**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-QSB**

 

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**QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the Quarterly Period Ended April 30, 2008**

 

**CommissionFile Number 0-11518**

 

**PPT VISION, INC.**

(Exact name ofSmall Business Issuer as specified in its charter)

 

| **MINNESOTA**                                       | ** ** | **41-1413345**          |
|-----------------------------------------------------|------------|-------------------------|
| (State or other  jurisdiction of                    |       | (I.R.S. Employer        |
| incorporation or  organization)                     |       | Identification  Number) |
|                                                |       |                    |
| **12988  Valley View Road Eden Prairie, Minnesota** | ** ** | **55344**               |
| (Address of  principal executive offices)           |       | (Zip Code)              |

 

**(952)996-9500**

(Issuer’stelephone number, including area code)

 

Check whether the issuer (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theExchange Act during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the last 90 days.  Yes x  No o

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  No x

 

Shares of $.10 par valuecommon stock outstanding at May 30, 2008: 14,902,916

 

 

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INDEX

 

PPT VISION, INC.

 
| ** **    | ** **                                                                                               | ** ** | **Page** |
|---------------|----------------------------------------------------------------------------------------------------------|------------|----------|
|          |                                                                                                     |       |     |
| Part I.  | Financial Information                                                                                    |       |     |
|          |                                                                                                     |       |     |
| Item 1.       | Financial Statements                                                                                     |       |     |
|          |                                                                                                     |       |     |
|          | Balance Sheets as of April 30, 2008 and October 31,  2007                                      |       | 3        |
|          |                                                                                                     |       |     |
|          | Statements of Operations for the Three  and Six Months Ended April 30, 2008 and April 30, 2007 |       | 4        |
|          |                                                                                                     |       |     |
|          | Statements of Cash Flows for the Six  Months Ended April 30, 2008 and April 30, 2007           |       | 5        |
|          |                                                                                                     |       |     |
|          | Notes to  Condensed Financial Statements – April 30, 2008                                      |       | 6        |
|          |                                                                                                     |       |     |
| Item 2.       | Management’s Discussion and Analysis or  Plan of Operation                                          |       | 10       |
|          |                                                                                                     |       |     |
| Item 3.       | Controls and Procedures                                                                                  |       | 14       |
|          |                                                                                                     |       |     |
| Part II. | Other Information                                                                                        |       | 14       |
|          |                                                                                                     |       |     |
| Item 1.       | Legal Proceedings                                                                                        |       | 14       |
|          |                                                                                                     |       |     |
| Item 2.       | Unregistered Sales of Equity Securities  and Use of Proceeds                                             |       | 14       |
|          |                                                                                                     |       |     |
| Item 3.       | Defaults Upon Senior Securities                                                                          |       | 14       |
|          |                                                                                                     |       |     |
| Item 4.       | Submission of Matters to a Vote of  Security Holders                                                     |       | 14       |
|          |                                                                                                     |       |     |
| Item 5.       | Other Information                                                                                        |       | 14       |
|          |                                                                                                     |       |     |
| Item 6.       | Exhibits                                                                                                 |       | 15       |
|          |                                                                                                     |       |     |
|          | Signatures                                                                                               |       | 15       |

 

2

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PPT VISION, INC.

BALANCE SHEETS

 
| ** **                                       | ** ** | **April 30, 2008** | ** ** | **October 31, 2007** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **(unaudited)**              | ** ** | **(audited)**                  | ** ** |
| ASSETS                                           |       |                         |       |                           |       |
| Current assets                                   |       |                         |       |                           |       |
| Cash and cash equivalents                        |       | $                            | 576,000    |                           | $          | 624,000 |   |
| Accounts  receivable, net                        |       | 1,168,000                    |       | 1,199,000                      |       |
| Inventories:                                     |       |                         |       |                           |       |
| Manufactured and  purchased parts                |       | 409,000                      |       | 400,000                        |       |
| Work-in-process                                  |       | 16,000                       |       | 12,000                         |       |
| Finished goods                                   |       | 30,000                       |       | 24,000                         |       |
| Total  inventories                               |       | 455,000                      |       | 436,000                        |       |
| Other current  assets                            |       | 64,000                       |       | 69,000                         |       |
| Total current  assets                            |       | 2,263,000                    |       | 2,328,000                      |       |
| Fixed assets,  net                               |       | 208,000                      |       | 245,000                        |       |
| Intangible and  other assets, net                |       | 61,000                       |       | 61,000                         |       |
| Total assets                                     |       | $                            | 2,532,000  |                           | $          | 2,634,000 |   |
|                                             |       |                         |       |                           |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY       |       |                         |       |                           |       |
| Current  liabilities                             |       |                         |       |                           |       |
| Accounts payable                                 |       | $                            | 558,000    |                           | $          | 490,000 |   |
| Accrued expenses                                 |       | 152,000                      |       | 156,000                        |       |
| Deferred revenue  – customer advances       |       | 3,000                        |       | 3,000                          |       |
| Total current  liabilities                       |       | 713,000                      |       | 649,000                        |       |
| Shareholders’  equity                       |       |                         |       |                           |       |
| Common stock                                     |       | 1,490,000                    |       | 990,000                        |       |
| Capital in  excess of par value                  |       | 37,611,000                   |       | 37,607,000                     |       |
| Accumulated  deficit                             |       | (37,282,000                  | )          | (36,612,000                    | )          |
| Total  shareholders’ equity                 |       | 1,819,000                    |       | 1,985,000                      |       |
| Total  liabilities and shareholders’ equity |       | $                            | 2,532,000  |                           | $          | 2,634,000 |   |

 

See accompanying notes to condensed financialstatements

 

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PPT VISION, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 
| ** **                                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **April 30,**               | ** ** | **April 30,**             | ** ** |
| ** **                                   | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                         |       |                             |       |                           |       |   |   |   |   |   |   |   |   |
| Revenues                                     |       | $                                | 1,600,000  |                           | $          | 1,245,000 |   | $ | 2,935,000 |   | $ | 2,286,000 |   |
| Cost of revenues                             |       | 751,000                          |       | 626,000                        |       | 1,465,000 |   | 1,175,000 |   |
| Gross profit                                 |       | 849,000                          |       | 619,000                        |       | 1,470,000 |   | 1,111,000 |   |
| Expenses:                                    |       |                             |       |                           |       |   |   |   |   |
| Sales and  marketing                         |       | 526,000                          |       | 495,000                        |       | 1,000,000 |   | 924,000 |   |
| General and  administrative                  |       | 230,000                          |       | 256,000                        |       | 447,000 |   | 491,000 |   |
| Research and  development                    |       | 347,000                          |       | 341,000                        |       | 697,000 |   | 647,000 |   |
| Total expenses                               |       | 1,103,000                        |       | 1,092,000                      |       | 2,144,000 |   | 2,062,000 |   |
| Interest and  other Income (expense)         |       | (2,000                           | )          | 7,000                          |       | 4,000 |   | 8,000 |   |
| Net loss                                     |       | $                                | (256,000   | )                              | $          | (466,000 | ) | $ | (670,000 | ) | $ | (943,000 | ) |
| Per share data:                              |       |                             |       |                           |       |   |   |   |   |
| Weighted average  basic shares outstanding   |       | 12,736,000                       |       | 6,247,000                      |       | 11,304,000 |   | 5,382,000 |   |
| Weighted average  diluted shares outstanding |       | 12,736,000                       |       | 6,247,000                      |       | 11,304,000 |   | 5,382,000 |   |
| Net loss                                     |       | $                                | (0.02      | )                              | $          | (0.07 | ) | $ | (0.06 | ) | $ | (0.18 | ) |

 

See accompanyingnotes to condensed financial statements

 

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PPT VISION, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
| ** **                                                                   | ** ** | **Six Months**          | ** ** | **Six Months**          | ** ** |
|------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                                   | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** |
| ** **                                                                   | ** ** | **April 30, 2008** | ** ** | **April 30, 2007** | ** ** |
| Net loss                                                                     |       | $                            | (670,000   | )                            | $          | (943,000 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                         |       |                         |       |
| Stock option  expense                                                        |       | 3,000                        |       | 11,000                       |       |
| Depreciation and  amortization                                               |       | 49,000                       |       | 62,000                       |       |
| Change in assets  and liabilities:                                           |       |                         |       |                         |       |
| Accounts  receivable                                                         |       | 31,000                       |       | (131,000                     | )          |
| Inventories                                                                  |       | (19,000                      | )          | (106,000                     | )          |
| Other current assets                                                         |       | 5,000                        |       | (9,000                       | )          |
| Accounts payable                                                             |       | 68,000                       |       | 164,000                      |       |
| Accrued expenses                                                             |       | (4,000                       | )          | (10,000                      | )          |
| Total  adjustments                                                           |       | 133,000                      |       | (19,000                      | )          |
| Net cash used in  operating activities                                       |       | (537,000                     | )          | (962,000                     | )          |
| Cash flows from  investing activities:                                       |       |                         |       |                         |       |
| Purchase of  fixed assets                                                    |       | (11,000                      | )          | (35,000                      | )          |
| Net cash used in  investing activities                                       |       | (11,000                      | )          | (35,000                      | )          |
| Cash flows from  financing activities:                                       |       |                         |       |                         |       |
| Proceeds from  issuance of common stock and warrants                         |       | 500,000                      |       | 1,004,000                    |       |
| Net cash  provided by financing activities                                   |       | 500,000                      |       | 1,004,000                    |       |
| Net increase  (decrease) in cash and cash.equivalents                        |       | (48,000                      | )          | 7,000                        |       |
| Cash and cash  equivalents at beginning of year                              |       | 624,000                      |       | 753,000                      |       |
| Cash and cash  equivalents at end of period                                  |       | $                            | 576,000    |                         | $          | 760,000 |   |

 

See accompanying notes tocondensed financial statements

 

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PPT VISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

April 30,2008

(UNAUDITED)

 

NOTE A – DESCRIPTION OFBUSINESS

 

PPT VISION, Inc. (“the Company”) designs,manufactures, and markets machine vision based intelligent cameras used forautomated inspection, measurement, and guidance applications in themanufacturing marketplace. The Company’s IMPACTTM intelligent camera productline enables manufacturers to realize significant economic paybacks byincreasing the quality of manufactured parts and improving the productivity ofmanufacturing processes. The Company’s IMPACT intelligent camera product lineis sold through a global network of distribution and integration partners toend-user manufacturers, original equipment manufacturers, and manufacturingmachine builders, in a wide variety of manufacturing markets includingelectronics, automotive, medical device, and packaged goods industries.

 

NOTE B – BASIS OFPRESENTATION

 

The accompanyingunaudited condensed financial statements have been prepared in accordance withaccounting principles generally accepted in the United States of America for interimfinancial information and with the instructions to Form 10-QSB.Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Results of operations for the interim periodsare not necessarily indicative of the results to be expected for the full yearor of the results for any future periods.

 

The Balance Sheet at October 31,2007 has been derived from the Company’s audited financial statements for thefiscal year ended October 31, 2007 but does not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for complete financial statements.

 

For further information,refer to the financial statements and footnotes thereto included in the Company’sannual report on Form 10-KSB for the year ended October 31, 2007.

 

NOTE C – REVENUERECOGNITION

 

The Company typicallyrecognizes revenue on product sales upon shipment to the end user customers ifcontractual obligations have been met and title and risk of loss have passed tothe customer, which is generally the case for sales of machine vision systems,spare parts and accessories. The Company also recognizes revenue on productssold to distributors upon shipment because contracts with distributors do notinclude post-shipment obligations or any right of return provisions and pricingis fixed at the time of sale. Revenue related to application engineering,product development and customer training services is recognized when theservices are performed. Service revenue was less than 10% of total revenues forthe three and six months ended April 30, 2008 and 2007.

 

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NOTE D – LIQUIDITY ANDCAPITAL RESOURCES

 

The Company had a net loss for the three and sixmonths ended April 30, 2008 of $256,000 and $670,000, respectively. Cashused in operations was $537,000 for the six months ended April 30, 2008.

 

NOTE E – LOSS PER SHARE

 

At April 30, 2008,options to purchase 382,465 shares and warrants to purchase 2,500,000 shares ofthe Company’s common stock were not considered in the calculation of dilutedearnings per share. At April 30, 2007, options to purchase 390,449 sharesand warrants to purchase 1,000,000 of the Company’s common stock were notconsidered in the calculation of diluted earnings per share. As the Company hada net loss for both periods, the inclusion of potentially dilutive outstandingoptions and warrants would have been anti-dilutive.

 

NOTE F – CUSTOMER AND GEOGRAPHIC DATA

 

The following tables set forth the percentage of theCompany’s revenues (including sales delivered through internationaldistributors) by geographic location for the three and six months ended April 30,2008 and 2007:

 
| ** **                   | ** ** | **Three Months Ended  April 30,**     | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|
| **Geographic Location** | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                   | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| North America                |       | 47                                                   | %          | 53 | % |
| Europe                       |       | 28                                                   | %          | 20 | % |
| Asia-Pacific                 |       | 25                                                   | %          | 27 | % |
| South America                |       | 0                                                    | %          | 0 | % |
|                         |       | 100                                                  | %          | 100 | % |
|                         |       |                                                 |       |   |   |
| ** **                   | ** ** | **Six Months Ended   April 30,** | ** ** |
| **Geographic Location** | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
|                         |       |                                                 |       |   |   |
| North America                |       | 47                                                   | %          | 49 | % |
| Europe                       |       | 29                                                   | %          | 20 | % |
| Asia-Pacific                 |       | 24                                                   | %          | 31 | % |
| South America                |       | 0                                                    | %          | 0 | % |
|                         |       | 100                                                  | %          | 100 | % |

 

In the three-month periodended April 30, 2008, revenues from one customer represented approximately11% of total revenue. In the three-month period ended April 30, 2007,revenues from two customers represented approximately 17% and 12% of totalrevenue, respectively. In the six-month period ended April 30, 2008,revenues from one customer represented approximately 10% of total revenue. Inthe six-month period ended April 30, 2007, revenues from two customers representedapproximately 14% and 10% of total revenue, respectively.

 

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Note G – SALE OF EQUITYSECURITIES

 

OnMarch 11, 2008, the Company entered into a Subscription Agreement with P.R. Peterson relating to the purchase on March 11, 2008 of securities ofthe Company by the P. R. Peterson Co. Keogh Plan (the “Keogh Plan”). P.R. Peterson, a director of the Company and the Company’s largestshareholder, controls the Keogh Plan.

 

Pursuantto the Subscription Agreement, the Company sold to the KeoghPlan 5,000,000 shares of the Company’s common stock for $0.10 per share incash for gross proceeds of $500,000. As additional consideration for thepurchase of the common stock, the Company also issued the Keogh Plan aseven-year immediately exercisable warrant to purchase 500,000 shares of theCompany’s common stock at an exercise price of $0.10 per share. The purchaseprice for the Company’s common stock was determined based upon negotiationsbetween the Company and Mr. Peterson.

 

Alsoon March 11, 2008, the Company and the Keogh Plan entered into aRegistration Rights Agreement by which the Company is obligated, among otherthings, to register the 500,000 shares underlying the warrant upon demandof the Keogh Plan, subject to certain limitations. Through theRegistration Rights Agreement, the Company also granted the Keogh Plan “piggyback”registration rights with respect to the shares underlying the warrants.  With the proceeds of the sale of shares tothe Keogh Plan, the Company believes it has sufficient cash to fund itsoperations, working capital and capital resource needs through its fiscal yearending October 31, 2008.

 

NOTE H – NEW ACCOUNTINGPRONOUNCEMENTS

 

The Company adopted FSP EITF 00-19-2, as of October 1,2007, “Accounting for Registration Payment Arrangements” (“FSP”), whichaddresses an issuer’s accounting for registration payment arrangements. ThisFSP specifies that the contingent obligation to make future payments orotherwise transfer consideration under a registration payment arrangement,whether issued as a separate agreement or included as a provision of afinancial instrument or other agreement, should be separately recognized andmeasured in accordance with FASB Statement No. 5, “Accounting forContingencies”. This FSP further clarifies that a financial instrument subjectto a registration payment arrangement should be accounted for in accordancewith other applicable generally accepted accounting principles (GAAP) withoutregard to the contingent obligation to transfer consideration pursuant to theregistration payment arrangement. The adoption of this FSP did not have animpact on the Company.

 

During March 2008,the FASB issued SFAS No. 161, “Disclosures about Derivative Instrumentsand Hedging Activities” (SFAS No. 161). SFAS No. 161 is intended to improve financial reporting aboutderivative instruments and hedging activities by requiring enhanced disclosuresto enable investors to better understand their effects on an entity’s financialposition, financial performance, and cash flows.  SFAS No. 161 also improves transparencyabout the location and amounts of derivative instruments in an entity’sfinancial statements; how derivative instruments and related hedged items areaccounted for under Statement 133; and how derivative instruments and relatedhedged items affect its financial position, financial performance, and cashflows.  SFAS No. 161 is effectivefor financial statements issued for fiscal years and interim periods beginningafter November 15, 2008, with early application encouraged.  We do not believe the 

 

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adoption of SFAS 161 willhave a material effect on our results of operations or financial position.

 

SFAS 162

 

In May 2008, theFinancial Accounting Standards Board (FASB) issued Statements of FinancialStandards No. 162 (SFAS 162), “The Hierarchy of Generally AcceptedAccounting Principles.” SFAS 162 is intended to improve financial reporting byidentifying a consistent framework, or hierarchy, for selecting accountingprinciples to be used in preparing financial statements that are presented inconformity with U.S. generally accepted accounting principles (GAAP) fornongovernmental entities.

 

Prior to the issuance ofSFAS 162, GAAP hierarchy was defined in the American Institute of CertifiedPublic Accountants (AICPA) Statement on Auditing Standards No. 69 (SAS69), “The Meaning of Present Fairly in Conformity With Generally AcceptedAccounting Principles.” SAS 69 has been criticized because it is directed tothe auditor rather than the entity. SFAS 162 addresses these issues byestablishing that the GAAP hierarchy should be directed to entities because itis the entity (not its auditor) that is responsible for selecting accountingprinciples for financial statements that are presented in conformity with GAAP.

 

SFAS 162 is effective 60days following the SEC’s approval of the Public Company Accounting OversightBoard Auditing amendments to AU Section 411, “The Meaning of Present Fairlyin Conformity with Generally Accepted Accounting Principles.” It is onlyeffective for nongovernmental entities; therefore, the GAAP hierarchy willremain in SAS 69 for state and local governmental entities and federalgovernmental entities.  The Company doesnot expect SFAS 162 to have a material effect on its consolidated financialstatements.

 

SFAS 163

 

During May 2008, theFinancial Accounting Standards Board (FASB) issued Statements of FinancialStandards No. 163 (SFAS 163), “Accounting for Financial GuaranteeInsurance Contracts.”  SFAS 163 providesenhanced guidance on the recognition and measurement to be used to account forpremium revenue and claim liabilities and related disclosures and is limited tofinancial guarantee insurance (and reinsurance) contracts, issued byenterprises included within the scope of FASB Statement No. 60, “Accountingand Reporting by Insurance Enterprises”. SFAS 163 also requires that an insurance enterprise recognize a claimliability prior to an event of default when there is evidence that creditdeterioration has occurred in an insured financial obligation.  SFAS 163 is effective for financialstatements issued for fiscal years and interim periods beginning after December 15,2008, with early application not permitted. The Company does not expect SFAS 163 to have a material effect on itsconsolidated financial statements.

 

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Item 2

 

MANAGEMENT’S DISCUSSIONAND ANALYSIS OR PLAN OF OPERATION

 

# Overview

 

PPT VISION, Inc. (“the Company”) designs,manufactures, and markets machine vision based intelligent cameras used forautomated inspection, measurement, and guidance applications in themanufacturing marketplace. The Company’s IMPACT intelligent camera product lineenables manufacturers to realize significant economic paybacks by increasingthe quality of manufactured parts and improving the productivity ofmanufacturing processes. The Company’s IMPACT intelligent camera product lineis sold through a global network of distribution and integration partners toend-user manufacturers, original equipment manufacturers, and manufacturingmachine builders, in a wide variety of manufacturing markets includingelectronics, automotive, medical device, and packaged goods industries.

 

RESULTS OFOPERATIONS

 

Revenues

 

Net revenues increased29% to $1,600,000 for the three-month period ended April 30, 2008,compared to net revenues of $1,245,000 for the same period in fiscal 2007. Forthe six-month period ended April 30, 2008, revenues increased 28% to$2,935,000 from $2,286,000 for the same period in fiscal 2007. In thethree-month period ended April 30, 2008, revenues from one customerrepresented approximately 11% of total revenue. In the three-month period endedApril 30, 2007, revenues from two customers represented approximately 17%and 12% of total revenue, respectively. In the six-month period ended April 30,2008, revenues from one customer represented approximately 10% of totalrevenue. In the six-month period ended April 30, 2007, revenues from twocustomers represented approximately 14% and 10% of total revenue, respectively.

 

The increase in revenuein the second quarter of fiscal year 2008 compared to the second quarter offiscal year 2007 occurred as a result of an increase in our IMPACT product linesales. Unit sales for the three-month period ended April 30, 2008increased slightly to 333 from 328. Unit sales for the six-month period ended April 30,2008 increased to 631 from 522 in the same period of fiscal 2007.  IMPACT unit volume increased slightly to 2%in the second quarter of fiscal 2008 compared to the second quarter of fiscal2007.

 

During the second quarterof fiscal 2008, revenues from outside North America accounted for 53% ofrevenues compared to 47% in the fiscal 2007 second quarter. During the firstsix months of fiscal 2008, revenues from outside North America accounted for53% of revenue compared to 51% in the first six months of fiscal 2007.

 

Quarter to quarter net revenue is subject to fluctuation given thenature of the machine vision industry and the capital nature of our product.

 

Gross profit increased37% to $849,000 for the three-month period ended April 30, 2008, comparedto $619,000 for the same period in fiscal 2007. For the 

 

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six-month period ended April 30,2008, gross profit increased 32% to $1,470,000 from $1,111,000 for the sameperiod in fiscal 2007. As a percentage of net revenues, the gross profit forthe second quarter of fiscal 2008 increased to 53% compared to 50% in the sameperiod of fiscal 2007. For the six-month period ended April 30, 2008,gross profit as a percentage of net revenue increased slightly to 50% comparedto 49% in the same period of fiscal 2007. We expect that our future grossmargins will continue to trend higher as our fixed manufacturing overhead isspread over a higher volume of sales.

 

Sales and marketing expenses increased 6% to $526,000for the three-month period ended April 30, 2008 compared to $495,000 forthe same period in fiscal 2007. For the six-month period ended April 30,2008, sales and marketing expenses increased 8% to $1,000,000 from $924,000 forthe same period in fiscal 2007. The increase in expenses in both the three andsix month periods ended 2008, are related to the additional employment in thisarea. As a percentage of net revenues, sales and marketing expenses decreasedto 33% for the second quarter 2008 compared to 40% for the same period infiscal 2007. For the six-month period ended April 30, 2008, sales andmarketing expenses as a percentage of net revenues decreased to 34% compared to40% in the same period in fiscal 2007. The Company expects sales and marketingexpenses in absolute dollars to remain relatively flat for the remainder offiscal 2008. Increases in sales expenditures may occur to the extent thatrevenue growth is achieved.

 

General and administrative expenses decreased 10% to$230,000 for the three-month period ended April 30, 2008, compared to$256,000 for the same period in fiscal 2007. For the six-month period ended April 30,2008, general and administrative expenses decreased 9% to $447,000 compared to$491,000 in the same period in fiscal 2007. The decrease in expenses in boththe three and six month periods ended 2008, primarily relate to the change fromfull time employment of our networking department to part time outsourcing. Asa percentage of net revenues, general and administrative expenses decreased to14% for the second quarter of fiscal 2008 compared to 21% for the same periodin fiscal 2007. For the six-month period ended April 30, 2008, general andadministrative expenses as a percentage of net revenues decreased to 15% from21% in the same period in fiscal 2007. The Company expects general andadministrative expenses to remain relatively flat for the remainder of fiscal2008.

 

Research and development expenses increased slightlyto $347,000 for the three-month period ended April 30, 2008, compared to$341,000 for the same period in fiscal 2007. For the six-month period ended April 30,2008, research and development increased 8% to $697,000 from $647,000 in thesame period in fiscal 2007. As a percentage of net revenues, research anddevelopment expenses decreased to 22% for the second quarter of fiscal 2008,compared to 27% for the second quarter of fiscal 2007. For the six-month periodended April 30, 2008, research and development expenses as a percentage ofnet revenues decreased to 24% from 28% in the same period in fiscal 2007. TheCompany expects research and development expenses to remain relatively flat forthe remainder of fiscal 2008.

 

The Company did not record an income tax benefit orexpense for the three and six month periods ended April 30, 2008 or 2007.

 

TheCompany’s net loss for the second quarter of fiscal 2008 decreased fromyear-ago levels to $256,000 or $0.02 per share, as compared with a loss of$466,000 or $0.07 per share for the same period in fiscal 2007. The Company’snet loss for the six-month period ended April 30, 2008 decreased to$670,000 or $0.06 per share, compared with a loss of $943,000 or $0.18 pershare for the 

 

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sameperiod in fiscal 2007. There were approximately 12.7 million shares outstandingduring the three-month period ended April 30, 2008, as compared withapproximately 6.2 million shares outstanding for the same period in fiscal2007. There were approximately 11.3 million shares outstanding during thesix-month period ended April 30, 2008, as compared with approximately 5.4million shares outstanding for the same period in fiscal 2007. The increase inthe number of shares outstanding resulted in a decrease in per share net lossfor the three and six-month period ended April 30, 2008 as compared to April 30,2007.

 

LIQUIDITYAND CAPITAL RESOURCES

 

At April 30, 2008 the Company had cash balancesof $576,000, working capital of approximately $1.6 million and no long-termdebt.

 

In the second quarter of fiscal 2008 the Companyincurred a net loss of $256,000 which included non-cash charges related todepreciation and amortization of $24,000. The net loss for the quarterdecreased $210,000 from the $466,000 loss reported in the second quarter offiscal 2007, which included $30,000 in non-cash charges relating todepreciation and amortization. For the six months ended April 30, 2008,cash used in operating activities was $537,000.

 

As of April 30,2008, the Company had no outstanding debt.

 

Working capital decreased $129,000 to$1,550,000 at April 30, 2008 from $1,679,000 at October 31, 2007. TheCompany financed its operations during the first six months of fiscal 2008through existing cash and cash equivalents, which was partially funded throughthe private placement of the Company’s securities completed on March 11,2008. Accounts receivable decreased $31,000 and inventories increased $19,000during the first six months of fiscal 2008. Accounts payable increased by$68,000 while accrued expenses decreased by $4,000 during the first six monthsof fiscal 2008.

 

Net cash used ininvesting activities was $11,000 during the six months ended April 30,2008 which accounted for fixed asset additions during the first six months offiscal 2008. This compares with $35,000 in fixed asset additions for the sameperiod in fiscal 2007. The Company expects that fixed asset additions for theremaining quarters of fiscal 2008 to continue at approximately the same rate,or slightly higher, as the first two quarters of fiscal 2008.

 

Net cash provided byfinancing activities relates to the private placement of the Company’ssecurities completed on March 11, 2008. For further details, pleasereference Note G under “Notes to Condensed Financial Statements.”

 

The Company does not have relationships withunconsolidated entities or financial partnerships, such as entities oftenreferred to as structured finance or special purpose entities, which would havebeen established for the purpose of facilitating off-balance sheet financialarrangements. As such, the Company is not materially exposed to any financing,liquidity, market or credit risk that could arise if we had engaged in sucharrangements.

 

The Company believes it does not havematerial exposure to quantitative and qualitative market risks. The carryingamounts reflected in the balance sheets of cash and cash equivalents, tradereceivables and trade payables approximate fair value at April 30, 2008due to the short maturities of these instruments.

 

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PPTVISION has realized significant operating losses over the past several years,resulting in recurring external capital requirements necessary to continue theoperations of the Company. The Company cannot assure that positive cash flowswill be realized within a time frame such that future external financing willnot be required to continue the operations of the Company. Further, the Company’scurrent business plan and future external financing requirements is uncertainand subject to change based upon, among other factors, market and industryconditions, the Company’s ability to continue to introduce new products,service existing customers, obtain new customers, and increase revenue and cashflow from operations. In the event that the Company needs to obtainadditional external capital to continue its operations, the Company believesthat a variety of debt or equity financing alternatives may be available,including borrowing secured by accounts receivable, inventory and other assets.However, there can be no assurance that this potential financing will be available.

 

Whilethe Company met its external working capital requirements for fiscal years2006, 2007 and 2008 through proceeds from sale of equity securities to P. R.Peterson, the Company has no commitments or agreements from Mr. Petersonor any other person at the current time to fund any future capitalrequirements. The Company’s efforts to raise additional funds from thesale of its equity may be hampered by the fact that its securities arerelatively illiquid and that more than a majority of the Company’s outstandingcommon stock is controlled by one shareholder. Additionally, any futurefinancing may be raised on terms that are dilutive to the holders of theCompany’s common stock.

 

CRITICALACCOUNTING POLICIES AND ESTIMATES

 

Adiscussion of the Company’s critical accounting policies was provided in Item 6in its Annual Report on Form 10-KSB for the fiscal year ended October 31,2007. There were no significant changes to these accounting policies during thefirst six months of 2008.

 

NEW ACCOUNTINGPRONOUNCEMENTS

 

Information regarding newaccounting pronouncements is included in Note H to Condensed UnauditedFinancial Statements, included in Item 1, “Financial Statements” of thisQuarterly Report on Form 10-QSB.

 

FORWARD LOOKINGSTATEMENTS

 

The discussion above contains forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995,including statements regarding the Company’s expectations, beliefs, intentionsand strategies regarding the future. Forward-looking statements include,without limitation, statements regarding the extent and timing of futurerevenues and expenses and customer demand. All forward-looking statementsincluded in this document are based on information available to the Company asof the date hereof, and the Company assumes no obligation to update any suchforward-looking statements.

 

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TheCompany’s actual results are subject to risks and uncertainties and coulddiffer materially from those discussed in the forward-looking statements. Thesestatements are based upon the Company’s expectations regarding a number offactors, including the Company’s ability to obtain additional working capitalor operating income sufficient to support its ongoing operations, changes inworldwide general economic conditions, cyclicality of capital spending bycustomers, the Company’s ability to keep pace with technological developmentsand evolving industry standards, worldwide competition, and the Company’sability to protect its existing intellectual property from challenges fromthird parties. A detailed description of the factors that could cause futureresults to materially differ from the Company’s recent results or thoseprojected in the forward-looking statements are contained in the section entitled “Descriptionof Business” under the caption “Important Factors Regarding Forward-LookingStatements” contained in its filing with the Securities and Exchange Commissionon Form 10-KSB for the year ended October 31, 2007 and other reportsfiled with the Securities and Exchange Commission.

 

Item 3:   CONTROLSAND PROCEDURES

 

(a)  Evaluation of Disclosure Controls andProcedures.

 

The Company’s President,Chief Executive Officer and Chief Financial Officer Joseph C. Christenson, hasreviewed the Company’s disclosure controls and procedures as of the end of theperiod covered by this report and concluded that the Company’s disclosurecontrols and procedures are effective.

 

(b)  Changes inInternal Control Over Financial Reporting.

 

-There have been nochanges in internal control over financial reporting that occurred during thefiscal quarter covered by this report that have materially affected, or arereasonably likely to materially affect, the registrant’s internal control overfinancial reporting.

 
| PART II. | OTHER  INFORMATION                                           |
|---------------|--------------------------------------------------------------|
|          |                                                         |
| Item 1:       | LEGAL  PROCEEDINGS                                           |
|          |                                                         |
|          | None.                                                        |
|          |                                                         |
| Item 2:       | UNREGISTERED SALES OF  EQUITY SECURITIES AND USE OF PROCEEDS |
|          |                                                         |
|          | None.                                                        |
|          |                                                         |
| Item 3.       | DEFAULTS UPON SENIOR  SECURITIES                             |
|          |                                                         |
|          | Not Applicable.                                              |
|          |                                                         |
| Item 4:       | SUBMISSION OF MATTERS  TO A VOTE OF SECURITY HOLDERS         |
|          |                                                         |
|          | None.                                                        |
|          |                                                         |
| Item 5:       | OTHER INFORMATION                                            |
|          |                                                         |
|          | None.                                                        |

 

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| Item 6: | EXHIBITS |
|---------|----------|
|    |     |
|    | (a)      | The following exhibits  are included herein: |
|    |     |   |
|    |     | 31.1 | Certification of President,  Chief Executive Officer and Chief Financial Officer pursuant to  Rules 13a-14(a) and 15d-14(a)of the Exchange Act. |
|    |     |   |   |
|    |     | 32.1 | Certification pursuant  to 18 U.S.C. §1350. |

 

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                                 | PPT VISION, INC.                                                 |
|--------------------------------------|------------------------------------------------------------------|
|                                 |                                                             |
| Date:  June 13,  2008 |                                                             |
|                                 |                                                             |
|                                 | /s/ Joseph C.  Christenson                                       |
|                                 | Joseph C.  Christenson                                           |
|                                 | President, Chief  Executive Officer and  Chief Financial Officer |

 

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