**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

**Form10-QSB**

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

**For theQuarterly Period Ended April 30, 2007Commission File Number 0-11518**

**PPT VISION,INC.**(Exact name of Small Business Issuer as specified in itscharter)

| **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 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 been subject tosuch 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 31, 2007: 7,402,916

 

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INDEX

PPT VISION, INC.
| Part I.  | Financial Information                                                                           |
|----------|-------------------------------------------------------------------------------------------------|
|     |                                                                                            |
| Item 1.  | Financial Statements                                                                            |
|     |                                                                                            |
|     | Balance Sheets as of  April 30, 2007 and October 31, 2006                                       |
|     |                                                                                            |
|     | Statements  of Operations for the Three and Six Months Ended April 30, 2007 and April 30,  2006 |
|     |                                                                                            |
|     | Statements  of Cash Flows for the Six Months Ended April 30, 2007 and April 30, 2006            |
|     |                                                                                            |
|     | Notes  to Condensed Financial Statements – April 30, 2007                                  |
|     |                                                                                            |
| 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                                                                                      |

 

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PPT VISION, INC.

BALANCE SHEETS
| ** **                                       | ** ** | **April 30, 2007** | ** ** | **October 31, 2006** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **(unaudited)**              | ** ** | **(audited)**                  | ** ** |
| ASSETS                                           |       |                         |       |                           |       |
| Current assets                                   |       |                         |       |                           |       |
| Cash and cash equivalents                        |       | $                            | 760,000    |                           | $          | 753,000 |   |
| Accounts receivable, net                         |       | 1,034,000                    |       | 903,000                        |       |
| Inventories:                                     |       |                         |       |                           |       |
| Manufactured and  purchased parts                |       | 552,000                      |       | 440,000                        |       |
| Work-in-process                                  |       | 4,000                        |       | 15,000                         |       |
| Finished goods                                   |       | 20,000                       |       | 15,000                         |       |
| Total  inventories                               |       | 576,000                      |       | 470,000                        |       |
| Other current assets                             |       | 144,000                      |       | 135,000                        |       |
| Total current assets                             |       | 2,514,000                    |       | 2,261,000                      |       |
|                                             |       |                         |       |                           |       |
| Fixed assets, net                                |       | 288,000                      |       | 308,000                        |       |
| Intangible assets, net                           |       | 15,000                       |       | 22,000                         |       |
| Total assets                                     |       | $                            | 2,817,000  |                           | $          | 2,591,000 |   |
|                                             |       |                         |       |                           |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY       |       |                         |       |                           |       |
| Current  liabilities                             |       |                         |       |                           |       |
| Accounts payable                                 |       | $                            | 651,000    |                           | $          | 487,000 |   |
| Accrued expenses                                 |       | 128,000                      |       | 138,000                        |       |
| Deferred revenue – customer advances        |       | 2,000                        |       | 2,000                          |       |
| Total current liabilities                        |       | 781,000                      |       | 627,000                        |       |
| Shareholders’  equity                       |       |                         |       |                           |       |
| Common stock                                     |       | 740,000                      |       | 453,000                        |       |
| Capital in excess of par value                   |       | 37,353,000                   |       | 36,625,000                     |       |
| Accumulated deficit                              |       | (36,057,000                  | )          | (35,114,000                    | )          |
| Total  shareholders’ equity                 |       | 2,036,000                    |       | 1,964,000                      |       |
| Total liabilities and shareholders’  equity |       | $                            | 2,817,000  |                           | $          | 2,591,000 |   |

 

See accompanyingnotes to condensed financial statements

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PPT VISION, INC.

STATEMENTSOF OPERATIONS

(UNAUDITED)
| ** **                                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **April 30,**               | ** ** | **April 30,**             | ** ** |
| ** **                                   | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues                                     |       | $                                | 1,245,000  |                           | $          | 1,408,000 |   | $ | 2,286,000 |   | $ | 2,990,000 |   |
| Cost of revenues                             |       | 626,000                          |       | 672,000                        |       | 1,175,000 |   | 1,374,000 |   |
| Gross profit                                 |       | 619,000                          |       | 736,000                        |       | 1,111,000 |   | 1,616,000 |   |
| Expenses:                                    |       |                             |       |                           |       |   |   |   |   |
| Sales and marketing                          |       | 495,000                          |       | 543,000                        |       | 924,000 |   | 1,102,000 |   |
| General and administrative                   |       | 256,000                          |       | 249,000                        |       | 491,000 |   | 485,000 |   |
| Research and development                     |       | 341,000                          |       | 357,000                        |       | 647,000 |   | 686,000 |   |
| Total expenses                               |       | 1,092,000                        |       | 1,149,000                      |       | 2,062,000 |   | 2,273,000 |   |
| Interest and  other income                   |       | 7,000                            |       | 129,000                        |       | 8,000 |   | 169,000 |   |
| Net loss                                     |       | $                                | (466,000   | )                              | $          | (284,000 | ) | $ | (943,000 | ) | $ | (488,000 | ) |
| Per share data:                              |       |                             |       |                           |       |   |   |   |   |
| Weighted average  basic shares outstanding   |       | 6,247,000                        |       | 3,655,000                      |       | 5,382,000 |   | 3,321,000 |   |
| Weighted average  diluted shares outstanding |       | 6,247,000                        |       | 3,655,000                      |       | 5,382,000 |   | 3,321,000 |   |
| Net loss                                     |       | $                                | (0.07      | )                              | $          | (0.08 | ) | $ | (0.18 | ) | $ | (0.15 | ) |

 

See accompanyingnotes to condensed financial statements

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PPTVISION, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)
| ** **                                                                   | ** ** | **Six Months**          | ** ** | **Six Months**          | ** ** |
|------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                                   | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** |
| ** **                                                                   | ** ** | **April 30, 2007** | ** ** | **April 30, 2006** | ** ** |
| Net loss                                                                     |       | $                            | (943,000   | )                            | $          | (488,000 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                         |       |                         |       |
| Stock option expense                                                         |       | 11,000                       |       | 1,000                        |       |
| Depreciation and amortization                                                |       | 62,000                       |       | 86,000                       |       |
| Gain on sale of securities                                                   |       | —                       |       | (72,000                      | )          |
| Change in allowance for doubtful accounts                                    |       | —                       |       | (5,000                       | )          |
|                                                                         |       |                         |       |                         |       |
| Change in assets  and liabilities:                                           |       |                         |       |                         |       |
| Accounts receivable                                                          |       | (131,000                     | )          | (168,000                     | )          |
| Inventories                                                                  |       | (106,000                     | )          | 42,000                       |       |
| Other current assets                                                         |       | (9,000                       | )          | 37,000                       |       |
| Accounts payable                                                             |       | 164,000                      |       | 52,000                       |       |
| Accrued expenses                                                             |       | (10,000                      | )          | (84,000                      | )          |
| Deferred revenue - customer advances                                         |       | —                       |       | 3,000                        |       |
| Total adjustments                                                            |       | (19,000                      | )          | (108,000                     | )          |
| Net cash used in operating activities                                        |       | (962,000                     | )          | (596,000                     | )          |
| Cash flows from  investing activities:                                       |       |                         |       |                         |       |
| Purchase of fixed assets                                                     |       | (35,000                      | )          | (29,000                      | )          |
| Proceeds from sale of security                                               |       | —                       |       | 94,000                       |       |
| Net cash used in (provided by) investing activities                          |       | (35,000                      | )          | 65,000                       |       |
| Cash flows from  financing activities:                                       |       |                         |       |                         |       |
| Proceeds from issuance of common stock                                       |       | 1,004,000                    |       | 400,000                      |       |
| Net cash provided by financing activities                                    |       | 1,004,000                    |       | 400,000                      |       |
| Net increase  (decrease) in cash and cash equivalents                        |       | 7,000                        |       | (131,000                     | )          |
| Cash and cash  equivalents at beginning of year                              |       | 753,000                      |       | 778,000                      |       |
| Cash and cash  equivalents at end of period                                  |       | $                            | 760,000    |                         | $          | 647,000 |   |

 

See accompanying notes to condensed financial statements

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PPT VISION, INC.

NOTES TOCONDENSED FINANCIAL STATEMENTS

April 30, 2007

(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 forinterim financial 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 atOctober 31, 2006 has been derived from the Company’s audited financialstatements for the fiscal year ended October 31, 2006 but does not include allof the information and footnotes required by accounting principles generallyaccepted in 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 Form10-KSB/A for the year ended October 31, 2006.

NOTE C – REVENUERECOGNITION

The Company typicallyrecognizes revenue on product sales upon shipment to the end user customers ifcontractual obligations have been substantially met and title and risk of losshave passed to the customer, which is generally the case for sales of machinevision systems, spare parts and accessories. 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. Revenue related toapplication engineering, product development and customer training services isrecognized when the services are performed. Service revenue was less than 10%of total revenues for the three and six months ended April 30, 2007 and 2006.

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NOTE D – LIQUIDITY ANDCAPITAL RESOURCES

The Company had a net lossfor the three and six months ended April 30, 2007 of $466,000 and $943,000,respectively. Cash used in operations was $962,000 for the six months endedApril 30, 2007.

On February 26, 2007, theCompany agreed to issue $1,000,000 of securities in a private placement to theCompany’s current largest shareholder and a director, Mr. Peter R. Peterson,who purchased the securities through the P. R. Peterson Keogh Plan. The Companyentered in the agreement to strengthen its balance sheet and provide foradditional working capital requirements. In the offering, the Company agreed toissue 2,857,143 shares of its common stock, together with seven-year warrantsto purchase an additional 1,000,000 shares at a price of $0.50 per share. Theoffering was funded on February 26, 2007. The shares were issued on March 9,2007 following the approval by the shareholders of the Company at the PPTVISION 2007 Annual Meeting of Shareholders for an increase in the shares ofauthorized common stock from 5,000,000 to 10,000,000. The Company and Mr.Peterson also entered into a Registration Rights Agreement under which theCompany agreed to register the shares underlying the warrants. With theproceeds of the offering, the Company believes it has sufficient cash to fundits operations, working capital and capital resource needs for the remainder offiscal year 2007.

Beyond the end of fiscalyear 2007, the Company estimates that if revenues do not increase to a levelsufficient to generate positive cash flow, some form of external financing willbe required. The Company believes that a variety of financing alternatives willbe available including external borrowing against accounts receivable andinventory, or the sale of equity to the public or strategic partners.

There can be noassurance, however, that additional capital will be available on acceptableterms or at all, and the failure to obtain additional capital as needed mayhave an adverse effect on the Company’s ability to continue to take advantageof future opportunities or respond to competitive pressures or unanticipatedrequirements, which could adversely affect its business, financial position,results of operations and cash flows.

NOTE E – LOSS PER SHARE

At April 30, 2007,options to purchase 390,449 shares and warrants to purchase 1,000,000 shares ofthe Company’s common stock were not considered in the calculation of dilutedearnings per share. At April 30, 2006, options to purchase 327,380 shares ofthe Company’s common stock were not considered in the calculation of dilutedearnings per share. As the Company had a net loss for both periods, theinclusion of outstanding options would have been anti-dilutive.

NOTE F – STOCK-BASED COMPENSATION

The Company has various types of stock-basedcompensation plans. These plans are administered by the Board of Directors,which selects persons to receive awards and determines the number of shares subjectto each award and the terms, conditions, performance measures and otherprovisions of the award. Readers should refer to Note 10 of the Company’sconsolidated financial statements in 

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the Annual Report on Form 10-KSB for the fiscal yearended October 31, 2006, for additional information related to these stock-basedcompensation plans.

Effective November 1, 2006, the Company adoptedStatement of Financial Accounting Standards (SFAS) 123R, Share-Based PaymentSFAS No. 123R, which requires companies to measure and recognize compensationexpense for all stock-based payments at fair value. SFAS 123R is being appliedon the modified prospective basis. Prior to the adoption of SFAS 123R, theCompany had adopted the disclosure-only provisions of SFAS No. 148, Accountingfor Stock-Based Compensation and, accordingly, recognized no compensationexpense related to the stock-based plans prior to November 1, 2006.

Under the modified prospective approach, SFAS 123Rapplies to new awards and to awards that were outstanding on November 1, 2006that are subsequently modified, repurchased, cancelled or vested. Under themodified prospective approach, compensation cost recognized in 2007 includescompensation cost for all share-based payments granted prior to, but not yetvested on, November 1, 2006, based on the grant-date fair value estimated inaccordance with the provisions of SFAS 123R, and compensation cost for allshared-based payments granted subsequent to November 1, 2006, based on thegrant-date fair value estimated in accordance with the provisions of SFAS 123R.Prior periods were not restated to reflect the impact of adopting the newstandard.

As a result of adopting SFAS 123R on November 1, 2006,the net loss and net loss per share for the three months ended April 30, 2007,were $5,000 and $0.01 higher, respectively, than if the Company had continuedto account for stock-based compensation under SFAS No. 148. The net loss andnet loss per share for the six months ended April 30, 2007, were $11,000 and$0.01 higher, respectively.

The following table illustrates the effect on net lossand net loss per share had the Company accounted for stock-based compensationin accordance with SFAS 123R for the three and six months ended April 30, 2006:
| Three Months Ended  April 30, 2006 | ** ** | ** **  | ** ** | ** ** | ** ** |
|--------------------------------------------------------|------------|-------------|------------|------------|------------|
| Net loss                                               |       | As reported |       | $          | (284,000   | ) |
|                                                        |       | Pro forma   |       | $          | (322,000   | ) |
|                                                   |       |        |       |       |       |
| Stock based compensation                               |       | As reported |       | $     | —     |   |
|                                                        |       | Pro forma   |       | $          | (38,000    | ) |
|                                                   |       |        |       |       |       |
| Basic and diluted loss per  share                      |       | As reported |       | $          | (0.08      | ) |
|                                                        |       | Pro forma   |       | $          | (0.09      | ) |

 
| Six Months Ended  April 30, 2006 | ** ** | ** **  | ** ** | ** ** | ** ** |
|---------------------------------------|------------|-------------|------------|------------|------------|
| Net loss                              |       | As reported |       | $          | (488,000   | ) |
|                                       |       | Pro forma   |       | $          | (569,000   | ) |
|                                  |       |        |       |       |       |
| Stock based compensation              |       | As reported |       | $          | 1,000      |   |
|                                       |       | Pro forma   |       | $          | (81,000    | ) |
|                                  |       |        |       |       |       |
| Basic and diluted loss per  share     |       | As reported |       | $          | (0.15      | ) |
|                                       |       | Pro forma   |       | $          | (0.17      | ) |

 

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TheCompany uses the Black-Scholes option-pricing model to estimate fair value ofstock-based awards with the following weighted average assumptions:
| For All Periods Ended  April 30, | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
| Risk free  interest rates                            |       | 4.5      | %          | 4.0      | %          |
| Expected lives                                       |       | 7 Years  |       | 7 Years  |       |
| Expected  volatility                                 |       | 275      | %          | 221      | %          |
| Expected dividends                                   |       | 0        | %          | 0        | %          |

 

The Company calculates expected volatility for stockoptions and awards using historical volatility as the Company believes theexpected volatility will approximate historical volatility. The starting pointfor the historical period used is based on a material change in the Company’soperations that occurred in the first quarter of Fiscal 2003.

As of April 30, 2007 the estimated expense related tostock options outstanding and unvested will be $4,000 for the remainingquarters in the year ending October 31, 2007. The estimated expense related tostock options outstanding and unvested will be $3,000, $1,000 and $0 for thefiscal years ending October 31, 2008, 2009 and 2010, respectively.

NOTE G – CUSTOMER AND GEOGRAPHIC DATA

The following tables set forth the percentage of theCompany’s net revenues (including sales delivered through internationaldistributors) by geographic location for the three months ended April 30, 2007and 2006:
| Three Months Ended April 30, | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| North America                                    |       | 53       | %          | 44       | %          |
| Europe                                           |       | 20       | %          | 11       | %          |
| Asia-Pacific                                     |       | 27       | %          | 45       | %          |
| South America                                    |       | 0        | %          | 0        | %          |
|                                             |       | 100      | %          | 100      | %          |

 
| Six Months Ended April 30, | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| North America                                  |       | 49       | %          | 46       | %          |
| Europe                                         |       | 20       | %          | 18       | %          |
| Asia-Pacific                                   |       | 31       | %          | 36       | %          |
| South America                                  |       | 0        | %          | 0        | %          |
|                                           |       | 100      | %          | 100      | %          |

 

In the three-month periodended April 30, 2007, revenues from two customers represented approximately 17%and 12% of total revenue, respectively. In the three-month period ended April30, 2006, revenues from three customers represented approximately 14%, 13% and10% of total revenue.  In the six-monthperiod ended April 30, 2007, revenues from two customers representedapproximately 14% and 10% of total revenue, respectively.  In the six-month period ended April 30, 2006,revenues from one customer represented approximately 13% of the total revenue.

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NOTE H – NEW ACCOUNTINGPRONOUNCEMENTS

The FASB has publishedFASB Interpretation No. 48 (FIN No. 48), Accounting for Uncertainty in IncomeTaxes, to address the noncomparability in reporting tax assets and liabilitiesresulting from a lack of specific guidance in FASB Statement of FinancialAccounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes, onthe uncertainty in income taxes recognized in an enterprise’s financialstatements. Specifically, FIN No. 48 prescribes (a) a consistent recognitionthreshold and (b) a measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return, and provides related guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition. FIN No. 48 will apply to fiscal years beginning after December 15,2006, with earlier adoption permitted. The Company does not expect the adoptionof FIN No. 48 to have a material effect on its financial statements.

In September, 2006, theSecurities and Exchange Commission (SEC) issued Staff Accounting Bulletin 108, “Consideringthe Effects on Prior Year Misstatements when Quantifying Misstatements inCurrent Year Financial Statements,” (“SAB 108”). SAB 108 requires registrantsto quantify errors using both the income statement method (i.e. iron curtainmethod) and the rollover method and requires adjustment if either methodindicates a material error. If a correction in the current year relating to prioryear errors is material to the current year, then the prior year financialinformation needs to be corrected. A correction to the prior year results thatare not material to those years, would not require a “restatement process”where prior financials would be amended. SAB 108 is effective for fiscal yearsending after November 15, 2006. We do not anticipate that SAB 108 will have amaterial effect on our financial position, results of operations or cash flows.

Item 2

MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION

# Overview

PPT VISION, Inc. designs, manufactures, and marketsmachine vision based intelligent cameras used for automated inspection,measurement, and guidance applications in the manufacturing marketplace. TheCompany’s IMPACT intelligent camera product line enables manufacturers torealize significant economic paybacks by increasing the quality of manufacturedparts and improving the productivity of manufacturing processes. The Company’sIMPACT intelligent camera product line is sold through a global network ofdistribution and integration partners to end-user manufacturers, originalequipment manufacturers, and manufacturing machine builders, in a wide varietyof manufacturing markets including electronics, automotive, medical device, andpackaged goods industries.

The Company’s revenuesdecreased 12% to $1,245,000 during the second quarter ended April 30, 2007compared to revenues of $1,408,000 in the prior year’s second quarter. TheCompany’s net loss for the quarter ended April 30, 2007 increased to $466,000or $.07 per share compared to $284,000 or $.08 per share in the prior year’speriod. The decrease in revenue in the second quarter of fiscal year 2007compared to the second quarter of fiscal year 2006 occurred as

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a result of a sales mixshift toward IMPACT units with a lower selling price. IMPACT unit volumeincreased 6% in the second quarter of fiscal 2007 compared to the secondquarter of fiscal 2006. However, approximately 45% of the Company’s unit volumerepresented sales of the Company’s new lower priced IMPACT A10 product causingthe decline in average selling price and total revenue in comparison to theprior year’s second quarter of fiscal 2006.

Revenues decreased 24% to$2,286,000 during the six-month period ended April 30, 2007 compared to$2,990,000 during the prior year’s six-month period and the loss increased to$943,000 or $0.18 per share during the six-month period ended April 30, 2007compared to a loss of $488,000 or $0.15 per share in the prior year’s period.

During the fiscal 2007 second quarter, revenues fromoutside North America accounted for 47% of revenues compared to 56% in thesecond quarter of fiscal 2006. During the first six months of fiscal 2007,revenues from outside North America accounted for 51% compared to 54% in thefirst six months of fiscal 2006.

Total operating expenses for the three-month periodended April 30, 2007 were $1,092,000, a 5% decrease in comparison to totaloperating expenses of $1,149,000 in the prior year’s second quarter. Thedecrease in operating expenses from the second quarter of fiscal year 2007compared to the same period in fiscal 2006 is from the Company’s continuingefforts to control costs.

CRITICAL ACCOUNTINGPOLICIES AND ESTIMATES

Management’s discussionand analysis of its financial condition and results of operations are based onthe Company’s accompanying unaudited condensed financial statements, which havebeen prepared in accordance with accounting principles generally accepted inthe United States of America for interim financial information and with theinstructions to Form 10-QSB. Accordingly, they do not include all of theinformation required by accounting principles generally accepted in United Statesof America for complete financial statements. In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary fora fair presentation have been included.

The preparation of thesefinancial statements requires management to make certain estimates andassumptions that affect the reported amounts of assets and liabilities as ofthe date of the financial statements and the reported revenues and expensesduring 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 resultscould differ from these estimates.

Management believes theCompany’s critical accounting policies and areas that require more significantjudgments and estimates used in the preparation of its financial statements tobe:

·                  revenue recognition;

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

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

### RevenueRecognition

The Company typicallyrecognizes revenue on product sales upon shipment to the end user customers ifcontractual obligations have been substantially met and title and risk of losshave passed to the customer, which is generally the case for sales of machinevision systems, spare parts and accessories. 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. Service revenue, whichincludes application engineering, product development, customer training andrepair services, is recognized when the services are performed. Service revenueis less than 10% of total revenues for the three and six months ended April 30,2007 and 2006.

# Valuation Allowances

Management estimates the allowancefor doubtful accounts by analyzing accounts receivable balances by age andconsidering specific factors about the individual customer’s financialcondition. When it is deemed probable that all or a portion of a customer’saccount is uncollectible, a corresponding amount is added to the allowance fordoubtful accounts.

The Company’s inventoryprimarily consists of parts and other materials that are used in themanufacture of vision systems. The Company generally only builds systems basedon customer orders and as a result maintains only a minor amount of finishedgoods inventory. Management establishes valuation reserves on inventory forestimated excess and obsolete inventory equal to the difference between thecost of inventory and its estimated market value based on assumptions aboutfuture product demand and market conditions. In view of the rapid pace oftechnological change in the machine vision industry, the Company generallyconsiders inventory that has had no usage for one year to be obsolete.  In addition, changes in the Company’s productofferings or those of the Company’s competitors may also result in excess orobsolete inventory levels.  Accordingly,these factors will also be considered in the determination of the market valueof inventory.

Actual results coulddiffer from these estimates under different assumptions.  If the financial condition of one or more ofour customers were to deteriorate, or if actual product demand or marketconditions are less favorable than anticipated by management, additionalreserves may be required.

# Long-Lived and Intangible Assets

The Company reviews itslong-lived assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. Recoverabilityof assets to be held and used is measured by a comparison of the carryingamount of an asset to undiscounted future net cash flows expected to begenerated by the assets. If these assets are considered to be impaired, theimpairment to be recognized is measured by the amount by which the carryingamount of the assets exceeds the fair value of the assets.

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RESULTS OF OPERATIONS

Revenues

Net revenues decreased12% to $1,245,000 for the three-month period ended April 30, 2007, compared tonet revenues of $1,408,000 for the same period in fiscal 2006. For thesix-month period ended April 30, 2007, revenues decreased 24% to $2,286,000from $2,990,000 for the same period in fiscal 2006. Unit sales for thethree-month period ended April 30, 2007 increased to 328 from 305 in the sameperiod of fiscal 2006. Unit Sales for the six-month period ended April 30, 2007decreased to 522 from 560 in the same period of fiscal 2006. In the three-monthperiod ended April 30, 2007, revenues from two customers represented approximately17% and 12% of total revenue, respectively. In the three-month period endedApril 30, 2006, revenues from three customers represented approximately 14%,13% and 10% of total revenue. In the six-month period ended April 30, 2007revenues from two customers represented approximately 14% and 10% of the totalrevenue, respectively. In the six-month period ended April 30, 2006, revenuesfrom one customer represented approximately 13% of total revenue.

The decrease in revenuein the second quarter of fiscal year 2007 compared to the second quarter offiscal year 2006 occurred as a result of a sales mix shift toward IMPACT unitswith a lower selling price. IMPACT unit volume increased 6% in the secondquarter of fiscal 2007 compared to the second quarter of fiscal 2006. However,approximately 45% of the Company’s unit volume represented sales of the Company’snew lower priced IMPACT A10 product causing the decline in average sellingprice and total revenue in comparison to the prior years second quarter offiscal 2006.

During the second quarterof fiscal 2007, revenues from outside North America accounted for 47% ofrevenues compared to 56% in the fiscal 2006 second quarter.  During the first six months of fiscal 2007,revenues from outside North America accounted for 51% compared to 54% in thefirst six months of fiscal 2006.

Revenue trends may be inconsistent given the nature of the machine visionindustry and the capital nature of our product.

Gross profit decreased16% to $619,000 for the three-month period ended April 30, 2007, compared to$736,000 for the same period in fiscal 2006. For the six-month period endedApril 30, 2007, gross profit decreased 31% to $1,111,000 from $1,616,000 forthe same period in fiscal 2006. As a percentage of net revenues, the grossprofit for the second quarter of fiscal 2007 decreased to 50% compared to 52%in the same period of fiscal 2006. For the six-month period ended April 30,2007, gross profit as a percentage of net revenue decreased to 49% compared to54% in the same period of fiscal 2006. The decrease in gross margin is areflection of the decrease in revenue during the second quarter of fiscal 2007compared to the same period in the prior year. We expect that our future grossmargins will trend into the 55% to 60% range as our fixed manufacturingoverhead is spread over a higher volume of sales.

Sales and marketing expensesdecreased 9% to $495,000 for the three-month period ended April 30, 2007compared to $543,000 for the same period in fiscal 2006. For the six-monthperiod ended April 30, 2007, sales and marketing expenses decreased 16% to$924,000 from $1,102,000 for the same period in fiscal 2006. As a percentage ofnet revenues, sales and marketing expenses increased slightly to 40% for thesecond quarter 2007 compared to 39% for the same period in fiscal 2006. For thesix-month period ended April 30, 2007, sales and marketing

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expenses as a percentage ofnet revenues increased to 40% compared to 37% in the same period in fiscal2006. The Company expects sales and marketing expenses in absolute dollars toincrease modestly for the remainder of fiscal 2007 for the support andpromotion of two major exhibitions in the second half of fiscal 2007. Increasesin sales expenditures may also occur to the extent that revenue growth isachieved.

General and administrativeexpenses increased 3% to $256,000 for the three-month period ended April 30,2007, compared to $249,000 for the same period in fiscal 2006. For thesix-month period ended April 30, 2007, general and administrative expensesincreased slightly to $491,000 compared to $485,000 in the same period infiscal 2006. As a percentage of net revenues, general and administrativeexpenses increased to 21% for the second quarter of fiscal 2007 versus 18% forthe same period in fiscal 2006. For the six-month period ended April 30, 2007,general and administrative expenses as a percentage of net revenues increasedto 21% from 16% in the same period in fiscal 2006. The Company expects generaland administrative expenses to remain relatively flat for the remainder offiscal 2007.

Research and developmentexpenses decreased 4% to $341,000 for the three-month period ended April 30,2007, compared to $357,000 for the same period in fiscal 2006. For thesix-month period ended April 30, 2007, research and development expensesdecreased 6% to $647,000 from $686,000 in the same period in fiscal 2006. As apercentage of net revenues, research and development expenses increased to 27%for the second quarter of fiscal 2007, compared to 25% for the second quarterof fiscal 2006. For the six-month period ended April 30, 2007, research anddevelopment expenses as a percentage of net revenues increased to 28% from 23%in the same period in fiscal 2006. The Company expects research and developmentexpenses to remain relatively flat for the remainder of fiscal 2007.

The Company did not recordan income tax benefit or expense for the three and six month periods endedApril 30, 2007 or 2006.

TheCompany’s net loss for the second quarter of fiscal 2007 increased fromyear-ago levels to $466,000 or $0.07 per share, as compared with a loss of$284,000 or $0.08 per share for the same period in fiscal 2006. The Company’snet loss for the six-month period ended April 30, 2007 decreased to $943,000 or$0.18 per share, as compared with a loss of $488,000 or $0.15 per share for thesame period in fiscal 2006. There were approximately 6.2 million sharesoutstanding during the three-month period ended April 30, 2007, as comparedwith approximately 3.7 million shares outstanding for the same period in fiscal2006. There were approximately 5.4 million shares outstanding during thesix-month period ended April 30, 2007, as compared with approximately 3.3million shares outstanding for the same period in fiscal 2006.

LIQUIDITY AND CAPITALRESOURCES

At April 30, 2007 theCompany had cash balances of $760,000, working capital of approximately $1.7million and no long-term debt.

In the second quarter offiscal 2007 the Company incurred a net loss of $466,000 which included non-cashcharges related to depreciation and amortization of $30,000. The net loss forthe quarter increased $182,000 from the $284,000 loss reported in the secondquarter of fiscal 2006. For the quarter ended April 30, 2007, cash used inoperating activities was $962,000.

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On February 26, 2007, theCompany agreed to issue $1,000,000 of securities in a private placement to theCompany’s current largest shareholder and a director, Mr. Peter R. Peterson,who purchased the securities through the P. R. Peterson Keogh Plan. The Companyentered in the agreement to strengthen its balance sheet and provide foradditional working capital requirements. In the offering, the Company agreed toissue 2,857,143 shares of its common stock, together with seven-year warrantsto purchase an additional 1,000,000 shares at a price of $0.50 per share. Theoffering was funded on February 26, 2007. The shares were issued on March 9,2007 following the approval by the shareholders of the Company at the PPTVISION 2007 Annual Meeting of Shareholders for an increase in the shares ofauthorized common stock from 5,000,000 to 10,000,000. The Company and Mr.Peterson also entered into a Registration Rights Agreement under which theCompany agreed to register the shares underlying the warrants. With theproceeds of the offering, the Company believes it has sufficient cash to fundits operations, working capital and capital resource needs for the remainder offiscal year 2007.

Beyond the end of fiscalyear 2007, the Company estimates that if revenues do not increase to a levelsufficient to generate positive cash flow, some form of external financing willbe required. The Company believes that a variety of financing alternatives willbe available including external borrowing against accounts receivable andinventory, or the sale of equity to the public or strategic partners.

There can be noassurance, however, that additional capital will be available on acceptableterms or at all, and the failure to obtain additional capital as needed mayhave an adverse effect on the Company’s ability to continue to take advantageof future opportunities or respond to competitive pressures or unanticipatedrequirements, which could adversely affect its business, financial position,results of operations and cash flows.

As of April30, 2007, the Company had no outstanding debt.

Workingcapital increased $99,000 to $1,733,000 at April 30, 2007 from $1,634,000 atOctober 31, 2006. The Company financed its operations during the first sixmonths of fiscal 2007 through existing cash and cash equivalents, which waspartially funded through the private placement held in February, 2007. Accountsreceivable increased $131,000 and inventories increased $106,000 during thefirst six months of fiscal 2007. Accounts payable increased by $164,000 whileaccrued expenses decreased by $10,000 during the first six months of fiscal2007.

Net cash used ininvesting activities was $35,000 during the six months ended April 30, 2007which accounted for fixed asset additions during the first six months of fiscal2007. This compares with $29,000 in fixed asset additions and a sale of stockwith proceeds of $94,000 for the same period in fiscal 2006. The Companyexpects that fixed asset additions for the remaining quarters of fiscal 2007 tocontinue at approximately the same rate as the first two quarters of fiscal2007.

The Companydoes not have relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structured finance orspecial purpose entities, which would have been established for the purpose offacilitating off-balance sheet financial arrangements. As such, the Company isnot materially exposed to any financing, liquidity, market or credit risk thatcould arise if we had engaged in such arrangements.

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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 April 30, 2007 due to the short maturities of these instruments.

NEW ACCOUNTINGPRONOUNCEMENTS

Information regarding newaccounting pronouncements is included in the Notes to Condensed FinancialStatements.

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.

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 capitalif necessary to support its operations, changes in worldwide general economicconditions, cyclicality of capital spending by customers, the Company’s abilityto keep pace with technological developments and evolving industry standards,worldwide competition, and the Company’s ability to protect its existingintellectual property from challenges from third parties. A detaileddescription of the factors that could cause future results to materially differfrom the Company’s recent results or those projected in the forward-lookingstatements 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, 2006 and other reports filed withthe Securities and Exchange Commission.

Item 3:  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure 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 nochanges in internal control over financial reporting that occurred during thefiscal quarter covered by this report that have materially

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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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     | On February 26,  2007, the Company agreed to issue $1,000,000 of securities in a private  placement to the Company’s current largest shareholder and a director, Mr.  Peter R. Peterson, who purchased the securities through the P. R. Peterson  Keogh Plan. The Company entered in the agreement to strengthen its balance  sheet and provide for additional working capital requirements. In the offering,  the Company agreed to issue 2,857,143 shares of its common stock, together  with seven-year warrants to purchase an additional 1,000,000 shares at a  price of $0.50 per share. The offering was funded on February 26, 2007. The  shares were issued on March 9, 2007 following the approval by the  shareholders of the Company at the PPT VISION 2007 Annual Meeting of  Shareholders for an increase in the shares of authorized common stock from  5,000,000 to 10,000,000. The Company and Mr. Peterson also entered into a Registration  Rights Agreement under which the Company agreed to register the shares  underlying the warrants. The transaction was exempt pursuant to Section 4(2)  of the Securities Act of 1933. |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Item 3.  | DEFAULTS UPON SENIOR  SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     | Not Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Item 4:  | SUBMISSION OF MATTERS  TO A VOTE OF SECURITY HOLDERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     | On March 8, 2007  the Company held its Annual Meeting of Shareholders. Of the 4,545,773 shares  of common stock outstanding and entitled to vote at the meeting, 4,407,766  shares were present, either in person or by proxy. The following describes  the matters considered by the Company’s shareholders at the Annual Meeting,  as well as the results of the votes cast at the Annual Meeting:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     | A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | To elect three  (3) directors to hold office until the next Annual Meeting of Shareholders or  until their respective successors have been elected and shall qualify. |

 
| Name of Nominee | ** ** | **For**   | ** ** | **Withheld** | ** ** |
|---------------------------|------------|-----------|------------|--------------|------------|
| Joseph C.  Christenson    |       | 4,373,824 |       | 33,942       |       |
| Robert W. Heller          |       | 4,374,223 |       | 33,543       |       |
| Peter R. Peterson         |       | 4,367,284 |       | 40,482       |       |

 

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|         |                                                                                                                          |
|---------|-------------------------------------------------------------------------------------------------------------------------------|
|    | B.                                                                                                                            | The second  matter related to the approval to adopt the PPT VISION, Inc. 2007 Stock Plan.  3,125,457 votes were cast for approval and 63,396 were cast against approval.  There were 2,889 abstentions and 1,216,024 broker non-votes. |
|    |                                                                                                                          |   |
|    | C.                                                                                                                            | The third matter  related to the approval of an amendment to the Company’s Articles of  Incorporation to increase the authorized common stock of the Company from  5,000,000 to 10,000,000 shares. 4,309,016 votes were cast for approval and  96,017 were cast against approval. There were 2,733 abstentions and zero  broker non-votes. |
|    |                                                                                                                          |   |
|    | Based on these  voting results, each of the directors nominated were elected and the second  and third matters were approved. |
|    |                                                                                                                          |   |
| Item 5: | OTHER  INFORMATION                                                                                                            |
|    |                                                                                                                          |
|    | None.                                                                                                                         |
|    |                                                                                                                          |
| 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 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  14, 2007 |                                                             |
|                            |                                                             |
|                            | /s/Joseph C.  Christenson                                        |   |
|                            | Joseph C.  Christenson                                           |
|                            | President, Chief  Executive Officer and  Chief Financial Officer |

 

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