SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                        
                                        
                                    Form 10-Q
                                    ---------
                                        
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                        
                                        
                         For Quarter Ended July 31, 1998
                         Commission File Number 0-11518
                                        
                                        
                                        
                                PPT VISION, INC.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           MINNESOTA                                     41-1413345
-------------------------------                    ----------------------
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                    Identification Number)



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

                                 (612) 996-9500
               --------------------------------------------------
               (Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the last 90 days.               Yes  X  No

Shares of $.10 par value common stock outstanding at September 8, 1998:
5,456,209
                                                  Total pages this report:  14

Page 2


                                  INDEX

                            PPT VISION, INC.

Part I.    Financial Information                                    Page
-------    ---------------------                                    ----

Item 1.    Unaudited Financial Statements

           Balance Sheets as of July 31, 1998 and...................   3
           October 31, 1997

           Income Statements for the three-month and................   4
           nine-month periods ended July 31, 1998 and July 31, 1997

           Statement of Cash Flows for the nine-month periods.......   5
           ended July 31, 1998 and July 31, 1997

           Notes to Financial Statements--July 31, 1998.............   6

Item 2.    Management's Discussion and Analysis of..................   7
           Financial Condition and Results of Operations

Part II.   Other Information........................................  11
--------   -----------------

Item 1.    Legal Proceedings

Item 2.    Changes in 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 and Reports on Form 8-K

           Signatures...............................................  13
           ----------

Page 3

PART I.   FINANCIAL INFORMATION

Item 1:   UNAUDITED FINANCIAL STATEMENTS

                                PPT VISION, INC.

                                 BALANCE SHEETS


                                       July 31, 1998    October 31, 1997
                                           Note A            Note A
                                        ------------      ------------
                                       (unaudited)
ASSETS
Cash and cash equivalents.............  $ 2,290,000       $ 4,027,000
Short-term investments................   13,936,000        15,515,000
Accounts receivable, net..............    3,535,000         3,693,000
Inventories:
  Manufactured and purchased parts....    1,649,000         1,223,000
  Work-in-process.....................      584,000           448,000
  Finished goods......................       14,000            70,000
                                        ------------      ------------
Inventories, net......................    2,247,000         1,741,000
Other current assets..................      168,000           226,000
                                        ------------      ------------
     Total current assets.............   22,176,000        25,202,000

Fixed assets, net.....................    1,938,000         1,546,000
Other assets, net.....................    3,971,000         1,828,000
Deferred income taxes.................    1,394,000         1,410,000
                                        ------------      ------------
     Total assets.....................  $29,479,000       $29,986,000
                                        ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities...................  $ 1,401,000       $ 2,315,000

Deferred rent.........................      110,000           136,000

Shareholders' equity:
Common stock..........................      546,000           539,000
Capital in excess of par value........   29,831,000        29,555,000
Accumulated (deficit).................   (2,369,000)       (2,510,000)
Unrealized loss--investments..........      (40,000)          (49,000)
                                        ------------      ------------
     Total shareholders' equity.......   27,968,000        27,535,000
                                        ------------      ------------
     Total liabilities and
     shareholders' equity.............  $29,479,000       $29,986,000
                                        ============      ============

Page 4


                                PPT VISION, INC.
                                INCOME STATEMENTS
                                   (UNAUDITED)


                              Three Months Ended         Nine Months Ended
                                   July 31,                   July 31,
                           ------------------------  --------------------------
                              1998         1997           1998         1997
                           -----------  -----------  ------------  ------------
Net revenues.............  $3,185,000   $3,305,000   $10,367,000   $ 8,345,000
Cost of sales............   1,349,000    1,350,000     4,283,000     3,347,000
                           -----------  -----------  ------------  ------------
Gross profit.............   1,836,000    1,955,000     6,084,000     4,998,000

Expenses:
  Selling................   1,209,000      895,000     3,537,000     2,661,000
  General and
   administrative........     318,000      316,000       947,000       916,000
  Research and
   development...........     704,000      580,000     2,147,000     1,704,000
                           -----------  -----------  ------------  ------------
  Total expenses.........   2,231,000    1,791,000     6,631,000     5,281,000
                           -----------  -----------  ------------  ------------
Income (loss) from
 operations..............    (395,000)     164,000      (547,000)     (283,000)

Interest income..........     231,000      287,000       766,000       830,000
Other income.............       4,000        9,000         9,000        13,000
                           -----------  -----------  ------------  ------------
Net income (loss)
  before taxes...........    (160,000)     460,000       228,000       560,000
Income tax benefit
  (expense)..............      61,000     (175,000)      (86,000)     (213,000)
                           -----------  -----------  ------------  ------------
Net income (loss)........  $  (99,000)  $  285,000   $   142,000   $   347,000
                           ===========  ===========  ============  ============
Per share data:
Common shares outstanding   5,448,000    5,382,000     5,415,000     5,372,000
Common and common
  equivalent shares
  outstanding............   5,586,000    5,509,000     5,544,000     5,482,000
Basic earnings (loss)
  per share..............  $    (0.02)  $     0.05   $     0.03    $     0.06
                           ===========  ===========  ============  ============
Diluted earnings (loss)
  per share............... $    (0.02)  $     0.05   $     0.03    $     0.06
                           ===========  ===========  ============  ============

Page 5

                                PPT VISION, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                     Nine Months Ended July 31,
                                                     --------------------------
                                                         1998          1997
                                                     ------------  ------------
Net income.......................................... $    142,000  $    347,000
Adjustments to reconcile net income to net
 cash provided by operating activities:
 Depreciation and amortization......................      468,000       303,000
 Deferred rent......................................      (26,000)      (21,000)
 Deferred income tax benefit........................       16,000       181,000
 Accrued interest income............................     (148,000)     (285,000)
 Realized gain on sale of investments...............       (2,000)        --
Change in assets and liabilities
 Accounts receivable................................      159,000     1,413,000
 Inventories........................................     (506,000)     (404,000)
 Other assets.......................................       57,000        29,000
 Restricted cash....................................        --          117,000
 Accounts payable and accrued expenses..............     (914,000)     (202,000)
                                                     ------------  ------------
  Total adjustments.................................     (896,000)    1,131,000
                                                     ------------  ------------
  Net cash provided by (used in) operating activities    (754,000)    1,478,000

Cash flows from investing activities:
 Purchase of fixed assets...........................     (842,000)     (753,000)
 Purchase of investments............................  (16,526,000)  (16,407,000)
 Sales and maturities of investments................   18,267,000    15,214,000
 Net investment in other long-term assets...........   (2,165,000)        --
                                                     ------------  ------------
  Net cash provided by (used in) investing activities  (1,266,000)   (1,946,000)

Cash flows from financing activities
 Proceeds from issuance of common stock.............      283,000       113,000
                                                     ------------  ------------
  Net cash provided by financing activities.........      283,000       113,000
                                                     ------------  ------------

Net increase (decrease) in cash and cash equivalents   (1,737,000)     (355,000)

Cash and cash equivalents at beginning of year......    4,027,000     4,179,000
                                                     ------------  ------------
Cash and cash equivalents at end of period.......... $  2,290,000  $  3,824,000
                                                     ============  ============

Supplemental disclosure of cash flow information:
 Cash paid during the year for:
  Income tax........................................ $     70,000  $     35,000
  Interest..........................................        --            --

Page 6

                                PPT VISION, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

JULY 31, 1998

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.  In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The Balance Sheet at October 31, 1997 has been derived from the
Company's audited financial statements for the fiscal year ended October 31,
1997.  For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended October 31, 1997.

NOTE B - EARNINGS PER SHARE

In the quarter ended January 31, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."  SFAS No.
128 simplifies the standards required under current accounting rules for
computing earnings per share and replaces the presentation of primary earnings
per share and fully diluted earnings per share with a presentation of basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").
Basic EPS excludes dilution and is determined by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period.  Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock.  Diluted EPS is computed similarly to fully diluted
earnings per share under current accounting rules.  The implementation of SFAS
No. 128 is not expected to have a material effect on the Company's earnings per
share as determined under current accounting rules.

Page 7

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

Results of Operations
---------------------
  Net Revenues: Net revenues decreased 4% to $3,185,000 for the three-month
period ended July 31, 1998, compared to net revenues of $3,305,000 for the same
period in fiscal 1997.  For the nine-month period ended July 31, 1998, net
revenues increased 24% to $10,367,000 compared to net revenues of $8,345,000 for
the same period in fiscal 1997.  Unit sales of the Company's machine vision
systems decreased to 115 for the third quarter of fiscal 1998 versus 137 for the
same period in fiscal 1997.  For the nine-month period ended July 31, 1998, unit
sales increased to 390 compared to 332 for the same period in fiscal 1997.
Gross revenues for the first nine months of fiscal 1998 increased 1% in North
America and 103% outside North America. Sales to customers outside North America
represented 37% of gross revenues for the first nine months of fiscal 1998,
compared to 23% for the same period in fiscal 1997. The decrease in net revenues
during the third quarter of fiscal 1998 was primarily the result of slower sales
domestically, particularly in the electronics segment, which were partially
offset by strong sales internationally.

  Gross Profit: Gross profit decreased 6% to $1,836,000 for the three-month
period ended July 31, 1998, compared to $1,955,000 for the same period in fiscal
1997.  For the nine-month period ended July 31, 1998, gross profit increased 22%
to $6,084,000, compared to $4,998,000 for the same period in fiscal 1997.  As a
percentage of net revenues, the gross profit for the third quarter of fiscal
1998 decreased to 58%, compared to 59% for the same period in fiscal 1997.  For
the nine-month period ended July 31, 1998, the gross profit as a percentage of
net revenues decreased to 59%, compared to 60% for the same period in fiscal
1997.  The increase in gross profit is primarily due to the increase in sales.
The decrease in the gross profit as a percentage of net revenues is primarily
related to an increase in international sales, which are primarily through
distributors and therefore are generally at a lower margin.  The Company
anticipates that the gross profit as a percentage of net revenues may fluctuate
and may decline temporarily at certain times in the remainder of fiscal 1998 due
to shifts in geographic and product mix as well as normal start-up costs
associated with expected new product introductions.

  Selling Expenses: Selling expenses increased 35% to $1,209,000 for the three-
month period ended July 31, 1998, compared to $895,000 for the same period in
fiscal 1997.  For the nine-month period ended July 31, 1998, selling expenses
increased 33% to $3,537,000, compared to $2,661,000 for the same period in
fiscal 1997.  As a percentage of net revenues, selling expenses increased to 38%
for the third quarter of fiscal 1998, compared to 27% for the third quarter of
fiscal 1997.  For the nine-month period ended July 31, 1998, selling expenses as
a percentage of net revenues increased to 34%, compared to 32% for the same
period in fiscal 1997.  The increase in expenditures is primarily the result of
investments required to launch the Microelectronics Product Group ("MPG") as
well as the opening of sales and support offices in Michigan and North Carolina.


Page 8

Although the Company will limit the rate of growth in selling expenses, it is
anticipated that selling expenses may remain at current levels or increase
slightly in the coming quarters. However, the Company believes that over that
time, selling expenses may decrease somewhat as a percentage of net revenues
compared to the third quarter of fiscal 1998, depending on the level of sales
growth.

  General and Administrative Expenses: General and administrative expenses
increased slightly to $318,000 for the three-month period ended July 31, 1998,
compared to $316,000 for the same period in fiscal 1997. For the nine-month
period ended July 31, 1998, general and administrative expenses increased 3% to
$947,000, compared to $916,000 for the same period in fiscal 1997. As a
percentage of net revenues, general and administrative expenses remained
relatively constant at 10% for the third quarter of fiscal 1998, compared to the
third quarter of fiscal 1997. For the nine-month period ended July 31, 1998,
general and administrative expenses as a percentage of net revenues decreased to
9%, compared to 11% for the same period in fiscal 1997.  The decrease as a
percentage of net revenues is mainly related to operating leverage provided by
the Company's increased revenues. The Company believes that during the remainder
of fiscal 1998, general and administrative expenses will not increase
substantially as a percentage of net revenues compared to the first nine months
of fiscal 1998, depending on the level of sales growth.

  Research and Development Expenses: Research and development expenses increased
21% to $704,000 for the three-month period ended July 31, 1998, compared to
$580,000 for the same period in fiscal 1997. For the nine-month period ended
July 31, 1998, research and development expenses increased 26% to $2,147,000,
compared to $1,704,000 for the same period in fiscal 1997. As a percentage of
net revenues, research and development expenses increased to 22% for the third
quarter of fiscal 1998, compared to 18% for the third quarter of fiscal 1997.
For the nine-month period ended July 31, 1998, research and development expenses
as a percentage of net revenues increased slightly to 21%, compared to 20% for
the same period in fiscal 1997. The increase in expenditures is mainly due to
permanent staffing and contract personnel required to support the Company's new
product development programs and to build the MPG business and commercialize the
Company's 3D scanning technology ("SMI 3D"). While research and development
expenses may remain at current levels or increase slightly as the Company
continues to invest in next generation software and hardware development, the
Company expects that during the remainder of fiscal 1998, such expenses will not
increase substantially as a percentage of net revenues compared to the first
nine months of fiscal 1998, depending on the level of sales growth.

  Interest income decreased 20% to $231,000 for the three-month period ended
July 31, 1998, compared to $287,000 for the same period in fiscal 1997. For the
nine-month period ended July 31, 1998, interest income decreased 8% to
$766,000, compared to $830,000 for the same period in fiscal 1997. The decrease
in interest income is primarily related to a reduction in the balances in cash
and cash equivalents and short-term investments due to payments made to

Page 9

Medar, Inc. under the terms of licensing and purchase agreements for the SMI 3D
scanning technology and investment in inventories required to support new
product programs.

  Income Tax Benefit (Expense): Income tax benefit of $61,000 was recorded for
the three-month period ended July 31, 1998, compared to income tax expense of
$175,000 for the same period in fiscal 1997.  For the nine-month period ended
July 31, 1998, income tax expense decreased to $86,000, compared to $213,000 for
the same period in fiscal 1997. The decrease in income tax expense is a result
of the Company's decreased earnings.

Liquidity and Capital Resources
-------------------------------
  Working capital decreased to $20,775,000 on July 31, 1998 from $22,887,000 on
October 31, 1997. The Company financed its operations in the first nine months
of fiscal 1998 through internally generated cash flow and existing cash and cash
equivalents as well as cash provided by the exercise of stock options. Net cash
used by operating activities during the nine-month period ended July 31, 1998
was $754,000. Inventories increased $506,000 during the first nine months of
fiscal 1998 primarily due to investments required to support new product
programs.

  The Company used $1,266,000 of cash for investing activities, primarily for
the purchase of fixed assets and other long-term assets. The Company used
$842,000 of cash for the purchase of fixed assets, mainly consisting of
computer, laboratory, and manufacturing equipment.  The proceeds from sales and
maturities of investments provided $18,267,000 of cash flow, while $16,526,000
of cash was used for the purchase of investments. Investments consist of short-
term investment grade securities.  The Company used $2,165,000 of cash for the
purchase of other long-term assets, primarily related to payments made to Medar,
Inc. under the terms of licensing and purchase agreements for the SMI 3D
scanning technology. In addition, the Company generated $283,000 in cash flow
from its financing activities as a result of issuances of its Common Stock upon
exercise of stock options.

  Current assets decreased to $22,176,000 at July 31, 1998 from $25,202,000 at
October 31, 1997. Short-term investments increased to $13,936,000 at July 31,
1998 from $15,515,000 at October 31, 1997. Cash and cash equivalents decreased
to $2,290,000 at July 31, 1998 from $4,027,000 at October 31, 1997.

  The Company's current liabilities decreased to $1,401,000 at July 31, 1998
from $2,315,000 at October 31, 1997.  The decrease in current liabilities was
primarily due to a reduction in other short-term payables as a result of the
payment made to Medar, Inc. and a decrease in trade accounts payable.

  The Company expects that its capital expenditures in fiscal 1998 may increase
from the $1.1 million in fiscal 1997, primarily for computer, laboratory and
manufacturing equipment.  At September 8, 1998, the Company had commitments for
approximately $292,000 for capital equipment.  The Company is also obligated to

Page 10

pay an additional $500,000 under the terms of the Medar, Inc. license agreement,
subject to the achievement by Medar of certain development milestones.

  The Company believes that its cash flow from operations, existing cash and
cash equivalents, and short-term investments at July 31, 1998 will be adequate
for its working capital and capital resource needs, including payments due under
the Medar, Inc. license agreement during fiscal 1998.


FORWARD LOOKING STATEMENT
-------------------------
  Certain of the statements contained in this Form 10-Q that relate to
expectations regarding future sales and profitability contain forward-looking
statements regarding future performance of the Company.  The Company's actual
results could differ materially from the estimates made in the forward-looking
statements as a result of a number of factors, including (i) risks and
uncertainty in the market for machine vision, (ii) cyclicality of capital
spending by customers, (iii) quarterly fluctuations in operating results by the
Company due to the long selling cycle for machine vision products, (iv)
dependence on principal customers, including the Company's international
distributors, (v) competition in the Company's principal markets and (vi) the
Company's ability to continue to enhance its current products and develop new
products that keep pace with technological developments and evolving industry
standards.  The Company wishes to caution readers not to place undue reliance
upon any such forward-looking statement, which speak only as of the date made.
A more detailed presentation of certain factors is included in the Company's
Annual Report on Form 10-K for the year ended October 31, 1997.

Page 11

PART II.  OTHER INFORMATION

Item 1:   LEGAL PROCEEDINGS
          -----------------
          None

Item 2:   CHANGES IN SECURITIES AND USE OF PROCEEDS
          -----------------------------------------
          None

Item 3:   DEFAULTS UPON SENIOR SECURITIES
          ------------------------------
          None

Item 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------
          None
          
Item 5:   OTHER INFORMATION
          -----------------
          None

Page 12

Item 6:   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------
          (a)   Exhibits:                                                Page
                                                                         ----
             1. Exhibit 27 - Financial Data Schedule....................  14

          (b)   Reports on Form 8-K

             None

Page 13

                                   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
undersigned thereunto duly authorized.


                                        PPT VISION, INC.

Date: September 14, 1998

                                        /s/Thomas R. Northenscold
                                        -----------------------------
                                        Thomas R. Northenscold
                                        (Principal Accounting Officer)
                                        Chief Financial Officer