**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**Form 10-QSB**

----

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

**For the Quarterly Period Ended July 31, 2007**

**Commission 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 the ExchangeAct during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling 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 August 31, 2007: 7,402,916

 

----

INDEX

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

 

2

----

PPT VISION, INC.BALANCE SHEETS
| ** **                                       | ** ** | **July 31, 2007** | ** ** | **October 31, 2006** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **(unaudited)**             | ** ** | **(audited)**                  | ** ** |
| ASSETS                                           |       |                        |       |                           |       |
| Current assets                                   |       |                        |       |                           |       |
| Cash and cash  equivalents                       |       | $                           | 364,000    |                           | $          | 753,000 |   |
| Accounts receivable,  net                        |       | 947,000                     |       | 903,000                        |       |
| Inventories:                                     |       |                        |       |                           |       |
| Manufactured and  purchased parts                |       | 526,000                     |       | 440,000                        |       |
| Work-in-process                                  |       | 33,000                      |       | 15,000                         |       |
| Finished goods                                   |       | 28,000                      |       | 15,000                         |       |
| Total inventories                                |       | 587,000                     |       | 470,000                        |       |
| Other current assets                             |       | 44,000                      |       | 50,000                         |       |
| Total current assets                             |       | 1,942,000                   |       | 2,176,000                      |       |
| Fixed assets, net                                |       | 267,000                     |       | 308,000                        |       |
| Intangible and other  assets, net                |       | 97,000                      |       | 107,000                        |       |
| Total assets                                     |       | $                           | 2,306,000  |                           | $          | 2,591,000 |   |
|                                             |       |                        |       |                           |       |
| LIABILITIES AND SHAREHOLDERS’ EQUITY        |       |                        |       |                           |       |
| Current liabilities                              |       |                        |       |                           |       |
| Accounts payable                                 |       | $                           | 532,000    |                           | $          | 487,000 |   |
| Accrued expenses                                 |       | 140,000                     |       | 138,000                        |       |
| Deferred revenue –  customer advances       |       | 6,000                       |       | 2,000                          |       |
| Total current  liabilities                       |       | 678,000                     |       | 627,000                        |       |
| Shareholders’ equity                        |       |                        |       |                           |       |
| Common stock                                     |       | 740,000                     |       | 453,000                        |       |
| Capital in excess of  par value                  |       | 37,355,000                  |       | 36,625,000                     |       |
| Accumulated deficit                              |       | (36,467,000                 | )          | (35,114,000                    | )          |
| Total shareholders’  equity                 |       | 1,628,000                   |       | 1,964,000                      |       |
|                                             |       |                        |       |                           |       |
| Total liabilities and shareholders’  equity |       | $                      | 2,306,000  |                           | $     | 2,591,000 |   |

 

See accompanying notes to condensed financialstatements

3

----

PPT VISION, INC.STATEMENTS OF OPERATIONS(UNAUDITED)
| ** **                                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **July 31,**                | ** ** | **July 31,**               | ** ** |
| ** **                                   | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                         |       |                             |       |                            |       |   |   |   |   |
| Revenues                                     |       | $                                | 1,285,000  |                            | $          | 1,377,000 |   | $ | 3,571,000 |   | $ | 4,367,000 |   |
| Cost of revenues                             |       | 688,000                          |       | 644,000                         |       | 1,863,000 |   | 2,018,000 |   |
| Gross profit                                 |       | 597,000                          |       | 733,000                         |       | 1,708,000 |   | 2,349,000 |   |
| Expenses:                                    |       |                             |       |                            |       |   |   |   |   |
| Sales and marketing                          |       | 501,000                          |       | 545,000                         |       | 1,425,000 |   | 1,647,000 |   |
| General and administrative                   |       | 201,000                          |       | 227,000                         |       | 692,000 |   | 712,000 |   |
| Research and development                     |       | 307,000                          |       | 347,000                         |       | 954,000 |   | 1,033,000 |   |
| Total expenses                               |       | 1,009,000                        |       | 1,119,000                       |       | 3,071,000 |   | 3,392,000 |   |
| Interest and  other income                   |       | 3,000                            |       | 5,000                           |       | 11,000 |   | 174,000 |   |
| Net loss                                     |       | $                                | (409,000   | )                               | $          | (381,000 | ) | $ | (1,352,000 | ) | $ | (869,000 | ) |
| Per share data:                              |       |                             |       |                            |       |   |   |   |   |
| Weighted average  basic shares outstanding   |       | 7,403,000                        |       | 3,805,000                       |       | 6,063,000 |   | 3,484,000 |   |
| Weighted average  diluted shares outstanding |       | 7,403,000                        |       | 3,805,000                       |       | 6,063,000 |   | 3,484,000 |   |
| Net loss                                     |       | $                                | (0.06      | )                               | $          | (0.10 | ) | $ | (0.22 | ) | $ | (0.25 | ) |

 

See accompanying notes to condensed financialstatements

4

----

PPT VISION, INC.STATEMENTS OF CASH FLOWS(UNAUDITED)
| ** **                                                                   | ** ** | **Nine Months**        | ** ** | **Nine Months**        | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                   | ** ** | **Ended**                   | ** ** | **Ended**                   | ** ** |
| ** **                                                                   | ** ** | **July 31, 2007** | ** ** | **July 31, 2006** | ** ** |
| Net loss                                                                     |       | $                           | (1,352,000 | )                           | $          | (869,000 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                        |       |                        |       |
| Stock option  expense                                                        |       | 13,000                      |       | 2,000                       |       |
| Depreciation and  amortization                                               |       | 90,000                      |       | 126,000                     |       |
| Gain on sale of  securities                                                  |       | —                      |       | (72,000                     | )          |
| Change in  allowance for doubtful accounts                                   |       | (4,000                      | )          | —                      |       |
| Change in assets and  liabilities:                                           |       |                        |       |                        |       |
| Accounts  receivable                                                         |       | (40,000                     | )          | (57,000                     | )          |
| Inventories                                                                  |       | (117,000                    | )          | 64,000                      |       |
| Other current  assets                                                        |       | 6,000                       |       | 50,000                      |       |
| Accounts payable                                                             |       | 45,000                      |       | 68,000                      |       |
| Accrued expenses                                                             |       | 2,000                       |       | (86,000                     | )          |
| Deferred revenue  – customer advances                                   |       | 4,000                       |       | 17,000                      |       |
| Total  adjustments                                                           |       | (1,000                      | )          | 112,000                     |       |
| Net cash used in  operating activities                                       |       | (1,353,000                  | )          | (757,000                    | )          |
| Cash flows from  investing activities:                                       |       |                        |       |                        |       |
| Purchase of  fixed assets                                                    |       | (40,000                     | )          | (38,000                     | )          |
| Proceeds from  sale of securities                                            |       | —                      |       | 94,000                      |       |
| Net cash (used  in) provided by investing activities                         |       | (40,000                     | )          | 56,000                      |       |
| Cash flows from  financing activities:                                       |       |                        |       |                        |       |
| Proceeds from  issuance of common stock and warrants                         |       | 1,004,000                   |       | 405,000                     |       |
| Net cash  provided by financing activities                                   |       | 1,004,000                   |       | 405,000                     |       |
| Net decrease in cash  and cash equivalents                                   |       | (389,000                    | )          | (296,000                    | )          |
| Cash and cash equivalents  at beginning of year                              |       | 753,000                     |       | 778,000                     |       |
| Cash and cash equivalents at end of period                                   |       | $                           | 364,000    |                        | $          | 482,000 |   |

 

See accompanying notes tocondensed financial statements

5

----

PPTVISION, INC.

NOTES TOCONDENSED FINANCIAL STATEMENTS

July 31, 2007

(UNAUDITED)

NOTE A –DESCRIPTION OF BUSINESS

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 onForm 10-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 nine months ended July 31, 2007 and 2006.

6

----

NOTE D – LIQUIDITYAND CAPITAL RESOURCES

The Company had a net lossfor the three and nine months ended July 31, 2007 of $409,000 and $1,352,000, respectively.Cash used in operations was $1,353,000 for the nine months ended July 31, 2007.

On August 30, 2007, theCompany agreed to issue $500,000 of securities in a private placement toCompany’s current largest shareholder and a director, Mr. Peter R. Peterson,who is purchasing the securities through the P. R. Peterson Keogh Plan. TheCompany entered in the agreement to strengthen its balance sheet and acquireadditional working capital. In the offering, the Company agreed to issue2,500,000 shares of its common stock, together with seven-year warrants topurchase an additional 1,000,000 shares at a price of $0.25 per share. Althoughthe offering was funded on August 30, 2007, issuance of the shares and warrantsare subject to approval by the shareholders of the Company at the PPT VISION2008 Annual Meeting of Shareholders of an increase in the shares of authorizedcommon stock from 10,000,000 to 20,000,000. The Company and Mr. Peterson alsoentered into a Registration Rights Agreement under which the Company agreed toregister the shares underlying the warrants. With the proceeds of the offering,the Company believes it has sufficient cash to fund its operations, workingcapital and capital resource needs through the next nine to twelve months.

The Company estimatesthat if revenues do not increase to a level sufficient to generate positivecash flow, some form of external financing will be required. The Companybelieves that a variety of financing alternatives will be available includingexternal borrowing against accounts receivable and inventory, or the sale ofequity 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 PERSHARE

At July 31, 2007, optionsto purchase 382,315 shares and warrants to purchase 1,000,000 shares of theCompany’s common stock were not considered in the calculation of dilutedearnings per share. At July 31, 2006, options to purchase 332,330 shares of theCompany’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 and warrants 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 sharessubject to 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 the Annual Report on Form 10-KSB/A for thefiscal year ended October 31, 2006, for additional information related to thesestock-based compensation plans.

7

----

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 yet vestedon, 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 July 31, 2007,were $2,000 and $0.00 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 nine months ended July 31, 2007, were $13,000 and$0.00 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 nine months ended July 31, 2006:
| Three Months Ended  July 31, 2006 | ** ** | ** **  | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|-------------|------------|------------|------------|
| Net loss                                              |       | As reported |       | $          | (381,000   | ) |
|                                                       |       | Pro forma   |       | $          | (425,000   | ) |
|                                                  |       |        |       |       |       |
| Stock based  compensation                        |       | As reported |       | $          | 1,000      |   |
|                                                       |       | Pro forma   |       | $          | (44,000    | ) |
|                                                  |       |        |       |       |       |
| Basic and diluted loss  per share                |       | As reported |       | $          | (0.10      | ) |
|                                                       |       | Pro forma   |       | $          | (0.11      | ) |

 
| Nine Months Ended  July 31, 2006  | ** ** | ** **         | ** ** | ** ** | ** ** |
|----------------------------------------|------------|--------------------|------------|------------|------------|
| Net loss                               |       | As reported        |       | $          | (869,000   | ) |
|                                        |       | Pro forma          |       | $          | (994,000   | ) |
|                                   |       |               |       |       |       |
| Stock based  compensation         |       | As reported   |       | $          | 2,000      |   |
|                                        |       | Pro forma          |       | $          | (125,000   | ) |
|                                   |       |               |       |       |       |
| Basic and diluted loss  per share |       | As reported        |       | $          | (0.25      | ) |
|                                        |       | Pro forma          |       | $          | (0.29      | ) |

 

8

----

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  July 31, | ** ** | **2007**                  | ** ** | **2006**                  | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| Risk free interest  rates                           |       | 4.8%                      |       | 4.0%                      |       |
| Expected lives                                      |       | 7 Years    |       | 7 Years    |       |
| Expected volatility                                 |       | 280%                      |       | 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 July 31, 2007 the estimated expense related tostock options outstanding and unvested will be $2,000 for the remaining quarterin the year ending October 31, 2007. The estimated expense related to stockoptions outstanding and unvested will be $4,000, $2,000 and $1,000 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 revenues (including sales delivered through internationaldistributors) by geographic location for the three and nine months ended July31, 2007 and 2006:
| Three Months Ended July 31, | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| North America                                   |       | 59       | %          | 38       | %          |
| Europe                                          |       | 18       | %          | 22       | %          |
| Asia-Pacific                                    |       | 23       | %          | 39       | %          |
| South America                                   |       | 0        | %          | 1        | %          |
|                                            |       | 100      | %          | 100      | %          |

 
| Nine Months Ended July 31, | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| North America              |       | 52       | %          | 44       | %          |
| Europe                     |       | 20       | %          | 19       | %          |
| Asia-Pacific               |       | 28       | %          | 36       | %          |
| South America              |       | 0        | %          | 1        | %          |
|                       |       | 100      | %          | 100      | %          |

 

In the three-month periodended July 31, 2007, revenues from one customer represented approximately 10%of total revenue. In the three-month period ended July 31, 2006, revenues fromthree customers represented approximately 15%, 15% and 11% of total revenue. Inthe nine-month period ended July 31, 2007, revenues from two customers eachrepresented approximately 10% of total revenue, respectively. In the nine-monthperiod ended July 31, 2006, revenues from two customers representedapproximately 14% and 11% of the total revenue, respectively.

9

----

NOTE H – NEWACCOUNTING PRONOUNCEMENTS

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 toprior year errors is material to the current year, then the prior yearfinancial information needs to be corrected. A correction to the prior yearresults that are not material to those years, would not require a “restatementprocess” where prior financials would be amended. SAB 108 is effective forfiscal years ending after November 15, 2006. We do not anticipate that SAB 108will have a material effect on our financial position, results of operations orcash flows.

NOTE I – SUBSEQUENT EVENT

Subsequent to the end ofthe third quarter ended July 31, 2007, PPT Vision closed on a $500,000 privateplacement with P. R. Peterson on August 30, 2007. Details of this closing canbe found in Note D Liquidity and Capital Resources.

NOTE J – RECLASSIFICATION

The October 31, 2006other current assets has been reclassified to be consistent with thecurrent-year presentation. The balance decreased by $84,596 and is included inother long-term assets. The reclassification did not affect net loss orshareholders’ equity.

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 

10

----

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 7% to $1,285,000 during the third quarter ended July 31, 2007compared to revenues of $1,377,000 in the prior year’s third quarter. TheCompany’s net loss for the quarter ended July 31, 2007 increased to $409,000 or$.06 per share compared to $381,000 or $.10 per share in the prior year’speriod. The decrease in revenue in the third quarter of fiscal year 2007compared to the third quarter of fiscal year 2006 occurred as a result of asales mix shift toward IMPACT units with a lower selling price. IMPACT unitvolume increased 2% in the third quarter of fiscal 2007 compared to the thirdquarter of fiscal 2006.

Revenues decreased 18% to$3,571,000 during the nine-month period ended July 31, 2007 compared to$4,367,000 during the prior year’s nine-month period and the loss increased to$1,352,000 or $0.22 per share during the nine-month period ended July 31, 2007compared to a loss of $869,000 or $0.25 per share in the prior year’s period.

During the fiscal 2007 third quarter, revenues fromoutside North America accounted for 41% of revenues compared to 62% in thethird quarter of fiscal 2006. During the first nine months of fiscal 2007,revenues from outside North America accounted for 48% compared to 56% in thefirst nine months of fiscal 2006.

Total operating expenses for the three-month periodended July 31, 2007 were $1,009,000, a 10% decrease in comparison to totaloperating expenses of $1,119,000 in the prior year’s third quarter. Thedecrease in operating expenses from the third quarter of fiscal year 2007compared to the same period in fiscal 2006 is from the Company’s continuingefforts to control costs.

CRITICALACCOUNTING POLICIES 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

11

----

making judgments aboutthe carrying values of assets and liabilities. Actual results could differ fromthese 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;

·                  estimating valuation allowances,specifically the allowance for doubtful accounts and inventory; and

·                  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 nine months ended July 31,2007 and 2006.

# Valuation Allowances

Management estimates theallowance for doubtful accounts by analyzing accounts receivable balances byage and considering 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.

12

----

# Long-Lived and IntangibleAssets

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.Recoverability of assets to be held and used is measured by a comparison of thecarrying amount of an asset to undiscounted future net cash flows expected tobe generated 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.

RESULTS OFOPERATIONS

Revenues

Net revenues decreased 7%to $1,285,000 for the three-month period ended July 31, 2007, compared to netrevenues of $1,377,000 for the same period in fiscal 2006. For the nine-monthperiod ended July 31, 2007, revenues decreased 18% to $3,571,000 from$4,367,000 for the same period in fiscal 2006. Unit sales for the three-monthperiod ended July 31, 2007 increased to 269 from 263 in the same period offiscal 2006. Unit Sales for the nine-month period ended July 31, 2007 decreasedto 791 from 823 in the same period of fiscal 2006. In the three-month periodended July 31, 2007, revenues from one customer represented approximately 10%of total revenue. In the three-month period ended July 31, 2006, revenues fromthree customers represented approximately 15%, 15% and 11% of total revenue. Inthe nine-month period ended July 31, 2007 revenues from two customers eachrepresented approximately 10% of total revenue, respectively. In the nine-monthperiod ended July 31, 2006, revenues from two customers representedapproximately 14% and 11% of total revenue, respectively.

The decrease in revenuein the third quarter of fiscal year 2007 compared to the third quarter offiscal year 2006 occurred as a result of a sales mix shift toward IMPACT unitswith a lower selling price. IMPACT unit volume increased 2% in the thirdquarter of fiscal 2007 compared to the third quarter of fiscal 2006.

During the third quarterof fiscal 2007, revenues from outside North America accounted for 41% ofrevenues compared to 62% in the fiscal 2006 third quarter.  During the first nine months of fiscal 2007,revenues from outside North America accounted for 48% compared to 56% in thefirst nine 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 decreased19% to $597,000 for the three-month period ended July 31, 2007, compared to$733,000 for the same period in fiscal 2006. For the nine-month period endedJuly 31, 2007, gross profit decreased 27% to $1,708,000 from $2,349,000 for thesame period in fiscal 2006. As a percentage of net revenues, the gross profitfor the third quarter of fiscal 2007 decreased to 46% compared to 53% in thesame period of fiscal 2006. For the nine-month period ended July 31, 2007,gross profit as a percentage of net revenue decreased to 48% compared to 54% inthe same period of fiscal 2006. The decrease in gross margin is a reflection ofthe decrease in revenue during the third quarter of fiscal 2007 compared to thesame period in the prior year and sale of IMPACT units, which have a lowergross profit margin. We expect that our future gross margins will

13

----

trend into the 55% to 60%range as our fixed manufacturing overhead is spread over a higher volume ofsales.

Sales and marketing expensesdecreased 8% to $501,000 for the three-month period ended July 31, 2007compared to $545,000 for the same period in fiscal 2006. For the nine-monthperiod ended July 31, 2007, sales and marketing expenses decreased 13% to$1,425,000 from $1,647,000 for the same period in fiscal 2006. As a percentageof net revenues, sales and marketing expenses decreased slightly to 39% for thethird quarter 2007 compared to 40% for the same period in fiscal 2006. For thenine-month period ended July 31, 2007, sales and marketing expenses as apercentage of net revenues increased to 40% compared to 38% in the same periodin fiscal 2006. The Company expects sales and marketing expenses in absolutedollars to increase modestly for the remainder of fiscal 2007 for the supportand promotion of one major exhibition in the last quarter of fiscal 2007.Increases in sales expenditures may also occur to the extent that revenuegrowth is achieved.

General and administrativeexpenses decreased 11% to $201,000 for the three-month period ended July 31,2007, compared to $227,000 for the same period in fiscal 2006. For the nine-monthperiod ended July 31, 2007, general and administrative expenses decreased 3% to$692,000 compared to $712,000 in the same period in fiscal 2006. As apercentage of net revenues, general and administrative expenses remainedrelatively flat at 16% for the third quarter of fiscal 2007 and the same periodin fiscal 2006. For the nine-month period ended July 31, 2007, general andadministrative expenses as a percentage of net revenues increased to 19% from16% in the same period in fiscal 2006. The Company expects general andadministrative expenses to remain relatively flat for the remainder of fiscal2007.

Research and developmentexpenses decreased 12% to $307,000 for the three-month period ended July 31,2007, compared to $347,000 for the same period in fiscal 2006. For thenine-month period ended July 31, 2007, research and development expensesdecreased 8% to $954,000 from $1,033,000 in the same period in fiscal 2006. Asa percentage of net revenues, research and development expenses decreasedslightly to 24% for the third quarter of fiscal 2007, compared to 25% for thethird quarter of fiscal 2006. For the nine-month period ended July 31, 2007,research and development expenses as a percentage of net revenues increased to27% from 24% in the same period in fiscal 2006. The Company expects researchand development expenses to remain relatively flat for the remainder of fiscal2007.

The Company did not recordan income tax benefit or expense for the three and nine month periods endedJuly 31, 2007 or 2006.

TheCompany’s net loss for the third quarter of fiscal 2007 increased from year-agolevels to $409,000 or $0.06 per share, as compared with a loss of $381,000 or$0.10 per share for the same period in fiscal 2006. The Company’s net loss forthe nine-month period ended July 31, 2007 increased to $1,352,000 or $0.22 pershare, as compared with a loss of $869,000 or $0.25 per share for the sameperiod in fiscal 2006. There were approximately 7.4 million shares outstandingduring the three-month period ended July 31, 2007, as compared withapproximately 3.8 million shares outstanding for the same period in fiscal2006. There were approximately 6.1 million shares outstanding during thenine-month period ended July 31, 2007, as compared with approximately 3.5 millionshares outstanding for the same period in fiscal 2006.

14

----

LIQUIDITYAND CAPITAL RESOURCES

At July 31, 2007 the Companyhad cash balances of $364,000, working capital of approximately $1.3 millionand no long-term debt.

In the third quarter offiscal 2007 the Company incurred a net loss of $409,000 which included non-cashcharges related to depreciation and amortization of $28,000. The net loss forthe quarter increased $28,000 from the $381,000 loss reported in the thirdquarter of fiscal 2006. For the nine months ended July 31, 2007, cash used inoperating activities was $1,353,000.

On August 30, 2007, theCompany agreed to issue $500,000 of securities in a private placement toCompany’s current largest shareholder and a director, Mr. Peter R. Peterson, whois purchasing the securities through the P. R. Peterson Keogh Plan. The Companyentered in the agreement to strengthen its balance sheet and acquire additionalworking capital. In the offering, the Company agreed to issue 2,500,000 sharesof its common stock, together with seven-year warrants to purchase anadditional 1,000,000 shares at a price of $0.25 per share. Although theoffering was funded on August 30, 2007, issuance of the shares and warrants aresubject to approval by the shareholders of the Company at the PPT VISION 2008Annual Meeting of Shareholders of an increase in the shares of authorizedcommon stock from 10,000,000 to 20,000,000. The Company and Mr. Peterson alsoentered into a Registration Rights Agreement under which the Company agreed toregister the shares underlying the warrants. With the proceeds of the offering,the Company believes it has sufficient cash to fund its operations, workingcapital and capital resource needs through the next nine to twelve months.

The Company estimatesthat if revenues do not increase to a level sufficient to generate positivecash flow, some form of external financing will be required. The Companybelieves that a variety of financing alternatives will be available includingexternal borrowing against accounts receivable and inventory, or the sale ofequity 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.

Asof July 31, 2007, the Company had no outstanding debt.

Workingcapital decreased $285,000 to $1,264,000 at July 31, 2007 from $1,549,000 atOctober 31, 2006. The Company financed its operations during the first ninemonths of fiscal 2007 through existing cash and cash equivalents, which waspartially funded through the private placement held in February, 2007. Accountsreceivable increased $40,000 and inventories increased $117,000 during thefirst nine months of fiscal 2007. Accounts payable increased by $45,000 whileaccrued expenses also increased by $2,000 during the first nine months offiscal 2007.

Net cash used ininvesting activities was $40,000 during the nine months ended July 31, 2007which accounted for fixed asset additions during the first nine months offiscal 2007. This compares with $38,000 in fixed asset additions and a sale ofstock with proceeds of $94,000 for the same period in fiscal 2006. The Companyexpects that fixed asset additions for the remaining quarter of fiscal 

15

----

2007 to continue atapproximately the same rate as the first three quarters of fiscal 2007.

The Companydoes not have relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structured finance or specialpurpose 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.

The Companybelieves it does not have material exposure to quantitative and qualitativemarket risks. The carrying amounts reflected in the balance sheets of cash andcash equivalents, trade receivables and trade payables approximate fair valueat July 31, 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/A for the year ended October 31, 2006 and other reports filedwith the Securities and Exchange Commission.

16

----

Item 3:        CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controlsand 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 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 August 30, 2007, the Company agreed to issue  $500,000 of securities in a private placement to Company’s current largest  shareholder and a director, Mr. Peter R. Peterson, who is purchasing 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 2,500,000  shares of its common stock, together with seven–year warrants to purchase an  additional 1,000,000 shares at a price of $0.25 per share. Although the  offering was funded on August 30, 2007, issuance of the shares and warrants  are subject to approval by the shareholders of the Company at the PPT VISION  2008 Annual Meeting of Shareholders of an increase in the shares of  authorized common stock from 10,000,000 to 20,000,000. The Company and Mr.  Peterson also entered into a Registration Rights Agreement under which the  Company agreed to register the shares underlying the warrants. With the  proceeds of the offering, the Company believes it has sufficient cash to fund  its operations, working capital and capital resource needs through the next  nine to twelve months. 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|     | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Item 5:  | OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|     | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

 

17

----

,
| 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: September  14, 2007 |                                    |
|                      |                                    |
|                      | /s/Joseph C.  Christenson               |   |
|                      | Joseph C.  Christenson                  |
|                      | President, Chief  Executive Officer and |
|                      | Chief Financial  Officer                |

 

18

----