken in future periods in relation to the Singapore dollar, the unrealized loss on our open foreign exchange forward contracts would be reduced, but costs that are not hedged would increase. The ultimate impact of any fluctuation in the relationship between the U.S. dollar and Singapore dollar is dependent on the level of Singapore denominated cash flows in future periods.
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Our products could become obsolete.
Our current products, as well as the products we have under development, are designed to operate with the technology that we believe currently exists or may exist for electronic components, printed circuit boards, memory modules and semiconductor manufacturing. The products we develop to meet customer needs and requirements are subject to rapid technological change, and because it takes considerable time to develop new products, we must anticipate industry trends, as well as technological developments, in order to effectively compete. Further, because we do not have unlimited development resources, we might choose to forgo the pursuit of what becomes a leading technology or market and devote our resources to technologies and markets that are less successful. If we incorrectly anticipate technology developments or market trends, or have inadequate resources to develop our products to deal with changes in technology and markets, our products could become obsolete.
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Advances in the SMT electronics assembly alignment sensor market have eliminated some of the advantages of our sensors
. Our SMT electronic assembly alignment sensor products compete with products made by larger machine vision companies, other optical sensor companies, and by solutions internally developed by our customers. Advances in machine vision technology in recent years have eliminated some, but not all, of the advantages that have differentiated our products from some of these competitors, and advances in other technologies could eliminate other advantages.
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The market for surface mount capital equipment has become more mature and price competitive, negatively impacting our margins.
The electronics capital equipment market for surface mount technologies is becoming more mature, resulting in increased price pressure on suppliers of equipment. Consequently, our SMT electronic assembly inspection systems and alignment sensor products have become subject to increased levels of price competition and competition from other suppliers and technologies, including suppliers in Asia who have specifically designed their products to compete favorably against our products.
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Because of the high cost of changing equipment, customers in our markets are sometimes resistant to purchasing our products even if they are superior
. We believe that, because of the high cost of installation and integration of new inspection equipment into production lines, once an SMT customer has selected a vendor’s capital equipment, the customer generally relies upon that capital equipment and, to the extent possible, subsequent generations of the same vendor’s equipment. Accordingly, unless our systems offer performance or cost advantages that outweigh the expense of installing and integrating new systems, it may be difficult for us to achieve significant sales to a customer that currently uses a competitor’s equipment.
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Our ability to compete in the market for SMT inspection systems is dependent upon the sales skills of our channel of independent sales representatives, value added resellers and distributors.
Our ability to successfully compete in the market for SMT inspection systems is dependent upon the ability of our channel partners to sell our products. To the extent our competitors have relationships with stronger channel partners, it may be difficult for us to achieve significant sales, even if our products are technologically superior.
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Competitors in Asia may be able to compete favorably with us based on lower production, employee costs and in some cases, governmental support
. We compete with large multinational companies when selling our inspection system products, many of which are able to take advantage of greater financial resources and larger sales distribution networks. We also compete with new Asian based suppliers, many of which may have lower overall production and employee costs and are willing to offer their products at lower selling prices to customers. Further, we believe some competitors receive government sponsored research and manufacturing assistance that can cause their relative cost of development of new products to be lower, and are under less market pressure to forgo the short-term income impact of concentrated investment in research and development.
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We are exposed to credit risk through sales to our OEM customers and distributors of our stand-alone system products.
We sell our products through three key OEM customers, and usually have significant credit exposure with respect to these customers. In addition, we sell our stand-alone inspection system products through a network of international distributors. These distributors tend to be smaller in size with limited financial resources and access to capital. Although these distributors do not hold our products in inventory for re-sale, we are exposed to credit risk and would incur losses if they are unable to pay for the products they have purchased from us.
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We are dependent upon outside suppliers for components of our products, and delays in or unavailability of those components would adversely affect our results.
We use outside contractors to manufacture the components used in many of our products and some of the components we order require significant lead times that could affect our ability to sell our products if not available. In addition, if these components do not meet stringent quality requirements or become subject to obsolescence, there could be delays in product availability, and we could be required to make significant investments in designing replacement components.
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Future sales of MX600 will require a significant upfront investment in working capital.
The
materials handling equipment for our MX600 system for post-singulation memory inspection, which constitutes the vast majority of the content and cost of the system, is manufactured by a third-party contractor. We are required to make significant upfront inventory investments with that contractor to facilitate future sales of the MX600 system, and we cannot be assured that, if significant orders of the system were received, the contractor would be able to satisfy our production needs. If for some reason our supplier for these systems should fail to appropriately complete their work in a timely manner, or if our end customer should ultimately fail to accept and pay for these systems, we could incur losses.
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We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage.
Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology for our principal product families, and we rely, in part, on patent and trade secret law and confidentiality agreements to protect that technology. If we fail to adequately protect our intellectual property, our competitors may be able to duplicate and enhance what we have created. We own or have licensed a number of patents, and have filed applications for additional patents. Any of our pending patent applications may be rejected, and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and may be challenged by third parties. Further, third parties may also design around these patents. In addition to patent protection, we rely upon trade secret protection for our confidential and proprietary information and technology. We routinely enter into confidentiality agreements with our employees and other third parties. Even though these agreements are in place there can be no assurances that trade secrets and proprietary information will not be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition. Costly and time-consuming litigation might be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection might adversely affect our ability to continue our research or bring products to market.
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Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or the loss of important intellectual property rights.
We may be required to initiate litigation in order to enforce any patents issued to or licensed by us, or to determine the scope or validity of a third party’s patent or other proprietary rights. Any litigation, regardless of outcome, could be expensive and time consuming, and could subject us to significant liabilities or require us to re-engineer our products or obtain expensive licenses from third parties. There can be no assurance that any patents issued to or licensed by us will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide us with a competitive advantage. In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other proprietary rights owned by third parties. From time to time, we may receive communications from third parties asserting that our products infringe, or may infringe, the proprietary rights of these third parties. These claims of infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of our products stopped by an injunction. Infringement claims could also cause product delays or require us to redesign our products and these delays could result in the loss of substantial revenues. We may also be required to obtain a license from the third party or cease activities utilizing the third party’s proprietary rights. We may not be able to enter into such a license or such a license may not be available on commercially reasonable terms. Accordingly, the loss of important intellectual property rights could hinder our ability to sell our products, or make the sale of these products more expensive.
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Our efforts to protect our intellectual property may be less effective in certain foreign countries, where intellectual property rights are not as well protected as in the United States.
The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the U.S., and many U.S. companies have encountered substantial problems in protecting their proprietary rights against infringement abroad. Consequently, there is a risk that we may be unable to adequately protect our proprietary rights in certain foreign countries. If this occurs, it would be easier for our competitors to develop and sell competing products in these countries.
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Breaches of our network security could expose us to losses.
We manage and store on our network systems various proprietary information and sensitive or confidential data relating to our operations. There has been an increasing incidence of unauthorized access to the computer networks of various technology companies, and we are not immune to attempted unauthorized access. Computer programmers and hackers may be able to gain unauthorized access to our network system and steal proprietary information, compromise confidential information, create system disruptions, or cause shutdowns. These parties may also be able to develop and deploy viruses, worms, and other malicious software programs that disrupt our operations and create security vulnerabilities. Attacks on our network systems could result in significant losses, compromise our competitive advantages and damage our reputation with customers.
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The absence of significant market liquidity in our common stock could impact the ability of our shareholders to purchase and sell larger blocks, the attractiveness of our stock to institutional shareholders, and the market value of our common stock.
There were 6,643,851 shares of our common stock outstanding as of December 31, 2014. Although our common stock is traded in the NASDAQ Global Market, in part because of the number of shares we have outstanding and available for trading, the daily trading volume in our stock is low, averaging less than 50,000 shares per day. Shareholders wishing to purchase or sell larger blocks of stock may not be able to do so quickly, and disposal by any shareholder of a significant block of stock could adversely affect the sale price in the marketplace. Further, institutional investors often have policies against investment in stock that is illiquid, and many institutional investors may elect not to purchase or hold our stock because of the inability to dispose of it. The reduced institutional interest, as well as the lack of current evaluations by securities analysts, has had and can be expected to continue to have a further adverse impact on the market price and liquidity of our common stock.
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|
|
2014
|
|
2013
|
||||||||||||
Quarter
|
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
First
|
|
$
|
9.17
|
|
|
$
|
6.13
|
|
|
$
|
7.90
|
|
|
$
|
5.98
|
|
Second
|
|
$
|
8.45
|
|
|
$
|
7.49
|
|
|
$
|
6.90
|
|
|
$
|
5.26
|
|
Third
|
|
$
|
12.84
|
|
|
$
|
7.97
|
|
|
$
|
6.82
|
|
|
$
|
5.42
|
|
Fourth
|
|
$
|
11.30
|
|
|
$
|
7.54
|
|
|
$
|
6.60
|
|
|
$
|
4.91
|
|
(In thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||||
SMT and High Precision 3D OEM Sensors
|
|
$
|
15,493
|
|
|
$
|
10,792
|
|
|
$
|
13,187
|
|
Semiconductor Sensors
|
|
7,595
|
|
|
7,096
|
|
|
6,363
|
|
|||
SMT Inspection Systems
|
|
18,089
|
|
|
15,420
|
|
|
22,094
|
|
|||
3D Scanning Solutions and Services
|
|
5,306
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
46,483
|
|
|
$
|
33,308
|
|
|
$
|
41,644
|
|
(In thousands)
|
|
Fourth Quarter 2013 Workforce
Reduction |
||
Balance, December 31, 2012
|
|
$
|
—
|
|
Cost incurred
|
|
952
|
|
|
Payments made
|
|
441
|
|
|
Balance, December 31, 2013
|
|
511
|
|
|
Costs incurred
|
|
—
|
|
|
Payments made
|
|
511
|
|
|
Balance, December 31, 2014
|
|
$
|
—
|
|
•
|
Significant under-performance relative to expected historical or projected future operating results.
|
•
|
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business.
|
•
|
Significant negative industry or economic trends.
|
•
|
Significant decline in our stock price for a sustained period; and our market capitalization relative to net book value.
|
•
|
For intangible and long-lived assets, if the carrying value exceeds the undiscounted cash flows from such asset.
|
•
|
For goodwill, if the carrying value of our net assets (net book value) exceeds fair value.
|
|
|
December 31,
|
|
December 31,
|
||||
(In thousands, except share information)
|
|
2014
|
|
2013
|
||||
ASSETS
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
5,171
|
|
|
$
|
3,101
|
|
Marketable securities
|
|
5,285
|
|
|
9,402
|
|
||
Accounts receivable, less allowance for doubtful accounts of $561 at December 31, 2014 and $705 at December 31, 2013
|
|
7,945
|
|
|
6,562
|
|
||
Inventories
|
|
11,657
|
|
|
11,331
|
|
||
Other current assets
|
|
1,202
|
|
|
1,104
|
|
||
Deferred tax assets
|
|
82
|
|
|
77
|
|
||
Total current assets
|
|
31,342
|
|
|
31,577
|
|
||
|
|
|
|
|
||||
Marketable securities, long-term
|
|
9,889
|
|
|
10,742
|
|
||
Equipment and leasehold improvements, net
|
|
2,918
|
|
|
1,272
|
|
||
Intangible and other assets, net
|
|
642
|
|
|
136
|
|
||
Goodwill
|
|
1,366
|
|
|
569
|
|
||
Other assets
|
|
188
|
|
|
194
|
|
||
Deferred tax assets
|
|
67
|
|
|
85
|
|
||
Total assets
|
|
$
|
46,412
|
|
|
$
|
44,575
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
4,713
|
|
|
$
|
2,630
|
|
Advance customer payments
|
|
490
|
|
|
552
|
|
||
Accrued expenses
|
|
3,201
|
|
|
2,241
|
|
||
Total current liabilities
|
|
8,404
|
|
|
5,423
|
|
||
|
|
|
|
|
||||
Deferred rent
|
|
285
|
|
|
352
|
|
||
Deferred warranty revenue
|
|
26
|
|
|
165
|
|
||
Deferred tax liability
|
|
119
|
|
|
6
|
|
||
Reserve for income taxes
|
|
140
|
|
|
150
|
|
||
Total liabilities
|
|
8,974
|
|
|
6,096
|
|
||
|
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
|
||
Preferred stock, no par value, 5,000,000 shares authorized, none outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, no par value, 25,000,000 shares authorized, 6,643,851 shares issued and outstanding at December 31, 2014 and 6,496,805 shares issued and outstanding at December 31, 2013
|
|
30,145
|
|
|
28,968
|
|
||
Accumulated other comprehensive loss
|
|
(1,271
|
)
|
|
(540
|
)
|
||
Retained earnings
|
|
8,564
|
|
|
10,051
|
|
||
Total stockholders’ equity
|
|
37,438
|
|
|
38,479
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
46,412
|
|
|
$
|
44,575
|
|
|
|
Year Ended December 31,
|
||||||
(In thousands, except per share amounts)
|
|
2014
|
|
2013
|
||||
Revenues
|
|
$
|
46,483
|
|
|
$
|
33,308
|
|
Cost of revenues
|
|
25,298
|
|
|
18,658
|
|
||
|
|
|
|
|
||||
Gross margin
|
|
21,185
|
|
|
14,650
|
|
||
|
|
|
|
|
||||
Research and development expenses
|
|
8,789
|
|
|
7,519
|
|
||
Selling, general and administrative expenses
|
|
13,820
|
|
|
12,345
|
|
||
Restructuring and severance costs
|
|
—
|
|
|
952
|
|
||
Amortization of intangibles
|
|
53
|
|
|
—
|
|
||
|
|
|
|
|
||||
Loss from operations
|
|
(1,477
|
)
|
|
(6,166
|
)
|
||
|
|
|
|
|
||||
Interest income and other
|
|
123
|
|
|
(188
|
)
|
||
|
|
|
|
|
||||
Loss before income taxes
|
|
(1,354
|
)
|
|
(6,354
|
)
|
||
|
|
|
|
|
||||
Income tax provision (benefit)
|
|
133
|
|
|
(186
|
)
|
||
|
|
|
|
|
||||
Net loss
|
|
$
|
(1,487
|
)
|
|
$
|
(6,168
|
)
|
|
|
|
|
|
||||
Net loss per share – Basic
|
|
$
|
(0.23
|
)
|
|
$
|
(0.91
|
)
|
Net loss per share – Diluted
|
|
$
|
(0.23
|
)
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
||||
Weighted average shares outstanding – Basic
|
|
6,576
|
|
|
6,798
|
|
||
Weighted average shares outstanding – Diluted
|
|
6,576
|
|
|
6,798
|
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Net loss
|
|
$
|
(1,487
|
)
|
|
$
|
(6,168
|
)
|
|
|
|
|
|
||||
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
||
Foreign currency translation adjustments
|
|
(464
|
)
|
|
(211
|
)
|
||
|
|
|
|
|
||||
Unrealized gains (losses) on available-for-sale securities:
|
|
|
|
|
|
|
||
Unrealized gains
|
|
31
|
|
|
34
|
|
||
Reclassification adjustment for (gains) losses included in net loss
|
|
(2
|
)
|
|
21
|
|
||
Total unrealized gains on available-for-sales securities
|
|
29
|
|
|
55
|
|
||
|
|
|
|
|
||||
Unrealized gains (losses) on foreign exchange forward contracts:
|
|
|
|
|
||||
Unrealized losses
|
|
(399
|
)
|
|
(280
|
)
|
||
Reclassification adjustment for losses included in net loss
|
|
103
|
|
|
53
|
|
||
Total unrealized losses on foreign exchange forward contracts
|
|
(296
|
)
|
|
(227
|
)
|
||
|
|
|
|
|
||||
Other comprehensive loss, before tax
|
|
(731
|
)
|
|
(383
|
)
|
||
Income tax provision related to items of other comprehensive loss
|
|
—
|
|
|
—
|
|
||
Other comprehensive loss, net of tax
|
|
(731
|
)
|
|
(383
|
)
|
||
Total comprehensive loss
|
|
$
|
(2,218
|
)
|
|
$
|
(6,551
|
)
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
||||
Net loss
|
|
$
|
(1,487
|
)
|
|
$
|
(6,168
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
1,914
|
|
|
1,673
|
|
||
Provision for doubtful accounts
|
|
(75
|
)
|
|
(51
|
)
|
||
Deferred taxes
|
|
120
|
|
|
279
|
|
||
Foreign currency transaction (gains) losses
|
|
(230
|
)
|
|
87
|
|
||
Realized (gains) losses on available-for-sale securities
|
|
(2
|
)
|
|
21
|
|
||
Stock compensation costs
|
|
436
|
|
|
447
|
|
||
Changes in operating assets and liabilities, net of acquisition:
|
|
|
|
|
||||
Accounts receivable
|
|
(646
|
)
|
|
(382
|
)
|
||
Inventories
|
|
(647
|
)
|
|
561
|
|
||
Income tax refunds receivable
|
|
—
|
|
|
1,325
|
|
||
Other assets
|
|
(16
|
)
|
|
31
|
|
||
Accounts payable
|
|
1,491
|
|
|
182
|
|
||
Advance customer payments
|
|
(534
|
)
|
|
8
|
|
||
Accrued expenses
|
|
503
|
|
|
(253
|
)
|
||
Net cash provided by (used in) operating activities
|
|
827
|
|
|
(2,240
|
)
|
||
|
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from maturities of available-for-sale marketable securities
|
|
7,080
|
|
|
8,341
|
|
||
Proceeds from sales of available-for-sale marketable securities
|
|
5,050
|
|
|
5,047
|
|
||
Purchases of available-for-sale marketable securities
|
|
(7,147
|
)
|
|
(11,648
|
)
|
||
Purchase of LDI
|
|
(3,108
|
)
|
|
—
|
|
||
Additions to equipment and leasehold improvements
|
|
(1,251
|
)
|
|
(681
|
)
|
||
Additions to patents
|
|
(111
|
)
|
|
(68
|
)
|
||
Net cash provided by investing activities
|
|
513
|
|
|
991
|
|
||
|
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from exercise of stock options
|
|
628
|
|
|
25
|
|
||
Common stock repurchases
|
|
—
|
|
|
(2,979
|
)
|
||
Proceeds from issuance of common stock under employee stock purchase plan
|
|
113
|
|
|
65
|
|
||
Net cash provided by (used in) financing activities
|
|
741
|
|
|
(2,889
|
)
|
||
|
|
|
|
|
||||
Effects of exchange rate changes on cash and cash equivalents
|
|
(11
|
)
|
|
(101
|
)
|
||
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
|
2,070
|
|
|
(4,239
|
)
|
||
|
|
|
|
|
||||
Cash and cash equivalents – beginning of period
|
|
3,101
|
|
|
7,340
|
|
||
Cash and cash equivalents – end of period
|
|
$
|
5,171
|
|
|
$
|
3,101
|
|
|
|
Common Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total Stockholders’ Equity
|
|||||||||||
(In thousands)
|
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
BALANCE, DECEMBER 31, 2012
|
|
6,970
|
|
|
$
|
31,410
|
|
|
$
|
(157
|
)
|
|
$
|
16,219
|
|
|
$
|
47,472
|
|
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment
|
|
18
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Share issuances for compensation purposes
|
|
5
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||
Stock compensation
|
|
—
|
|
|
417
|
|
|
—
|
|
|
—
|
|
|
417
|
|
||||
Issuance of common stock under Employee Stock Purchase Plan
|
|
13
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
65
|
|
||||
Repurchase of common stock
|
|
(509
|
)
|
|
(2,979
|
)
|
|
—
|
|
|
—
|
|
|
(2,979
|
)
|
||||
Market value adjustments of marketable securities, net of reclassification adjustment
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
||||
Unrealized loss on foreign exchange forward contracts, net of reclassification adjustment
|
|
—
|
|
|
—
|
|
|
(227
|
)
|
|
—
|
|
|
(227
|
)
|
||||
Cumulative translation adjustment
|
|
—
|
|
|
—
|
|
|
(211
|
)
|
|
—
|
|
|
(211
|
)
|
||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,168
|
)
|
|
(6,168
|
)
|
||||
BALANCE, DECEMBER 31, 2013
|
|
6,497
|
|
|
28,968
|
|
|
(540
|
)
|
|
10,051
|
|
|
38,479
|
|
||||
Exercise of stock options, vesting of restricted stock units, net of shares exchanged as payment
|
|
121
|
|
|
628
|
|
|
—
|
|
|
—
|
|
|
628
|
|
||||
Share issuances for compensation purposes
|
|
4
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||
Stock compensation
|
|
—
|
|
|
404
|
|
|
—
|
|
|
—
|
|
|
404
|
|
||||
Issuance of common stock under Employee Stock Purchase Plan
|
|
22
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
113
|
|
||||
Market value adjustments of marketable securities, net of reclassification adjustment
|
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
||||
Unrealized loss on foreign exchange forward contracts, net of reclassification adjustment
|
|
—
|
|
|
—
|
|
|
(296
|
)
|
|
—
|
|
|
(296
|
)
|
||||
Cumulative translation adjustment
|
|
—
|
|
|
—
|
|
|
(464
|
)
|
|
—
|
|
|
(464
|
)
|
||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,487
|
)
|
|
(1,487
|
)
|
||||
BALANCE, DECEMBER 31, 2014
|
|
6,644
|
|
|
$
|
30,145
|
|
|
$
|
(1,271
|
)
|
|
$
|
8,564
|
|
|
$
|
37,438
|
|
|
(In thousands)
|
|
Weighted Average
Life-Years
|
||
Software
|
$
|
206
|
|
|
7
|
Patent
|
165
|
|
|
7
|
|
Marketing assets and customer relationships
|
101
|
|
|
9
|
|
Non-compete agreements
|
101
|
|
|
4
|
|
|
$
|
573
|
|
|
7
|
(In thousands, except per share amounts)
|
|
Year Ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Revenue
|
|
$
|
47,904
|
|
|
$
|
39,408
|
|
Net loss
|
|
(1,292
|
)
|
|
(7,047
|
)
|
||
Basic and diluted loss per share
|
|
$
|
(0.20
|
)
|
|
$
|
(1.04
|
)
|
|
|
December 31, 2014
|
||||||||||||||
(In thousands)
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value
|
||||||||
Short-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
3,378
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
3,380
|
|
Corporate debt securities and certificates of deposit
|
|
1,903
|
|
|
2
|
|
|
—
|
|
|
1,905
|
|
||||
Marketable securities – short-term
|
|
$
|
5,281
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
5,285
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
5,761
|
|
|
$
|
3
|
|
|
$
|
(5
|
)
|
|
$
|
5,759
|
|
Corporate debt securities and certificates of deposit
|
|
1,867
|
|
|
1
|
|
|
(1
|
)
|
|
1,867
|
|
||||
Asset backed securities
|
|
2,156
|
|
|
1
|
|
|
(1
|
)
|
|
2,156
|
|
||||
Equity security
|
|
42
|
|
|
65
|
|
|
—
|
|
|
107
|
|
||||
Marketable securities – long-term
|
|
$
|
9,826
|
|
|
$
|
70
|
|
|
$
|
(7
|
)
|
|
$
|
9,889
|
|
|
|
December 31, 2013
|
||||||||||||||
(In thousands)
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value
|
||||||||
Short-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
6,299
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
6,309
|
|
Corporate debt securities and certificates of deposit
|
|
3,091
|
|
|
2
|
|
|
—
|
|
|
3,093
|
|
||||
Marketable securities – short-term
|
|
$
|
9,390
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
9,402
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
4,783
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
4,790
|
|
Corporate debt securities and certificates of deposit
|
|
3,417
|
|
|
1
|
|
|
(5
|
)
|
|
3,413
|
|
||||
Asset back securities
|
|
2,474
|
|
|
2
|
|
|
(1
|
)
|
|
2,475
|
|
||||
Equity security
|
|
42
|
|
|
22
|
|
|
—
|
|
|
64
|
|
||||
Marketable securities – long-term
|
|
$
|
10,716
|
|
|
$
|
32
|
|
|
$
|
(6
|
)
|
|
$
|
10,742
|
|
|
|
December 31, 2014
|
||||||||||||||
(In thousands)
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Recorded
Basis
|
||||||||
Corporate debt securities and certificates of deposit
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
321
|
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
321
|
|
|
|
December 31, 2013
|
||||||||||||||
(In thousands)
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Recorded
Basis
|
||||||||
Corporate debt securities and certificates of deposit
|
|
$
|
327
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
327
|
|
|
|
$
|
327
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
327
|
|
|
|
Year Ended December 31, 2014
|
||||||||||
(In thousands)
|
|
Pretax Loss Recognized
in Other Comprehensive
Loss on Effective
Portion of Derivative
|
|
Pretax Loss Recognized
in Earnings on Effective
Portion of Derivative as a
Result of Reclassification
from Accumulated Other
Comprehensive Loss
|
|
Ineffective Portion of
Gain (Loss) on Derivative
and Amount Excluded
from Effectiveness
Testing Recognized in
Earnings
|
||||||
Cost of revenues
|
|
$
|
(252
|
)
|
|
$
|
(60
|
)
|
|
$
|
—
|
|
Research and development
|
|
(76
|
)
|
|
(21
|
)
|
|
—
|
|
|||
Selling, general and administrative
|
|
(71
|
)
|
|
(22
|
)
|
|
—
|
|
|||
Total
|
|
$
|
(399
|
)
|
|
$
|
(103
|
)
|
|
$
|
—
|
|
|
|
Year Ended December 31, 2013
|
||||||||||
(In thousands)
|
|
Pretax Loss Recognized
in Other Comprehensive
Loss on Effective
Portion of Derivative
|
|
Pretax Loss Recognized
in Earnings on Effective
Portion of Derivative as a
Result of Reclassification
from Accumulated Other
Comprehensive Loss
|
|
Ineffective Portion of
Gain (Loss) on Derivative
and Amount Excluded
from Effectiveness
Testing Recognized in
Earnings
|
||||||
Cost of revenues
|
|
$
|
(169
|
)
|
|
$
|
(16
|
)
|
|
$
|
—
|
|
Research and development
|
|
(63
|
)
|
|
(20
|
)
|
|
—
|
|
|||
Selling, general and administrative
|
|
(48
|
)
|
|
(17
|
)
|
|
—
|
|
|||
Total
|
|
$
|
(280
|
)
|
|
$
|
(53
|
)
|
|
$
|
—
|
|
|
|
Year Ended
December 31, 2014 |
|
Year Ended
December 31, 2013 |
||||||||||||||||||||
(In thousands)
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
Amount
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
Amount
|
||||||||||||
Foreign currency translation adjustments
|
|
$
|
(464
|
)
|
|
$
|
—
|
|
|
$
|
(464
|
)
|
|
$
|
(211
|
)
|
|
$
|
—
|
|
|
$
|
(211
|
)
|
Net changes related to available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized gains
|
|
31
|
|
|
—
|
|
|
31
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||||
Reclassification adjustment for (gains) losses included in net loss
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
21
|
|
|
—
|
|
|
21
|
|
||||||
Total net changes related to available-for-sale securities
|
|
29
|
|
|
—
|
|
|
29
|
|
|
55
|
|
|
—
|
|
|
55
|
|
||||||
Net changes related to foreign exchange forward contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized losses
|
|
(399
|
)
|
|
—
|
|
|
(399
|
)
|
|
(280
|
)
|
|
—
|
|
|
(280
|
)
|
||||||
Reclassification adjustment for losses included in net loss
|
|
103
|
|
|
—
|
|
|
103
|
|
|
53
|
|
|
—
|
|
|
53
|
|
||||||
Total net changes related to foreign exchange forward contracts
|
|
(296
|
)
|
|
—
|
|
|
(296
|
)
|
|
(227
|
)
|
|
—
|
|
|
(227
|
)
|
||||||
Other comprehensive loss
|
|
$
|
(731
|
)
|
|
$
|
—
|
|
|
$
|
(731
|
)
|
|
$
|
(383
|
)
|
|
$
|
—
|
|
|
$
|
(383
|
)
|
Details about Components
of Accumulated Other
Comprehensive Loss
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line Item in the Statements of Operations
|
||||||
|
|
Year Ended
|
|
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
|
|
||||
Unrealized gains (losses) on available-for-sale securities
|
|
$
|
2
|
|
|
$
|
(21
|
)
|
|
Interest income and other
|
|
|
—
|
|
|
—
|
|
|
Income tax provision (benefit)
|
||
|
|
$
|
2
|
|
|
$
|
(21
|
)
|
|
Net of tax
|
Unrealized losses on foreign exchange forward contracts
|
|
$
|
(60
|
)
|
|
$
|
(16
|
)
|
|
Cost of revenues
|
|
|
(21
|
)
|
|
(20
|
)
|
|
Research and development expenses
|
||
|
|
(22
|
)
|
|
(17
|
)
|
|
Selling, general and administrative expenses
|
||
|
|
(103
|
)
|
|
(53
|
)
|
|
Total before tax
|
||
|
|
—
|
|
|
—
|
|
|
Income tax provision (benefit)
|
||
|
|
$
|
(103
|
)
|
|
$
|
(53
|
)
|
|
Net of tax
|
(In thousands)
|
|
Foreign
Currency
Translation
Adjustments
|
|
Available-
for-Sale
Securities
|
|
Foreign
Exchange
Forward
Contracts
|
|
Accumulated
Other
Comprehensive
Loss
|
||||||||
Balances at December 31, 2012
|
|
$
|
(245
|
)
|
|
$
|
(23
|
)
|
|
$
|
111
|
|
|
$
|
(157
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(211
|
)
|
|
34
|
|
|
(280
|
)
|
|
(457
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
21
|
|
|
53
|
|
|
74
|
|
||||
Total change for the period
|
|
(211
|
)
|
|
55
|
|
|
(227
|
)
|
|
(383
|
)
|
||||
Balances at December 31, 2013
|
|
$
|
(456
|
)
|
|
$
|
32
|
|
|
$
|
(116
|
)
|
|
$
|
(540
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(464
|
)
|
|
31
|
|
|
(399
|
)
|
|
(832
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
(2
|
)
|
|
103
|
|
|
101
|
|
||||
Total change for the period
|
|
(464
|
)
|
|
29
|
|
|
(296
|
)
|
|
(731
|
)
|
||||
Balances at December 31, 2014
|
|
$
|
(920
|
)
|
|
$
|
61
|
|
|
$
|
(412
|
)
|
|
$
|
(1,271
|
)
|
|
|
|
|
Fair Value Measurements at
December 31, 2014 Using |
||||||||||||
(In thousands)
|
|
Balance
December 31, 2014 |
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
9,139
|
|
|
$
|
—
|
|
|
$
|
9,139
|
|
|
$
|
—
|
|
Corporate debt securities and certificates of deposit
|
|
3,772
|
|
|
—
|
|
|
3,772
|
|
|
—
|
|
||||
Asset backed securities
|
|
2,156
|
|
|
—
|
|
|
2,156
|
|
|
—
|
|
||||
Equity security
|
|
107
|
|
|
107
|
|
|
—
|
|
|
—
|
|
||||
Total marketable securities
|
|
$
|
15,174
|
|
|
$
|
107
|
|
|
$
|
15,067
|
|
|
$
|
—
|
|
Derivative instruments-liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts
|
|
$
|
352
|
|
|
$
|
—
|
|
|
$
|
352
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements at
December 31, 2013 Using |
||||||||||||||
(In thousands)
|
|
Balance
December 31, 2013 |
|
Quoted Prices
in Active Markets for Identical
Assets
(Level 1)
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency obligations
|
|
$
|
11,099
|
|
|
$
|
—
|
|
|
$
|
11,099
|
|
|
$
|
—
|
|
Corporate debt securities and certificates of deposit
|
|
6,506
|
|
|
—
|
|
|
6,506
|
|
|
—
|
|
||||
Asset backed securities
|
|
2,475
|
|
|
—
|
|
|
2,475
|
|
|
—
|
|
||||
Equity security
|
|
64
|
|
|
64
|
|
|
—
|
|
|
—
|
|
||||
Total marketable securities
|
|
$
|
20,144
|
|
|
$
|
64
|
|
|
$
|
20,080
|
|
|
$
|
—
|
|
Derivative instruments-liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
|
Options Outstanding
|
|
Weighted Average Exercise
Price Per Share
|
|||
Outstanding, December 31, 2013
|
|
586,483
|
|
|
$
|
8.07
|
|
Granted
|
|
267,250
|
|
|
8.42
|
|
|
Exercised
|
|
(107,243
|
)
|
|
5.85
|
|
|
Expired
|
|
(52,801
|
)
|
|
14.38
|
|
|
Forfeited
|
|
(114,788
|
)
|
|
6.85
|
|
|
Outstanding, December 31, 2014
|
|
578,901
|
|
|
$
|
8.30
|
|
Exercisable, December 31, 2014
|
|
243,465
|
|
|
$
|
8.75
|
|
|
|
2014
|
|
2013
|
Risk-free interest rates
|
|
1.55% - 1.69%
|
|
1.51%
|
Expected life in years
|
|
5.12 - 5.48
|
|
5.31 - 5.48
|
Expected volatility
|
|
42.45% - 46.90%
|
|
46.58%
|
Dividend yield
|
|
0.00%
|
|
0.00%
|
Weighted average fair value on grant date
|
|
$3.55
|
|
$2.34
|
Non-vested restricted stock units
|
|
Shares
|
|
Weighted Average Grant Date
Fair Value
|
|||
Non-vested at December 31, 2013
|
|
46,943
|
|
|
$
|
6.82
|
|
Granted
|
|
35,450
|
|
|
8.12
|
|
|
Vested
|
|
(13,479
|
)
|
|
7.01
|
|
|
Forfeited
|
|
(15,196
|
)
|
|
7.52
|
|
|
Non-vested at December 31, 2014
|
|
53,718
|
|
|
$
|
7.43
|
|
(In thousands)
|
|
2014
|
|
2013
|
||||
Pre-tax equity compensation expense
|
|
$
|
436
|
|
|
$
|
447
|
|
Income tax benefits related to equity based compensation
|
|
$
|
—
|
|
|
$
|
—
|
|
(In thousands except per share amounts)
|
|
Net Loss
|
|
Weighted Average Shares Outstanding
|
|
Per Share Amount
|
|||||
Year Ended 12/31/2014:
|
|
|
|
|
|
|
|
|
|
||
Basic
|
|
$
|
(1,487
|
)
|
|
6,576
|
|
|
$
|
(0.23
|
)
|
Dilutive effect of common equivalent shares
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Dilutive
|
|
$
|
(1,487
|
)
|
|
6,576
|
|
|
$
|
(0.23
|
)
|
(In thousands except per share amounts)
|
|
Net Loss
|
|
Weighted Average Shares Outstanding
|
|
Per Share Amount
|
|||||
Year Ended 12/31/2013:
|
|
|
|
|
|
|
|
|
|
||
Basic
|
|
$
|
(6,168
|
)
|
|
6,798
|
|
|
$
|
(0.91
|
)
|
Dilutive effect of common equivalent shares
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Dilutive
|
|
$
|
(6,168
|
)
|
|
6,798
|
|
|
$
|
(0.91
|
)
|
|
|
December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Raw materials and purchased parts
|
|
$
|
6,581
|
|
|
$
|
6,690
|
|
Work in process
|
|
503
|
|
|
553
|
|
||
Finished goods
|
|
4,573
|
|
|
4,088
|
|
||
Total inventories
|
|
$
|
11,657
|
|
|
$
|
11,331
|
|
|
|
December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Equipment
|
|
$
|
12,382
|
|
|
$
|
10,265
|
|
Leasehold improvements
|
|
1,615
|
|
|
1,598
|
|
||
|
|
13,997
|
|
|
11,863
|
|
||
Accumulated depreciation and amortization
|
|
(11,079
|
)
|
|
(10,591
|
)
|
||
|
|
$
|
2,918
|
|
|
$
|
1,272
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
(In thousands)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Patents
|
|
$
|
2,625
|
|
|
$
|
(2,338
|
)
|
|
$
|
287
|
|
|
$
|
2,915
|
|
|
$
|
(2,779
|
)
|
|
$
|
136
|
|
Software
|
|
206
|
|
(23
|
)
|
|
183
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Marketing assets and customer relationships
|
|
101
|
|
(10
|
)
|
|
91
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Non-compete agreements
|
|
101
|
|
(20
|
)
|
|
81
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
|
|
$
|
3,033
|
|
|
$
|
(2,391
|
)
|
|
$
|
642
|
|
|
$
|
2,915
|
|
|
$
|
(2,779
|
)
|
|
$
|
136
|
|
|
|
Year Ended December 31,
|
|
Weighted Avg. Remaining Life-Years at December 31, 2014
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
|
|||||
Patents
|
|
$
|
113
|
|
|
$
|
121
|
|
|
6.2
|
Software
|
|
23
|
|
|
—
|
|
|
4.9
|
||
Marketing assets and customer relationships
|
|
10
|
|
|
—
|
|
|
8.2
|
||
Non-compete agreements
|
|
20
|
|
|
—
|
|
|
3.2
|
||
|
|
$
|
166
|
|
|
$
|
121
|
|
|
|
|
|
December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Wages and benefits
|
|
$
|
1,715
|
|
|
$
|
862
|
|
Warranty liability
|
|
839
|
|
|
513
|
|
||
Restructuring and severance costs
|
|
—
|
|
|
511
|
|
||
Other
|
|
647
|
|
|
355
|
|
||
|
|
$
|
3,201
|
|
|
$
|
2,241
|
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Balance at beginning of period
|
|
$
|
513
|
|
|
$
|
694
|
|
Accrual for warranties
|
|
1,171
|
|
|
642
|
|
||
Assumed in acquisition
|
|
5
|
|
|
—
|
|
||
Warranty revision
|
|
12
|
|
|
(5
|
)
|
||
Settlements made during the period
|
|
(862
|
)
|
|
(818
|
)
|
||
Balance at end of period
|
|
$
|
839
|
|
|
$
|
513
|
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Balance at beginning of period
|
|
$
|
444
|
|
|
$
|
582
|
|
Revenue deferrals
|
|
338
|
|
|
299
|
|
||
Assumed in acquisition
|
|
89
|
|
|
—
|
|
||
Amortization of deferred revenue
|
|
(396
|
)
|
|
(437
|
)
|
||
Total deferred warranty revenue
|
|
475
|
|
|
444
|
|
||
Current portion of deferred warranty revenue
|
|
(449
|
)
|
|
(279
|
)
|
||
Long-term deferred warranty revenue
|
|
$
|
26
|
|
|
$
|
165
|
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Sources of income (loss) before income taxes:
|
|
|
|
|
|
|
||
United States
|
|
$
|
(2,536
|
)
|
|
$
|
(7,636
|
)
|
Foreign
|
|
1,182
|
|
|
1,282
|
|
||
Total loss before income taxes
|
|
$
|
(1,354
|
)
|
|
$
|
(6,354
|
)
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Current:
|
|
|
|
|
|
|
||
Federal
|
|
$
|
(10
|
)
|
|
$
|
(448
|
)
|
State
|
|
13
|
|
|
28
|
|
||
Foreign
|
|
10
|
|
|
(45
|
)
|
||
Total current
|
|
$
|
13
|
|
|
$
|
(465
|
)
|
Deferred:
|
|
|
|
|
|
|
||
Federal
|
|
$
|
73
|
|
|
$
|
122
|
|
State
|
|
1
|
|
|
—
|
|
||
Foreign
|
|
46
|
|
|
157
|
|
||
Total deferred
|
|
$
|
120
|
|
|
$
|
279
|
|
Total provision (benefit) for income taxes
|
|
$
|
133
|
|
|
$
|
(186
|
)
|
|
|
Year Ended December 31,
|
||||
|
|
2014
|
|
2013
|
||
Federal statutory rate
|
|
34.0
|
%
|
|
34.0
|
%
|
State income taxes, net of federal benefit
|
|
6.4
|
|
|
0.7
|
|
U.S. Subpart F income
|
|
(2.6
|
)
|
|
(0.7
|
)
|
Stock based compensation
|
|
(1.1
|
)
|
|
(0.2
|
)
|
Research and experimentation credit
|
|
7.8
|
|
|
1.6
|
|
Foreign rate difference
|
|
34.1
|
|
|
7.2
|
|
Reserve for income taxes
|
|
0.7
|
|
|
7.1
|
|
Valuation allowance
|
|
(86.6
|
)
|
|
(45.9
|
)
|
Other, net
|
|
(2.5
|
)
|
|
(0.9
|
)
|
Effective tax rate
|
|
(9.8
|
)%
|
|
2.9
|
%
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
|
2014
|
|
2013
|
||||
Gross UTB balance at beginning of year
|
|
$
|
1,408
|
|
|
$
|
1,500
|
|
Additions based on tax positions related to the current year
|
|
165
|
|
|
188
|
|
||
Additions for tax positions of prior years
|
|
—
|
|
|
123
|
|
||
Reductions for tax positions of prior years
|
|
(48
|
)
|
|
(45
|
)
|
||
Reductions due to lapse of applicable statute of limitations
|
|
(17
|
)
|
|
(358
|
)
|
||
Gross UTB balance at end of year
|
|
$
|
1,508
|
|
|
$
|
1,408
|
|
Net UTB balance at end of year
|
|
$
|
140
|
|
|
$
|
150
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
(In thousands)
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
Equipment, leaseholds and intangible amortization, net
|
|
$
|
464
|
|
|
$
|
256
|
|
|
$
|
520
|
|
|
$
|
75
|
|
Inventory allowances
|
|
653
|
|
|
—
|
|
|
636
|
|
|
—
|
|
||||
Accrued expenses
|
|
353
|
|
|
—
|
|
|
287
|
|
|
—
|
|
||||
Warranty accrual
|
|
289
|
|
|
—
|
|
|
178
|
|
|
—
|
|
||||
Deferred revenue
|
|
300
|
|
|
—
|
|
|
419
|
|
|
—
|
|
||||
Accounts receivable allowance
|
|
194
|
|
|
—
|
|
|
244
|
|
|
—
|
|
||||
Federal and state tax credits
|
|
3,175
|
|
|
—
|
|
|
3,014
|
|
|
—
|
|
||||
Federal and state net operating loss carry forwards
|
|
4,296
|
|
|
—
|
|
|
3,138
|
|
|
—
|
|
||||
Foreign net operating loss carry forwards
|
|
419
|
|
|
—
|
|
|
838
|
|
|
—
|
|
||||
Stock based compensation
|
|
391
|
|
|
—
|
|
|
437
|
|
|
—
|
|
||||
Unrealized gains and losses - other comprehensive income (loss)
|
|
115
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||
Other, net
|
|
137
|
|
|
—
|
|
|
139
|
|
|
—
|
|
||||
Subtotal
|
|
10,786
|
|
|
256
|
|
|
9,858
|
|
|
75
|
|
||||
Valuation allowance
|
|
(10,500
|
)
|
|
—
|
|
|
(9,627
|
)
|
|
—
|
|
||||
Total deferred tax assets and liabilities
|
|
$
|
286
|
|
|
$
|
256
|
|
|
$
|
231
|
|
|
$
|
75
|
|
Year ending December 31,
|
(In thousands)
|
||
2015
|
$
|
897
|
|
2016
|
760
|
|
|
2017
|
587
|
|
|
2018
|
529
|
|
|
Total
|
$
|
2,773
|
|
(In thousands)
|
|
2014
|
|
2013
|
||||
SMT and High Precision 3D OEM Sensors
|
|
$
|
15,493
|
|
|
$
|
10,792
|
|
Semiconductor Sensors
|
|
7,595
|
|
|
7,096
|
|
||
SMT Inspection Systems
|
|
18,089
|
|
|
15,420
|
|
||
3D Scanning Solutions and Services
|
|
5,306
|
|
|
—
|
|
||
Total
|
|
$
|
46,483
|
|
|
$
|
33,308
|
|
(In thousands)
|
|
Significant Customer
|
|
Revenues
|
|
Percentage of Revenues
|
|||
Year ended December 31, 2014
|
|
A
|
|
$
|
7,928
|
|
|
17
|
%
|
|
|
B
|
|
$
|
3,778
|
|
|
8
|
%
|
Year ended December 31, 2013
|
|
A
|
|
$
|
5,870
|
|
|
18
|
%
|
|
|
B
|
|
$
|
2,257
|
|
|
7
|
%
|
(In thousands)
|
|
2014
|
|
2013
|
||||
Long-lived assets:
|
|
|
|
|
|
|
||
United States
|
|
$
|
3,245
|
|
|
$
|
952
|
|
Europe
|
|
8
|
|
|
23
|
|
||
Asia and other
|
|
307
|
|
|
433
|
|
||
Total long-lived assets
|
|
$
|
3,560
|
|
|
$
|
1,408
|
|
(In thousands)
|
|
Fourth Quarter
2013
Workforce
Reduction
|
||
Balance, December 31, 2012
|
|
$
|
—
|
|
Cost incurred
|
|
952
|
|
|
Payments made
|
|
441
|
|
|
Balance, December 31, 2013
|
|
511
|
|
|
Cost incurred
|
|
—
|
|
|
Payments made
|
|
511
|
|
|
Balance, December 31, 2014
|
|
$
|
—
|
|
2014
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
|
$
|
9,835
|
|
|
$
|
13,263
|
|
|
$
|
11,657
|
|
|
$
|
11,728
|
|
Gross margin
|
|
4,568
|
|
|
5,867
|
|
|
5,296
|
|
|
5,454
|
|
||||
Income (loss) from operations
|
|
(722
|
)
|
|
(275
|
)
|
|
(514
|
)
|
|
34
|
|
||||
Net income (loss)
|
|
(809
|
)
|
|
(315
|
)
|
|
(448
|
)
|
|
85
|
|
||||
Net income (loss) per share - Basic (1)
|
|
(0.12
|
)
|
|
(0.05
|
)
|
|
(0.07
|
)
|
|
0.01
|
|
||||
Net income (loss) per share - Diluted (1)
|
|
(0.12
|
)
|
|
(0.05
|
)
|
|
(0.07
|
)
|
|
0.01
|
|
2013
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
|
$
|
6,713
|
|
|
$
|
9,317
|
|
|
$
|
8,726
|
|
|
$
|
8,552
|
|
Gross margin
|
|
2,939
|
|
|
4,074
|
|
|
4,006
|
|
|
3,631
|
|
||||
Loss from operations (2)
|
|
(2,024
|
)
|
|
(1,171
|
)
|
|
(961
|
)
|
|
(2,010
|
)
|
||||
Net loss
|
|
(2,146
|
)
|
|
(1,200
|
)
|
|
(774
|
)
|
|
(2,048
|
)
|
||||
Net loss per share - Basic (1)
|
|
(0.31
|
)
|
|
(0.17
|
)
|
|
(0.11
|
)
|
|
(0.31
|
)
|
||||
Net loss per share - Diluted (1)
|
|
(0.31
|
)
|
|
(0.17
|
)
|
|
(0.11
|
)
|
|
(0.31
|
)
|
(1)
|
The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.
|
(2)
|
Includes a restructuring and severance charge of
$952,000
in the fourth quarter of 2013.
|
Plan Category
|
|
(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
|
(b)
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights
|
|
(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
those reflected in
column (a))
|
||||
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
1998 Stock Incentive Plan (1)
|
|
524,901
|
|
|
$
|
7.84
|
|
|
251,458
|
|
Stock Option Plan for Non-Employee Directors
|
|
54,000
|
|
|
12.78
|
|
|
—
|
|
|
Stock Grant Plan for Non-Employee Directors
|
|
N/A
|
|
|
N/A
|
|
|
32,000
|
|
|
Employee Stock Purchase Plan (2)
|
|
N/A
|
|
|
N/A
|
|
|
131,602
|
|
|
Total
|
|
578,901
|
|
|
$
|
8.30
|
|
|
415,060
|
|
(1)
|
In addition to options, shares may be issued in the form of restricted stock awards, performance awards and other stock-based awards.
|
(2)
|
Shares are issued based on employees’ elections to participate in the plan.
|
|
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013.
|
|
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013.
|
|
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2014 and 2013.
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013.
|
|
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014 and 2013.
|
|
Notes to the Consolidated Financial Statements.
|
|
CYBEROPTICS CORPORATION
|
|
|
|
/s/ SUBODH KULKARNI
|
|
By Subodh Kulkarni, President and CEO
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ SUBODH KULKARNI
|
|
President and CEO
|
|
March 12, 2015
|
Subodh Kulkarni
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ ALEX B. CIMOCHOWSKI
|
|
Director
|
|
March 12, 2015
|
Alex B. Cimochowski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ MICHAEL M. SELZER, JR.
|
|
Director
|
|
March 12, 2015
|
Michael M. Selzer, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ IRENE M. QUALTERS
|
|
Director
|
|
March 12, 2015
|
Irene M. Qualters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ CRAIG D. GATES
|
|
Director
|
|
March 12, 2015
|
Craig D. Gates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ JEFFREY A. BERTELSEN
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Vice President, CFO, and COO
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March 12, 2015
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Jeffrey A. Bertelsen
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(Principal Financial Officer
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and Principal Accounting Officer)
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(a)
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An “Adverse Change” in Employee’s employment shall mean the occurrence of any of the following events:
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(i)
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the assignment to Employee of employment responsibilities which are not of comparable responsibility and status as the employment responsibilities held by Employee immediately prior to a Change in Control;
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(ii)
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a reduction by the Company in Employee’s compensation (including targeted bonus compensation) as in effect immediately prior to a Change in Control;
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(iii)
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the Company’s requiring Employee to be based anywhere after a Change of Control other than within fifty (50) miles of Employee’s office location immediately prior to a Change in Control, except for requirements of temporary travel on the Company’s business to an extent substantially consistent with Employee’s business travel obligations immediately prior to a Change in Control; or
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(b)
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“Change in Control” shall mean:
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(i)
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a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement;
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(ii)
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the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such person has become the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities;
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(ii)
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the Continuing Directors cease to constitute a majority of the Company’s Board of Directors;
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(iii)
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the shareholders of the Company approve (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company stock would be converted into cash, securities or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger; (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (z) any plan of liquidation or dissolution of the Company; or
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(iv)
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the majority of the Continuing Directors determine in their sole and absolute discretion that there has been a change in control of the Company.
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(c)
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“Code” shall mean the Internal Revenue Code of 1986, as amended.
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(d)
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“Company” shall mean CyberOptics Corporation, a Minnesota corporation, and with respect to any reference to Employee’s employer, any subsidiary of CyberOptics Corporation.
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(e)
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“Common Stock” shall mean the common stock, no par value, of the Company.
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(f)
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“Continuing Director” shall mean any person who is a member of the Board of Directors of the Company, while such person is a member of the Board of Directors, who is not an Acquiring Person (as defined below) or an Affiliate or Associate (as defined below) of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and who (x) was a member of the Board of Directors on the effective date of this Option or (y) subsequently becomes a member of the Board of Directors, if such person’s initial nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors. For purposes of this subparagraph (ii), “Acquiring Person” shall mean any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who beneficially owns (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities, but shall not include the Company, any subsidiary of the Company or any employee benefit plan of the Company or of any subsidiary of the Company or any entity holding shares of Common Stock organized, appointed or established for, or pursuant to the terms of, any such plan; and “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
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(g)
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“Disabled” or “Disability” shall have the meaning attributed to it by Section 105(d)(4) of the Code or any successor section.
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(h)
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“Option” shall mean the right to purchase Common Stock of the Company represented by this Agreement.
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(i)
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“Retirement” or “Retire” shall mean the cooperative Resignation of Employee pursuant to its retirement policies after age 58
and after the Employee has been employed by the Company or a subsidiary for more than ten years.
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(j)
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“Resign” or “Resignation” shall mean the voluntary termination by Employee of employment with the Company, unless the Company agrees, through its Board of Directors, that such voluntary termination shall not constitute a resignation for purposes of this Option.
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(a)
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Except as provided in paragraph 3(b) or 4(b) below, this Option may not be exercised by Employee until the expiration of one (1) year from the date hereof and shall become exercisable on the first anniversary of the date hereof with respect to 25% of the shares subject hereto and with respect to an additional cumulative 25% of the shares subject to this Option on the anniversary of the date hereof in each year thereafter until the fourth anniversary of the date hereof when this Option shall be exercisable in full. This Option shall terminate in all events seven (7) years after the date of grant.
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(b)
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Notwithstanding Section 3(a), the exercisability of this Option shall be accelerated, and this Option shall become exercisable with respect to all of the shares subject to this Option on the date of, and in the event of, an Adverse Change in Employee’s employment after a Change In Control.
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(c)
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During the lifetime of Employee, the Option shall be exercisable only by Employee and shall not be assignable or transferable by Employee, other than by will or the laws of descent and distribution.
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(a)
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In the event that Employee (i) shall cease to be employed by the Company prior to a Change of Control for any reason other than Employee’s gross and willful misconduct, Employee’s Retirement or Employee’s death or Disability, or (ii) shall Resign after a Change of Control and prior to an Adverse Change, then Employee shall have the right to exercise the Option at any time within three months after such termination of employment or Resignation to the extent of the full number of shares Employee was entitled to purchase under the Option on the date of termination or resignation, subject to the condition that no Option shall be exercisable after the expiration of the term of the option.
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(b)
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In the event that Employee’s employment with the Company is terminated by the Company within two years after a Change of Control, Employee shall have the right to exercise the Option at any time within three months after such termination of employment with respect to the full number of shares subject to this Option.
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(c)
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In the event that Employee shall cease to be employed by the Company by reason of Employee’s gross and willful misconduct during the course of employment, including but not limited to wrongful appropriation of the Company funds or the commission of a gross misdemeanor or felony, the option shall be terminated as of the date of the misconduct.
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(d)
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If Employee shall die while in the employ of the Company or within three months after termination of employment for any reason other than gross and willful misconduct or become Disabled while in the employ of the Company and Employee shall not have fully exercised the option, such option may be exercised at any time within twelve months after Employee’s death or Disability by the personal representatives or administrators, or if applicable guardian, of Employee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of shares Employee was entitled to purchase under the option on the date of death, Disability or termination of employment, if earlier, and subject to the condition that no option shall be exercisable after the expiration of the term of the option.
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(e)
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In the event Employee Retires, then Employee shall have the right to exercise the Option at any time after such Retirement and until the term of this Option expires to the extent of the full number of shares Employee was entitled to purchase under the Option on the date of Retirement.
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(a)
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The option can be exercised only by Employee or other proper party by delivering within the option period written notice to the Company at its principal office. The notice shall state the number of shares as to which the option is being exercised and be accompanied by payment in full of the option price for all shares designated in the notice.
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(b)
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Employee may pay the option price by check (bank check, certified check or personal check) or with the approval of the Company by delivering to the Company for cancellation Common Stock of the Company with a fair market value equal to the option price; provided, however, that Employee shall not be entitled to tender shares of the Common Stock pursuant to successive, substantially simultaneous exercises of this Option or any other stock option of the Company. For these purposes, the fair market value of the Common Stock shall be as reasonably determined by the Company but shall not be less than, if applicable, (i) the closing price of the stock as reported for composite transactions, if the Common Stock is then traded on a national securities exchange, (ii) the last sale price if the Common Stock is then quoted on the NASDAQ National Market System or (iii) the average of the closing representative bid and asked prices of the Common Stock as reported on NASDAQ on the date as of which fair market value is being determined.
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(a)
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This option is issued pursuant to the Company’s 1998 Stock Incentive Plan and is subject to its terms. The terms of the Plan are available for inspection during business hours at the principal offices of the Company.
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(b)
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This Agreement shall not confer on Employee any right with respect to employment or continuance of employment by the Company, nor will it interfere in any way with the right of the Company to terminate such employment at any time. Employee shall have none of the rights of a shareholder with respect to shares subject to this Option until such shares shall have been issued to Employee upon exercise of this Option.
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(c)
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The exercise of all or any parts of this Option shall only be effective at such time that the sale of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws.
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(d)
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Notwithstanding any other provision of this Option, if there shall be any change in the common stock subject to the Option through merger, consolidation, reorganization, recapitalization, dividend or other distribution, stock split or other similar corporate transaction or event of the Company, or the Company shall enter into a written agreement to undergo such a transaction or event, the Company, in its absolute discretion, may either: (i) make appropriate adjustment in the number of shares and the price per share of the shares subject to the Option in order to prevent dilution or enlargement of the Option rights granted hereunder (provided that the number of shares subject to the Option shall always be a whole number) or (ii) cancel any or all of this Option and pay to Employee in cash the value of such cancelled Option or portion thereof based on the price per share received, or to be received, by a shareholder of the Company in such transaction.
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(e)
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The Company shall at all times during the term of the Option reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.
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(f)
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In order to provide the Company with the opportunity to claim the benefit of any income tax deduction which may be available to it upon the exercise of the Option, and in order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Employee. Employee may elect to satisfy his federal and state income tax withholding obligations upon exercise of the Option by (i) having the Company withhold a portion of its common shares otherwise to be delivered upon exercise of the Option having a fair market value equal to the amount of federal and state income tax required to be withheld upon such exercise, or (ii) delivering to the Company shares of Common Stock other than the shares issuable upon exercise of the Option with a fair market value equal to such taxes.
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On or after Each of the Following Dates
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Percentage of Shares that Vest
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First Anniversary of the Effective Date
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25%
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Second Anniversary of the Effective Date
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25%
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Third Anniversary of the Effective Date
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25%
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Fourth Anniversary of the Effective Date
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25%
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CYBEROPTICS CORPORATION
By:
Name: Subodh Kulkarni
Title: President/CEO
PARTICIPANT
By:
Name:
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Name
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Jurisdiction of Formation
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CyberOptics Ltd.
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United Kingdom
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CyberOptics Holdings Ltd.
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United Kingdom
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CyberOptics (Singapore) Pte. Ltd
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Singapore
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Laser Design, Inc.
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Minnesota
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CyberOptics (China) Co., Ltd.
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People’s Republic of China
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1.
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I have reviewed this Annual Report on Form 10-K of CyberOptics Corporation.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Subodh Kulkarni
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Signature
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Name: Subodh Kulkarni
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Title: President and CEO
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1.
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I have reviewed this Annual Report on Form 10-K of CyberOptics Corporation.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Jeffrey A. Bertelsen
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Signature
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Name: Jeffrey A. Bertelsen
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Title: Vice President, CFO and COO
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Subodh Kulkarni
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Subodh Kulkarni
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President and CEO
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March 12, 2015
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/s/ Jeffrey A. Bertelsen
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Jeffrey A. Bertelsen
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Vice President, CFO and COO
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March 12, 2015
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