**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-QSB**

 

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**QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For theQuarterly Period Ended July 31, 2005**

**CommissionFile Number 0-11518**

 

**PPT VISION, INC.**

(Exact name of Small BusinessIssuer 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’s telephone number,including area code)

 

Check whether the issuer (1) has filed all reports required to befiled by Section 13 or 15(d) of the Exchange Act during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe last 90 days.  Yes ý  No o

 

Shares of $.10 par value common stock outstanding at August 31,2005: 2,998,747

 

 

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INDEX

 

PPT VISION, INC.

 
| Part I.  | Financial Information                                                                                    |   |
|---------------|----------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                     |   |
| Item 1.       | Financial Statements                                                                                     |   |
|          |                                                                                                     |   |
|          | Balance  Sheets as of July 31, 2005 and October 31, 2004                                       |   |
|          |                                                                                                     |   |
|          | Statements  of Operations for the Three and Nine Months Ended July 31, 2005 and July 31,  2004 |   |
|          |                                                                                                     |   |
|          | Statements  of Cash Flows for the Nine Months Ended July 31, 2005 and July 31,  2004           |   |
|          |                                                                                                     |   |
|          | Notes to  Condensed Financial Statements – July 31, 2005                                       |   |
|          |                                                                                                     |   |
| Item 2.       | Management’s  Discussion and Analysis or Plan of Operation                                          |   |
|          |                                                                                                     |   |
| Item 3.       | Controls  and Procedures                                                                                 |   |
|          |                                                                                                     |   |
| Part II. | Other  Information                                                                                       |   |
|          |                                                                                                     |   |
| Item 1.       | Legal  Proceedings                                                                                       |   |
|          |                                                                                                     |   |
| Item 2.       | Unregistered  Sales of Equity Securities and Use of Proceeds                                             |   |
|          |                                                                                                     |   |
| Item 3.       | Defaults Upon  Senior Securities                                                                         |   |
|          |                                                                                                     |   |
| Item 4.       | Submission of  Matters to a Vote of Security Holders                                                     |   |
|          |                                                                                                     |   |
| Item 5.       | Other  Information                                                                                       |   |
|          |                                                                                                     |   |
| Item 6.       | Exhibits                                                                                                 |   |
|          |                                                                                                     |   |
|          | Signatures                                                                                               |   |

 

2

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PPT VISION, INC.

 

BALANCE SHEETS

 
| ** **                                       | ** ** | **July 31, 2005** | ** ** | **October 31, 2004** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|---------------------------|------------|
| ** **                                       | ** ** | **(unaudited)**        | ** ** | **(audited)**             | ** ** |
| ASSETS                                           |       |                   |       |                      |       |
| Current assets                                   |       |                   |       |                      |       |
| Cash and  cash equivalents                       |       | $                      | 968,000    |                      | $          | 2,617,000 |   |
| Accounts  receivable, net                        |       | 1,298,000              |       | 1,912,000                 |       |
| Inventories:                                     |       |                   |       |                      |       |
| Manufactured  and purchased parts                |       | 693,000                |       | 828,000                   |       |
| Work-in-process                                  |       | 58,000                 |       | 105,000                   |       |
| Finished  goods                                  |       | 36,000                 |       | 44,000                    |       |
| Total  inventories, net                          |       | 787,000                |       | 977,000                   |       |
| Other  current assets                            |       | 149,000                |       | 243,000                   |       |
| Assets of  discontinued operations               |       | —                 |       | 200,000                   |       |
| Total  current assets                            |       | 3,202,000              |       | 5,949,000                 |       |
|                                             |       |                   |       |                      |       |
| Fixed  assets, net                               |       | 372,000                |       | 323,000                   |       |
| Intangible  assets, net                          |       | 77,000                 |       | 109,000                   |       |
| Other assets                                     |       | 7,000                  |       | 53,000                    |       |
| Total assets                                     |       | $                      | 3,658,000  |                      | $          | 6,434,000 |   |
|                                             |       |                   |       |                      |       |
| LIABILITIES AND SHAREHOLDERS’ EQUITY        |       |                   |       |                      |       |
| Current liabilities                              |       |                   |       |                      |       |
| Accounts  payable                                |       | $                      | 187,000    |                      | $          | 944,000 |   |
| Accrued  expenses                                |       | 308,000                |       | 513,000                   |       |
| Deferred  revenue – customer advances       |       | 9,000                  |       | 54,000                    |       |
| Total  current liabilities                       |       | 504,000                |       | 1,511,000                 |       |
|                                             |       |                   |       |                      |       |
| Shareholders’ equity                        |       |                   |       |                      |       |
| Common stock                                     |       | 300,000                |       | 300,000                   |       |
| Capital in  excess of par value                  |       | 36,080,000             |       | 36,075,000                |       |
| Accumulated  deficit                             |       | (33,226,000            | )          | (31,452,000               | )          |
| Total  shareholders’ equity                 |       | 3,154,000              |       | 4,923,000                 |       |
| Total  liabilities and shareholders’ equity |       | $                      | 3,658,000  |                      | $          | 6,434,000 |   |

 

See accompanying notes tocondensed financial statements

 

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PPT VISION, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 
| ** **                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **July 31,**      | ** ** | **July 31,**     | ** ** |
| ** **                                  | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues                                    |       | $                      | 1,317,000  |                  | $          | 2,505,000 |   | $ | 4,409,000 |   | $ | 6,565,000 |   |
| Cost of revenues                            |       | 626,000                |       | 1,192,000             |       | 2,158,000 |   | 3,234,000 |   |
| Gross profit                                |       | 691,000                |       | 1,313,000             |       | 2,251,000 |   | 3,331,000 |   |
|                                        |       |                   |       |                  |       |   |   |   |   |
| Expenses:                                   |       |                   |       |                  |       |   |   |   |   |
| Sales and  marketing                        |       | 487,000                |       | 742,000               |       | 1,832,000 |   | 2,083,000 |   |
| General and administrative                  |       | 246,000                |       | 278,000               |       | 806,000 |   | 860,000 |   |
| Research and  development                   |       | 286,000                |       | 400,000               |       | 996,000 |   | 1,224,000 |   |
| Restructuring  charges                      |       | —                 |       | —                |       | 390,000 |   | — |   |
| Total expenses                              |       | 1,019,000              |       | 1,420,000             |       | 4,024,000 |   | 4,167,000 |   |
| Interest and other Income                   |       | 34,000                 |       | (14,000               | )          | 54,000 |   | (12,000 | )  |
| Loss from continuing operations             |       | (294,000               | )     | (121,000              | )     | (1,719,000 | )  | (848,000 | )  |
| Income (loss) from discontinued operations  |       | —                 |       | (122,000              | )          | (55,000 | ) | 36,000 |   |
| Net loss                                    |       | $                      | (294,000   | )                | $          | (243,000 | )  | $ | (1,774,000 | )  | $ | (812,000 | )  |
| Per share data:                             |       |                   |       |                  |       |   |   |   |   |
| Weighted average basic shares outstanding   |       | 2,998,000              |       | 2,980,000             |       | 2,997,000 |   | 2,961,000 |   |
| Weighted average diluted shares outstanding |       | 2,998,000              |       | 2,980,000             |       | 2,997,000 |   | 2,961,000 |   |
| Basic and diluted loss per common share     |       |                   |       |                  |       |   |   |   |   |
| Loss from  continuing operations            |       | $                      | (0.10      | )                | $          | (0.04 | )  | $ | (0.57 | )  | $ | (0.28 | )  |
| Income  (loss) from discontinued operations |       | $                      | —     |                  | $          | (0.04 | )  | $ | (0.02 | )  | $ | 0.01 |   |
| Net loss                                    |       | $                      | (0.10      | )                     | $          | (0.08 | )  | $ | (0.59 | )  | $ | (0.27 | )  |

 

See accompanying notes tocondensed financial statements

 

4

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PPT VISION, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
| ** **                                                                   | ** ** | **Nine Months**        | ** ** | **Nine Months**        | ** ** |
|------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | **Ended**              | ** ** | **Ended**              | ** ** |
| ** **                                                                   | ** ** | **July 31, 2005** | ** ** | **July 31, 2004** | ** ** |
|                                                                         |       |                   |       |                   |       |
| Net loss                                                                     |       | $                      | (1,774,000 | )                      | $          | (812,000 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                   |       |                   |       |
| Depreciation  and amortization                                               |       | 173,000                |       | 325,000                |       |
| Gain on sale  of securities                                                  |       | (25,000                | )          | —                 |       |
| Loss  (income) from discontinued operations                                  |       | 55,000                 |       | (36,000                | )          |
|                                                                         |       |                   |       |                   |       |
| Change in assets and liabilities:                                            |       |                   |       |                   |       |
| Accounts  receivable                                                         |       | 614,000                |       | (120,000               | )          |
| Inventories                                                                  |       | 190,000                |       | (258,000               | )          |
| Other assets                                                                 |       | 94,000                 |       | 80,000                 |       |
| Accounts  payable                                                            |       | (757,000               | )          | 237,000                |       |
| Accrued  expenses                                                            |       | (205,000               | )          | (41,000                | )          |
| Deferred  revenue - customer advances                                        |       | (45,000                | )          | (52,000                | )          |
| Total  adjustments                                                           |       | 94,000                 |       | 135,000                |       |
| Net cash  used in operating activities                                       |       | (1,680,000             | )          | (677,000               | )          |
|                                                                         |       |                   |       |                   |       |
| Cash flows from investing activities:                                        |       |                   |       |                   |       |
| Purchase of  fixed assets                                                    |       | (188,000               | )          | (89,000                | )          |
| Net  investment in other long-term assets                                    |       | (2,000                 | )          | (14,000                | )          |
| Proceeds  from sale of securities                                            |       | 71,000                 |       | —                 |       |
| Net cash  used in investing activities                                       |       | (119,000               | )          | (103,000               | )          |
|                                                                         |       |                   |       |                   |       |
| Cash flows from financing activities:                                        |       |                   |       |                   |       |
| Proceeds  from the exercise of stock options                                 |       | 3,000                  |       | 6,000                  |       |
| Proceeds  from the issuance of stock                                         |       | 2,000                  |       | 109,000                |       |
| Net cash  provided by financing activities                                   |       | 5,000                  |       | 115,000                |       |
| Net cash  provided by discontinued operations                                |       | 145,000                |       | 504,000                |       |
| Net decrease  in cash and cash equivalents                                   |       | (1,649,000             | )          | (161,000               | )          |
| Cash and cash equivalents at beginning of  year                              |       | 2,617,000              |       | 2,086,000              |       |
| Cash and cash equivalents at end of period                                   |       | $                      | 968,000    |                   | $          | 1,925,000 |   |

 

See accompanying notes tocondensed financial statements

 

5

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PPT VISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

July 31, 2005

(UNAUDITED)

 

NOTE A – DESCRIPTION OF BUSINESS

 

PPT VISION, Inc. (“The Company”) designs, manufactures, andmarkets camera-based intelligent systems for automated inspection inmanufacturing applications.  The Company’sproducts, commercially known as machine vision systems, enable manufacturers torealize significant economic paybacks by increasing the quality of manufacturedparts and improving the productivity of manufacturing processes.  The Company’s machine vision product line issold on a global basis to end-users, system integrators, distributors and originalequipment manufacturers (OEM’s) primarily in the electronic and semiconductorcomponent, automotive, medical device, and packaged goods industries.

 

NOTE B - BASIS OF PRESENTATION

 

The accompanying unaudited condensed financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with theinstructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States ofAmerica for complete financial statements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded.  Results of operations for theinterim periods are not necessarily indicative of the results to be expectedfor the full year or of the results for any future periods.

 

The Balance Sheet at October 31, 2004 has been derived from theCompany’s audited financial statements for the fiscal year ended October 31,2004 but does not include all of the information and footnotes required byaccounting principles generally accepted in the United States of America forcomplete financial statements.

 

For further information, refer to the financial statements andfootnotes thereto included in the Company’s annual report on Form 10-KSBfor the year ended October 31, 2004.

 

NOTE C – REVENUE RECOGNITION AND COST OF REVENUES

 

The Company typically recognizes revenue on product sales upon shipmentto the end user customers if contractual obligations have been substantiallymet and title and risk of loss have passed to the customer, which is generallythe case for sales of machine vision systems, spare parts and accessories.  The Company also recognizes revenue onproducts sold to distributors upon shipment because contracts with distributorsdo not include post-shipment obligations or any right of return provisions andpricing is fixed at the time of sale. Revenue related to application engineering, product development andcustomer training services is recognized when the services are performed.

 

6

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Cost of revenues include the cost of products sold and the cost of third-partyapplication engineers who perform certain installation services at our requestfor customers.  Cost of revenues does notinclude any costs associated with engineering services performed by PPTemployees as these costs are a fixed component of our operating cost structureand an allocation of a portion of these costs to cost of revenues would bearbitrary and lead to inconsistent presentation of gross margins and operatingcosts.

 

NOTE D – LIQUIDITY AND CAPITAL RESOURCES

 

The Company had a loss from continuingoperations for the three and nine months ended July 31, 2005 of $294,000and $1,719,000, respectively.  Cash usedin operations was $1,680,000 for the nine months ended July 31, 2005.  Effective May 1, 2005, the Companyfinalized an agreement with its current landlord to restructure the Company’slease obligation with respect to its headquarters facility in Eden Prairie,Minnesota.  Under the amended leaseterms, the Company received a reduction in its base rental rates and its leasedfacility decreased from approximately 64,000 square feet to approximately35,000 square feet, resulting in a savings of approximately $120,000 perquarter.  In exchange for these amendedlease terms, the Company paid and capitalized $140,000 for certain leaseholdimprovements associated with the reconfigured space which will be amortizedover the revised lease term and also paid approximately $300,000 in accrueddeferred rent.  The Company also agreedto pay a $240,000 lease termination fee (which was expensed) in equal monthlyinstallments over a twelve-month period starting May 1, 2005 and to extendthe current lease term by two years through May, 2011.  As a result, cash balances dropped to$968,000 as of July 31, 2005 from $2,617,000 at October 31, 2004.

 

The Company believes that existing cashbalances and potentially available sources of capital willenable the Company to meet its operating, working capital and capitalresource obligations through the next twelve months.

 

The other potential sourcesof capital that may be available to the Company include sales of its common orpreferred stock, external borrowing, customer or vendor financing, customersponsored research and development projects or investments by strategicpartners.

 

There can beno assurance that the Company will not incur additional losses for a longerperiod of time, will generate positive cash flow from operations, raiseadditional capital, or that the Company will attain or thereafter sustainprofitability in any future period.

 

NOTE E – LOSS PER SHARE

 

On March 10, 2005, the Company announced that its Board ofDirectors approved a 1-for-4 reverse split of its common stock effective as ofthe close of business on March 31, 2005 and the conversion to book-entryshare registration also effective as of March 31, 2005.  In connection with the reverse split, theBoard of Directors also approved an amendment to Article 4.1 of theCompany’s Articles of Incorporation to proportionately reduce the number ofshares of common stock authorized from 20,000,000 shares to 5,000,000shares.  All share numbers 

 

7

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presented in this report have been restated to give effect to the 1-for-4reverse split.

 

At July 31, 2005, options to purchase 341,218 shares of the Company’scommon stock were not considered in the calculation of diluted earnings pershare.  At July 31, 2004, options topurchase 271,119 shares and warrants to purchase 12,500 shares of the Company’scommon stock were not considered in the calculation of diluted earnings pershare.  As the Company had a net loss forboth periods, the inclusion of outstanding options and warrants would have beenanti-dilutive.

 

NOTE F –STOCK-BASED COMPENSATION

 

TheCompany uses the intrinsic value method prescribed by Accounting PrinciplesBoard Opinion No. 25, “Accounting for Stock Issued to Employees,” andrelated interpretations in accounting for employee stock options.  Under the intrinsic value method,compensation expense is recorded only to the extent that the market price ofthe common stock exceeds the exercise price of the stock option on the date ofgrant.

 

In December 2002, theFinancial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation- Transition and Disclosure.”  SFAS No. 148 is an amendment to SFAS No. 123providing alternative methods of transition for a voluntary change to the fairvalue based method of accounting for stock-based employee compensation and alsoprovides required additional disclosures about the method of accounting forstock-based employee compensation. The Company adopted the annualdisclosure provision of SFAS No. 148 during the year ended October 31,2003.  The Company chose to not adopt thevoluntary change to the fair value based method of accounting for stock-basedemployee compensation, pursuant to SFAS No. 148.

 

The Company has adopted the disclosure-only provisions of SFAS No. 148,Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized with respect tostock options.  Had compensation cost forstock options been determined based on the fair value methodology prescribed bySFAS 123, the Company’s net loss and net loss per share would have been reducedto the pro forma amounts indicated below:

 

8

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| **Three Months Ended****July 31,** | ** ** | ** **  | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------|------------|-------------|------------|----------|------------|----------|------------|
| Net loss                                |       | As reported |       | $        | (294,000   | )        | $          | (243,000 | ) |
|                                    |       | Pro forma   |       | $        | (351,000   | )        | $          | (299,000 | ) |
|                                    |       |        |       |     |       |     |       |
| Stock based compensation                |       | As reported |       | $        | —     |     | $          | — |   |
|                                    |       | Pro forma   |       | $        | (57,000    | )        | $          | (56,000 | ) |
|                                    |       |        |       |     |       |     |       |
| Basic and diluted loss per share        |       | As reported |       | $        | (0.10      | )        | $          | (0.08 | ) |
|                                    |       | Pro forma   |       | $        | (0.12      | )        | $          | (0.10 | ) |

 
| **Nine  Months Ended****July 31,** | ** ** | ** **  | ** ** | **2005** | ** ** | **2004** |   |
|-----------------------------------------|------------|-------------|------------|----------|------------|----------|--------|
| Net loss                                |       | As reported |       | $        | (1,774,000 | )        | $      | (812,000 | ) |
|                                    |       | Pro forma   |       | $        | (1,895,000 | )        | $      | (978,000 | ) |
|                                    |       |        |       |     |       |     |   |
| Stock based compensation                |       | As reported |       | $        | —     |     | $      | — |   |
|                                    |       | Pro forma   |       | $        | (121,000   | )        | $      | (166,000 | ) |
|                                    |       |        |       |     |       |     |   |
| Basic and diluted loss per share        |       | As reported |       | $        | (0.59      | )        | $      | (0.27 | ) |
|                                    |       | Pro forma   |       | $        | (0.63      | )        | $      | (0.33 | ) |

 

| **For All Periods Ended  July 31,** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
| Risk free interest rates                 |       | 4.0      | %          | 4.0      | %          |
| Expected lives                           |       | 6.0      |       | 6.0      |       |
| Expected volatility                      |       | 180      | %          | 115      | %          |
| Expected dividends                       |       | 0        | %          | 0        | %          |

 

NOTE G – CUSTOMER AND GEOGRAPHIC DATA

 

The followingtables set forth the percentage of the Company’s net revenues (including salesdelivered through international distributors) by geographic location for thethree and nine months ended July 31, 2005 and 2004:

 
| **Three Months Ended July 31** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| United States                       |       | 48       | %          | 42       | %          |
| Europe and Canada                   |       | 27       | %          | 16       | %          |
| Asia-Pacific                        |       | 25       | %          | 41       | %          |
| South America                       |       | 0        | %          | 1        | %          |

 
| **Nine  Months Ended July 31** | ** ** | **2005** | ** ** | **2004** |   |
|-------------------------------------|------------|----------|------------|----------|--------|
| United States                       |       | 47       | %          | 38       | %      |
| Europe and Canada                   |       | 29       | %          | 18       | %      |
| Asia-Pacific                        |       | 23       | %          | 43       | %      |
| South America                       |       | 1        | %          | 1        | %      |

 

In the three-month period ended July 31, 2005, revenues from onecustomer represented approximately 16% of total revenue.  In the three-month period ended 

 

9

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July 31, 2004, revenues from one customer accounted for 28% oftotal revenue.  In the nine-month periodended July 31, 2005, revenues from one customer represented approximately12% of total revenue.  In the nine-monthperiod ended July 31, 2004, revenues from one customer accounted for 30%of total revenue.

 

NOTE H – NEW ACCOUNTING PRONOUNCEMENTS

 

In December 2004, FASB issued SFAS No. 123 (revised 2004), “Share-BasedPayment,” that focuses primarily on accounting for transactions in which anentity obtains employee services in share-based payment transactions.  This statement replaces SFAS No. 123,“Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25,“Accounting for Stock Issued to Employees.” Beginning with our quarterly period that begins November 1, 2006,we will be required to expense the fair value of employee stock options andsimilar awards.  As a public company, weare allowed to select from two alternative transition methods, each havingdifferent reporting implications.  Wehave not yet determined the impact of SFAS No. 123R on us.

 

In June, 2005, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards (SFAS) No. 154, “AccountingChanges and Error Corrections”, a replacement of APB Opinion No. 20 andFASB Statement No. 3.  The statementapplies to all voluntary changes in accounting principle, and changes therequirements for accounting for and reporting of a change in accountingprinciple.  SFAS No. 154 requiresretrospective application to reporting of a change in accounting principle.  SFAS No. 154 requires retrospectiveapplication to prior periods’ financial statements of a voluntary change inaccounting principle unless it is impracticable.  SFAS No. 154 is effective for accountingchanges and corrections of errors made in fiscal years beginning after December 15,2005.  Earlier application is permittedfor accounting changes and corrections of errors made occurring in fiscal yearsbeginning after June 1, 2005.  Thestatement does not change the transition provisions of any existing accountingpronouncements, including those that are in a transition phase as of theeffective date of this statement.  TheCompany does not expect the adoption of SFAS No. 154 to have a materialeffect on its financial statements.

 

NOTE I – DISCONTINUED OPERATIONS

 

In the fourth quarter of fiscal 2004, the Company implemented astrategy to focus all of its resources on its core 2D machine visionbusiness.  In accordance with this plan,in the fourth quarter of fiscal 2004, the Company initiated and completed thesale of its 3D business unit, together with all the related patents,intellectual property, inventory and equipment. The terms of the sale included cash payments of $1.0 million and theopportunity to receive royalties on sales of certain products by the buyer forthe next five years.  The royalties,which will be recorded as a part of discontinued operations, are anticipated tobe minimal, if any.  To date there havebeen no royalties.  As a result of thesale, in accordance with appropriate accounting principles, the Company hasrevised the financial results for all periods presented to include the 3Dbusiness as a discontinued operation. Accordingly, all 3D related revenue and expenses have been removed fromcontinuing operations and presented in a separate line in the statement ofoperations entitled “income or (loss) from discontinued operations.”  Below is a Condensed Statement of Operationsfor 

 

10

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the discontinued operations for the three and nine month periods ended July 31,2004 and 2005.

 
| **Condensed Statement of  Operations** | ** ** | **Quarter Ended   July 31, 2005** | ** ** | **Quarter Ended  July 31, 2004** | ** ** |
|----------------------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| Revenues                               |       | $                                      | —     |                                  | $          | 228,000 |   |
| Cost of revenues                       |       | —                                 |       | 7,000                                 |       |
| Gross profit                           |       | —                                 |       | 221,000                               |       |
| Total operating expenses               |       | —                                 |       | 343,000                               |       |
| Loss from discontinued Operations      |       | $                                      | —     |                                  | $          | (122,000 | ) |

 
| **Condensed  Statement of  Operations**    | ** ** | **Nine-Month Ended  July 31, 2005** | ** ** | **Nine-Month Ended  July 31, 2004** | ** ** |
|--------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| Revenues                                   |       | $                                        | 169,000    |                                     | $          | 1,219,000 |   |
| Cost of revenues                           |       | 56,000                                   |       | 183,000                                  |       |
| Gross profit                               |       | 113,000                                  |       | 1,036,000                                |       |
| Total operating expenses                   |       | 168,000                                  |       | 1,000,000                                |       |
| Income (loss) from discontinued operations |       | $                                        | (55,000    | )                                        | $          | 36,000 |   |

 
| **Assets**          | ** ** | **July 31, 2005** | ** ** | **October 31, 2004** | ** ** |
|---------------------|------------|------------------------|------------|---------------------------|------------|
| Accounts receivable |       | $                      | —     |                      | $          | 200,000 |   |
|                     |            |                        |            |                           |            |  |  |

 

NOTE J – RESTRUCTURING ACTIONS

 

In the secondquarter of fiscal 2005, the Company completed a three part corporaterestructuring in an effort to bring the Company’s cost structure into closeralignment with current revenues.  Thefirst part of this plan involved the closing of the Company’s Michiganoffice.  The functions of the Michiganoffice have been transferred to several of the Company’s system integrationpartners.  The second part of the planinvolved the restructuring of the Company’s lease obligation with respect toits headquarters facility in Eden Prairie, Minnesota. Under theamended lease terms signed on April 29, 2005, the Company received areduction in its base rental rates and its leased facility decreased fromapproximately 64,000 square feet to approximately 35,000 square feet resultingin a savings of approximately $120,000 per quarter.  In exchange for these amended lease terms,the Company paid $140,000 for certain leasehold improvements associated withthe reconfigured space and also paid approximately $300,000 in accrued deferredrent.  The Company is also paying a$240,000 lease termination fee, which was accrued in the second quarter offiscal 2005, in equal monthly installments over a twelve-month period whichstarted on May 1, 2005.  The amendedlease terms also extended the current lease term by two years through May,2011. The thirdpart of the plan included other operating expense reductions primarilyconsisted of an approximately 15% workforce reduction.  When taken together, the three parts of thisrestructuring will result in a reduction of the Company’s total cost structureby over $1,200,000 per year.

 

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An analysis of the components of the restucturing charge related tothese restructuring actions is as follows:

 
| Lease  termination fee and related costs                   |   | $        | 280,000 |   |
|------------------------------------------------------------|--------|----------|---------|--------|
| Michigan office closure costs                              |   | 60,000   |    |
| Severance costs                                            |   | 50,000   |    |
| Total restructuring charge                                 |   | $        | 390,000 |   |
| Less: Payment through July 31, 2005                   |   | (182,000 | )       |
| Amount included in accrued expenses at July 31,  2005 |   | $        | 208,000 |   |

 

NOTE K – SALE OF ELECTRO-SENSORS, INC. COMMON STOCK

 

During the third quarter of fiscal 2005, the Company sold 13,000 sharesof Electro-Sensors, Inc. common stock, resulting in gross proceeds of$71,000.  At July 31, 2005 theCompany continued to own 9,500 shares of Electro-Sensors, Inc. commonstock.

 

Item 2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

# Overview

 

PPT VISION, Inc.designs, manufactures, and markets camera-based intelligent systems for automatedinspection in manufacturing applications. The Company’s products, commerciallyknown as machine vision systems, enable manufacturers to realize significanteconomic paybacks by increasing the quality of manufactured parts and improvingthe productivity of manufacturing processes. The Company’s machine vision product line is sold on a global basis toend-users, system integrators, distributors and original equipmentmanufacturers (OEM’s) primarily in the electronic and semiconductor component,automotive, medical device, and packaged goods industries.

 

The Company’s revenues decreased 47% to $1,317,000 during the thirdquarter ended July 31, 2005 compared to sales of $2,505,000 in the prioryear’s third quarter.  The Company’s lossfor the quarter ended July 31, 2005 increased to $294,000 or $.10 pershare compared to $243,000 or $.08 per share in the prior year’s period.  The decrease in revenues in the third quarter resulted largely fromthe discontinuation of sales of our older analog vision units to a large OEMcustomer, which accounted for approximately $703,000 of revenue in the thirdquarter of fiscal 2004.  Sales to othercustomers approximated $1.8 million in the third quarter of fiscal 2004.

 

Revenues decreased 33% to $4,409,000 during the nine-month period endedJuly 31, 2005 compared to the prior year’s nine-month period and the lossincreased to $1,774,000 or $0.59 per share compared to a loss of $812,000 or$0.27 per share in the prior year’s period. Again, the decrease in revenues in the nine-month period ended July 31,2005 resulted from the discontinuation of sales of our 

 

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older analog vision units to a large OEM customer, which accounted forapproximately $1,983,000 of revenue in the nine-month period ended July 31,2004.  Sales to other customersapproximated $4.6 million in the nine-month period of last year.

 

During thefiscal 2005 third quarter, revenues from outside the United States accountedfor 52% of revenues compared to 58% in the fiscal 2004 third quarter.  During the first nine months of fiscal 2005,revenues from outside the United States accounted for 53% compared to 62% inthe first nine months of fiscal 2004.

 

Totaloperating expenses for the three-month period ending July 31, 2005 were$1,019,000 a 28% decrease in comparison to total operating expenses of$1,420,000 in the prior years third quarter. Total operating expenses in the nine-month period ending July 31,2005 were $4,024,000 compared to $4,167,000 for the prior year’s nine-monthperiod.  These reductions in operatingexpenses reflect the effect of the restructuring actions implemented in thesecond quarter ending April 30, 2005 as described in Note J.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Management’s discussion and analysis of its financial condition andresults of operations are based on the Company’s accompanying unauditedcondensed financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and with the instructions to Form 10-QSB.  Accordingly, they do not include all of theinformation required by accounting principles generally accepted in UnitedStates of America for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included.

 

The preparation of these financial statements requires management tomake certain estimates and assumptions that affect the reported amounts ofassets and liabilities as of the date of the financial statements and thereported revenues and expenses during the reporting period.  Management bases its estimates on historicalexperience and various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities.  Actual results could differ from theseestimates.

 

Management believes the Company’s critical accounting policies andareas that require more significant judgments and estimates used in thepreparation of its financial statements to be:

 

•                  revenuerecognition and cost of revenues;

•                  estimatingvaluation allowances, specifically the allowance for doubtful accounts andinventory; and

•                  valuationand useful lives of long-lived and intangible assets.

 

### Revenue Recognition and Costsof Revenues

 

The Company typically recognizes revenue on product sales upon shipmentto the end user customers if contractual obligations have been substantiallymet and title and risk of loss have passed to the customer, which is generallythe case 

 

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for sales of 2D machine vision systems, spare parts andaccessories.  The Company also recognizesrevenue on products sold to distributors upon shipment because contracts withdistributors do not include post-shipment obligations or any right of returnprovisions and pricing is fixed at the time of sale.  Services revenue, which includes applicationengineering, product development, customer training and repair services, isrecognized when the services are performed.

 

Costs of revenues include the cost of products sold and the cost ofthird party application engineers who perform certain installation services atour request for customers.  Cost ofrevenues does not include any costs associated with engineering servicesperformed by PPT employees as these costs are a fixed component of ouroperating cost structure and an allocation of a portion of these costs to costof revenues would be arbitrary and lead to inconsistent presentation of grossmargins and operating costs.

 

# ValuationAllowances

 

Management estimates the allowance for doubtful accounts by analyzingaccounts receivable balances by age and considering specific factors about theindividual customer’s financial condition. When it is deemed probable that all or a portion of a customer’s accountis uncollectible, a corresponding amount is added to the reserve.

 

The Company’s inventory primarily consists of parts and other materialsthat are used in the manufacture of vision systems.  The Company generally only builds systemsbased on customer orders and as a result maintains only a minor amount offinished goods inventory.  Managementestablishes valuation reserves on inventory for estimated excess and obsoleteinventory equal to the difference between the cost of inventory and itsestimated market value based on assumptions about future product demand andmarket conditions.  In view of the rapidpace of technological change in the machine vision industry, the Companygenerally considers inventory that has had no usage for one year to beobsolete.  In addition, changes in theCompany’s product offerings or those of the Company’s competitors may alsoresult in excess or obsolete inventory levels. Accordingly, these factors will also be considered in the determinationof the market value of inventory.

 

# Long-Livedand Intangible Assets

 

The Company reviews its long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of assets to be held and used is measured by a comparisonof the carrying amount of an asset to undiscounted future net cash flowsexpected to be generated by the assets. If these assets are considered to be impaired, the impairment to berecognized is measured by the amount by which the carrying amount of the assetsexceeds the fair value of the assets.

 

RESULTS OF OPERATIONS

 

Revenues

 

Net revenues decreased 47% to $1,317,000 for the three-month periodended July 31, 2005, compared to net revenues of $2,505,000 for the sameperiod in fiscal 

 

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2004.  For the nine-month periodended July 31, 2005, revenues decreased 33% to $4,409,000 from $6,565,000for the same period in fiscal 2004.  Unitsales of the Company’s machine vision systems decreased to 192 for the thirdquarter of fiscal 2005 versus 281 for the same period in fiscal 2004.  Unit sales for the nine-month period ended July 31,2005 decreased to 604 from 682 in the same period of fiscal 2004.  In the three-month period ended July 31,2005, revenues from one customer represented approximately 16% of totalrevenue.  In the three-month period endedJuly 31, 2004, revenues from one customer accounted for 28% of totalrevenue.  In the nine-month period ended July 31,2005, revenues from one customer represented approximately 12% of totalrevenue.  In the nine-month period ended July 31,2004, revenues from one customer accounted for 30% of total revenue.

 

The decrease in revenues in thethree-month and nine-month period ended July 31, 2005 primarily resultedfrom the discontinuation of sales of our older analog vision units to a largeOEM customer, which accounted for approximately $703,000 of revenue in thethird quarter of fiscal 2004 and $1,983,000 for the nine-month period ended July 31,2004.  Sales to other customersapproximated $1.8 million in the third quarter of last year and $4.6 millionfor the nine-month period ended July 31, 2004.

 

During the fiscal 2005 third quarter, revenues from outside the UnitedStates accounted for 52% of revenues compared to 58% in the fiscal 2004 thirdquarter.  During the first nine months offiscal 2005, revenues from outside the United States accounted for 53% comparedto 62% in the first nine months of fiscal 2004.

 

We will continue to experience adversequarter-over-quarter revenue comparisons as we transition almost exclusively toproduct development and sales of the IMPACT family of products.  In addition, revenue comparisons may beunfavorable for the current fiscal year compared to 2004 as we are no longershipping product to the one large OEM customer who was a significant customerin each of the first three quarters of fiscal 2004.  Revenue trends may also be inconsistent giventhe nature of the machine vision industry and the capital nature of our product.

 

Gross profit decreased 47% to $691,000 for the three-month period endedJuly 31, 2005, compared to $1,313,000 for the same period in fiscal2004.  For the nine-month period ended July 31,2005, gross profit decreased 32% to $2,251,000 from $3,331,000 for the sameperiod in fiscal 2004.  As a percentageof net revenues, the gross profit for the third quarter of fiscal 2005 andfiscal 2004 was 52%.  For the nine-monthperiods ended July 31, 2005 and 2004, gross profits as a percentage of netrevenues were 51%.  The gross marginsthis year were approximately the same as last year for both the three and ninemonth periods, even though revenues were substantially lower.  This is due to the fact that a significantportion of last years sales consisted of older, lower gross margin Passport andScout product lines.  Now that a majorityof the Company’s revenues consist of its newer, higher gross margin, IMPACTproduct line, it is expected that future gross margins will trend into the 55%to 60% range as our fixed manufacturing overhead is spread over a higher volumeof sales.

 

Sales and marketing expensesdecreased 34% to $487,000 for the three-month period ended July 31, 2005compared to $742,000 for the same period in fiscal 2004.  For the nine-month period ended July 31,2005, sales and marketing expenses decreased 12% to $1,832,000 from $2,083,000for the same period in fiscal 2004.  As apercentage of net revenues, sales and marketing expenses 

 

15

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increased to 37% for thethird quarter of fiscal 2005 compared to 30% for the same period in fiscal2004.  For the nine-month period ended July 31,2005, sales and marketing expenses as a percentage of net revenues increased to42% compared to 32% in the same period in fiscal 2004.  This increase is the result of a decrease insales. The Company expects sales and marketing expenses in absolute dollars toremain relatively flat for the remainder of fiscal 2005. Increases in sales andmarketing expenditures may occur to the extent that revenue growth is achieved.

 

General and administrativeexpenses decreased 12% to $246,000 for the three-month period ended July 31,2005, compared to $278,000 for the same period in fiscal 2004.  For the nine-month period ended July 31,2005, general and administrative expenses decreased 6% to $806,000 as comparedto $860,000 in the same period in fiscal 2004. As a percentage of net revenues, general and administrative expensesincreased to 19% for the third quarter of fiscal 2005 versus 11% for the sameperiod in fiscal 2004.  For thenine-month period ended July 31, 2005, general and administrative expensesas a percentage of net revenues increased to 18% from 13% in the same period infiscal 2004.  The Company expects generaland administrative expenses to remain relatively flat for the remainder offiscal 2005.

 

Research and developmentexpenses decreased 29% to $286,000 for the three-month period ended July 31,2005, compared to $400,000 for the same period in fiscal 2004. For thenine-month period ended July 31, 2005, research and development expensesdecreased 19% to $996,000 from $1,224,000 in the same period in fiscal2004.  As a percentage of net revenues,research and development expenses increased to 22% for the third quarter of fiscal2005, compared to 16% for the third quarter of fiscal 2004.  For the nine-month period ended July 31,2005, research and development expenses as a percentage of net revenuesincreased to 23% from 19% in the same period in fiscal 2004.  Again, the Company expects research anddevelopment expenses to remain relatively flat for the remainder of fiscal2005.

 

The Company did not recordan income tax benefit or expense for the three and nine month periods ended July 31,2005 or 2004.

 

The Company’s net loss from continuingoperations for the third quarter of fiscal 2005 increased from year-ago levelsto $294,000 or 10 cents per share, as compared with a loss of $121,000 or 4cents per share for the same period in fiscal 2004.  The Company’s net loss from continuingoperations for the nine-month period ended July 31, 2005 increased to$1,719,000 or 57 cents per share, as compared with a loss of $848,000 or 28cents per share for the same period in fiscal 2004.  There were approximately 3.0 million sharesoutstanding during the three and nine month periods in fiscal 2005 and 2004.

 

The results of our discontinued operationsresulted in no loss for the third quarter of fiscal 2005 and a loss of $122,000or $0.04 per share in the third quarter of fiscal 2004.  Our discontinued operations resulted in aloss of $55,000 or 2 cents for the nine-month ended July 31, 2005 comparedto income of $36,000 or 1 cent per share in the same period of fiscal 2004.

 

LIQUIDITYAND CAPITAL RESOURCES

 

At July 31, 2005 theCompany had cash balances of $968,000, working capital of approximately $2.7million and no long-term debt.

 

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In the third quarter offiscal 2005 the Company incurred a net loss from continuing and discontinuedoperations of $294,000 which included non-cash charges related to depreciationand amortization of $46,000.  The netloss for the quarter increased $51,000 from the $243,000 loss reported in thethird quarter of fiscal 2004.  For thequarter ended July 31, 2005, cash used in operating activities was$425,000 and for the nine-month period ended July 31, 2005, cash used inoperating activities was $1,680,000.  Forthe nine-month period, this represents a decrease of $981,000 from fiscal 2004to fiscal 2005.  The increase in cashused in operations during fiscal 2005 relates to the Company’s second quartercorporate restructuring actions.  TheCompany finalized an agreement with its current landlord to restructure theCompany’s lease obligation with respect to its headquarters facility in EdenPrairie, Minnesota.  Under the amendedlease terms, the Company received a reduction in its base rental rates and itsleased facility decreased from approximately 64,000 square feet toapproximately 35,000 square feet resulting in a savings of approximately$120,000 per quarter.  In exchange forthese amended lease terms, the Company paid $140,000 for certain leaseholdimprovements associated with the reconfigured space and also paid approximately$300,000 in accrued deferred rent. The Company expects that the restructuringactions will reduce operating expenses by approximately $1.2 millionannually.  Future building rentcommitments for the next five years are as follows:

 
| Three Months  ended Oct 31,     | 2005  |   | $       | 71,000    |   |
|---------------------------------|-------|--------|---------|-----------|--------|
|                            | 2006  |   | 285,000 |      |
|                            | 2007  |   | 285,000 |      |
|                            | 2008  |   | 285,000 |      |
|                            | 2009  |   | 285,000 |      |
| Nine months ended July 31, | 2010  |   | 214,000 |      |
|                            | Total |   | $       | 1,425,000 |   |

 

The Company has been usingits existing cash and cash equivalents to fund the cash needs of its operatingactivities.  We are carefully monitoringour cash position and evaluating the need for additional capital to enable usto achieve our short and long-term objectives. If there was a need for additional capital, the Company believes thatother sources of financing are available including sales of its common orpreferred stock, external borrowing, customer or vendor financing, customersponsored research and development projects or investments by strategicpartners. The avenues that we take to satisfy our potential capitalrequirements will depend in large part on the level of our revenues, and wewill evaluate these alternatives as we obtain better visibility of our revenueexpectations.

 

The Company believes that existing cashbalances and potentially available sources of capital willenable the Company to meet its operating, working capital and capitalresource obligations through the next twelve months.

 

There can beno assurance that the Company will not incur additional losses for a longerperiod of time, will generate positive cash flow from it operations, raiseadditional capital, or that the Company will attain or thereafter sustainprofitability in any future period.  Tothe extent that the Company continues to incur losses or achieves revenuegrowth in the future requiring an increase in working capital, its operatingand investing activities may use cash and, consequentially, such losses orgrowth will require the Company to obtain additional sources of financing toprovide for these cash needs.

 

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As of July 31,2005, the Company had no outstanding debt.

 

Workingcapital decreased 39% to $2,698,000 at July 31, 2005 from $4,438,000 at October 31,2004.  The Company financed itsoperations during the first nine months of fiscal 2005 through existing cashand cash equivalents.  Net cash used inoperating activities during the first nine months of fiscal 2005 was$1,680,000.  Accounts receivabledecreased $614,000 and inventories decreased $190,000 during the first ninemonths of fiscal 2005.  Accounts payableand accrued expenses decreased by $757,000 and $205,000, respectively.

 

Net cash used in investing activities was $119,000 during the ninemonths ended July 31, 2005 and is mostly related to the $140,000 leaseholdimprovement costs that were paid during the second quarter of fiscal 2005related to the amended lease agreement of the Company’s corporate office inEden Prairie, Minnesota along with other fixed asset additions.  This compares with $89,000 in fixed assetadditions and $14,000 of other long term asset additions for the same period infiscal 2004.  The Company expects thatfixed asset additions will be approximately $30,000 for the remainder of fiscal2005.

 

The Companydoes not have relationships with unconsolidated entities or financial partnerships,such as entities often referred to as structured finance or special purposeentities, which would have been established for the purpose of facilitatingoff-balance sheet financial arrangements. 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 Companybelieves it does not have material exposure to quantitative and qualitativemarket risks. The carrying amounts reflected in the balance sheets of cash andcash equivalents, trade receivables and trade payables approximate fair valueat July 31, 2005 due to the short maturities of these instruments.

 

NEW ACCOUNTING PRONOUNCEMENTS

 

Information regarding new accounting pronouncements is included in theNotes to Condensed Financial Statements.

 

FORWARD LOOKING STATEMENTS

 

Thediscussion above contains forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995, including statementsregarding the Company’s expectations, beliefs, intentions and strategiesregarding the future.  Forward-lookingstatements include, without limitation, statements regarding the extent andtiming of future revenues and expenses and customer demand.  All forward-looking statements included inthis document are based on information available to the Company as of the datehereof, and the Company assumes no obligation to update any suchforward-looking statements.

 

The Company’s actual resultsare subject to risks and uncertainties and could differ materially from thosediscussed in the forward-looking statements. These statements are based upon the Company’s expectations regarding anumber of factors, including the Company’s ability to obtain additional workingcapital if necessary to support its operations, changes in worldwide generaleconomic 

 

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conditions, cyclicality ofcapital spending by customers, the Company’s ability to keep pace withtechnological developments and evolving industry standards, worldwidecompetition, and the Company’s ability to protect its existing intellectualproperty from challenges from third parties. A detailed description of the factors that could cause future results tomaterially differ from the Company’s recent results or those projected in theforward-looking statements are contained in the section entitled “Description ofBusiness” 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, 2004 and other reportsfiled with the Securities and Exchange Commission.

 

Item 3:  CONTROLS AND PROCEDURES

 

(a) Evaluation ofDisclosure Controls and Procedures.

 

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 in InternalControl Over Financial Reporting.

 

There have been no changes in internal control over financial reportingthat occurred during the fiscal quarter covered by this report that havematerially affected, or are reasonably likely to materially affect, theregistrant’s internal control over financial 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 Section 302 of the  Sarbanes-Oxley Act of 2002 (Rules 13a- 14 and 15d-14 of the Exchange  Act). |
|                                                   |   |   |
| 32.1                                                   |   | Certification pursuant Section 906 of  the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350). |

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.

 
|                         |   | PPT VISION, INC.                                                 |
|------------------------------|--------|------------------------------------------------------------------|
|                         |   |                                                             |
| Date: September 9, 2005 |   |                                                             |
|                         |   |                                                             |
|                         |   | /s/ Joseph C. Christenson                                   |   |
|                         |   | Joseph C. Christenson                                            |
|                         |   | President, Chief Executive Officer and   Chief Financial Officer |

 

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