SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K
                                    ---------
(Mark One)
   [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                   For the fiscal year ended October 31, 1996

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                 For the Transition period from              to

                        Commission File Number:  0-11518

                                PPT VISION, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                MINNESOTA                            41-1413345
       ---------------------------           --------------------------
       (State or other jurisdiction               (I.R.S. Employer
    of incorporation or organization)           Identification No.)

                             10321 West 70th Street
                             Eden Prairie, MN  55344
              -----------------------------------------------------
              (Address of principal executive offices and zip code)

       Registrant's telephone number, including area code:  (612) 995-9500

        Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock ($.10
par value)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
                                   YES  X      NO
                                       ---        ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ( )

As of January 7, 1997, assuming as market value the closing sale price of
$8.375 as reported by the NASDAQ System on that date, the aggregate market value
of shares of Common Stock held by non-affiliates was $34.9 million.

As of January 7, 1997, 5,360,682 shares of common stock, $.10 par value were
outstanding.

Documents Incorporated by Reference:  The Company's Proxy Statement for its
Annual Meeting of Shareholders to be held March 5, 1997 is incorporated by
reference into Part III of this Form 10-K.

Page 2

                                TABLE OF CONTENTS
                                -----------------

PART I                                                                Page
                                                                      ----

     Item 1.   Business..............................................   3
                  Executive Officers of the Company..................  14
     Item 2.   Properties............................................  15
     Item 3.   Legal Proceedings.....................................  15
     Item 4.   Submission of Matters for a
                  Vote of Security Holders...........................  15

PART II

     Item 5.   Market for Registrant's Common
                  Equity and Related Stockholder Matters.............  16
     Item 6.   Selected Financial Data...............................  17
     Item 7.   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations................  19
     Item 8.   Financial Statements and Supplementary Data...........  21
     Item 9.   Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure................  21

PART III

     Item 10.  Directors and Executive Officers of the Registrant....  23
     Item 11.  Executive Compensation................................  23
     Item 12.  Security Ownership of Certain
                  Beneficial Owners and Management...................  23
     Item 13.  Certain Relationships and Related Transactions........  23

PART IV

     Item 14.  Exhibits, Financial Statement Schedules, and Reports
                  on Form 8-K........................................  24

     Signatures......................................................  26



Page 3
                                        
                                    BUSINESS
                                    --------

OVERVIEW

  PPT VISION is a leading designer, manufacturer, marketer and integrator of a
complete family of machine vision systems for end user manufacturers, system
integrators and machine builders. The Company's machine vision systems consist
of a combination of proprietary computer software and hardware, cameras and
lighting, working together to capture and analyze images of moving parts to
determine the quality of manufactured parts and control manufacturing
processes. PPT VISION's systems enable manufacturers to achieve 100% on-line
inspection, thus achieving zero defect production, in situations where
previously only random sampling or less precise human inspection was used as a
means of monitoring quality. In addition to functioning as a quality control
tool, PPT VISION systems provide manufacturers a window on their manufacturing
processes by producing real-time statistical process control feedback. This
allows manufacturers to take earlier corrective action to improve their
manufacturing process.

  The Company's machine vision systems are used for a broad range of
manufacturing applications, including electronic and mechanical assembly
verification, verification of printed characters, packaging integrity, surface
flaw detection and gauging and measurement tasks. The Company's systems are
sold principally throughout North America, Europe and the Far East to various
industries, including electronics, pharmaceutical, medical, automotive,
consumer products and plastics. Major manufacturing end users of PPT VISION
systems include AMP, Abbott Labs, Berg Electronics, Chrysler, the Delphi
Electronic Division of General Motors, Imation, Johnson & Johnson, Kemet,
Molex, Siemens and 3M.

  PPT VISION believes that it has a leadership position as the most vertically
integrated developer of machine vision systems and solutions for a wide range
of manufacturing applications. Through this approach, PPT VISION can rapidly
and cost-effectively provide machine vision system solutions to a wide variety
of manufacturing end users while enabling them to concentrate their engineering
and manufacturing expertise on the products they manufacture. PPT VISION's
library of machine vision software tools enables end users to implement machine
vision solutions to a growing number of manufacturing applications quickly and
cost effectively.

BACKGROUND

  A machine vision system consists of computer software and hardware, working
together with cameras and lighting, to perform image analysis and image
processing for automated inspection, measurement and identification functions
in the manufacturing process. Commercial use of machine vision technology for
manufacturing quality control began to emerge in the early 1980s. However,
machine vision systems at that time were complex to program and maintain,
difficult to install, limited in performance and not cost effective. Through

Page 4

advances in microprocessor and software technologies, these barriers have been
removed, enabling machine vision to emerge as a powerful process control
technology that allows manufacturers to improve quality and increase
productivity.

  The machine vision market is large and highly fragmented. The Automated
Imaging Association ("AIA") estimates that the North American market for machine
vision systems in 1995 was approximately $900 million, with worldwide levels
estimated at approximately $2.3 billion. The AIA expects this market to grow at
approximately 15% per year through the year 2000. According to the AIA, over 70%
of the estimated 200 companies in the North American machine vision market have
less than $5 million in annual revenues. Demand for machine vision systems comes
from end user manufacturers who apply these systems as an integral part of their
manufacturing process, OEMs who incorporate machine vision systems into their
products, systems integrators and machine builders. The AIA estimates that a
substantial majority of the North American market for machine vision systems
consists of sales to end user manufacturers.

  A key factor in the expansion of the machine vision market is the growth in
the demand for machine vision systems in the semiconductor and electronics
industries. The growth in demand for personal computers, cellular
communications and other electronic devices, as well as the increase in
electronic components inside other products such as consumer appliances and
automobiles, is stimulating demand for electronic and semiconductor components.
In an effort to rapidly ramp up manufacturing capability while at the same time
introducing innovative new designs and improving quality, manufacturers of
these components are increasingly turning to machine vision as a vital part of
their manufacturing process.

  The growth of the end user machine vision market is also being driven by
global competitive trends, which have led manufacturers worldwide to
dramatically redesign manufacturing processes in order to reduce cost and
increase productivity and quality. In order to meet today's manufacturing
quality requirements, statistical sampling methods are insufficient and 100%
on-line inspection is required. To accomplish these objectives, manufacturers
are increasingly adopting machine vision solutions.

  Manufacturers are demanding expanded capabilities from machine vision
systems, including faster processing capabilities and greater ease of use.
Manufacturers are also demanding more comprehensive services from machine
vision providers, including application engineering, technical support and
training. Furthermore, manufacturers are seeking the ability to monitor trends,
to better comprehend the manufacturing process and to identify problems. In
addition, manufacturers are being challenged to maintain high production levels
which require rapid set up times, flexibility and seamless networking with the
host manufacturing control system to provide comprehensive diagnostic and
process control feedback.

Page 5

THE PPT VISION SOLUTION

  The Company's machine vision systems are primarily targeted at providing
manufacturers with 100% on-line inspection in high speed discrete part
manufacturing applications. This typically replaces older off-line random
sampling techniques or human vision inspection techniques as a means of
monitoring quality, thus enabling manufacturers to achieve zero defect
production.

  PPT VISION's family of machine vision systems which include its proprietary
VPM graphical programming software provide significant performance advantages
that meet manufacturers' critical requirements. These requirements include high
speed, flexibility, ease-of-use, networkability and statistical feedback, all
without sacrificing performance. All PPT VISION systems are supported by the
Company's focus on providing its customers with complete solutions, not just
components, and a major commitment to providing its customers with value-added
application engineering services.

  PPT VISION has developed products which have specific advantages in terms of
speed and ease-of-use. The Company's machine vision systems are capable of
operating speeds of over 12,000 parts per minute performing 100% on-line
inspection. This speed is critical to successfully employing machine vision in
many applications. PPT VISION also pioneered the use of an icon-based visual
programming system (VPM) operating in the Microsoft(R) Windows(TM) environment.
Users are able to program the Company's systems by creating a flowchart of
icons linked together rather than having to write a computer program in a
programming language such as C or using a complex, pull-down menu-based system.
This results in lower cost and time for implementation.

  The Company is pursuing what it believes is the most fully vertically
integrated business model in the machine vision industry. PPT VISION develops
its own image acquisition and processing hardware, image analysis software,
application specific software tools and general purpose graphical user
interface. The Company also provides lighting solutions and value-added
application engineering services on a direct basis to manufacturers. These
capabilities enable PPT VISION to provide its customers with (i) application
specific software tools (such as the Connector Tool used for
inspection of fully assembled electronic connectors), (ii) complete
application specific products (such as the Stampede providing high speed
inspection for precision metal stamping applications), and (iii) complete
custom solutions. This strategy enables PPT VISION to leverage its investment
in core software and hardware architectures while providing improved service
for the end user manufacturing customers. In addition, PPT VISION markets its
vision systems to manufacturing system integrators and machine builders who
address the end user market with unique expertise in specific vertical
markets. Many system integrators and machine builders prefer to use the
Company's complete vision systems, which enable them to reduce programming
development time, save money and concentrate their expertise on material
handling and integration issues. The Company believes that this business model
gives it a decisive competitive advantage in providing cost effective,
complete solutions to the end user machine vision market.

Page 6

PPT VISION STRATEGY

  The Company's objective is to be a worldwide leader in the design,
manufacture, marketing and integration of machine vision systems for automated
manufacturing applications in the end user machine vision market. Through the
successful integration of the Company's five core competencies, including
image acquisition, image processing, application development software, optics
and illumination and vision system integration, the Company believes it will
be able to meet its objective and successfully implement its strategy.

  Key elements of the Company's strategy include:

  * Provide Complete Solutions to End Users: The Company focuses on providing
    complete machine vision solutions to end user manufacturers, system
    integrators and machine builders. PPT VISION is pursuing what it believes
    to be the most fully vertically integrated business model in the
    industry, including the design, manufacturing, marketing and integration
    of complete machine vision solutions. The Company believes this provides
    it with a competitive advantage in delivering cost effective complete
    vision solutions.

  * Extend Technology Leadership in Speed and Ease-of-Use: The Company is
    continuing to aggressively invest in next generation software and
    hardware architectures that will expand its lead in speed, ease-of-use
    and the ability to deliver cost effective complete solutions to its
    customers. New products currently in development will feature significant
    enhancements in speed, accuracy and breadth of application through new
    proprietary technology. Key software products will enable support for
    different hardware and user interfaces, as well as increasing the
    development speed of application specific software tools.

  * Target Expanding Markets Through Continued Development of Application
    Specific Software Tools: The Company's application specific software
    tools are a proven solution for a wide variety of electronic component
    inspection applications. In response to the worldwide expansion of the
    semiconductor and electronics industries, the Company is developing
    additional software tools for electronic component, electronics and
    semiconductor applications. The Company also focuses considerable effort
    on expanding the offerings of application specific software tools to the
    industries it identifies as being poised to exhibit significant growth in
    demand for machine vision solutions, such as pharmaceuticals, medical
    devices, automotive and plastics.

  * Provide a Superior Level of Value-Added Application Engineering Support:
    The Company delivers a high level of value-added application engineering
    support to its end user customers through its own in-house applications
    engineering resources. Manufacturing end users increasingly want to
    concentrate their engineering expertise on the products they manufacture,
    not on engineering machine vision systems. They are seeking complete
    machine vision solutions with the associated application engineering
    support on an on-going basis.

Page 7

  * Increase International Market Presence: The Company is aggressively
    focusing on increasing its market share in the worldwide machine vision
    market. The Company believes international
    markets represent a significant opportunity and intends to capture a
    significant share of this market through investment and expansion in its
    international sales distribution and support infrastructure.

PRODUCTS

  PPT VISION's systems consist of proprietary software and hardware working
together with cameras and lighting to capture and analyze images of parts on-
line. The four key process steps in the PPT VISION solution are lighting and
optics, image acquisition, image processing and outputs. In lighting and
optics, cameras, lenses and lighting options are configured to capture a high-
definition image of each part as it passes the camera. Image acquisition
involves capturing an image at extremely high rates of speed and preparing the
image for further processing. In image processing, the machine vision system
measures critical part features and compares algorithmically the digital image
to a preset standard that has been programmed into the system. The output
function typically involves sending the results of the inspection process to
the production line controller or the host manufacturing control system, as
well as providing real-time process control data which can be used to improve
the production process over time.

  Software Operating System and Tools. All PPT VISION systems run on
proprietary software in a Microsoft(R) Windows(TM) environment using the
Company's VPM user interface. VPM is an icon-based, graphical language which
is easy to use and extremely flexible. It allows the Company's customers to
create complete inspection solutions with no training in computer programming
languages. Instead of writing a computer program in a programming language
such as C or using a complex, pull-down menu-based system, the vision system
is set up by creating visual flowcharts. Clicking the trackball, the user
graphically grabs icons (representing machine vision functions) out of system
toolboxes and arranges them in the workspace on the system monitor. The icons
are then connected with different colored lines to indicate execution and data
flow throughout the inspection routine.

  Machine vision functions are performed by the Company's extensive set of
software tools. PPT VISION has developed a library of over 40 vision tools
contained in four toolboxes covering imaging, input/output ("I/O"), utility
and control functions. The Company's imaging toolbox contains all system tools
directly associated with image acquisition, processing and analysis. These
tools provide access to all of the Company's vision algorithms, which are the
vital core of all inspections performed by its vision systems. The I/O toolbox
holds all the tools which permit an inspection developer to control vision
system input and output options. These tools allow for system networking, data
collection and application control. The tools in the utility and control
toolboxes access functions such as counters, reset and display functions, math
and logical operations, data collection and screen controls. These toolboxes
also provide control of data flow to a variety of peripherals such as disk
drives, serial ports and Microsoft(R) Visual Basic(TM) programs.

Page 8

  Hardware Architecture. PPT VISION's machine vision processor includes the
Company's proprietary high performance Framegrabber and Image Processor boards
with a Texas Instruments DSP (digital signal processor) and high speed
pipeline architecture along with an integrated PC for inspection set-up and
networking and fully integrated I/O capability. All PPT VISION systems are
capable of capturing full framed video images at a rate of up to 3,600 images
per minute, in both strobed and shuttered modes. Most competitors are limited
to capturing full frame images at 1,800 images per minute, which is the
industry standard. Much higher inspection rates are achieved through the use
of the Company's exclusive partial scanning technology and split-screen
imaging, which enables speeds of over 12,000 parts per minute.

  PPT VISION Product Family. The Company's machine vision systems are the
Passport(R) 440, Passport(R) 240, and Scout(R). Each of these systems includes a
machine vision processor, a Super VGA touch-screen color monitor and VPM.

  The Passport(R) 440 is the Company's top of the line product, designed to
operate with up to four asynchronously functioning cameras for multiple
inspection views and complex imaging tasks. The Passport(R) 240 has all of the
basic capabilities of the Passport(R) 440 in a two-camera model. Both systems
are housed in industrially rugged enclosures and are capable of operating at
speeds of over 12,000 inspections per minute. These systems are widely used in
the electronic connector, metal stamping and automotive components industries
that demand speed, accuracy and flexibility while maintaining industrial
ruggedness.

  The Scout(R) is a cost-effective machine vision system designed for industrial
applications that do not require rugged enclosures. It is packaged in a non-
industrial desktop style enclosure and is capable of running two cameras with
similar speed and power to the Passport(R) 240.

  In addition, the Company sells a broad range of peripheral services and
components, including applications engineering, installation and training
services, custom lighting solutions, fixturing, cameras, cabling and various
software options.

MARKETS AND CUSTOMERS

  The Company sells its products to a broad range of industries, including
manufacturers of electronic components, pharmaceuticals, medical devices,
automotive components, consumer products and plastics. As of October 31, 1996,
the Company had sold 1,573 machine vision systems to over 200 customers since
inception. In the area of electronic components, eight of the ten largest
electronic connector manufacturers in the world have purchased PPT VISION
systems. These companies are included in the list shown below.

Page 9

  The following is a representative list of end users of the Company's
products.

AMP                          ITT Cannon                   Philips
Abbott Labs                  Imation                      Reynolds Metals
Akso                         I-Stat                       Siemens
Allied Signal                JST                          Sumitomo
Augat                        Japan Aviation Electronics   Suzuki
Berg Electronics             Johnson & Johnson            Syntex
Chrysler                     Kemet                        Thomas & Betts
Framatome                    Molex                        3M
Ford                         Motorola                     Toshiba
GM-Delphi Division           Novo Nordisk                 United Technologies
Hewlett Packard              Philip Morris                Vishay

  In each of the past several years, the Company has had one or more customers
that have accounted for ten percent or more of the Company's net revenues.
During the fiscal year ended October 31, 1996, sales to one customer, Simac
Masic B.V., a European distributor for the Company, represented 14% of net
revenues.  Sales to another customer, Advantek, Inc., represented 12% of net
revenues during fiscal 1996.  The loss of, or significant curtailment of
purchases by, any of the Company's principal customers could have a material
adverse effect on the Company's results of operations.

SALES, MARKETING AND CUSTOMER SUPPORT

  The Company sells its products primarily on a direct basis in the United
States to end users, system integrators and machine builders. Outside the
United States, the Company sells primarily through a network of five
distributors covering Europe, Singapore, Taiwan, Korea and Japan. The Company
markets its products through appearances at industry trade shows, advertising
in industry journals, articles published in industry and technical journals and
through direct-selling in specific vertical markets. In addition, the Company's
strong customer relationships serve as valuable references.

  The Company focuses on delivering a high level of value-added applications
engineering support to its end user customers through its own in-house
applications engineering resources. The Company also provides extensive
training opportunities for its customers, either at the Company's facilities or
on-site at the customer's facilities.

  The Company's sales and applications engineering departments are structured
along a team concept, with each team having dedicated sales and applications
engineering resources. The Company believes this team approach provides it with
increased flexibility in responding to customers' needs.

Page 10

  The following table sets forth the percentage of the Company's net revenues
(including sales delivered through international distributors) by geographic
location during the past three years:

<TABLE>

                                                    YEAR ENDED
                                                   OCTOBER 31,
                                                  --------------
                                                  1996 1995 1994
                                                  ---- ---- ----
      <S>                                         <C>  <C>  <C>
      North America.............................. 73%  67%  73%
      Europe..................................... 14%  21%  24%
      Far East................................... 13%  12%   3%
</TABLE>

  Substantially all of the Company's export sales are negotiated, invoiced and
paid in United States dollars.

BACKLOG

  The Company does not believe backlog is a key indicator of future revenues in
the end user machine vision market. PPT VISION products are typically shipped
within 30 days after receipt of an order. The Company believes that maintaining
as short a time as practical for delivery is a competitive advantage in the end
user machine vision market. The nature of the end user machine vision market is
that customers do not normally place orders for large multiples of units with
scheduled deliveries over many months. Rather, end user machine vision
addresses a specific application or problem at a specific manufacturing site.

RESEARCH AND PRODUCT DEVELOPMENT

  PPT VISION's products are distinguished by the Company's proprietary
technology and its significant commitment to research and product development
efforts. The Company's research and product development efforts are focused on
its five core competencies, including image acquisition, imaging processing,
application development software, optics and illumination and vision system
integration. The Company believes that the integration of these core
competencies is essential to achieving long term success in the machine vision
market. The Company's five core competencies can be described as follows:

    Image Acquisition. This refers to the means and methods by which an image
  is captured, stored, and then made available for subsequent processing and
  display. Image acquisition combines the disciplines of photo-optics and
  electrical engineering.

Page 11

    Imaging Processing. This refers to the means and methods whereby an image
  is analyzed or enhanced to produce some desired information, measurements
  or results. Image processing combines the disciplines of software
  engineering, mathematics, algorithm development and electrical engineering
  to implement efficient solutions to computationally complex problems.
  Typical image processing tasks include real-time inspection, guidance,
  gauging and recognition.

    Application Development Software. This refers to the means and methods
  whereby a machine vision system is configured and controlled. The
  development and support of applications development software requires
  expertise in the disciplines of object-oriented programming, graphical
  programming environments, man-machine interfaces, device drivers and
  general software engineering.

    Optics and Illumination. This refers to the means and methods by which a
  scene is illuminated and optically presented to an input device such as a
  video camera. Special optics and illumination techniques are often used to
  reveal features in an image which would otherwise go undetected or to
  optimize an image for subsequent processing. Strobed illumination is often
  used to "freeze" the motion of continuously moving parts. Optics and
  illumination draw on skills from the disciplines of physics, mechanical
  engineering and electrical engineering.

    Vision System Integration. This refers to the means and methods whereby a
  machine vision system is interfaced to and combined with other factory
  automation equipment for purposes of creating a complete solution for the
  customer. This may include the development of application specific solutions
  for certain vertical market applications along with mechanical fixturing for
  mounting camera and lighting components, networking and programmable
  controllers for process control, and reject mechanisms for ejection of
  defective parts.

Various configurations of the Company's products include proprietary design
work performed by the Company's employees in each of these five areas.

  PPT VISION believes that continued and timely development of new products
and enhancements to existing product characteristics is essential to
maintaining its competitive position. The Company has committed and expects to
continue to commit substantial resources to its research and development
effort, which plays a significant role in maintaining and advancing its
position as a leading provider of complete machine vision systems. The
Company's current research and development efforts are directed to increasing
performance in image acquisition, image processing and application development
software, which could produce systems with greater speed attributes while also
providing end users with more expanded software tools. New products currently
in development will feature significant enhancements in speed, accuracy and
robustness through new proprietary technology. Key software products will
enable support for different hardware and user interfaces, as well as
increasing the development speed of application specific software tools. The
Company also intends to expand its offerings of application specific software

Page 12

tools to the industries it identifies as being poised to exhibit significant
growth in demand for machine vision solutions, such as the electronics,
semiconductor, pharmaceutical, medical, automotive, consumer products and
plastics markets.

  Research and development expenditures were $1.8 million, $1.3 million, and
$1.1 million in the fiscal years ended October 31, 1996, 1995, and 1994,
respectively.

MANUFACTURING

  The Company assembles, configures and tests its products at its suburban
Minneapolis facility. The Company's printed circuit boards are custom built by
several manufacturers. Most of the components used in the Company's machine
vision systems are available off-the-shelf. However, some components are
available from only a single supplier or from a limited number of suppliers.
The Company typically purchases inventory and builds products in response to
quarterly sales forecasts, enabling it to ship products within 30 days after
receipt of an order.

  Much of the Company's product manufacturing, consisting primarily of circuit
board manufacturing and assembly and machined parts production, is contracted
with outside vendors. Company personnel inspect incoming parts and perform
final assembly and testing of finished products. The Company believes that its
outsourcing strategy enables it to employ its resources on the key core
competency areas from which it derives its competitive advantages.

COMPETITION

  The machine vision industry is highly fragmented. Recent data provided by the
AIA show that there were approximately 200 machine vision companies in North
America in 1995, of which over 70% had revenues of less than $5 million.
Currently, no competitor holds a significant aggregate market share percentage,
although some dominate individual niches within the overall machine vision
industry. The Company believes that over the next several years, the industry
will experience a continuing trend toward consolidation. However, given the
application specific nature of the industry, the Company also believes that the
machine vision industry will continue to have a relatively large number of
competitors.

  Although the Company believes that its products are unique, competitors offer
technologies and systems that are capable of certain of the functions performed
by the Company's products. The Company faces competition from a number of
companies in the machine vision market, some of which have greater
manufacturing and marketing capabilities and greater financial, technological
and personnel resources. Certain competitors in this market include the machine
vision group of Allen Bradley, the Acuity Imaging division of Robotic Vision
Systems, Inc. and Cognex Corporation.

  Although the Company believes that its current products offer several
advantages in terms of speed and ease-of-use and although the Company has
attempted to protect the proprietary nature of such products, it is possible
that any of the Company's products could be duplicated by other companies in

Page 13

the same general market. There can be no assurances that the Company would be
able to compete with similar products produced by a competitor.

PATENTS AND TRADEMARKS

  The Company relies on a combination of patent, copyright, trademark and trade
secret laws to establish its proprietary rights in its products. The Company has
applied for foreign and domestic patents which are now pending with respect to 
several key technologies. United States patent No. 5,530,813 application was 
issued on June 25, 1996. Although the Company believes that its patents may have
been useful in protecting its proprietary products and may be useful in 
protecting  potential future products, the Company also believes its ability to 
efficiently develop and sell high performance, cost-effective vision systems on 
a timely basis, whether patented or not, is more crucial to the Company's future
success. The Company requires each of its employees to enter into standard 
agreements pursuant to which the employee agrees to keep confidential all 
proprietary information of the Company and to assign to the Company all rights 
in any proprietary information or technology made or contributed by the employee
during his or her employment or made thereafter as a result of any inventions 
conceived or work done during such employment. Despite these precautions, it may
be possible for a third party to copy or otherwise obtain and use the Company's
products or technology without authorization or to develop similar technology
independently. In addition, effective patent, copyright, trademark and trade
secret protection may be unavailable or limited in certain foreign countries.

  The Company has obtained United States federal registration for its "PPT", 
"PPT VISION", "Passport" and "Scout" trademarks. The Company intends to file for
federal registration of additional trademarks in the future. Although no
assurance can be given as to the strength or scope of the Company's trademarks,
the Company believes that its trademarks have been and will be useful in
developing and protecting market recognition for its products.

EMPLOYEES

  As of October 31, 1996, the Company had 74 employees, including 27 employees
in research and development, 28 in sales and marketing, 14 in manufacturing and
5 in finance and administration. To date, the Company has been successful in
attracting and retaining qualified technical personnel, although there can be no
assurance that this success will continue. None of the Company's employees are
covered by collective bargaining agreements or are members of a union. The
Company has never experienced a work stoppage and believes that its relations
with its employees are excellent.


Page 14

EXECUTIVE OFFICERS OF THE COMPANYAND DIRECTORS

  The executive officers and directors of the Company are as follows:

<TABLE>

NAME                            AGE  POSITION
-----                           ---  --------
<S>                              <C> <C>
Joseph C. Christenson..........  38  President, Director
Thomas R. Northenscold.........  38  Chief Financial Officer
Larry G. Paulson...............  45  Vice President of Research and Development,
                                     Secretary, Director
Arye Malek.....................  40  Vice President of Marketing
</TABLE>
- --------

  Joseph C. Christenson has been President of the Company since January 1989
and a director since December 1987. Prior to being elected President of the
Company, he had been its Chief Operating Officer and Chief Financial Officer
from December 1987 to December 1988, General Manager and Chief Financial
Officer from August 1986 to November 1987, and financial analyst and marketing
manager since joining the Company in May 1985. Mr. Christenson has a Masters in
Business Administration from the University of Michigan and a Bachelor of Arts
degree from St. Olaf College.

  Thomas R. Northenscold has been Chief Financial Officer of the Company since
February 1995. Prior to that, he had been the Senior Vice President of
Operations in the City Directory Division of R.L. Polk and Company, a directory
publishing company, from April 1992 to April 1994. Mr. Northenscold was
previously employed at Cardiac Pacemakers, Inc., a medical device company, in
several finance and operations positions from June 1985 to April 1992. He has a
Masters in Business Administration in finance from the University of Michigan
and a Bachelor of Science degree from Mankato State University.

  Larry G. Paulson was a co-founder of the Company and has been Vice President
of Research and Development, Secretary and a director of the Company since
December 1981. Mr. Paulson is also a Registered Professional Engineer and holds
Bachelors and Masters Degrees in Science from the University of Minnesota.

  Arye Malek has been the Vice President of Marketing of the Company since May
1996. He joined the Company in May 1990 as a Senior Account Manager and became
Director of International Operations in November 1992. Mr. Malek holds a
Bachelor of Science Degree from the University of Minnesota.

Page 15

Item 2.  PROPERTIES
-------------------
  The Company leases approximately 28,400 square feet of office and
manufacturing space in suburban Minneapolis pursuant to a seven year lease
beginning in March 1994.  Rent payments for its facilities commenced at $7,093
per month during the first year of the lease and increase over the term of the
lease to $16,551 during the final twelve months of the lease. The Company
believes that its facilities are adequate for its current operations and that
additional space will be available for expansion, if necessary.

Item 3. LEGAL PROCEEDINGS
-------------------------
  None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
  None.


Page 16
                                        
                                     PART II
                                     -------

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------
                          PRICE RANGE OF COMMON STOCK

  Since December 28, 1995, the Common Stock of the Company has been listed on
the Nasdaq National Market under the symbol "PPTV." Prior to that time, the
Common Stock was traded on the Nasdaq SmallCap Market. The following table sets
forth the high and low sales prices of the Company's Common Stock on the Nasdaq
National Market for the period beginning December 28, 1995, and the high and low
closing bid prices for the Company's Common Stock on the Nasdaq SmallCap Market
for the periods prior to December 28, 1995, each as reported by Nasdaq. The
Nasdaq SmallCap Market quotations listed below indicate inter-dealer prices
without retail mark-up, mark-down or commissions, and may not represent actual
transactions.

<TABLE>

                                                                    HIGH   LOW
                                                                   ------ -----
      <S>                                                          <C>    <C>
      FISCAL YEAR ENDED OCTOBER 31, 1995
        First Quarter............................................. $ 2.50 $1.67
        Second Quarter............................................   2.75  2.17
        Third Quarter.............................................   3.83  2.33
        Fourth Quarter............................................   8.67  3.50
      FISCAL YEAR ENDING OCTOBER 31, 1996
        First Quarter............................................. $13.17 $8.50
        Second Quarter............................................  16.00  8.83
        Third Quarter.............................................  19.25  6.88
        Fourth Quarter............................................  10.62  7.12
</TABLE>

  The Company estimates that there were approximately 3,700 beneficial holders 
of the Company's Common Stock at January 7, 1997.

                                DIVIDEND POLICY

  The Company has never declared or paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its operations and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.


Page 17

Item 6.  SELECTED FINANCIAL DATA
--------------------------------

<TABLE>

                                             YEAR ENDED OCTOBER 31,
                            ---------------------------------------------------------
                               1996       1995        1994        1993       1992
                            ---------- ----------  ----------  ---------- -----------
<S>                         <C>        <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
 Net revenues..............$12,693,000 $9,750,000  $6,587,000  $5,935,000  $4,294,000
 Cost of sales.............  5,044,000  4,442,000   3,026,000   2,539,000   1,855,000
                            ---------- ----------  ----------  ---------- -----------
  Gross profit.............  7,649,000  5,308,000   3,561,000   3,396,000   2,439,000
 Selling expenses..........  2,897,000  2,279,000   1,970,000   1,576,000   1,005,000
 General and administrative
  expenses.................    976,000    851,000     711,000     550,000     451,000
 Research and development
  expenses.................  1,827,000  1,299,000   1,133,000     831,000     687,000
                            ---------- ----------  ----------  ---------- -----------
  Income (loss) from
   operations..............  1,949,000    879,000    (253,000)    439,000     296,000
 Other income 
   (expense), net..........    453,000     61,000      40,000      (4,000)     42,000
                            ---------- ----------  ----------  ---------- -----------
  Net income (loss) before
   taxes...................  2,402,000    940,000    (213,000)    435,000     338,000
 Income tax benefit........  1,309,000    407,000       -0-          --          --
                             --------- ----------  ----------  ---------- -----------
  Net income (loss)........ $3,711,000 $1,347,000  $ (213,000) $  435,000  $  338,000
                            ========== ==========  ==========  ==========  ===========
 Net income (loss) per
  share.................... $   0.84   $   0.37    $  (0.06)   $   0.13    $   0.12
                            ========== ==========  ==========  ==========  ===========
 Weighted average common
  and common equivalent
  shares outstanding.......  4,410,000  3,650,000   3,455,000   3,236,000   2,899,000
                            ========== ==========  ==========  ==========  ===========
</TABLE>

Page 18

<TABLE>

                                                          OCTOBER 31,
                                    -----------------------------------------------------------
                                       1996         1995        1994        1993        1992
                                    -----------  ----------  ----------  ----------  ----------
<S>                                 <C>          <C>         <C>         <C>         <C>
BALANCE SHEET DATA:
 Working capital................... $24,083,000  $4,131,000  $3,253,000  $3,071,000  $1,502,000
 Total assets......................  28,056,000   6,098,000   4,449,000   4,005,000   2,370,000
 Shareholders' equity..............  26,809,000   5,145,000   3,719,000   3,384,000   1,833,000
</TABLE>

Page 19

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Comparison of Year Ended October 31, 1996 to Year Ended October 31, 1995
------------------------------------------------------------------------
  Net Revenues: Net revenues increased 30% to $12,693,000 in fiscal 1996,
compared to net revenues of $9,750,000 in fiscal 1995. The increase in net
revenues in fiscal 1996 was due to a 40% growth in unit sales, with sales of the
Company's machine vision systems increasing to 465 in fiscal 1996 versus 333
in fiscal 1995. The Company attributes its sales growth to increased demand in
all markets. Net revenues in fiscal 1996 increased 42% in North America and 7%
outside North America. Sales to customers outside North America represented 27%
of total revenues in fiscal 1996, compared to 33% for in fiscal 1995. The
increase in North America is primarily the result of increased sales to
electronic component and automobile manufacturers.

  Gross Profit: Gross profit increased 44% to $7,649,000 in fiscal 1996,
compared to $5,308,000 in fiscal 1995. Gross profit as a percentage of net
revenues for fiscal 1996 increased to 60%, compared with 54% in fiscal 1995. The
increase in gross profit as a percentage of net revenues in 1996 is primarily
due to economies of scale related to increasing volume, model mix shift, and
decreased material costs. The Company anticipates that it can support increased
net revenues at its current manufacturing capacity.  The Company anticipates
that the gross profit as a percentage of net revenues may fluctuate and may
decline temporarily at certain times in fiscal 1997 due to normal start-up costs
associated with expected new product introductions.

  Selling Expenses: Selling expenses increased 27% to $2,897,000 in fiscal 1996,
compared to $2,279,000 in fiscal 1995. As a percentage of net revenues, fiscal
1996 selling expenses remained relatively constant at 23%. Although the Company
anticipates selling expenses to increase in fiscal 1997 as the Company maintains
its investments in sales and applications engineering, the Company believes that
these expenditures will not increase substantially as a percentage of net
revenues in fiscal 1997.

  General and Administrative Expenses: General and administrative expenses
increased 15% to $976,000 in fiscal 1996, compared to $851,000 in fiscal 1995.
As a percentage of net revenues, general and administrative expenses decreased
to 8% for fiscal 1996, compared to 9% for fiscal 1995. The increase in
expenditures in fiscal 1996 is primarily attributable to increased expenses
associated with operating the Company as it continues to grow and to investments
in management infrastructure. The decrease as a percentage of net revenues is
mainly related to operating leverage provided by the Company's growing revenue
base. The Company believes that general and administrative expenses may decline
slightly as a percentage of net revenues during fiscal 1997.

  Research and Development Expenses: Research and development expenses
increased 41% to $1,827,000 in fiscal 1996, compared to $1,299,000 in fiscal
1995. Research and development expenses as a percentage of net revenues for
fiscal 1996 increased to 14%, compared to 13% for fiscal 1995. The increase in
expenses in fiscal 1996 is mainly due to new product development programs and

Page 20

increased staffing to support these efforts. As the Company continues to invest
in next generation software and hardware development, it expects research and
development expenses may remain constant or increase slightly as a percentage of
net revenues during fiscal 1997.

  Interest income increased 625% to $442,000 in fiscal 1996, compared to $61,000
in fiscal 1995.  The increase in interest income is primarily due to interest on
the proceeds of a public stock offering completed in June of 1996.

  Income Tax Benefit: The income tax benefit of $1,309,000 recorded in fiscal
1996 reflects full recognition of the potential future tax benefits of loss
carry forwards and net deductible temporary differences available to offset
taxable income in future periods. As a result of this full recognition,
beginning in fiscal 1997 the Company will report earnings on a fully-taxed
basis.

Comparison of Year Ended October 31, 1995 to Year Ended October 31, 1994
------------------------------------------------------------------------
  Net Revenues: Net revenues increased 48% to $9,750,000 in fiscal 1995,
compared to $6,587,000 in fiscal 1994. The increase in net revenues was
due to a 48% growth in unit sales, with sales of the Company's machine vision
systems increasing to 333 in fiscal 1995 versus 225 in fiscal 1994. The
Company attributes its sales growth to increased demand in all markets, with
particularly strong results in international markets. In fiscal 1995 revenues
increased 84% outside of North America and 35% in North America. The increase
internationally was primarily the result of a 492% increase in Far East sales
through distributors. The increase in North America is primarily due to demand
in the electronic components market as well as increased sales to systems
integrators.

  Gross Profit: Gross profit increased 49% to $5,308,000 in fiscal 1995,
compared to $3,561,000 in fiscal 1994. The gross profit as a percentage
of net revenues for fiscal 1995 remained constant at 54%.

  Selling Expenses: Selling expenses increased 16% to $2,279,000 in fiscal
1995, compared to $1,970,000 in fiscal 1994. As a percentage of net
revenues, fiscal 1995 selling expenses declined to 23% from 30% in fiscal
1994. The increase in selling expenses in 1995 was related to expanded
marketing and promotion efforts and the addition of new employees in the sales
and customer support areas. The decline in selling expenses as a percentage of
net revenues in fiscal 1995 is primarily due to increased productivity from
the Company's sales and applications engineering teams and increased sales
through international distributors.

  General and Administrative Expenses: General and administrative expenses
increased 20% to $851,000 in fiscal 1995, compared to $711,000 in
fiscal 1994. As a percentage of net revenues, general and administrative
expenses decreased to 9% in fiscal 1995 compared with 11% in fiscal 1994. The
increase in expenditures in 1995 is primarily due to incurring a full year of
lease expense in the Company's new facility and investments in management
infrastructure. The decrease as a percentage of net revenues is mainly related
to operating leverage provided by the Company's growing revenue base.

Page 21

  Research and Development Expenses: Research and development expenses increased
15% to $1,299,000 in fiscal 1995, compared to $1,133,000 in fiscal 1994.
Research and development expenses as a percentage of net revenues declined to
13% in fiscal 1995 from 17% in fiscal 1994. The increase in expenditures in 1995
is mainly due to new product development programs and the necessary new
employees to support these efforts. The decline as a percentage of net revenues
in 1995 is the result of the Company's growing revenue base.

  Income Tax Benefit: Income tax benefit of $407,000 was recorded in fiscal
1995.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
  Working capital increased to $24,083,000 at October 31, 1996 from $4,131,000
at October 31, 1995 primarily as a result of the Company's continued
profitability and the successful completion of a secondary offering in June of
1996. The Company financed its increased sales in fiscal 1996 through internally
generated cash flow and existing cash and cash equivalents. Net cash provided
from operating activities in fiscal 1996 was $788,000. Accounts receivable
increased $1,764,000 due to a higher level of sales volume and in part to a
higher percentage of sales occurring in the last month of the fourth quarter of
fiscal 1996. Inventories increased $285,000 in fiscal 1996 due to raw material
purchases to support increased sales and new product introductions.

The Company used $15,797,000 in cash flow in investing activities, primarily for
the purchase of marketable securities and capital equipment.  Investments in
marketable securities consist of short-term investment grade securities. In
addition, the Company generated $17,953,000 from its financing activities as a
result of the completion of a public stock offering in June of 1996 and
issuances of its Common Stock upon exercise of stock options and warrants.

  Current assets increased to $25,164,000 at October 31, 1996 from $4,912,000 at
October 31, 1995. This increase was primarily due to an increase in marketable
securities to $15,135,000 at October 31, 1996 from no marketable securities at
October 31, 1995. Cash and cash equivalents also increased to $4,179,000 at
October 31, 1996 from $1,235,000 at October 31, 1995.

  The Company's current liabilities increased to $1,081,000 at October 31, 1996
from $781,000 at October 31, 1995. This was mainly due to increased trade
accounts payable associated with a higher level of sales.

  The Company believes that its cash flow from operations, existing cash and
cash equivalents, and marketable securities at October 31, 1996 will
be adequate for its foreseeable operating needs.

DILUTION
--------
  Management expects further dilution of earnings per share in fiscal 1997 due
to the issuance of 1,600,000 shares of common stock in June of 1996 through a
public stock offering.  Given that these shares were outstanding for less than
five months of fiscal 1996 and that they will be outstanding for all of fiscal

Page 22

1997, the weighted average common shares outstanding will increase to 5.5
million from 4.4 million in fiscal 1996.  This represents approximately 20%
dilution.

FORWARD LOOKING STATEMENT

  Certain of the statements contained in this Form 10-K that relate to
expectations regarding future sales and profitability contains forward-looking
statements regarding future performance of the Company.  The Company's actual
results could differ materially from the estimates made in the forward-looking
statements as a result of a number of factors, including (i) risks and
uncertainty in the market for machine vision, (ii) cyclicality of capital
spending by customers, (iii) quarterly fluctuations in operating results by the
Company due to the long selling cycle for machine vision products, (iv) the
Company's continued ability to achieve significant international revenue, (v)
competition in the Company's principal markets and (vi) the Company's ability to
continue to enhance its current products and develop new products that keep pace
with technological developments and evolving industry standards.  The Company
wishes to caution readers not to place undue reliance upon any such forward-
looking statement, which speak only as of the date made.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
  See Item 14 for a list of the financial statements included in this Form 10-K.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
-----------------------------------------------------------------------
  Not applicable.

Page 23
                                        
                                    PART III
                                    --------
                                        
Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
  Information required under this item with respect to directors is contained
in the section "Election of Directors" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held in March 1997 (the "1997 Proxy
Statement"), a definitive copy of which will be filed with the Commission within
120 days of the close of the past fiscal year, and is incorporated herein by
reference.

  Information concerning executive officers is set forth in the Section
entitled "Executive Officers of the Company" in Part I of this Form 10-K
pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S-K.

Item 11.  EXECUTIVE COMPENSATION
--------------------------------
  Information required under this item is contained in the sections entitled
"Executive Compensation," "Employment Agreements" and "Stock Option Plan" in the
Company's 1997 Proxy Statement and is incorporated herein by reference.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
  Information required under this item is contained in the section entitled
"Shareholdings of Principal Shareholders, Directors and Officers" in the
Company's 1997 Proxy Statement and is incorporated herein by reference.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
  Information required under this item is contained in the section entitled
"Certain Transactions" in the Company's 1997 Proxy Statement which is
incorporated herein by reference.

Page 24
                                        
                                     PART IV
                                     -------

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

     (a)  Documents filed as Part of this Report

          (1)  FINANCIAL STATEMENTS.  The following financial statements of the
               Company are hereby included in this Form 10-K.
                                                                      Page
                                                                      ----
               Report of Independent Accountants.....................  28
               Income Statements for the three years ended
                    October 31, 1996, 1995 and 1994..................  29
               Balance Sheets as of October 31, 1996 and 1995........  30
               Statements of Cash Flows for the Years
                    ended October 31, 1996, 1995 and 1994............  31
               Statements of Shareholders' Equity for the Years
                    ended October 31, 1996, 1995 and 1994............  32
               Notes to Financial Statements.........................  33

          (2)  FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS
               ENDED OCTOBER 31, 1996


               VIII.  Valuation and Qualifying Accounts..............  42

     All other schedules are omitted because they are not
     applicable or the required information is shown in the
     Financial Statements or the notes thereto.

     (b)  Reports on Form 8-K
          -------------------

     No reports on Form 8-K were filed during the
     quarter ended October 31, 1996.

Page 25

     (c)  Listing of Exhibits
          -------------------

Exhibit
  No.                           Description                           Page
-------  ----------------------------------------------------------   ----

3.1.....  Restated Articles of Incorporation of Registrant...........  43

3.2.....  By-Laws of Registrant......................................  47

10.1....  Lease Agreement dated February 11, 1993 for facilities at
          10321 West 70th Street, Eden Prairie, Minnesota
          (Incorporated by reference to Exhibit 10.3 of
          1993 Form 10-K)

10.2*...  PPT VISION, Inc. 1988 Stock Option Plan, as amended
          (incorporated by reference from Exhibit 10.4 to
          1993 Form 10-K)

10.3....  Employment Agreement with Joseph C. Christenson dated as of
          May 7, 1984 (incorporated by reference from Exhibit 10.4 to
          May 15, 1996 Form S-2)

10.4....  Employment Agreement with Larry G. Paulson dated as of
          February 1, 1984 (incorporated by reference from
          Exhibit 10.5 to May 15, 1996 Form S-2)

10.5....  Employment Agreement with Tom Northenscold dated as of
          February 27, 1995 (incorporated by reference from
          Exhibit 10.6 to May 15, 1996 Form S-2)

10.6....  Employment Agreement with Arye Malek dated as of
          May 1, 1990 (incorporated by reference from
          Exhibit 10.7 to May 15, 1996 Form S-2)

22......  The Company has no subsidiaries

23......  Consent of Price Waterhouse LLP............................  53

27......  Financial Data Schedule....................................  54


*Indicates compensatory plan

Page 26

                                   SIGNATURES
                                   ----------


     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                PPT VISION, INC.

Date:  January 28, 1997                 By:/s/Joseph C. Christenson
                                           ----------------------------
                                               Joseph C. Christenson
                                           (Principal Executive Officer)

Date:  January 28, 1997                 By:/s/Thomas R. Northenscold
                                           ----------------------------
                                              Thomas R. Northenscold
                                             Chief Financial Officer

                        Signatures and Power of Attorney

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant, in
the capacities, and on the dates, indicated.  Each person whose signature
appears below constitutes and appoints Joseph C. Christenson and Thomas R.
Northenscold as his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any or all amendments
to this Annual Report on Form 10-K and to file the same, with the exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission.

        Date                                   Signature and Title
        ----                                   -------------------

  January 28, 1997                         /s/Joseph C. Christenson
                                           ----------------------------
                                              Joseph C. Christenson
                                               President, Director
                                           (Principal Executive Officer)

  January 28, 1997                         /s/Thomas R. Northenscold
                                           ----------------------------
                                              Thomas R. Northenscold
                                              Chief Financial Officer

  January 28, 1997                         /s/Larry G. Paulson
                                           ----------------------------
                                           Larry G. Paulson, Secretary,
                                            Vice President of Research
                                            and Development, Director

Page 27

  January 28, 1997                         /s/Bruce C. Huber
                                           ----------------------------
                                             Bruce C. Huber, Director

  January 28, 1997                         /s/David C. Malmberg
                                           ----------------------------
                                           David C. Malmberg, Director

  January 28, 1997                         /s/Peter R. Peterson
                                           ----------------------------
                                           Peter R. Peterson, Director






Page 28

REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders and Board of Directors of PPT VISION, Inc.

In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) and (2) present fairly, in all material respects, the financial 
position of PPT VISION, Inc. at October 31, 1996 and 1995, and the results of 
its operations and cash flows for each of the three fiscal years in the period 
ended October 31, 1996 in conformity with generally accepted accounting 
principles.  These financial statements are the responsibility of the Company's 
management; our responsibility is to express an opinion on these financial 
statements based on our audits.  We conducted our audits of these statements in 
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial 
statements, assessing the accounting principles used and significant estimates 
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed 
above.

/s/Price Waterhouse LLP
------------------------
Price Waterhouse LLP
Minneapolis, MN
November 22, 1996

Page 29

                                PPT VISION, INC.

                               INCOME STATEMENTS

<TABLE>
                                               YEAR ENDED OCTOBER 31,
                                         -----------------------------------
                                            1996         1995        1994
                                         -----------  ----------  ----------
<S>                                      <C>          <C>         <C>
Net revenues............................ $12,693,000  $9,750,000  $6,587,000
Cost of sales...........................   5,044,000   4,442,000   3,026,000
                                         -----------  ----------  ----------
    Gross profit........................   7,649,000   5,308,000   3,561,000
                                         -----------  ----------  ----------
Expenses:
  Selling...............................   2,897,000   2,279,000   1,970,000
  General and administrative............     976,000     851,000     711,000
  Research and development..............   1,827,000   1,299,000   1,133,000
                                         -----------  ----------  ----------
    Total expenses......................   5,700,000   4,429,000   3,814,000
                                         -----------  ----------  ----------
Income (loss) from operations...........   1,949,000     879,000    (253,000)
Interest income.........................     442,000      61,000      39,000
Other income (expense)..................      11,000       --          1,000
                                         -----------  ----------  ----------
Net income (loss) before taxes........     2,402,000     940,000    (213,000)
Income tax benefit......................   1,309,000     407,000       --
                                         -----------   ---------  ----------
    Net income (loss)................... $ 3,711,000  $1,347,000  $ (213,000)
                                         ===========  ==========  ==========
Per share data:
  Net income (loss) per share........... $    0.84    $   0.37    $  (0.06)
                                         ===========  ==========  ==========
  Weighted average common
   shares outstanding...................   4,410,000   3,650,000   3,455,000
                                         ===========  ==========  ==========
</TABLE>


    The accompanying notes are an integral part of the financial statements

Page 30

                                PPT VISION, INC.

                                 BALANCE SHEETS

<TABLE>
                                                           OCTOBER 31,
                                                    -------------------------
                                                       1996           1995
                                                    -----------    ----------
<S>                                                 <C>            <C>
ASSETS
Current assets
  Cash and cash equivalents........................ $ 4,179,000    $1,235,000
  Marketable securities                              15,135,000         --
  Accounts receivable, net.........................   4,451,000     2,687,000
  Inventories......................................   1,228,000       943,000
  Other current assets.............................     171,000        47,000
                                                    -----------    ----------
    Total current assets...........................  25,164,000     4,912,000
Restricted cash....................................     135,000       213,000
Fixed assets, net..................................     863,000       501,000
Other assets, net..................................      79,000        65,000
Deferred income taxes..............................   1,815,000       407,000
                                                    -----------    ----------
    Total assets................................... $28,056,000    $6,098,000
                                                    ===========    ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable................................. $   754,000    $  564,000
  Commissions payable..............................      62,000        55,000
  Accrued expenses.................................     265,000       162,000
                                                    -----------    ----------
    Total current liabilities......................   1,081,000       781,000
Deferred rent......................................     166,000       172,000
Commitments and contingencies (Note 8)
Shareholders' equity
  Common Stock $.10 par value; authorized
   10,000,000 shares;
   issued and outstanding 5,358,422 and. 3,578,705.     536,000       358,000
  Capital in excess of par value...................  29,443,000    11,668,000
  Accumulated (deficit)............................  (3,170,000)   (6,881,000)
                                                    -----------    ----------
    Total shareholders' equity.....................  26,809,000     5,145,000
                                                    -----------    ----------
    Total liabilities and shareholders' equity..... $28,056,000    $6,098,000
                                                    ===========    ==========
</TABLE>

    The accompanying notes are an integral part of the financial statements

Page 31

                                PPT VISION, INC.

                            STATEMENT OF CASH FLOWS

<TABLE>
                                                YEAR ENDED OCTOBER 31,
                                         ------------------------------------
                                             1996         1995        1994
                                         ------------  ----------  ----------
<S>                                      <C>           <C>         <C>
Net income (loss)....................... $  3,711,000  $1,347,000  $ (213,000)
Adjustment to reconcile net income
 (loss)
 to net cash provided by operating
 activities:
  Depreciation and amortization.........      286,000     164,000     131,000
  Deferred rent.........................       (6,000)     44,000     128,000
  Deferred income tax benefit...........   (1,408,000)   (407,000)       --
Change in assets and liabilities:
  Accounts receivable...................   (1,764,000)   (749,000)    (72,000)
  Inventories...........................     (285,000)   (158,000)      9,000
  Other assets..........................     (124,000)     (7,000)      5,000
  Restricted cash.......................       78,000        --      (213,000)
  Accounts payable......................      190,000     102,000      31,000
  Commissions payable...................        7,000      12,000      (6,000)
  Accrued expenses......................      103,000      65,000     (44,000)
                                         ------------  ----------  ----------
    Total adjustments...................   (2,923,000)   (934,000)    (31,000)
                                         ------------  ----------  ----------
Net cash provided (used) by operating
 activities.............................      788,000     413,000    (244,000)
Cash flows from investing activities:
  Purchase of fixed assets..............     (662,000)   (349,000)   (194,000)
  Purchase of marketable securities       (17,156,000)       --          --
  Proceeds on sales of marketable
   securities                               2,025,000        --          --
  Realized gain on marketable securities       (4,000)       --          --
  Unrealized loss on marketable
   securities                                    --          --          --
                                         ------------  ----------  ----------
Net cash used by investing activities...  (15,797,000)   (349,000)   (194,000)
Cash flows from financing activities:
  Proceeds from issuance of common
   stock................................   17,953,000      79,000     548,000
                                         ------------  ----------  ----------
Net cash provided by financing
 activities.............................   17,953,000      79,000     548,000
                                         ------------  ----------  ----------
Net increase in cash and cash
 equivalents............................    2,944,000     143,000     110,000
Cash and cash equivalents at beginning
 of year................................    1,235,000   1,092,000     982,000
                                         ------------  ----------  ----------
Cash and cash equivalents at end of
 year  ................................. $  4,179,000  $1,235,000  $1,092,000
                                         ============  ==========  ==========
</TABLE>


    The accompanying notes are an integral part of the financial statements

Page 32

                                PPT VISION, INC.
                                        
                        STATEMENT OF SHAREHOLDERS' EQUITY
                                        
                              (DOLLARS IN THOUSANDS)

<TABLE>

                                               CAPITAL IN
                           COMMON    COMMON     EXCESS OF     PREFERRED PREFERRED      ACCUMULATED
                           SHARES    STOCK      PAR VALUE      SHARES      STOCK        (DEFICIT)
                         --------- ---------   -----------    --------- ----------     -------------
<S>                      <C>       <C>         <C>             <C>      <C>            <C>
October 31, 1993........ 3,224,304 $ 322,000   $10,796,000     95,832   $280,000       $(8,015,000)
  Stock issued through
   the
   exercise of stock
   options..............    64,743     6,000        32,000
  Stock issued through
   the
   employee stock
   purchase plan........    26,082     3,000        68,000
  Stock issued through
   conversion of
   preferred shares.....     5,357     1,000        24,000     (8,333)   (24,000)
  Stock issued through
   private placement
   (net of issue costs).   120,000    12,000       427,000
  Net Loss..............                                                                  (213,000)
                         ---------  --------   -----------    -------    --------       -----------
October 31, 1994........ 3,440,486   344,000    11,347,000     87,499    256,000        (8,228,000)
  Stock issued through
   the
   exercise of stock
   options..............    65,370     6,000        37,000
  Stock issued through
   the
   employee stock
   purchase plan........    16,599     2,000        35,000
  Stock issued through
   conversion of
   preferred shares.....    56,250     6,000       249,000    (87,499)  (256,000)
  Net income............                                                                 1,347,000
                         ---------  --------   -----------    -------    --------       -----------
October 31, 1995........ 3,578,705   358,000    11,668,000          0          0        (6,881,000)
  Stock issued through
   public offering
   (net of issue costs)  1,600,000   160,000    17,459,000
  Stock issued through
   the
   exercise of stock
   options..............    94,526     9,000       123,000
  Stock issued through
   the
   employee stock
   purchase plan........    35,691     4,000        74,000
  Stock issued through
   the
   exercise of warrants.    49,500     5,000       119,000
  Net income............                                                                 3,711,000
                         ---------  --------   -----------    -------    --------      ------------
  October 31, 1996...... 5,358,422  $536,000   $29,443,000          0          0       $(3,170,000)
                         =========  ========   ===========    =======    ========      ============
</TABLE>

    The accompanying notes are an integral part of the financial statements

Page 33

                                PPT VISION, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND OPERATIONS

  The Company designs, manufactures, markets and integrates machine vision
based automated inspection systems. The systems are used to improve
productivity and quality by automating inspection tasks in manufacturing
applications such as assembly verification, flaw detection, character
verification or measurement tasks.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTS RECEIVABLE

  Accounts receivable are shown net of allowance for doubtful accounts of
$35,110 at October 31, 1996, and $35,000 at October 31, 1995.

INVENTORIES

  Inventories are stated at the lower of cost or market, with costs determined
on a first-in, first-out (FIFO) basis. As of October 31, 1996 and 1995
inventories consist of the following:

<TABLE>


                                                       OCTOBER 31,
                                                   -------------------
                                                      1996      1995
                                                   ---------- --------
      <S>                                          <C>        <C>
      Manufactured and purchased parts............ $1,015,000 $681,000
      Work-in-process.............................    144,000  214,000
      Finished goods..............................     69,000   48,000
                                                   ---------- --------
          Totals.................................. $1,228,000 $943,000
                                                   ========== ========
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

  The Company's financial instruments consist of cash and cash equivalents,
marketable securities, short-term trade receivables and payables for which
current carrying amounts approximate fair market value.

Page 34

OTHER ASSETS

  Other assets at October 31, 1996 and 1995 consist of the following:

<TABLE>


                                                                 OCTOBER 31,
                                                               ----------------
                                                                 1996    1995
                                                               -------  -------
      <S>                                                      <C>      <C>
      Patent and trademark.................................... $91,000  $71,000
      Security deposits.......................................    --       --
      Investment in related party.............................  53,000   53,000
                                                               -------  -------
                                                               144,000  124,000
      Less accumulated amortization........................... (65,000) (59,000)
                                                               -------  -------
          Total other assets.................................. $79,000  $65,000
                                                               =======  =======
</TABLE>

  The investment in a related party represents common stock the Company intends
to hold as an investment and is recorded at cost. During 1994, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS). No. 115 requires
certain investments in debt and equity securities to be recorded at fair market
value. No adjustment to market value was recorded as of October 31, 1995 and
1996 as the difference was not material. Patent and trademark costs are
amortized over 60 months.

Page 35

FIXED ASSETS

  Fixed assets consist of furniture, fixtures and equipment, and are stated at
cost net of accumulated depreciation. Depreciation is computed for book
purposes on a straight-line basis over the estimated useful life of the asset
and for tax purposes over five and ten years using accelerated and straight-
line methods. At October 31, 1996 and 1995 furniture, fixtures and equipment
consisted of the following:

<TABLE>

                                                             OCTOBER 31,
                                                       -----------------------
                                                           1996        1995
                                                        ----------  ----------
      <S>                                               <C>         <C>
      Equipment.......................................  $2,215,000  $1,743,000
      Furniture and fixtures..........................     407,000     235,000
                                                        ----------  ----------
                                                         2,622,000   1,978,000
      Less accumulated amortization...................  (1,759,000) (1,477,000)
                                                        ----------  ----------
          Total fixed assets..........................  $  863,000  $  501,000
                                                        ==========  ==========
</TABLE>

REVENUE RECOGNITION

  The Company records sales revenue upon shipment to the customer.

RESEARCH AND DEVELOPMENT

  Expenditures for research and development are expensed as incurred.

INCOME TAXES

  Income taxes are provided on the liability method. Under the liability
method, deferred income taxes are provided on the difference in basis of assets
and liabilities between financial reporting and tax returns using expected tax
rates.

INCOME (LOSS) PER SHARE

  Income per share computations are based on the weighted average number of
common shares and common share equivalents outstanding during the year. Common
share equivalents consist of stock options and warrants outstanding during the
year.

CASH FLOWS

  For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and investments with original maturities of three months or less.

Page 36

  Non-cash transactions in 1996 consist of $10,568 related to the transfer of
long-term assets to inventory. In 1995 non-cash transactions consist of $255,952
related to the conversion of 87,499 preferred shares into 56,250 shares of
common stock and $37,514 related to the transfer of long-term assets to
inventory. In 1994 non-cash transactions consist of $24,376 related to the
conversion of 8,333 preferred shares into 5,357 shares of common stock and
$15,345 related to the transfer of long-term assets to inventory.

ESTIMATES BY MANAGEMENT

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

STOCK SPLIT

  On March 14, 1996, the Board of Directors approved a three-for-two stock split
in the form of a fifty percent (50%) stock dividend.  The distribution of shares
was made on April 5, 1996 to shareholders of record as of March 25, 1996.  All
historical share and per share data included in the financial statements and
exhibits have been restated to reflect the stock split.

NOTE 3: CUSTOMER INFORMATION

SIGNIFICANT CUSTOMER INFORMATION

  During 1996 and 1995, revenue from one customer accounted for 14% and 17% of
net revenues respectively.  During 1996, revenue from another customer accounted
for 12% of net revenues.  During 1994, revenue from another customer accounted
for 10% of net revenues.

CUSTOMER GEOGRAPHIC DATA

  North American and export sales as a percentage of net revenues in 1996, 1995
and 1994 are as follows:

<TABLE>

                                                                   YEAR ENDED
                                                                   OCTOBER 31,
                                                                ----------------
                                                                1996  1995  1994
                                                                ----  ----  ----
      <S>                                                        <C>   <C>   <C>
      North America...........................................   73%   67%   73%
      Europe..................................................   14%   21%   24%
      Far East.................................................  13%   12%    3%
</TABLE>

Page 37

NOTE 4: ACCRUED EXPENSES

  Accrued expenses at October 31, 1996 and 1995 include:

<TABLE>


                                                                 OCTOBER 31,
                                                              ----------------
                                                                1996     1995
                                                              -------- --------
      <S>                                                     <C>      <C>
      Vacation............................................... $ 30,000 $ 30,000
      Employee Stock Purchase Plan payroll deductions........   42,000   33,000
      Compensation...........................................   67,000   68,000
      Other..................................................  126,000   31,000
                                                              -------- --------
          Total.............................................. $265,000 $162,000
                                                              ======== ========
</TABLE>


NOTE 5: COMMON STOCK OPTIONS AND WARRANTS

  Under the Company's 1988 Stock Option Plan the Company may issue options to
purchase up to 600,000 shares of common stock to employees and directors.
Options are granted at prices equal to the average of the bid and ask prices on
the date of the grant. The granting of options and their vesting is within the
discretion of the Company's Board of Directors.

Page 38

  A summary of stock options issued and outstanding under the 1988 Stock Option
Plan is as follows:

<TABLE>

                                                           NUMBER OF SHARES
                                                       ------------------------
                                                        EMPLOYEE     DIRECTOR
                                                         OPTIONS      OPTIONS
                                                       -----------  -----------
<S>                                                    <C>          <C>
Balance at October 31, 1993...........................     259,498       18,675
  Granted.............................................      72,750       39,000
  Exercised...........................................     (64,743)           0
  Forfeited...........................................      (1,462)           0
                                                       -----------  -----------
Balance at October 31, 1994...........................     266,043       57,675
  Granted.............................................      22,125            0
  Exercised...........................................     (63,870)      (1,500)
  Forfeited...........................................      (4,687)           0
                                                       -----------  -----------
Balance at October 31, 1995...........................     219,611       56,175
  Granted.............................................     122,350        4,500
  Exercised...........................................     (93,026)      (1,500)
  Forfeited...........................................        (350)           0
                                                       -----------  -----------
Balance at October 31, 1996...........................     248,585       59,175
                                                       ===========  ===========
As of October 31, 1996:
  Price Range of Outstanding Options
    Options...........................................$2.00-$18.12 $1.66-$12.00
    Expiration Dates..................................   1997-2003    1997-2003
    Options Exercisable...............................     116,647       36,675
</TABLE>

  During the year ended October 31, 1996, stock options were exercised at
prices of $1.00 to $3.67 per share under the Employee Stock Option Plan.

  The Company accounts for stock options and other equity instruments in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," was issued in October 1995.  SFAS No. 123 establishes
a fair value based method of accounting for employee stock based compensation
plans and encourages companies to adopt that method.  However, it also allows
companies to continue to apply the intrinsic value based method currently
prescribed under APB Opinion No. 25, provided certain pro forma disclosures are
made.  SFAS No. 123 is not required to be adopted until fiscal 1997.  The
Company currently intends to continue to apply the accounting method prescribed
by APB Opinion No. 25 and, accordingly, the adoption of SFAS No. 123 will not
have a material impact on the Company's operating results.

Page 39

NOTE 6: STOCK OFFERINGS

  In June of 1996, the Company completed a public stock offering, issuing
1,600,000 shares of common stock at $12.00 per share, that raised $17,618,522
net of offering costs of $1,581,478.

  In February of 1994, the Company completed a private equity placement,
issuing 120,000 shares of common stock at $3.66 per share, that raised $438,365
net of offering costs of $1,635.

NOTE 7: EMPLOYEE STOCK PURCHASE PLAN

  In March 1995 shareholders approved the adoption of the 1995 Employee Stock
Purchase Plan to replace the 1990 Employee Stock Purchase Plan which expired in
1995. Under the terms of the 1995 Plan, 225,000 shares have been
reserved for issuance under the Plan.

  The second phase of the 1995 Plan began on June 1, 1996 and employees were
granted the right to purchase 6,773 shares at $14.66 per share under the Plan.

  The first phase of the 1995 Plan ended on May 31, 1996 and employees purchased
35,691 shares at $2.19 per share under the Plan.

  Phase five of the 1990 Plan ended on May 31, 1995 and employees purchased
16,599 shares at $2.19 per share.

NOTE 8: COMMITMENTS & CONTINGENCIES

  Rental expense under operating leases was $170,987, $163,100, and $162,823 in
1996, 1995, and 1994 respectively. Minimum future rental payments due under
noncancelable operating lease agreements are as follows:

<TABLE>
             <S>                              <C>
             1997............................  180,000
             1998............................  185,000
             1999............................  189,000
             2000............................  196,000
             Thereafter......................   66,000
                                              --------
                 Total....................... $816,000
                                              ========
</TABLE>

LETTER OF CREDIT

  During 1994 the Company obtained a standby letter of credit for a security
deposit related to the Company's building lease. The letter of credit is
secured by the restricted cash balance of $134,771. As of June 1996 the
restricted cash balance decreases on a dollar for dollar basis as rental
payments are made.

Page 40

NOTE 9: EMPLOYEE SAVING PLAN

  The Company provides a supplementary retirement savings plan which is
structured in accordance with Section 401(k) of the Internal Revenue Code.
Employees eligible for the Plan may contribute from one to fifteen percent of
their monthly earnings on a pre-tax basis subject to annual contribution
limitations. The Company makes matching contributions of fifty cents for each
dollar contributed by each Plan participant up to a maximum of $1,000 annually.
The Company's contributions under this program were approximately $52,250,
$30,876, and $26,407 for the years ended October 31, 1996, 1995 and 1994
respectively.

NOTE 10: INCOME TAXES

No current tax provisions were recorded in the fiscal years ended October 31,
1996 and 1995 due to the utilization of net operating loss (NOL) carry forwards.
The deferred tax provisions of approximately $14,000 and $36,000 for the years
ended October 31, 1996 and 1995, respectively, are negated primarily by
reductions in the FAS 109 valuation allowances.

At October 31, 1996, the Company has available net operating loss and research
and development tax credit carry forwards for income tax purposes of $3.6
million and $340,000, respectively. These carry forwards expire in the years 
ending October 31, 2001 through 2009.

The utilization of the net operating loss and tax credit carry forwards is
dependent upon the Company's ability to generate sufficient taxable income
during the carry forward period.  A valuation allowance was established in 1994
and subsequent taxable earnings and an analysis of likely taxable income
resulted in reductions of the allowance by $2,219,000 and $804,000 for the years
ended October 31, 1996 and 1995, respectively.

An analysis of the effective rate on earnings and a reconciliation of the
expected federal statutory rate for the years ended October 31, 1996 and 1995 is
as follows:

<TABLE>
                                             1996        1995
                                          -----------  ---------
<S>                                        <C>          <C>
Expected tax provision
at statutory rate..........................$   783,000  $ 320,000
State income tax provision,
net of federal tax effect..................    138,000     56,000
Research and development credit............    (17,000)         0
(Reduction) of valuation allowance......... (2,219,000)  (804,000)
Other......................................      6,000     21,000
                                           -----------  ---------
   Total...................................$(1,309,000) $(407,000)
                                           ===========  =========
</TABLE>

Page 41

Deferred tax assets (liabilities) are comprised of the following at October 31:

<TABLE>
                                           1996        1995
                                        ----------  -----------
<S>                                      <C>         <C>
Depreciation.............................$  147,000  $   102,000
Deferred rent............................    66,000       69,000
Other....................................   170,000       94,000
Net operating loss carry forwards........ 1,432,000    2,361,000
Valuation allowance......................         0   (2,219,000)
                                         ----------  -----------
   Net deferred tax asset................$1,815,000  $   407,000
                                         ==========  ===========
</TABLE>

Page 42

                                  SCHEDULE VIII


Valuation and Qualifying Accounts

Allowance for Doubtful Accounts:

<TABLE>

                              Balance at  Additions    Deductions  Balance at
                              Beginning   Charged to   and Write-    End of
                              of Period    Earnings       offs       Period
                            ---------------------------------------------------
<S>                            <C>         <C>         <C>          <C>
Year Ended October 31, 1994    $55,000     $44,000     ($44,000)    $55,000

Year Ended October 31, 1995    $55,000     $69,000     ($89,000)    $35,000

Year Ended October 31, 1996    $35,000     $ 2,000     ($ 2,000)    $35,000

</TABLE>