10QSB

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 January 31, 2008

Commission File Number 0-11518

PPT VISION, INC.

(Exact name of Small Business Issuer as specified in its charter)

MINNESOTA	41-1413345
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer 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 Exchange Act 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 o

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

Shares of $.10 par value common stock outstanding at March 13, 2008: 14,902,916

INDEX

PPT VISION, INC.

		Page
Part I.	Financial Information
Item 1.	Financial Statements
	Balance Sheets as of January 31, 2008 and October 31, 2007	3
	Statements of Operations for the Three Months Ended January 31, 2008 and January 31, 2007	4
	Statements of Cash Flows for the Three Months Ended January 31, 2008 and January 31, 2007	5
	Notes to Condensed Financial Statements – January 31, 2008	6
Item 2.	Management’s Discussion and Analysis or Plan of Operation	9
Item 3.	Controls and Procedures	15
Part II.	Other Information	15
Item 1.	Legal Proceedings	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	17
Item 6.	Exhibits	17
	Signatures	18

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PPT VISION, INC.

BALANCE SHEETS

	January 31, 2008			October 31, 2007
	(unaudited)			(audited)
ASSETS
Current assets
Cash and cash equivalents	$	407,000		$	624,000
Accounts receivable, net	1,049,000			1,199,000
Inventories:
Manufactured and purchased parts	377,000			400,000
Work-in-process	13,000			12,000
Finished goods	22,000			24,000
Total inventories	412,000			436,000
Other current assets	60,000			69,000
Total current assets	1,928,000			2,328,000
Fixed assets, net	226,000			245,000
Intangible and other assets, net	61,000			61,000
Total assets	$	2,215,000		$	2,634,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	470,000		$	490,000
Accrued expenses	163,000			156,000
Deferred revenue – customer advances	9,000			3,000
Total current liabilities	642,000			649,000
Shareholders’ equity
Common stock	990,000			990,000
Capital in excess of par value	37,609,000			37,607,000
Accumulated deficit	(37,026,000		)	(36,612,000		)
Total shareholders’ equity	1,573,000			1,985,000
Total liabilities and shareholders’ equity	$	2,215,000		$	2,634,000

See accompanying notes to condensed financial statements

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PPT VISION, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	January 31,
	2008			2007
Revenues	$	1,335,000		$	1,041,000
Cost of revenues	714,000			549,000
Gross profit	621,000			492,000
Expenses:
Sales and marketing	474,000			429,000
General and administrative	217,000			235,000
Research and development	350,000			306,000
Total expenses	1,041,000			970,000
Interest and other income	6,000			1,000
Net loss	$	(414,000	)	$	(477,000	)
Per share data:
Weighted average basic shares outstanding	9,903,000			4,546,000
Weighted average diluted shares outstanding	9,903,000			4,546,000
Basic and diluted loss per common share	$	(0.04	)	$	(0.10	)

See accompanying notes to condensed financial statements

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PPT VISION, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months			Three Months
	Ended			Ended
	January 31, 2008			January 31, 2007
Net loss	$	(414,000	)	$	(477,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option expense	2,000			6,000
Depreciation and amortization	25,000			32,000
Change in assets and liabilities:
Accounts receivable	150,000			58,000
Inventories	24,000			(52,000		)
Other current assets	9,000			8,000
Accounts payable	(20,000		)	(47,000		)
Accrued expenses	7,000			—
Deferred revenue – customer advances	6,000			—
Total adjustments	203,000			5,000
Net cash used in operating activities	(211,000		)	(472,000		)
Cash flows from investing activities:
Purchase of fixed assets	(6,000		)	(7,000		)
Net cash used in investing activities	(6,000		)	(7,000		)
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants	—			4,000
Net cash provided by financing activities	—			4,000
Net decrease in cash and cash equivalents	(217,000		)	(475,000		)
Cash and cash equivalents at beginning of year	624,000			753,000
Cash and cash equivalents at end of period	$	407,000		$	278,000

See accompanying notes to condensed financial statements

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PPT VISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
January 31, 2008

(UNAUDITED)

NOTE A – DESCRIPTION OF BUSINESS

PPT VISION, Inc. (“the Company”) designs, manufactures, and markets machine vision based intelligent cameras used for automated inspection, measurement, and guidance applications in the manufacturing marketplace. The Company’s IMPACT™ intelligent camera product line enables manufacturers to realize significant economic paybacks by increasing the quality of manufactured parts and improving the productivity of manufacturing processes. The Company’s IMPACT intelligent camera product line is sold through a global network of distribution and integration partners to end-user manufacturers, original equipment manufacturers, and manufacturing machine builders, in a wide variety of manufacturing markets including electronics, automotive, medical device, and packaged goods industries.

NOTE B – BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America 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. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or of the results for any future periods.

The Balance Sheet at October 31, 2007 has been derived from the Company’s audited financial statements for the fiscal year ended October 31, 2007 but does not include all of the information and footnotes required by accounting principles generally accepted 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’s annual report on Form 10-KSB for the year ended October 31, 2007.

NOTE C – REVENUE RECOGNITION

The Company typically recognizes revenue on product sales upon shipment to the end user customers if contractual obligations have been met and title and risk of loss have passed to the customer, which is generally the case for sales of machine vision systems, spare parts and accessories. The Company also recognizes revenue on products sold to distributors upon shipment because contracts with distributors do not include post-shipment obligations or any right of return provisions and pricing is fixed at the time of sale. Revenue related to application engineering, product development and customer training services is recognized when the services are performed. Service revenue was less than 10% of total revenues for the three months ended January 31, 2008 and 2007.

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NOTE D – LIQUIDITY AND CAPITAL RESOURCES

The Company had a net loss for the three months ended January 31, 2008 of $414,000. Cash used in operations was $211,000 for the three months ended January 31, 2008. See Note I regarding an event impacting liquidity and capital resources subsequent to the end of the January 31, 2008 quarter.

NOTE E – LOSS PER SHARE

At January 31, 2008, options to purchase 385,590 shares and warrants to purchase 2,000,000 shares of the Company’s common stock were not considered in the calculation of diluted earnings per share. At January 31, 2007, options to purchase 383,015 shares of the Company’s common stock were not considered in the calculation of diluted earnings per share. As the Company had a net loss for both periods, the inclusion of potentially dilutive outstanding options and warrants would have been anti-dilutive.

NOTE F – STOCK-BASED COMPENSATION

The Company has five equity compensation plans, all of which have been approved by its shareholders: 1988 Stock Option Plan, 1997 Stock Option Plan, 2000 Stock Option Plan, 2005 Employee Stock Purchase Plan and 2007 Stock Option Plan. These plans are administered by the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award. Readers should refer to Note 10 of the Company’s consolidated financial statements in the Annual Report on Form 10-KSB for the fiscal year ended October 31, 2007, for additional information related to these stock-based compensation plans.

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

Under the modified prospective approach, SFAS 123R applies to new awards and to awards that were outstanding on November 1, 2006 that are subsequently modified, repurchased, cancelled or vested. Under the modified prospective approach, compensation cost recognized in 2007 and 2008 includes compensation cost for all share-based payments granted prior to, but not yet vested on, November 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R, and compensation cost for all shared-based payments granted subsequent to November 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.

As a result of SFAS 123R, the net loss and net loss per share for the three months ended January 31, 2008 were $2,000 and $0.00, respectively. The net loss and net loss per share for the three months ended January 31, 2007 were $6,000 and $0.00, respectively.

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The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards with the following weighted average assumptions:

For Periods Ended January 31,	2008		2007
Risk free interest rates	3.9	%	4.5	%
Expected lives	7 Years		7 Years
Expected volatility	293	%	264	%
Expected dividends	0	%	0	%

The Company calculates expected volatility for stock options and awards using historical volatility as the Company believes the expected volatility will approximate historical volatility. The starting point for the historical period used is based on a material change in the Company’s operations that occurred in the first quarter of fiscal 2003.

As of January 31, 2008 the estimated expense related to stock options outstanding and unvested is $3,000 for the remaining quarters in the year ending October 31, 2008. The estimated expense related to stock options outstanding and unvested is $4,000, $2,000 and $0 for the fiscal years ending October 31, 2009, 2010 and 2011, respectively.

NOTE G – CUSTOMER AND GEOGRAPHIC DATA

The following tables set forth the percentage of the Company’s revenues (including sales delivered through international distributors) by geographic location for the three months ended January 31, 2008 and 2007:

Three Months Ended January 31,	2008		2007
North America	46	%	43	%
Europe	31	%	21	%
Asia-Pacific	22	%	36	%
South America	1	%	0	%
	100	%	100	%

In the three-month period ended January 31, 2008, revenues from two customers represented approximately 15% and 10% of total revenue, respectively. In the three-month period ended January 31, 2007, revenues from two customers represented approximately 13% and 11% total revenue, respectively.

NOTE H – NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted FSP EITF 00-19-2, as of October 1, 2007, “Accounting for Registration Payment Arrangements” (“FSP”), which addresses an issuer’s accounting for registration payment arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, “Accounting for Contingencies”. This FSP further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable generally accepted accounting principles (GAAP) without regard to the contingent obligation to transfer

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consideration pursuant to the registration payment arrangement.   The adoption of this FSP did not have an impact on the Company.

NOTE I – SUBSEQUENT EVENT

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

Pursuant to the Subscription Agreement, the Company sold to the Keogh Plan 5,000,000 shares of the Company’s common stock for $0.10 per share in cash for gross proceeds of $500,000. As additional consideration for the issuance of the common stock, the Company also issued the Keogh Plan a seven-year immediately exercisable warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.10 per share. Also on March 11, 2008, the Company and the Keogh Plan entered into a Registration Rights Agreement by which the Company is obligated, among other things, to register the 500,000 shares underlying the warrant upon demand of the Keogh Plan, subject to certain limitations. Through the Registration Rights Agreement, the Company also granted the Keogh Plan “piggyback” registration rights with respect to the shares underlying the warrant.  With the proceeds of the sale of shares to the Keogh Plan, the Company believes it has sufficient cash to fund its operations, working capital and capital resource needs through its fiscal year ending October 31, 2008.

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

PPT VISION, Inc. (“the Company”) designs, manufactures, and markets machine vision based intelligent cameras used for automated inspection, measurement, and guidance applications in the manufacturing marketplace. The Company’s IMPACT intelligent camera product line enables manufacturers to realize significant economic paybacks by increasing the quality of manufactured parts and improving the productivity of manufacturing processes. The Company’s IMPACT intelligent camera product line is sold through a global network of distribution and integration partners to end-user manufacturers, original equipment manufacturers, and manufacturing machine builders, in a wide variety of manufacturing markets including electronics, automotive, medical device, and packaged goods industries.

The Company’s revenues increased 28% to $1,335,000 during the first quarter ended January 31, 2008 compared to revenues of $1,041,000 in the prior year’s first quarter. The Company’s net loss for the quarter ended January 31, 2008 decreased to $414,000 or $0.04 per share compared to $477,000 or $0.10 per share in the prior year’s period. The increase in revenue in the first quarter of fiscal year 2008 compared to the first quarter of fiscal year 2007 occurred as a result of an increase in our IMPACT product line sales. IMPACT unit volume increased 54% in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007.

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During the fiscal 2008 first quarter, revenues from outside North America accounted for 54% of revenues compared to 57% in the first quarter of fiscal 2007.

Total operating expenses for the three-month period ended January 31, 2008 were $1,041,000, a 7% increase in comparison to total operating expenses of $970,000 in the prior year’s first quarter. The increase in operating expenses from the first quarter of fiscal year 2008 compared to the same period in fiscal 2007 primarily relates to additional staffing in the research and development department.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of its financial condition and results of operations are based on the Company’s accompanying unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information required by accounting principles generally accepted in United States of America 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 preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported revenues and expenses during the reporting period. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.

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

·revenue recognition;

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

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

Revenue Recognition

The Company typically recognizes revenue on product sales upon shipment to the end user customers if contractual obligations have been met and title and risk of loss have passed to the customer, which is generally the case for sales of machine vision systems, spare parts and accessories. The Company also recognizes revenue on products sold to distributors upon shipment because contracts with distributors do not include post-shipment obligations or any right of return provisions and pricing is fixed at the time of sale. Service revenue, which includes application engineering, product development, customer training and repair services, is recognized when the services are performed. Service revenue

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is less than 10% of total revenues for the three months ended January 31, 2008 and 2007.

Valuation Allowances

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

The Company’s inventory primarily consists of parts and other materials that are used in the manufacture of vision systems. The Company generally only builds systems based on customer orders and as a result maintains only a minor amount of finished goods inventory. Management establishes valuation reserves on inventory for estimated excess and obsolete inventory equal to the difference between the cost of inventory and its estimated market value based on assumptions about future product demand and market conditions. In view of the rapid pace of technological change in the machine vision industry, the Company generally considers inventory that has had no usage for one year to be obsolete.  In addition, changes in the Company’s product offerings or those of the Company’s competitors may also result in excess or obsolete inventory levels.  Accordingly, these factors will also be considered in the determination of the market value of inventory.

Actual results could differ from these estimates under different assumptions.  If the financial condition of one or more of our customers were to deteriorate, or if actual product demand or market conditions are less favorable than anticipated by management, additional reserves may be required.

Long-Lived and Intangible Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate 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 the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

RESULTS OF OPERATIONS

Revenues

Net revenues increased 28% to $1,335,000 for the three-month period ended January 31, 2008, compared to net revenues of $1,041,000 for the same period in fiscal 2007. In the three-month period ended January 31, 2008, revenues from two customers each represented approximately 15% and 10% of total revenue, respectively. In the three-month period ended January 31, 2007, revenues from two customers each represented approximately 13% and 11% of total revenue, respectively.

The increase in revenue in the first quarter of fiscal year 2008 compared to the first quarter of fiscal year 2007 occurred as a result of an increase in our

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IMPACT product line sales. Unit sales for the three-month period ended January 31, 2008 increased to 298 from 194 in the same period of fiscal 2007. IMPACT unit volume increased 54% in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007.

During the first quarter of fiscal 2008, revenues from outside North America accounted for 54% of revenues compared to 57% in the fiscal 2007 first quarter.

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

Gross profit increased 26% to $621,000 for the three-month period ended January 31, 2008, compared to $492,000 for the same period in fiscal 2007. As a percentage of net revenues, the gross profit for the first quarter of fiscal 2008 and 2007 remained flat at 47%. We expect that our future gross margins will trend into the 55% to 60% range as our fixed manufacturing overhead is spread over a higher volume of sales.

Sales and marketing expenses increased 10% to $474,000 for the three-month period ended January 31, 2008 compared to $429,000 for the same period in fiscal 2007. As a percentage of net revenues, sales and marketing expenses decreased to 36% for the first quarter 2008 compared to 41% for the same period in fiscal 2007. The Company expects sales and marketing expenses in absolute dollars to remain relatively flat for the remainder of fiscal 2008. Increases in sales expenditures may occur to the extent that revenue growth is achieved.

General and administrative expenses decreased 8% to $217,000 for the three-month period ended January 31, 2008, compared to $235,000 for the same period in fiscal 2007. As a percentage of net revenues, general and administrative expenses decreased to 16% for the first quarter of fiscal 2008 compared 23% for the same period in fiscal 2007. The Company expects general and administrative expenses to remain relatively flat for the remainder of fiscal 2008.

Research and development expenses increased 14% to $350,000 for the three-month period ended January 31, 2008, compared to $306,000 for the same period in fiscal 2007. As a percentage of net revenues, research and development expenses decreased to 26% for the first quarter of fiscal 2008, compared to 29% for the first quarter of fiscal 2007. The Company expects research and development expenses to remain relatively flat for the remainder of fiscal 2008.

The Company did not record an income tax benefit or expense for the three month periods ended January 31, 2008 or 2007.

The Company’s net loss for the first quarter of fiscal 2008 decreased from year-ago levels to $414,000 or $0.04 per share, as compared with a loss of $477,000 or $0.10 per share for the same period in fiscal 2007. There were approximately 9.9 million shares outstanding during the three-month period ended January 31, 2008, as compared with approximately 4.5 million shares outstanding for the same period in fiscal 2007. The increase in the number of shares outstanding resulted in a decrease in per share net loss for the period ended January 31, 2008 as compared to January 31, 2007.

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LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2008 the Company had cash balances of $407,000, working capital of approximately $1.3 million and no long-term debt.

In the first quarter of fiscal 2008 the Company incurred a net loss of $414,000 which included non-cash charges related to depreciation and amortization of $25,000. The net loss for the quarter decreased $63,000 from the $477,000 loss reported in the first quarter of fiscal 2007, which included $32,000 in non-cash charges relating to depreciation and amortization. For the three months ended January 31, 2008, cash used in operating activities was $211,000.

As of January 31, 2008, the Company had no outstanding debt.

Working capital decreased $393,000 to $1,286,000 at January 31, 2008 from $1,679,000 at October 31, 2007. The Company financed its operations during the first three months of fiscal 2008 through existing cash and cash equivalents. Accounts receivable decreased $150,000 and inventories decreased $24,000 during the first three months of fiscal 2008. Accounts payable decreased by $20,000 while accrued expenses increased by $7,000 during the first three months of fiscal 2008.

Net cash used in investing activities was $6,000 during the three months ended January 31, 2008 which accounted for fixed asset additions during the first three months of fiscal 2008. This compares with $7,000 in fixed asset additions for the same period in fiscal 2007. The Company expects that fixed asset additions for the remaining quarters of fiscal 2008 to continue at approximately the same rate, or slightly higher, as the first quarter of fiscal 2008.

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

The Company believes it does not have material exposure to quantitative and qualitative market risks. The carrying amounts reflected in the balance sheets of cash and cash equivalents, trade receivables and trade payables approximate fair value at January 31, 2008 due to the short maturities of these instruments.

Subsequent to the end of the January 31, 2008 quarter, the Company anticipated a shortage in available capital and on March 11, 2008, the Company entered into a Subscription Agreement with P. R. Peterson relating to the purchase on March 11, 2008 of securities of the Company by the P. R. Peterson Co. Keogh Plan (the “Keogh Plan”). P. R. Peterson, a director of the Company and the Company’s largest shareholder, controls the Keogh Plan.

Pursuant to the Subscription Agreement, the Company sold to the Keogh Plan 5,000,000 shares of the Company’s common stock for $0.10 per share in cash for gross proceeds of $500,000. As additional consideration for the issuance of the common stock, the Company also issued the Keogh Plan seven-year immediately exercisable warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.10 per share. Also on March 11, 2008, the Company and the Keogh Plan entered into a Registration Rights Agreement by which the Company is obligated, among other things, to register the 500,000 shares underlying the warrants upon demand of the Keogh Plan, subject to certain limitations. Through the Registration Rights Agreement, the Company also granted the Keogh Plan

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“piggyback” registration rights with respect to the shares underlying the warrant.  With the proceeds of the sale of shares to the Keogh Plan, the Company believes it has sufficient cash to fund its operations, working capital and capital resource needs through its fiscal year ending October 31, 2008.

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

While the Company met its external working capital requirements for fiscal years 2006 and 2007 through proceeds from sale of equity securities to P. R. Peterson, the Company has no commitments or agreements from Mr. Peterson or any other person at the current time to fund any future capital requirements. The Company’s efforts to raise additional funds from the sale of its equity may be hampered by the fact that its securities are relatively illiquid and that more than a majority of the Company’s outstanding common stock is controlled by one shareholder. Additionally, any future financing may be raised on terms that are dilutive to the holders of the Company’s common stock.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note H to Condensed Unaudited Financial Statements, included in Item 1, “Financial Statements” of this Quarterly Report on Form 10-QSB.

FORWARD LOOKING STATEMENTS

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

The Company’s actual results are subject to risks and uncertainties and could differ materially from those discussed in the forward-looking statements. These statements are based upon the Company’s expectations regarding a number of factors, including the Company’s ability to obtain additional working capital if

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necessary to support its operations, changes in worldwide general economic conditions, cyclicality of capital spending by customers, the Company’s ability to keep pace with technological developments and evolving industry standards, worldwide competition, and the Company’s ability to protect its existing intellectual property from challenges from third parties. A detailed description of the factors that could cause future results to materially differ from the Company’s recent results or those projected in the forward-looking statements are contained in the section entitled “Description of Business” under the caption “Important Factors Regarding Forward-Looking Statements” contained in its filing with the Securities and Exchange Commission on Form 10-KSB for the year ended October 31, 2007 and other reports filed with the Securities and Exchange Commission.

Item 3:CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures.

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

(b)Changes in Internal Control Over Financial Reporting.

There have been no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

PART II.OTHER INFORMATION

Item 1:LEGAL PROCEEDINGS

None.

Item 2:UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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

Pursuant to the Subscription Agreement, the Company sold to the Keogh Plan 5,000,000 shares of the Company’s common stock for $0.10 per share in cash for gross proceeds of $500,000. As additional consideration for the issuance of the common stock, the Company also issued the Keogh Plan a seven-year  immediately exercisable warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.10 per share. The purchase price for the Company’s common stock was determined based upon negotiations between the Company and Mr. Peterson.

Also on March 11, 2008, the Company and the Keogh Plan entered into a Registration Rights Agreement by which the Company is obligated, among other

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things, to register the 500,000 shares underlying the warrant upon demand of the Keogh Plan, subject to certain limitations. Through the Registration Rights Agreement, the Company also granted the Keogh Plan “piggyback” registration rights with respect to the shares underlying the warrants.  With the proceeds of the sale of shares to the Keogh Plan, the Company believes it has sufficient cash to fund its operations, working capital and capital resource needs through its fiscal year ending October 31, 2008.

Based on the manner of sale of shares of common stock and the warrants and representations of the Keogh Plan (which represents itself as an “accredited investor”), the Company relied upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and Section 4(6) thereof.

Additionally, at the March 10, 2008 Annual Meeting of Shareholders, the Company’s shareholders approved a proposal to an amendment to the Company’s Articles of Incorporation to increase the authorized common stock of the Company from 10,000,000 to 50,000,000 shares. In part, the Company sought the increase in the number of shares of common stock authorized to permit the issuance to the Keogh Plan of 2,500,000 shares of its common stock and seven-year warrants to purchase an additional 1,000,000 shares of common stock pursuant to a Subscription Agreement dated August 30, 2007 between the Company and the Keogh Plan. On March 11, 2008, the Company and the Keogh Plan closed the transactions contemplated by the Subscription Agreement dated August 30, 2007 and the Company issued the Keogh Plan the 2,500,000 shares of its common stock and the seven-year warrants to purchase 1,000,000 shares of common stock.

As of March 13, 2008, and including the March 11, 2008 issuances to the Keogh Plan described above, there were 14,902,916 shares of the Company’s common stock outstanding.

Item 3.DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

Item 4:SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On March 10, 2008 the Company held its Annual Meeting of Shareholders. Of the 7,402,916 shares of common stock outstanding and entitled to vote at the meeting, 6,493,050 shares were present, either in person or by proxy. The following describes the matters considered by the Company’s shareholders at the Annual Meeting, as well as the results of the votes cast at the Annual Meeting:

A.To elect three (3) directors to hold office until the next Annual Meeting of Shareholders or until their respective successors have been elected and shall qualify.

Name of Nominee	For	Withheld
Joseph C. Christenson	6,314,752	178,298
Robert W. Heller	6,281,360	211,690
Peter R. Peterson	6,317,277	175,773

B.The second matter related to the approval of an amendment to the Company’s Articles of Incorporation to increase the authorized common stock of the Company from 10,000,000 to 50,000,000 shares.

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6,249,113 votes were cast for approval and 240,357 were cast against approval. There were 3,580 abstentions and zero broker non-votes.

C.The third matter related to the approval of an amendment to the Company’s 2007 Stock Incentive Plan. 5,226,243 votes were cast for approval and 63,875 were cast against approval. There were 2,174 abstentions and 1,200,758 broker non-votes.

Based on these voting results, each of the directors nominated were elected and the second and third matters were approved.

Item 5:OTHER INFORMATION

See Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for disclosure of information that would otherwise be disclosed by the Company under Items 1.01 and 3.02 of a Current Report on Form 8-K.

Item 6:EXHIBITS

(a)The following exhibits are included herein:

3.1	PPT VISION, Inc. Articles of Incorporation as in effect March 11, 2008.
4.1	Warrant to Purchase 500,000 shares of Common stock of PPT VISION, Inc. dated March 11, 2008 issued to P. R. Peterson Co. Keogh Plan.
4.2	Registration Rights Agreement dated March 11, 2008 by and between PPT VISION, Inc. and P. R. Peterson Co Keogh Plan.
31.1	Certification of President, Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)of the Exchange Act.
32.1	Certification pursuant to 18 U.S.C. §1350.

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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: March 13, 2008
	/s/Joseph C. Christenson
	Joseph C. Christenson
	President, Chief Executive Officer and Chief Financial Officer

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EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION

OF

PPT VISION, INC.

as in effect on March 11, 2008

ARTICLE 1

Name

1.1The name of the corporation shall be PPT Vision, Inc.

ARTICLE 2

Registered Office

2.1The location and post office address of the registered office of the corporation shall be 12988 Valley View Road, Eden Prairie, MN 55344.

ARTICLE 3

Purposes

3.1The corporation shall have general business purposes.

ARTICLE 4

Capital Stock

4.1Authorized Capital Stock - The authorized capital stock of this corporation shall be Fifty Million (50,000,000) shares of Common Stock with $.10 par value per share and Twenty Million (20,000,000) shares of Preferred Stock with no par value per share.  In accordance with the Statutes of the State of Minnesota, the Board of Directors may subdivide the Common Stock and Preferred St ock into one or more series and may designate the relative rights and preferences of the different classes and series to the extent the relative rights and preferences of the different classes and series are not otherwise fixed in the Articles, including with respect to the Preferred Stock, the right to create voting, dividend and liquidation preferences greater than those of the Common Stock.  All shares are to be held, sold and paid for at such times and in such manner as the Board of Directors may from time to time determine, in accordance with the statutes of Minnesota.

4.2Voting Rights - Each holder of record of the common stock of the corporation shall be entitled to one (1) vote for each share of common stock held by him at each meeting of the shareholders and in respect to any matter on which the shareholders have a right to vote.  The right to vote shall be subject to the provisions of the by-laws of the corporation in effect from time to time with respect to closing the transfer books and fixing a record date for the determina tion of shareholders entitled to vote.  Cumulative voting for directors is not permitted.

4.3Pre-emptive Rights - The shareholders of the corporation shall not have the pre-emptive right of subscription to any shares of common stock of the corporation to be issued or sold, or hereafter authorized, or any obligations or securities exchangeable for or convertible into stock of the corporation which has not yet been authorized.

4.4Stock Rights and Options - The Board of Directors shall have the power to create and issue rights, warrants, or options entitling the holders thereof to purchase from the corporation any shares of its capital stock of any class or series, upon such terms and conditions and at such times and prices as the Board of Directors may provide, which terms and conditions shall be incorporated in an instrument evidencing such rights.

4.5Dividends - The holders of the common stock shall be entitled to receive, when and as declared by the Board of Directors, out of earnings or surplus legally available therefor, any and all dividends, payable either in cash, in property or in shares of the capital stock of the corporation.  The Board of Directors may authorize dividends only if the corporation will be able to pay its debts in the ordinary course of business after paying the dividend.

4.6Other Distributions - The Board of Directors may authorize, and the holders of the common stock may receive, distributions other than dividends only if the corporation will be able to pay its debts in the ordinary course of business after making the distribution.

4.7Board of Directors’ Powers - The capital stock may be issued as and when the Board of Directors shall determine, and, under and pursuant to the laws of the State of Minnesota, the Board of Directors shall have the power to fix or alter, from time to time, in respect to shares then unissued, any or all of the following:  dividend rate; redemption price; the liquidation price; the conversion rights and the sinking or purchase fund rights of shares of any class, or of any series of any class, or the number of shares constituting any series of any class.

ARTICLE 5< /font>

Directors

5.1The Board of Directors is expressly authorized to make and alter by-laws of this corporation subject to the power of the shareholders to change or repeal such by-laws;

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provided, the Board of Directors shall not adopt, amend or repeal any by-laws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the board or fixing the number of directors or their classifications or terms of office.

5.2Any action re quired or permitted to be taken at a duly called Board of Directors meeting may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the board, except that on an action which requires shareholder approval the written action must be signed by all the directors.

ARTICLE 6

Voluntary Transfer of Corporate Assets

6.1The holders of a majority of all the shares entitled to vote at any duly constituted meeting of the shareholders shall have the power to authorize the Board of Directors to sell, lease, exchange or otherwise dispose of all or substantially all of the property and assets of this corporation, including its goodwill, upon such terms and conditions and for such consideration as the Board of Directors deems advisable; to adopt or reject an agreement of merger, provided, however, that notice of such proposal shall have been mailed to each shareholder entitled to vote at such meeting at least fourteen (14 ) days prior to such meeting, or the written consent of such shareholder is given to such action as provided by statute.

ARTICLE 7

Amendment of Articles

7.1The holders of a majority of all shares entitled to vote at any duly constituted meeting of the shareholders shall have the power to amend, alter or repeal the Articles of Incorporation to the extent and the manner prescribed by the laws of the State of Minnesota.

ARTICLE 8

Limitation of Director L iability

8.1No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) under Section 302A.559 or 80A.23 of

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Minnesota Statutes; (iv) for any transaction from which the director derived any improper personal benefit; or (v) for any act or omission occurring prior to the date when this provision becomes effective.

8.2The provisions of this Article 8 shall not be deemed to limit or preclude indemnification of a director by the corporation for any liability of a director which has not been eliminated by the provisions of this Article 8.

8.3If Minnesota Statutes hereafter are amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Minnesota Statutes, as so amended.

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EX-4.1

Exhibit 4.1

The securities represented by the Warrant and issuable upon its exercise have not been registered under the Securities Act of 1933 (the “Act”), as amended, and have not be registered under any state securities laws. The securities may not be sold, offered for sale, or transferred in the absence of either an effective registration under the Act and under applicable state securities laws, or an opinion of counsel satisfactory to the Company that the transaction is exempt from registration under the Act and under applicable state securities laws.”

WARRANT

To Purchase 500,000 Shares of Common Stock

of

PPT Vision, Inc.

EXERCISABLE ON OR BEFORE, AND VOID AFTER

5:00 P.M. MINNEAPOLIS TIME ON March 11, 2015

THIS CERTIFIES THAT, for good and valuable consideration, P. R. Peterson Keogh Plan (the “Holder”), or its registered assigns, is entitled to subscribe for and purchase from PPT Vision, Inc., Minnesota corporation (the “Company”), at any time prior to 5:00 P.M. on March 11, 2015, Five Hundred Thousand (500,000) fully paid and non-assessable shares of the Common Stock at the price of $0.10 per share (the “Warrant Exercise Price”), subject to the anti-dilution provisions of this Warrant.

The shares that may be acquired upon exercise of this Warrant are referred to as the “Warrant Shares.” The term “Holder” means any party who acquires all or a part of this Warrant as a registered transferee of the Holder, or any record holder or holders of the Warrant Shares issued upon exercise, whether in whole or in part, of the Warrant.  The term “Common Stock” means the common stock, par value $.10 per share, of the Company.

This Warrant is subject to the following provisions, terms and conditions:

1.Exercise.  The rights represented by this Warrant may be exercised by the Holder hereof, in whole or in part (but not as to a fractional share of Common Stock), by written notice of exercise (in the form attached hereto) delivered to the Company at the principal office of the Company prior to the expiration of this Warrant and accompanied or preceded by the surrender of this Warrant along with a check in payment of the Warrant Exercise Price for the shares.

2.Exchange and Replacement.  This Warrant is exchangeable upon the surrender hereof by the Holder to the Company at its office for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of Warrant Shares purchasable hereunder, each of the new Warrants to represent the right to purchase that number of Warrant Shares as may be designated by the Holder at the time of the surrender.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant.  The Company will pay all expenses, taxes (other than stock transfer taxes), and other charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 2.

3.Issuance of the Warrant Shares.

3.1The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant will be deemed to be issued to the Holder as of the close of business on the date on which this Warrant is surrendered and the payment made for the Warrant Shares.  Subject to the

provisions of Section 3.2, certificates for the Warrant Shares will be delivered to the Holder within a reasonable time, not exceeding 15 days after the rights represented by this Warrant are so exercised, and, unless this Warrant has expired, a new Warrant representing the right to purchase the number of Warrant Shares with respect to which this Warrant has not been exercised will also be delivered to the Holder within this time.

3.2The Company will not be required to deliver any certificate for Warrant Shares upon exercise of this Warrant except in accordance with exemptions from the applicable securities registration requirements or registrations under applicable securities laws.  The Holder agrees to execute such documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company, or the registrations made, for the issuance of the Warrant Shares.

4.Covenants of the Company. The Company covenants and agrees that all Warrant Shares will, upon issuance, be duly authorized and issued, fully-paid and non-assessable, and free from all taxes, liens and charges with respect to their issue. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved for the purpose of issue upon exercise of this Warrant a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant, subject to the approval by shareholders of the Company of an increase in the authorized common stock of the Company at the 2008 Annual Meeting of Shareholders.

5.Anti-Dilution Adjustments. The provisions of this Warrant are subject to adjustment as provided in this Section 5.

5.1The Warrant Exercise Price will be adjusted from time to time so that if the Company:

(a)pays any dividends on any class of stock of the Company payable in Common Stock or securities convertible into Common Stock;

(b)subdivides its then outstanding shares of Common Stock into a greater number of shares; or

(c)combines outstanding shares of Common Stock, by reclassification or otherwise;

then, in any such event, the Warrant Exercise Price in effect immediately prior to such event will be adjusted immediately after the event to a price determined by dividing  (A) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Warrant Exercise Price, by  (B) the total number of shares of Common Stock outstanding immediately after the event (including in each case the maximum number of shares of Common Stock issuable in respect of any securities convertible into Common Stock), and the resulting quotient will be the adjusted Warrant Exercise Price per share. An adjustment made pursuant to this Subsection will become effective immediately after the record date in the case of a dividend or distribution and will become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Subsection, the Holder becomes entitled to receive upon exercise of this Warrant shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors of the Company (whose determination will be conclusive) will determine the allocation of the adjusted Warrant Exercise Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock. All calculations under this Subsection will be made to the nearest full cent or to the nearest 1/100 of a share, as the case may be.

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In the event that at any time as a result of an adjustment made pursuant to this Subsection, the holder of any Warrant surrendered for exercise will become entitled to receive any securities of the Company other than shares of Common Stock, thereafter the Warrant Exercise Price of the other securities so receivable upon exercise of any Warrant will be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Section.

5.2Upon each adjustment of the Warrant Exercise Price pursuant to Section 5.1 above, the Holder of this Warrant will thereafter be entitled to purchase at the adjusted Warrant Exercise Price the number of adjusted Warrant Shares, calculated to the nearest full share, obtained by multiplying the number of Warrant shares specified in this Warrant by the Warrant Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Warrant Exercise Price.

5.3In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), there will be no adjustment under Section 5.1 above, but the Holder of each Warrant then outstanding will have the right thereafter to convert the Warrant into the kind and amount of shares of stock and other securities and property that he would have owned or have been entitled to receive immediately after such consolidation, merger or statutory exchange had the Warrant been converted immediately prior to the effective date of the consolidation, merger, or statutory exchange, and in any such case, if necessary, appropriate adjustment will be made in the application of the provisions set forth in this Section with respect to the rights and interests thereafter of any Holders of the Warrant, to the end that the provisions set forth in this Section will thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock and other securities and property thereafter deliverable on the exercise of the Warrant. The provisions of this Subsection will similarly apply to successive consolidations, mergers, or statutory exchanges.

5.4Upon any adjustment of the Warrant Exercise Price, then and in each case, the Company will give written notice thereof, by First-class mail, postage prepaid, addressed to the Holder as shown on the books of the Company, which notice must state the Warrant Exercise Price resulting from the adjustment and the increase or decrease, if any, in the number of shares of Common Stock purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which the calculation is based.

6.No Voting Rights. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company.

7.Legend; Notice of Transfer of Warrant or Resale of the Warrant Shares.

7.1This Warrant is, and each certificate representing the Warrant Shares will be, and any Warrant Shares that may be subsequently transferred (other than a transfer registered under the Securities Act or any subsequent transfer of shares so registered) stamped or otherwise imprinted with a legend substantially in the following form:

“The securities represented by the Warrant and issuable upon its exercise have not been registered under the Securities Act of 1933 (the “Act”), as amended, and have not be registered under any state securities laws. The securities may not be sold, offered for sale, or transferred in the absence of either an effective registration under the Act and under applicable state securities laws, or an

3

opinion of counsel satisfactory to the Company that the transaction is exempt from registration under the Act and under applicable state securities laws.”

7.2Subject to the sale, assignment, hypothecation, or other transfer restrictions under the Securities Act, the Holder must give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of the Holder’s intention to do so, describing briefly the manner of any proposed transfer. Promptly upon receiving such written notice, the Company will present copies thereof to the Company’s counsel and to counsel to the original holder of this Warrant.  If in the opinion of each counsel the proposed transfer may be effected without registration or qualification (under any federal or state securities laws), the Company, as promptly as practicable, will notify the Holder of such opinion, whereupon the Holder will be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the Company.  An appropriate legend may be endorsed on this Warrant or the certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and satisfactory to the Company to prevent further transfers that would be in violation of Section 5 of the Securities Act and applicable state securities laws.  The prospective transferee or purchaser must execute such documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company for the transfer or disposition of the Warrant or Warrant Shares.

7.3If in the opinion of either of the counsel referred to in this Section 7, the proposed transfer or disposition of this Warrant or Warrant Shares described in the written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant or Warrant Shares, the Company must promptly give written notice thereof to the Holder, and the Holder will limit its activities in respect to such transfer or disposition as, in the opinion of both such counsel, are permitted by law.

8.Fractional Shares.

8.1Fractional shares will not be issued upon the exercise of this Warrant, but the number of shares will be adjusted up or down to the nearest whole share.

9.Registration Rights.  Holders of Warrants will have the Registration Rights set forth in the Registration Rights Agreement being entered into concurrent with the issuance of this Warrant.

10.Notices.

10.1All notices under this Warrant must be in writing and be delivered by first class mail, postage prepaid.  Any notice addressed to the Holder must be delivered to

P R Peterson Co. Keogh Plan

6111 Blue Circle

Minnetonka, Minnesota

55343-9102

10.2as may be changed from time to time upon ten days’ written notice by the Holder, and any notice addressed to the Company, must be delivered to its principal office.

10.3The Holder is entitled to receive a notice from the Company not less than ten days prior to the date on which (a) a record will be taken for the purpose of determining the holders of Common Stock entitled to dividends (other than cash dividends) or subscription rights, or (b) a record

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will be taken (or in lieu thereof, the transfer books will be closed) for the purpose of determining the holders of Common Stock entitled to notice of and to vote at a meeting of shareholders at which any capital reorganization, reclassification of shares of Common Stock, consolidation, merger, dissolution, liquidation, winding up or sale of substantially all of the Company’s assets will be considered and acted upon.

IN WITNESS WHEREOF, PPT Vision, Inc. has caused this Warrant to be signed by its duly authorized officer and this Warrant to be dated March 11, 2008.

PPT Vision, Inc.
By	/s/ Joseph C. Christenson
		Joseph C. Christenson,
		Chief Executive Officer

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SUBSCRIPTION FORM

(To be signed upon exercise of Warrant)

The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by the Warrant for, and to purchase thereunder,                              of the shares of common stock of PPT Vision, Inc., to which the Warrant relates and herewith makes payment of $                                     therefor in cash or by certified check and requests that the certificate for the shares be issued in the name of, and be delivered to the undersigned holder at the address set forth below.

Dated:

(Signature)

(Name)

(Address)

Social Security or Tax ID. No.

ASSIGNMENT FORM

(To be signed upon authorized transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto                                     the right to purchase                          shares of Common Stock of PPT Vision, Inc. to which the within Warrant relates and appoints                                        attorney, to transfer said right on the books of                                  with full power of substitution in the premises.

Dated:

(Signature)

(Name)

(Address)

Social Security or Tax ID No.

EX-4.2

Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 11, 2008 is entered into between PPT Vision, Inc., a Minnesota corporation (the “Company”) and the P. R. Peterson Co. Keogh Plan (“Investor”).

WHEREAS, pursuant to a Warrant issued by the Company to the Investor today (the “Warrant”) the Investor is entitled to acquire from the Company fully paid and nonassessable shares of the Company’s common stock, $.10 par value (“Common Stock”); and

WHEREAS, the Company and the Investor believe it is in each of their best interest to provide for registration and other rights with respect to the shares of Common Stock to be issued under the Warrant.

NOW THEREFORE, the parties agree as follows:

1.CERTAIN DEFINITIONS.  As used in this Agreement, the following terms have the following respective meanings:

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the Sate of Minnesota are authorized or required by law or executive order to close.

“Exchange Act” means the Exchange Act of 1934, as amended, and the rules and regulations adopted under that Act.

“Form S-3” means such form of Registration Statement as in effect on the date hereof or any Registration Statement subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

“Holders” means the Investor and any other person to whom the Warrant or the Registrable Securities and the registration rights granted hereunder have been duly assigned or transferred by the Investor in accordance with this Agreement and the provisions of the Warrant, respectively.

“Register,” “registration” and “registered” refer to a registration effected under the Securities Act by preparing and filing a Registration Statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of the Registration Statement by the Commission.

“Registrable Securities” means:

(i)shares of Common Stock issued or issuable to Holders upon proper exercise of the Warrant;

(ii)all shares of Common Stock to be issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clauses (i).

Registrable Securities will cease to be Registrable Securities when

(i)a Registration Statement covering the Registrable Securities has been declared effective under the Securities Act by the Commission and the Registrable Securities have been disposed of pursuant to the Registration Statement,

(ii)all of the Registrable Securities owned by a Holder may be sold in a period of three months, in the opinion of counsel satisfactory to the Company, without any limitation as to volume pursuant to Rule 144,

(iii)the Registrable Securities are proposed to be sold or distributed by a person not entitled to the registration rights granted by this Agreement,

(iv)they have been transferred to a person in a private transaction to whom the rights under this Agreement have not been assigned,

(v)they have been transferred in violation of the terms of the Warrant or

(vi)they have previously been registered or have been sold to the public either pursuant to a Registration Statement or Rule 144.

Wherever reference is made in this Agreement to a request or consent of Holders of a certain percentage of Registrable Shares, the determination of that percentage will include shares of Common Stock issuable upon exercise of the Warrant, even if the conversion or exercise has not yet been effected.

“Registration Expenses” means all expenses incurred by the Company in complying with this Agreement, including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and disbursements of counsel for the Company, state blue sky fees and expenses, and the expense of any special audits incident to or required by any registration, but specifically exclude any Selling Holder Expense.

“Registration Statement” means a registration statement filed pursuant to the Securities Act.

“Rule 144” means Rule 144 promulgated under the Securities Act, or any successor provision then in effect.

“SEC” or “Commission” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Holder Expenses” means all discounts, commissions or other amounts payable to underwriters in connection with a registration that are to be paid by the Holders of Registrable Securities included in a Registration Statement and all fees and expenses for counsel or other advisors for the Holders of Registrable Securities included in a Registration Statement.

2.REGISTRATION RIGHTS.

a.Demand Registration.

i.Demand Rights.  The Holders holding a majority of the Registrable Securities held by all of the Holders may at any time make a written request (the “Demand Notice”) that the Company register, and the Company must register (other than pursuant to a Registration Statement on Form S-4 or S-8 or any successor thereto) (a “Demand Registration”), the number of Registrable Securities stated in such request if the Registrable Securities have an anticipated aggregate public offering price (net of underwriting discounts and commissions) of One Hundred Thousand Dollars ($100,000) (a “Demand Registration Statement”).  The Company must use its reasonable best efforts to cause any Demand Registration Statement to be filed with the Commission not later than 60 days after it receives a request under this Section.

ii.Other Shareholders.  Any other person entitled to participate in a Demand Registration Statement (“Other Shareholders”) and the Company will be permitted to register equity securities of the Company in any Demand Registration Statement or to participate in the offering, but only as provided in this subparagraph, by requesting that securities of the same class as the Registrable Securities be included in the Demand Registration Statement for sale in the offering on the following terms and conditions:

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a)Each Other Shareholder must give written notice of election to the Holders within 15 days of the date the Demand Notice was given to the Company, such notice to specify the number of shares proposed to be sold by each Other Shareholder in the offering;

b)the Company must give written notice of election to the Holders within 15 days of the date the Demand Notice was given to the Company, such notice to specify the number of shares proposed to be sold by the Company in the offering (the Other Shareholder and Company shares are “Other Shares”);

c)Each Other Shareholder and the Company must agree to sell such Other Shares on the same basis provided in the underwriting arrangements approved by the Holders and to timely complete and execute all questionnaires, powers of attorney, indemnities, hold-back agreements, underwriting agreements and other documents required under the terms of such underwriting arrangements or by the Commission or by any state securities regulatory body;

d)Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude Other Shares from the registration and the underwriting, and the number of Other Shares that may be included in the registration and the underwriting will be allocated pro rata among each Other Shareholder and the Company based upon the respective number of Other Shares sought to be included in the offering; and

e)If any Other Shareholder or the Company desire to withdraw their Other Shares from the Demand Registration Statement, they may only do so during the time period and on the terms to be determined by the Holders, the Company and the underwriters.

iii.Limits.  Notwithstanding anything contained in this Section 2.1 to the contrary, the Company will not be obligated to effect more than one Demand Registration for the Holders during the term of this Agreement.  In addition, notwithstanding anything contained in this Section 2.1 to the contrary, the Company may delay the Demand Registration of the Registrable Securities if upon receipt of such Demand Notice if

a)the Company notifies the Holders that it is contemplating filing a Registration Statement within 90 days of the demand (which notice will not affect the Holders’ other rights hereunder, including without limitation the Holders’ rights under Section 2.2 below) or

b)the Company notifies Holders that in the good faith judgment of the Company a material event has occurred that has not been publicly disclosed and if disclosed would have a material adverse effect on the Company.

In the case of clause (i) of this paragraph, the Company will use its best efforts, as soon as practical, upon the first to occur of the abandonment of such contemplated Registration Statement or the expiration of the 90-day period, to file the Demand Registration Statement for

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the Registrable Securities to which a Demand Notice relates, unless such Demand Notice is withdrawn.  In the case of clause (ii) of this paragraph, the Company may not delay the filing of the Demand Registration Statement for more than 90 days from the time of the demand unless such Demand Notice is withdrawn. The Company may not exercise the rights of postponement set forth above more than once in any twelve month period.  If there is a postponement under either clause (i) or (ii) above, the Demand Notice may be withdrawn by notice to the Company by the Holders of a majority of the Registrable Securities.  In this case, no demand will have been made for the purposes of this Section 2.1.

iv.Expenses.  The Company will pay all Registration Expenses incurred in connection with a Demand Registration.

v.Other Demand Rights.  Each of the Holders may offer such Holder’s Registrable Securities under any Demand Registration pursuant to this Section 2.1(e).  Within five days after the receipt of a request for a Demand Registration, the Company will (i) give written notice thereof to all of the Holders (other than Holders that have requested a Demand Registration under Section 2.1(a)) and (ii) include in such registration all of the Registrable Securities held by such Holders from whom the Company has received a written request within ten  days of the receipt by such Holders of the Company’s notice referred to in clause (i) above.  In the request referred to in clause (ii) above, the Holders must specify the number of Registrable Securities proposed to be registered.  The failure of any Holder to respond within such 10-day period referred to in clause (ii) above will be deemed to be a automatic waiver of such Demand Registration.  Any Holder may waive its rights under Section 2.1 with respect to such Demand Registration.  Any Holder may waive its rights under this Section 2.1(e) prior to the expiration of the 10-day period by giving written notice to the Company, with a copy to the other Holders.  If a Holder sends the Company a written request for inclusion of part of all of the Holder’s Registrable Securities in a registration, the Holder will not be entitled to withdraw or revoke the request without the prior written consent of the Company in its sole discretion.

b.Piggyback Registrations.

i.Company Registration.  The Company will promptly notify Holders in writing at least twenty days prior to filing any Registration Statement for purposes of effecting a public offering of securities of the Company (excluding any Registration Statements on Form S-8 or on Form S-4 or any Registration Statement in connection with a public offering of any security that is not of the same class as the Registrable Securities) (a “Piggyback Registration”), and the Company will afford each Holder an opportunity to register on such Registration Statement (a “Piggyback Registration Statement”) all or any part of the Registrable Securities of the Holder.  Each Holder desiring to include in the Piggyback Registration Statement all or any part of the Registrable Securities held by such Holder must, within ten days after receipt of the notice from the Company, notify the Company in writing and inform the Company of the number of Registrable Securities the Holder wishes to include in the Piggyback Registration Statement.  If a Holder decides not to include all of its Registrable Securities in the Piggyback Registration Statement, the Holder will nevertheless continue to have the right to include any Registrable Securities in any subsequent Piggyback Registration, all upon the terms and conditions of this Agreement.  The Company will not be required to include any Registrable Securities in more than two Piggyback Registration during the term of this Agreement.

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ii.Underwriting.  If a Piggyback Registration is an underwritten offering, then the Company will so advise the Holders of Registrable Securities.  In this event, the right of any Holder’s Registrable Securities to be included in a Piggyback Registration will be conditioned upon the Holder’s participation in the offering in the same terms and conditions as the Securities for the account of the Company or other shareholders, as the case may be, and the inclusion of the Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their Registrable Securities through such underwriting will enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for the underwriting.  Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the Piggyback Registration and the underwriting, and the number of shares that may be included in the Piggy Registration and the Piggyback Registration will be allocated, first, to the Company, and second, to each of the Holders requesting inclusion of their Registrable Securities in such Registration Statement on a pro rata basis based on the total number of Registrable Securities then held by each such Holder and third, any other securities requested to be included in such offering by any other shareholders of the Company.  If any Holder disapproves of the terms of any underwriting, the Holder may elect to withdraw form it by written notice to the Company and the underwriter, delivered at least ten Business Days prior to the effective date of the Registration Statement.  Any Registrable Securities excluded or withdrawn from such underwriting will be excluded and withdrawn from the Piggyback Registration.  For any Holder that is a partnership or corporation, the partners, retired partners and shareholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons will be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” will be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

iii.Expenses.  The Company will pay all Registration Expenses incurred in connection with a Piggyback Registration.

c.Form S-3 Registrations.  In case the Company receives from the Holders of a majority of the Registrable Securities a written request that the Company effect a registration on Form S-3 with respect to all or a part of the Registrable Securities owned by such Holders, the Company must:

i.promptly give written notice of the proposed registration to all other eligible Holders of Registrable Securities; and

ii.as soon as practicable, file the Registration Statement and use commercially reasonable efforts to have the Registration Statement declared effective as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other eligible Holders joining in such request as are specified in a written request given within fifteen days after receipt of such written notice from the Company.  The Company will not be obligated to effect any such registration, pursuant to this Section 2.3:

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a)if Form S-3 is not available for such offering by the Holders;

b)if the Company furnishes to the Holders a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 registration to be effected at such time, in which event the Company will have the right to defer the filing of the Form S-3 Registration Statement for a period of not more than sixty days after receipt of the request of the Holders under this Section 2.3 provided.  The Company may not utilize this right more than once in any twelve month period, and may register any other of its shares during such sixty day period;

c)if the Company has, within the nine month period preceding the date of the request, already effected one registration on Form S-3 for the Holders pursuant to this Section 2.3;

d)if the Company has already effected two registrations on Form S-3 for the Holders pursuant to this Section 2.3;

e)if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $100,000;

f)if the Holders would not be entitled to request a Demand Registration under Section 2.1.

iii.Subject to the foregoing, the Company must file a Registration Statement covering the Registrable Securities as soon as practicable after receipt of the request of the Holders.

iv.Each registration demanded pursuant to this Section 2.3 will be deemed to be a Demand Registration for the purposes of Section 2.1(c).

v.Expenses.  The Company will pay all Registration Expenses incurred in connection with a registration pursuant to this Section 2.3.

d.Obligations of the Company.  Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company will, as expeditiously as reasonably possible:

i.Prepare and file with the SEC a Registration Statement, on such form as is then available to the Company in connection with such registration, with respect to the Registrable Securities and use commercially reasonable, diligent efforts to cause the Registration Statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep the Registration Statement effective for up to ninety days, or if earlier, then until the Holders have completed the distribution related thereto. This ninety day period will be extended for a period of time equal to the period the Holders refrain from

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selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company and in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, the ninety day period will be extended, if necessary, to keep the Registration Statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment that (A) includes any prospectus required by Section 10(a)(3) of the Securities Act or (B) reflects facts or events representing a material or fundamental change in the information set forth in the Registration Statement, the incorporation by reference of information required to be included in (A) or (B) above to be contained in periodic reports filed pursuant to section 13 or 15(d) of the Exchange Act in the Registration Statement.

ii.Prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement.

iii.Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in the registration.

iv.Use reasonable, diligent efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as will be reasonably requested by the Holders,.  provided that the Company will not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

v.In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.  Each Holder participating in the underwriting must also enter into and perform its obligations under such an agreement.

vi.Notify each Holder of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the occurrence of any event as a result of which the required to be included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in the light of the circumstances then existing and the Company must promptly prepare a supplement or amendment to such prospectus and furnish to each seller of Registrable Securities a reasonable number of copies of such supplement to or an amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

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e.Furnish Information.  It will be a condition precedent to the obligations of the Company to take any action pursuant to Sections 2.1, 2.2 and 2.3 hereof that the selling Holders will furnish to the Company information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of the securities as will be required to timely effect the registration of their Registrable Securities.

f.Delay of Registration.  No Holder will have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.

g.Notice to Discontinue.  Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.4(f) the Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.4(f) and, if so directed by the Company, the Holder will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in the Holder’s possession, possession, of the prospectus covering such Registrable Securities that is current at the time of receipt of the notice.

h.Indemnification.  In the event any Registrable Securities are included in a Registration Statement under Sections 2.1, 2.2 or 2.3 hereof:

i.By the Company.  To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls (within the meaning of the Securities Act) the Holder against any losses, claims, damages, or liabilities (joint or several) under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”):

a)any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

b)the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading under the circumstances such statement were made; or

c)any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such Registration Statement;

and the Company will reimburse each such Holder, partner, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.8(a) will not

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apply to amounts paid in settlement of any such loss, claim, damage, liability or action if the settlement is effected without the consent of the Company, nor will the Company be liable in any such case for any loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director or controlling person of such Holder.

ii.By Selling Holders.  To the extent permitted by law, each selling Holder whose Registrable Securities are included in a Registration Statement will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act, and each underwriter, if any, and each person, if any, who controls any underwriter within the meaning of the Securities Act or the Exchange Act, and any other Holder selling securities under such Registration Statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.8(b) will not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent will not be unreasonably withheld; and provided further, that the total amounts payable in indemnity by a Holder under this Section 2.8(b) in respect of any violation will not exceed the proceeds received by such Holder in the Registration Statement out of which such Violation arises unless the Violation is a result of fraud on the part of such Holder.

iii.Notice.  Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action), the indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties. An indemnified party will have the right, however, to retain its own counsel, with the fees and expenses to be paid by the indemnifying party (or, if there is more than one indemnified party, the indemnifying party will pay the fees and expenses of one counsel for any and all indemnified parties, to be mutually agreed upon by such indemnified parties), if representation of the indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in the proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability

9

to defend such action, will relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

iv.Defect Eliminated in Final Prospectus.  The foregoing indemnity agreements are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement in question becomes effective or the amended prospectus is filed with the SEC pursuant to SEC Rule 424(b), such indemnity agreement will not inure to the benefit of any person if a copy of such final prospectus was furnished to the indemnified party and was not furnished to the person asserting the loss, liability, claim, or damage at or prior to the time such action is required by the Securities Act.

v.Contribution.  In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 2.7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 2.8; then, and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such Holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Securities offered by and sold under the Registration Statement bears to the public offering price of all securities offered by and sold under such Registration Statement, and the Company and other selling Holders are responsible for the remaining portion; provided, however, that, in any such case, (A) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such Registration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 1.1(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

vi.Survival.  The obligations of the Company and Holders under this Section 2.8 will survive the completion of any offering of Registrable Securities in a Registration Statement, and otherwise.

i.Rule 144 Reporting.  With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to use reasonable efforts to:

i.to make and keep public information available, as those terms are understood and defined in Rule 144 at all times;

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ii.to file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and

iii.so long as a Holder owns any Registrable Securities, to furnish to the Holders forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

j.Termination of the Company’s Obligations.  The obligations of the Company to register Registrable Securities under Sections 2.1, 2.2 and 2.3 will terminate on the earlier to occur of

i.the sale, lease or other disposition of all or substantially all of the assets of the Company;

ii.an acquisition of the Company by another entity by consolidation, merger or other reorganization in which the holders of the Company’s outstanding voting shares immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the entity surviving such transaction; or

iii.with respect to each Holder, whenever such Holder holds no Registrable Securities or may sell all such Holder’s Registrable Securities without registration pursuant to an exemption under Rule 144 or other exemption then applicable.

3.ASSIGNMENT AND AMENDMENT.

a.Assignment.  No person may be assigned the registration rights of a Holder under this Agreement (a) unless the Company is given written notice by the assigning Holder at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and (b) only to persons that are permitted transferees of the Warrant, or the Registrable Securities and provided further that prior to such assignment, any such assignee must execute a agreement to be bound by this Agreement in a form reasonably satisfactory to the Company and the assigning Holder.

b.Amendment of Rights.  Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of (i) the Company, and (ii) Holders then holding at least a majority of all of the Registrable Securities.  Any amendment or waiver effected in accordance with this Section 3.2 will be binding upon (i) each Holder, (ii) each permitted successor or assignee of such Holder and (iii) the Company.

4.GENERAL PROVISIONS.

a.Third Parties.  Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

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b.Adjustments for Stock Splits.  Wherever in this Agreement there is a reference to a specific number of shares of Common Stock of the Company or any class or series, then, upon the occurrence of any subdivision, combination or share dividend of such class or series of shares, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or series of shares by such subdivision, combination or share dividend.

c.Severability.  Whenever possible, each provision of this Agreement must be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, the invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if the invalid, illegal or unenforceable provision had never been contained herein.

d.Entire Agreement.  Except as otherwise expressly set forth herein or in agreements executed contemporaneously herewith, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.

e.Successors and Assigns.  Except as otherwise provided herein, this Agreement will shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Holders and their respective successors and assigns.

f.Counterparts.  This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement.

g.Remedies.  The Company and each Holder will be entitled to enforce its rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its favor.  The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company and each Holder may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

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h.Notices.  All notices, requests, consents and other communications hereunder to any party will be deemed to be sufficient if contained in a written instrument delivered in person, including delivery by recognized express courier, fees prepaid, or sent by facsimile transmission, or duly sent by first class registered or certified mail, return receipt requested, postage prepaid, in each case addressed:  if to the Company, at

PPT Vision, Inc.

12988 Valley View Road

Eden Prairie, MN   55344

Attention:

Mr. Joseph C. Christenson

Chief Executive Officer

or at such other address or addresses as may have been furnished in writing by the Company to the Holders, with a copy to

Lindquist & Vennum, P.L.L.P.

4200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Facsimile: (612) 371-3207,

Attention: Thomas G. Lovett, IV

if to a Holder, at the address and facsimile number set forth therefore for the Holder on Annex I attached hereto, or such other address as may hereafter be designated in writing by the addressee to the addressor pursuant to this Section 4.08.  All such notices, requests, consents and other communications will be deemed to have been received in the case of personal delivery, including delivery by express courier, on the date of such delivery; in the case of facsimile transmission, on the date of transmission; and in the case of mailing, on the third day after deposit in the U.S. mail, proper postage prepaid.

i.Governing Law.  This Agreement will be governed by and construed in accordance with the internal laws of the State of Minnesota, without giving effect to any choice of law or other conflict of law provision or rule (whether of the State of Minnesota or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Minnesota.

j.Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.

COMPANY:
PPT Vision, Inc.
By:	/s/ Joseph C. Christenson
Its:	Chief Executive Officer
INVESTOR:
P.R. Peterson Co. Keogh Plan
By:	/s/ Peter R. Peterson
Its:	Trustee

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ANNEX I

HOLDER(S)

Name & Address

P.R. Peterson Co. Keogh Plan

6111 Blue Circle,

Minnetonka, Minnesota

55343-9102

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Joseph C. Christenson, certify that:

1)I have reviewed this Form 10-QSB of PPT Vision, Inc.

2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 13, 2008

/s/ Joseph C. Christenson

Joseph C. Christenson

President, Chief Executive Officer and Chief

Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

The undersigned certifies pursuant to 18 U.S.C. § 1350, that:

(1)The accompanying Quarterly Report on Form 10-QSB for the period ended January 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  March 13, 2008

/s/ Joseph C. Christenson

Joseph C. Christenson

President, Chief Executive Officer and Chief
Financial Officer