FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three  Months Ended

March 31,

(in thousands)

Cash flows from:

Operating activities:

Net loss

$          (21,164)

$            (9,687)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

4,413

3,012

Stock-based compensation

3,634

2,867

Provisions for bad debts, net of recoveries

33

16

Loss on disposal of assets

69

112

Provision for excess and obsolete inventory

344

229

Deferred income tax expense (benefit)

562

66

Change in operating assets and liabilities:

Decrease (Increase) in:

Accounts receivable

2,378

1,449

Inventories

(1,530)

(2,065)

Prepaid expenses and other current assets

(4,219)

(3,313)

(Decrease) Increase in:

Accounts payable and accrued liabilities

(2,450)

(1,682)

Income taxes payable

(102)

1,261

Customer deposits

(433)

492

Unearned service revenues

121

206

Net cash used in operating activities

(18,344)

(7,037)

Investing activities:

Purchases of short-term investments

(20,024)

—

Purchases of property and equipment

(1,688)

(2,442)

Cash paid for technology development, patents and licenses

(1,820)

(2,612)

Net cash used in investing activities

(23,532)

(5,054)

Financing activities:

Payments on finance leases

(44)

(58)

Proceeds from issuance of convertible notes, net of discount and issuance cost

72,310

—

Payments for taxes related to net share settlement of equity awards

14

(916)

Net cash (used in) provided by financing activities

72,280

(974)

Effect of exchange rate changes on cash and cash equivalents

348

(1,732)

Increase (Decrease) in cash and cash equivalents

30,752

(14,797)

Cash and cash equivalents, beginning of period

37,812

121,989

Cash and cash equivalents, end of period

$           68,564

$         107,192