UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Quarterly period ended March 31, 2004.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to .
Commission File Number 0-12728
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INTEGRAL VISION, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-2191935
(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification Number)
38700 Grand River Avenue, 48335
Farmington Hills, Michigan
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 471-2660
--------------
Former name, former address and former fiscal year, if changed
since last report:
Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
YES X NO
---- ----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES NO X
---- ----
The number of shares outstanding of the registrant's Common Stock, no par value,
stated value $.20 per share, as of April 30, 2004 was 13,258,901.
1
INTEGRAL VISION, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PAGE
----
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statement of Stockholders' Deficit 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
Item 4. Controls and Procedures 19
Part II - Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 24
Certifications 25
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGRAL VISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2004 2003
(Unaudited)
----------- -----------
(in thousands)
ASSETS
CURRENT ASSETS
Cash $ 61 $ 42
Accounts receivable, less allowance of $166,000 73 14
Inventories - Note A 366 168
Other current assets 39 48
----- -----
TOTAL CURRENT ASSETS 539 272
PROPERTY, PLANT AND EQUIPMENT
Leasehold Improvements 43 43
Production and engineering equipment 110 110
Furniture and fixtures 64 64
Vehicles 18 18
Computer equipment 164 160
----- -----
399 395
Less accumulated depreciation (375) (368)
----- -----
24 27
OTHER ASSETS
Capitalized computer software development costs, less accumulated amortization
of $7,543,000 ($7,495,000 in 2003) - Note A 274 323
Patents, less accumulated amortization of $435,000 ($428,000 in 2003) - Note A 39 45
----- -----
313 368
----- -----
$ 876 $ 667
===== =====
See notes to consolidated financial statements.
3
INTEGRAL VISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - CONTINUED
March 31, December 31,
2004 2003
(Unaudited)
-------------- ------------
(in thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable - Notes C & F $ 1,002 $ 1,171
Accounts payable 569 412
Accrued compensation and related costs - Note F 269 282
Accrued state income taxes - Note B 149 166
Accrued interest - Note C 447 403
Other accrued liabilities 69 64
Current maturities of long-term debt - Note C 465 666
-------- --------
TOTAL CURRENT LIABILITIES 2,970 3,164
LONG-TERM DEBT, less current maturities and O.I.D. - Note C 1,645 1,425
-------- --------
TOTAL LIABILITIES 4,615 4,589
STOCKHOLDERS' DEFICIT
Common stock, without par value, stated value $.20 per share; 31,000,000 shares
authorized; 13,168,901 shares issued
and outstanding (9,249,901 in 2003) 2,634 1,886
Additional paid-in capital 31,725 31,694
Accumulated deficit (38,098) (37,502)
-------- --------
Total Stockholders' Deficit (3,739) (3,922)
-------- --------
$ 876 $ 667
======== ========
See notes to consolidated financial statements.
4
INTEGRAL VISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
2004 2003
---------- ---------
(Unaudited)
(In thousands, except per share data)
Net sales $ 93 $ 412
Costs of sales:
Direct costs of sales 60 215
Depreciation and amortization 62 66
-------- --------
Total costs of sales 122 281
-------- --------
Gross margin (29) 131
Other costs and expenses:
Marketing 53 49
General and administrative 240 208
Engineering and development 189 182
-------- --------
Total other costs and expenses 482 439
-------- --------
Operating loss (511) (308)
Other income 31 26
Interest expense - Note C (116) (70)
-------- --------
Net loss $ (596) $ (352)
======== ========
Basic and diluted loss per share:
Net loss $ (0.06) $ (0.04)
======== ========
Weighted average number of shares of common stock and common stock equivalents,
where applicable 10,373 9,430
======== ========
See notes to consolidated financial statements.
5
INTEGRAL VISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Common Stock
-----------------------------
Number of
Shares Additional Paid- Accumulated
Outstanding Amount In Capital Deficit Total
----------- ------ ---------- ------- -----
(in thousands, except number of common shares outstanding)
BALANCE AT JANUARY 1, 2004 9,429,901 $ 1,886 $ 31,694 $(37,502) $(3,922)
Net loss for the period (596) (596)
Warrants exercised 3,670,000 734 35 769
Stock options exercised 69,000 14 (4) 10
---------- ------- -------- -------- -------
BALANCE AT MARCH 31, 2004 13,168,901 $ 2,634 $ 31,725 $(38,098) $(3,739)
========== ======= ======== ======== =======
See notes to consolidated financial statements.
6
INTEGRAL VISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2004 2003
---------- ---------
(Unaudited)
(in thousands)
OPERATING ACTIVITIES
Net loss $(596) $(352)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 7 8
Amortization 81 73
Changes in operating assets and liabilities:
Accounts receivable (7) 117
Inventories (198) 205
Prepaid and other 9 42
Accounts payable and other current liabilities 169 (348)
----- -----
Net Cash Used In Operating Activities (535) (255)
INVESTING ACTIVITIES
Purchase of property and equipment (4) (2)
----- -----
Net Cash Used In Investing Activities (4) (2)
FINANCING ACTIVITIES
Proceeds from sale of Class 2 Notes 280
Proceeds from sale of Class 3 Notes 268
Proceeds from exercise of options 10
Repayments of Class 2 Notes (154)
Proceeds from other short term notes 17
Repayments on short term notes (70)
Proceeds from sale of Class 1 Notes, net of discount 296
Proceeds from sales of warrants in connection with Class 1 Notes 94
----- -----
Net Cash Provided By Financing Activities 558 183
----- -----
Increase (Decrease) in Cash 19 (74)
Cash at Beginning of Period 42 81
----- -----
Cash at End of Period $ 61 $ 7
===== =====
SUPPLEMENTAL CASH FLOWS DISCLOSURE:
Interest Paid $ 4 $ 18
===== =====
Non-Cash Financing Activities:
A note payable in the amount of $250,000 was converted to a
Class 3 Note during the period ended March 31, 2004.
See notes to consolidated financial statements.
7
INTEGRAL VISION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
Note A - Summary of Significant Accounting Policies
Nature of Business
Integral Vision, Inc. (or the "Company") develops, manufactures and
markets microprocessor-based process monitoring and control systems for
use in industrial manufacturing environments. The principle application
for the Company's products is optical display inspection ("machine vision
products"). The Company's product offerings include LCI-Professional,
SharpEye, ChromaSee, and Lifetime Tester. The Company's products are
generally sold as capital goods. Depending on the application, machine
vision systems have an indefinite life. Machine vision applications are
more likely to require replacement due to possible technological
obsolescence rather than physical wear.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its 100% owned subsidiary: Integral Vision LTD, United Kingdom. Upon
consolidation, all significant intercompany accounts and transactions are
eliminated.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31,
2004 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2004. For further information, refer to
the consolidated financial statements and notes thereto included in
Integral Vision's Annual Report on Form 10-K for the year ended December
31, 2003.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Translation of Foreign Currencies
The financial statements of Integral Vision LTD are translated into United
States dollar equivalents at exchange rates as follows: balance sheet
accounts at year-end rates; income statement accounts at average exchange
rates for the year. Transaction gains and losses are reflected in net
earnings and are not significant.
Reclassifications
Certain amounts have been reclassified in prior periods' presentations to
conform to the current year's presentation.
8
Accounts Receivable
Trade accounts receivable primarily represent amounts due from equipment
manufacturers and end-users in North America, Asia and Europe. The Company
maintains an allowance for the inability of our customers to make required
payments. These estimates are based on historical data, the length of time
the receivables are past due and other known factors.
Inventories
Inventories are stated at the lower of standard cost, which approximates
actual cost determined on a first-in, first-out basis, or market. At March
31, 2004 and December 31, 2003, inventories consisted of the following
(net of allowance of $704,000 at March 31, 2004 and $671,000 at December
31, 2003):
March 31, December 31,
2004 2003
(Unaudited)
----------- -----------
(in thousands)
Raw materials $117 $70
Work in process 180 48
Finished goods 69 50
---- ----
$366 $168
==== ====
Inventories are recorded net of allowances for unsalable or obsolete raw
materials, work-in-process and finished goods. We evaluate on a quarterly
basis the status of our inventory to ensure the amount recorded in our
financial statements reflects the lower of our cost or the value we expect
to receive when we sell the inventory. This estimate is based on several
factors, including the condition and salability of our inventory and the
forecasted demand for the particular products incorporating these
components. Based on current backlog and expected orders, we forecast the
upcoming usage of current stock. We record reserves for obsolete and
slow-moving parts ranging from 0% for active parts with sufficient
forecasted demand up to 100% for excess parts with insufficient demand or
obsolete parts. Amounts in work-in-process and finished goods inventory
typically relate to firm orders and, therefore, are not subject to
obsolescence risk.
Impairment of Long-lived Assets
The Company reviews its long-lived assets, including property, equipment
and intangibles, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be
fully recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the
asset and its eventual disposition are less than the carrying amount of
the asset.
Capitalized Computer Software Development Costs
Computer software development costs are capitalized after the
establishment of technological feasibility of the related technology.
These costs are amortized following general release of products based on
current and estimated future revenue for each product with an annual
minimum equal to the straight-line amortization over the remaining
estimated economic life of the product (not to exceed 5 years). Management
continually reviews the net realizable value of capitalized software
costs. At the time that a determination is made that capitalized software
amounts exceed the estimated net realizable value of amounts capitalized,
any amounts in excess of the estimated realizable amounts are written off.
Property and Equipment
Property and equipment is stated on the basis of cost. Expenditures for
normal repairs and maintenance are charged to operations as incurred.
Depreciation is computed by the straight-line method based on the
estimated useful lives of the assets (buildings-40 years, other property
and equipment-3 to 10 years).
9
Patents
Patents are stated at cost less accumulated amortization and are amortized
on a straight-line basis over the estimated useful lives of the assets
(not to exceed 5 years).
Revenue Recognition
The Company recognizes revenue in accordance with SOP 97-2, Software
Revenue Recognition and Staff Accounting Bulletin No. 101 ("SAB 101"),
Revenue Recognition in Financial Statements. Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the selling price is fixed or determinable
and collectibility is reasonably assured.
The Company accounts for certain product sales of its flat panel display
inspection systems as multiple-element arrangements. If specific customer
acceptance requirements are met, the Company recognizes revenue for a
portion of the total contract price due and billable upon shipment, with
the remainder recognized when it becomes due (generally upon acceptance).
The Company recognizes all other product sales with customer acceptance
provisions upon final customer acceptance. The Company recognizes revenue
from the sale of spare parts upon shipment. Revenue from service contracts
is recognized over the life of the contract. Revenue is reported net of
sales commissions.
Concentrations of Credit and Other Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
A significant portion of the Company's customers are located in Asia,
primarily Japan, Taiwan, and Korea, and in Europe. Therefore, the
Company's sales to these countries may be adversely affected by the
overall health of these economies, including the effects of currency
exchange rate fluctuations and political risks. The Company generally does
not require collateral for most of its trade accounts receivable. For
sales to some of its customers in certain geographic regions, the Company
requires letters of credit. Substantially all of the Company's revenue is
invoiced in U.S. dollars. For the quarter ended March 31, 2004, sales to
three customers represented $83,000 of the Company's total revenue of
$93,000 for the quarter. The Company believes its credit evaluation and
monitoring mitigates its credit risk.
Advertising
Advertising costs are expensed as incurred. Advertising costs were
approximately $1,000 for the three months ended March 31, 2004 and $2,000
for the comparable 2003 period.
Income Taxes
The Company accounts for income taxes in accordance with FASB Statement
No. 109, Accounting for Income Taxes ("FAS 109"), which requires the use
of the liability method in accounting for income taxes. Under FAS 109,
deferred tax assets and liabilities are measured based on differences
between the financial reporting and tax bases of assets and liabilities
using enacted tax rates and laws that will be in effect when differences
are expected to reverse. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is provided for net
deferred tax assets if it is more likely than not that these items will
either expire before the Company is able to realize their benefit, or
future deductibility is uncertain.
Fair Value Disclosure
The carrying amounts of certain financial instruments such as cash,
accounts receivable, notes receivable, accounts payable and long-term debt
approximate their fair values. The fair value of the long-term financial
instruments is estimated using discounted cash flow analysis and the
Company's current incremental borrowing rates for similar types of
arrangements.
Contingencies and Litigation
The Company makes an assessment of the probability of an adverse judgment
resulting from current and threatened litigation. The Company accrues the
cost of an adverse judgment if, in Management's estimation, an adverse
settlement is probable and Management can reasonably estimate the ultimate
cost
10
of such litigation. The Company has made no such accruals at March 31,
2004.
Stock Options and Warrants
The Company has elected to follow APB No. 25 "Accounting for Stock Issued
to Employees" and related interpretations in accounting for its employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized. The Company has
elected to adopt only the disclosure provisions of FASB Statement No. 123,
"Accounting for Stock-Based Compensation", as amended by FASB Statement
No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure."
The Compensation Committee of the Board of Directors approves option
grants. The option price is the market price on the date of the grant,
vesting generally occurs after one year and the expiration occurs ten
years from the date of the grant. No options were granted in the three
month periods ended March 31, 2003 and 2004. At March 31, 2004, there were
options outstanding to purchase 936,000 shares of common stock at prices
ranging from $.10 to $9.25 per share.
Subsequent to March 31, 2004, the Company's stockholders approved a new
stock option plan to authorize shares on which qualified and nonqualified
options may be granted for the purchase of up to 1,000,000 shares of
common stock of the Company.
Under the terms of the Company's Note and Warrant Purchase agreement, as
amended, the Company could issue up to $4.0 million of senior debentures,
which consists of Class 1 and Class 2 Notes. Class 2 Notes are working
capital notes, are secured by accounts receivable of the Company, and are
subordinated to the Class 1 Notes issued prior to April 16, 2002. In
September 2003, the holders of all of the then outstanding Class 2 Notes
agreed to modify the maturity dates of those Notes to April 30, 2004. In
December 2003, certain of the Class 2 Notes were amended to have maturity
dates of May 31, 2004. The purchasers of the Class 2 Notes receive
warrants for the purchase of the Company's common stock when the Note is
repaid. Class 2 Warrants entitle the holder to purchase one share of
Common Stock for each $1 in value of the Class 2 Note multiplied by a
fraction, the numerator of which is the number of days such Class 2 note
is outstanding and the denominator of which is 365, at a specified price
which shall be approximately 150% of the recent fair market value of the
Common Stock as of the date of the issuance of the Class 2 Note. Based on
their respective maturity dates, the number of common shares that could be
purchased with Class 2 warrants is estimated to be 455,000. In August
2003, the holders of those Notes agreed to a modification to the Note and
Warrant Purchase Agreement that increased the maximum amount of the Notes
outstanding to $4.0 million and created a new Class 3 Note which is
convertible into Integral Vision, Inc. common stock at a conversion rate
set by the Company's board of directors at the date of issuance. No Class
3 Notes were issued, however. Class 1 Notes issued have maturities of up
to four years, an interest rate of 10%, and the purchasers of the Notes
receive warrants for the purchase of the Company's common stock. The value
assigned to warrants is included in additional paid-in capital and the
discount is amortized over the life of the note. Additionally, the
directors will determine the conversion rate at the date of issuance,
subject to change in the event additional shares are issued in the future.
In March 2004, the holders of the Class 1 and Class 2 Notes agreed to an
additional modification to the Note and Warrant Purchase Agreement. The
maturity date on substantially all of the outstanding Class 2 Notes was
extended to December 31, 2005. Principal and interest due on the Class 2
notes on December 31, 2005 is projected to be approximately $1.2 million.
The terms of the Class 1 Notes were changed such that all accrued interest
would be due on June 30, 2004. Additionally, the first principal payments
on the Class 1 Notes would be due on June 30, 2004. However, the amended
Note and Warrant Purchase Agreement provides that, as a result of the
Company's shareholders' approval of management's proposal to increase the
Company's authorized stock to 31,000,000 at the Company's annual meeting
of its shareholders that was held on May 6, 2004, the following has
occurred:
- The accrued interest on outstanding Class 1 Notes as of
December 31, 2003 in the amount of approximately $313,000 has
been exchanged for new Class 3 Notes due July 3, 2006 with
interest at 8% payable semi-annually beginning April 1, 2005
and convertible into shares of the Company's common stock at
$0.75 per share.
- The initial interest payment due on Class 1 Notes for interest
accruing after December 31, 2003 is due April 1, 2005.
- Quarterly principal payments on Class 1 Notes have been
eliminated, with all principal due at maturity.
- $330,000 of principal on Class 1 Notes issued prior to April
16, 2002 have been exchanged for Class 3 Notes due February
27, 2007 with interest at 8% payable semi-annually beginning
April 1, 2005 and convertible into shares of the Company's
common stock at $0.75 per share.
11
- Class 2 Notes outstanding at February 29, 2004, plus interest
then accrued, may be exchanged for Class 3 Notes due December
31, 2005 with interest at 8% payable semi-annually beginning
April 1, 2005 and convertible into shares of the Company's
common stock at $0.75 per share.
On the modification date, the market price of the Company's common stock
was approximately $1.50 per share. The Board felt the $0.75 conversion
price was justified given the concessions received in connection with the
debt, the fact that the shares are restricted, and other factors.
During the quarter ended March 31, 2004, $280,000 of the Class 2 Notes and
$268,000 of the Class 3 Notes were placed. Additionally, Warren, Cameron,
Asciutto, & Blackmer, P.C. (the Company's corporate counsel), agreed to
convert $250,000 of its $354,000 short term note payable into a Class 3
Note. The remaining $104,000 was converted to a new note with an interest
rate of 6.75% and a maturity date of July 1, 2005. Also during the
quarter, certain holders of Class 1 Notes exercised their warrants to
purchase 1,540,000 shares of the Company's common stock at $0.25 per
share, the proceeds of which were used to repay the face value of the
respective Class 1 Notes. Mr. Drake exercised his warrants to purchase
1,890,000 shares of the Company's common stock at $0.25 per share, the
proceeds of which were used to repay substantially all of the face value
of the his Class 1 Notes. Maxco, Inc. exercised its warrants to purchase
240,000 shares of the Company's common stock at $0.25 per share, the
proceeds of which were used to repay a portion of the face value of the
its Class 1 Note. At March 31, 2004, a total of $1,537,500 of the Class 1
Notes, $972,000 of the Class 2 Notes, and $518,000 of the Class 3 Notes
were outstanding. Max A. Coon (a director of the Company) has purchased a
total of $90,000 of the Company's Class 1 Notes.
Subsequent to March 31, 2004, $210,000 of Class 3 Notes was placed which
are convertible into shares of the Company's common stock at $1.25 per
share. Additionally, $30,000 of Class 2 Notes was placed.
In connection with the private placement of $7.0 million of debentures in
1997, which were retired in 1999, the Company issued warrants for the
purchase of 1,400,000 Integral Vision common shares at $6.86 per share
through June 30, 2005, all of which were outstanding at March 31, 2004.
Pursuant to the 1997 Note and Warrant Purchase agreement, these warrants
have been re-priced based on subsequent warrant issues. At March 31, 2004,
the holders of these warrants had the right to purchase up to 3,336,688
shares of the Company's common stock at $2.88 per share.
During the quarter ended March 31, 2004 employee stock options to purchase
69,000 shares of the Company's stock at prices ranging from $0.10 to $0.24
per share were exercised, resulting in net proceeds of approximately
$10,000.
A summary of the outstanding warrants, options, and other potential
common stock equivalents at March 31, 2004 is as follows:
Weighted Weighted
Average Number Average Number
Exercise Price Outstanding Remaining Life Exercisable
-------------- ----------- -------------- -----------
(number of shares in thousands)
1997 Note and Warrant Purchase Agreement $2.88 3,337 1.25 3,337
2001 Note and Warrant Purchase Agreement (1) $0.26 4,916 2.68 4,916
Class 3 Notes $0.91 568 2.97 568
Qualified ISO Plan $9.25 7 0.40 7
1995 Employee Stock Option Plan $1.10 460 6.43 438
1999 Employee Stock Option Plan $0.23 462 7.92 304
----- ----- ---- -----
$1.26 9,182 2.61 9,002
===== ===== ==== =====
(1) Excludes warrants exercisable under outstanding Class 2 Notes.
The number of warrants available to holders of Class 2 Notes
is dependent on the length of time the principal balance is
outstanding and the agreed upon base exercise price. At March
31, 2004, $972,000 of the Class 2 Notes was outstanding.
(2) Subsequent to March 31, 2004, Class 3 Notes of $660,000
convertible at $0.75 and $210,000 convertible at $1.25 were
issued for a total potential convertible into common stock of
1,048,000 shares.
12
Comprehensive Income
The Company displays components of accumulated comprehensive income
(loss), if any, in the Consolidated Statement of Stockholders' Deficit.
Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board (FASB) issued
Financial Interpretation No. (FIN) 46 "Consolidation of Variable Interest
Entities". This standard clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements" and addresses
consolidation by business enterprises of variable interest entitles, more
commonly known as "Special Purpose Entities" or "SPE's". FIN 46 requires
existing unconsolidated variable interest entities' interests to be
consolidated by their primary beneficiaries if the entities do not
effectively disperse risk among the parties involved. FIN 46 also enhances
the disclosure requirements related to variable interest entities. The
interpretation is effective with respect to interests in variable interest
entities created after January 31, 2003. For interests in variable
interest entities created before February 1, 2003, the interpretation
applies to the first interim or annual reporting period beginning after
June 15, 2003. The subject matter of FIN 46 is not currently applicable to
the Company; accordingly, it is not expected that the provisions of FIN 46
will have a material impact on financial position, results of operations,
or cash flows of the Company.
Note B - Sale of Welding Controls Division
The Company incurred both Federal and State income tax liabilities as a
result of the sale of the assets of its Welding Controls division in 1999.
The Company paid approximately $90,000 for its 1999 alternative minimum
tax liability, which resulted primarily from the gain on the sale of the
Welding Controls Division. This amount was refunded to the Company in
2002. Additionally, the Company incurred a Michigan Single Business Tax
(SBT) liability of approximately $120,000 for the 1999 tax year as a
result of the transaction. At March 31, 2004, this liability was not yet
paid in full and was included in accrued state income taxes in the
consolidated balance sheet. Including interest and penalties,
approximately $149,000 was outstanding at March 31, 2004 for this
obligation, which is included in accrued state income taxes in the
consolidated balance sheet. The Company is making monthly payments of
approximately $6,300 to the taxing authority.
The acquiring company also assumed a liability to Square D in the amount
of $1.8 million in accordance with the purchase agreement. This liability
resulted from the settlement of patent litigation in 1994. The settlement
required payments of $300,000 per year for ten years. In the event the
acquiring company fails to make the required payments, Integral Vision may
be obligated for those amounts due. As of March 31, 2004, no notifications
have been made that the Company is obligated for any payments not made and
the arrangement expires in 2004.
Note C - Long-Term Debt and Other Financing Arrangements
At March 31, 2004, the Company had long term notes payable to related
parties of approximately $243,000. The Company's notes to related parties
included the following: a $139,000 obligation to Maxco, Inc. (a 17% owner
of the Company) with an interest rate of prime plus 0.5%; and a $104,000
obligation to Warren, Cameron, Asciutto, & Blackmer, P.C. (the Company's
corporate counsel) with an interest rate of 6.75%. These notes mature in
July 2005.
13
A summary of the Company's debt obligations is as follows:
March 31, December 31,
2004 2003
--------- ------------
(in thousands)
Long Term Debt:
Face value Class 1 Notes $ 1,537 $ 2,455
Less Original Issue Discount (188) (364)
Class 3 Notes 518 --
Other Long Term Debt 243 --
Less Current Maturities (465) (666)
------- -------
Net Long Term Debt $ 1,645 $ 1,425
======= =======
Short Term Debt:
Class 2 Notes $ 1,002 $ 722
Other Short Term Debt -- 449
------- -------
Total Short Term Debt $ 1,002 $ 1,171
------- -------
For further discussion regarding the Company's obligations, see Note A --
Summary of Significant Accounting Policies -- Stock Options and Warrants.
Note D - Loss per Share
The following table sets forth the computation of basic and diluted loss
per share:
Three Months Ended March 31,
2004 2003
------------- -------------
(unaudited)
(in thousands, except per share data)
NUMERATOR FOR BASIC AND DILUTED LOSS PER SHARE - LOSS AVAILABLE TO
COMMON STOCKHOLDERS
Net loss $(596) $(352)
====== =====
*there was no effect of dilutive securities -- see below
DENOMINATOR FOR BASIC AND DILUTED LOSS PER
SHARE - WEIGHTED AVERAGE SHARES 10,373 9,430
====== =====
*there was no effect of dilutive securities -- see below
BASIC AND DILUTED LOSS PER SHARE:
Net loss $(0.06) $(0.04)
------ ------
Warrants and options outstanding were not included in the computation of
diluted earnings per share because the inclusion of these options would
have an antidilutive effect. For additional disclosures regarding stock
options and warrants see Note A.
Note E - Sale of Optical Disc Inspection Technology
On September 9, 2002, DaTARIUS Technologies Inc., a subsidiary of global
test equipment manufacturer DaTARIUS Technologies GmbH, purchased Integral
Vision's assets related to inspection systems for the optical disc
industry, including the names "Automatic Inspection Systems" and "AID."
The sale included Integral Visions optical disc scanner products as well
as its range of print and identification code products used to inspect the
printing stage of disc manufacture. The consideration the Company received
for the technology consisted of a non-refundable $100,000 advanced minimum
royalty payment in addition to future royalties. The Company received
approximately $54,000 in royalties in 2003 and expects to receive
additional royalties in excess of $60,000 a year for the next two years.
Additionally, the Company received $25,000 from the sale of equipment to
DaTARIUS. The Company recognized a gain on the transaction of
approximately $112,000, which is included in gain(loss) on sales of assets
in 2002, primarily attributable to the advanced minimum royalty payment
received. The proceeds from the transaction were used primarily to fund
current operations.
14
Note F - Related Party Transactions
During the quarter ended March 31, 2004, Mr. Charles Drake, the Company's
chairman, exercised warrants to purchase 1,890,000 shares of the Company's
common stock at $0.25 per share in exchange for retiring various Class 1
Notes in the amount of $472,500.
Mr. Mark Doede, the Company's President, advanced the Company
approximately $15,000 in the first quarter of 2004. This amount is
included in other accrued liabilities in the consolidated balance sheet.
Mr. Arthur Harmala, the Company's Vice President of Marketing, has
voluntarily deferred approximately $17,000 of his wages as of March 31,
2004. This amount is included in accrued compensation and related costs in
the consolidated balance sheet.
During the quarter ended March 31, 2004, Maxco, Inc., a 17% owner of the
Company, exercised warrants to purchase 240,000 shares of the Company's
common stock at $0.25 per share in exchange for retiring a portion of a
Class 1 Note in the amount of $60,000.
Maxco, Inc. advanced the Company approximately $139,000 in 2001 to permit
the Company to meet its obligations. In March 2004, the parties reached an
agreement on a new note that extended the maturity date to July 1, 2005.
Additionally, Maxco provides consulting services to the Company. These
services include assistance with financial statement preparation,
compliance with governmental filing requirements, and assistance with
certain financing arrangements. The Company has not recorded any charge
for these services to date. For future services the Company may record
charges, if and when, Management, Maxco, and the Independent Directors
determine the value of such services on an ongoing basis.
Warren, Cameron, Asciutto, & Blackmer, P.C. (the Company's corporate
counsel), agreed to convert $250,000 of its $354,000 short term note
payable into a Class 3 Note. The remaining $104,000 was converted to a new
note with an interest rate of 6.75% and a maturity date of July 1, 2005.
Note G - Income Taxes
The Company establishes valuation allowances in accordance with the
provisions of FASB Statement No. 109, "Accounting for Income Taxes." The
Company continually reviews realizability of deferred tax assets and
recognizes these benefits only as reassessment indicates that it is more
likely than not that the benefits will be realized.
In March 2002, Congress enacted what is known as the "Job Creation and
Worker Assistance Act of 2002" to provide tax incentives for economic
recovery. One of the provisions of the Act was to extend the carryback
period for net operating losses incurred in tax years ending in 2001 or
2002 to five years versus the three years previously allowed.
Additionally, any net operating losses as computed for alternative minimum
tax purposes for tax years ending in 2001 or 2002 can also be carried back
five years and can be used to offset up to 100% of alternative minimum
taxable income. Previously, alternative minimum tax net operating losses
could only be used to offset up to 90% of alternative minimum taxable
income. As a result of this Act, the Company was able to carryback its
2001 net operating loss as computed for alternative minimum tax purposes
to 1999, which reduced its tax liability in that year to zero. In the
quarter ended September 30, 2002, the Company received a refund of taxes
previously paid of approximately $90,000.
15
Note H - Going Concern Matters
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in
the financial statements, the Company has incurred losses from operations
in the current and prior year quarters of $596,000 and $352,000,
respectively. Further, during the years ended December 31, 2003, 2002, and
2001, the Company incurred losses from continuing operations of $1.9
million, $2.2 million, $8.1 million, respectively. The continuing losses,
in addition to working capital deficiencies, recurring reductions in
product sales, and cash flow deficiencies, among other factors, may
indicate that the Company will be unable to continue as a going concern
for a reasonable period of time.
The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis,
to obtain additional financing as may be required, and ultimately to
attain profitability. Additionally, at March 31, 2004, substantially all
of the Company's $369,000 in trade accounts payable was overdue, of which
$126,000 was paid subsequent to March 31, 2004. The Company also has an
estimated $369,000 in amounts owed to certain regulatory agencies. The
Company is making monthly payments of approximately $6,300 to one of the
regulatory agencies.
For further discussion regarding the Company's obligations, see Note A --
Summary of Significant Accounting Policies -- Stock Options and Warrants.
Note I - Subsequent Events
Subsequent to March 31, 2004, $210,000 of Class 3 Notes was placed which
are convertible into shares of the Company's common stock at $1.25 per
share. Additionally, $30,000 of Class 2 Notes was placed.
In May 2004 the Company distributed a Private Offering Memorandum to raise
capital of approximately $2.0 million by the sale of shares of the common
stock of the Company at a price per share equal to 75% of the average of
the closing prices reported on the Over-the-Counter Bulletin Board for
Integral Vision common stock for the 5 trading days prior to the closing
date. The shares have not been registered under the federal securities
laws or the securities laws of any state. If successful, the shares issued
upon sale in this offering will be restricted securities. The proceeds of
the offering will be used for working capital and payment of certain
outstanding indebtedness.
Note J - Off Balance Sheet Risk
A claim has been made against the Company citing unpaid royalties totaling
$107,000. Management does not believe that the Company will ultimately be
found to be liable to the claimant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those projected in
the forward-looking statements as a result of a number of factors, risks
and uncertainties. Generally, the words "anticipate", "expect", "intend",
"believe" and similar expressions identify forward-looking statements. The
information included in this Form 10-Q is as of the filing date with the
Securities and Exchange Commission and future events or circumstances
could differ significantly from the forward-looking statements included
herein. Accordingly, we caution readers not to place undue reliance on
such statements.
OVERVIEW
Integral Vision, Inc. (or the "Company") develops, manufactures and
markets microprocessor-based process monitoring and control systems for
use in industrial manufacturing environments. The principle
16
application for the Company's products is optical display inspection
("machine vision products"). The Company's product offerings include
LCI-Professional, SharpEye, ChromaSee, and Lifetime Tester. The Company's
products are generally sold as capital goods. Depending on the
application, machine vision systems have an indefinite life. Machine
vision applications are more likely to require replacement due to possible
technological obsolescence rather than physical wear.
LCI PROFESSIONAL - Integral Vision's LCI-Professional product is used for
inspection of LCD Displays as components or final assemblies. Applications
include cell phones, car radios, pagers, electronic organizers and
hand-held video games. Integral Vision's display inspection systems are
designed to detect two classes of defects: cosmetic and functional.
Cosmetic defects do not affect the functionality of the display, but they
cause user annoyance and reduce product value. Functional defects are
flaws that cause the device to be inoperable or have a significant effect
on functionality.
SHARPEYE - Integral Vision's SharpEye product provides small Flat Panel
Display (FPD) inspection for reflective, emissive and transmissive display
technologies. SharpEye is designed for the detection of functional and
cosmetic defects in LCOS, OLED, Poly OLED, DMD, EL, HTPS, LTPS, LCD and
other emerging display technologies. These technologies are applied to
consumer products such as camcorders, rear projection computer monitors,
digital still cameras, HDTV, projectors, video headsets and video
telephones. The core technology of SharpEye inspection algorithms is the
ability to quantize data to the level of a single display pixel. SharpEye
can be configured for production inspection or for display evaluation in a
laboratory based on the equipment configuration selected.
CHROMASEE - Integral Vision's ChromaSee product, which was introduced in
2003, provides luminance, color matching and defect inspections for FPD
displays. Defect detection includes functional (e.g. failed pixels, icons)
and cosmetic (e.g. scratches) defects. ChromaSee integrates with
production equipment to allow inline or offline testing. A configuration
interface (Task Sequencer) uses a familiar "Tree View" representation of
the inspection sequence flow. For deployment into production, the
operator's interface provides essential views of results, images and
statistics for production floor personnel.
LIFETIME TESTER - Integral Vision's Lifetime Tester product, which was
introduced in 2003, evaluates changes in display luminance, color and
other performance characteristics over time. The Lifetime Tester
facilitates the process of comparing different display manufacturing
processes and formulas by evaluating large numbers of samples side by side
to determine their life characteristics. This allows design and process
engineers to efficiently evaluate the effectiveness of proposed design and
process changes off line prior to implementation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 COMPARED WITH THREE MONTHS ENDED MARCH
31, 2003
Net revenues decreased $319,000 (77.4%) to $93,000 in the first quarter of
2004 from $412,000 in the first quarter of 2003. The decrease in net
revenue was primarily attributable to $398,000 of revenue from sales of
the Company's flat panel display inspection products in the first quarter
of 2003; there were only $14,000 in sales from that product line in the
comparable 2004 period. Conversely, the first quarter of 2004 included
$77,000 of revenue from packaging applications; there were no such sales
in 2003.
Costs of sales decreased $159,000 (56.6%) to $122,000 (131.1% of sales) in
the first quarter of 2004 compared to $281,000 (68.2% of sales) in the
first quarter of 2003. This was primarily due to a decrease of $237,000 in
material costs as a result of the lower sales of flat panel display
inspection products in the 2004 period. Partially offsetting this decrease
were $87,000 in costs related to packaging applications in 2004 while
there were no such costs in 2003.
Marketing costs increased $4,000 (8.2%) to $53,000 in the first quarter of
2004 compared to $49,000 in the first quarter of 2003. This was
attributable to an increase in employee related costs.
General and administrative costs increased $32,000 (15.4%) to $240,000 in
the first quarter of 2004 compared to $208,000 in the first quarter of
2003. This was primarily due to increased legal costs of $23,000 in the
2004 period. The remainder of the increase in the first quarter of 2004
compared to the first quarter of 2003 was mainly attributable to an
increase in employee related costs.
Engineering and development expenditures increased $7,000 (3.8%) to
$189,000 in the first quarter of 2004 compared to $182,000 in the first
quarter of 2003. This was primarily attributable to an increase in
employee related costs.
17
Other income in the first quarter of 2004 includes $29,000 of royalty
income received in connection with the DaTARIUS Technologies transaction
(see Note E to consolidated financial statements). Other income in the
first quarter of 2003 includes $18,000 for engineering fees and $5,000 of
royalty income.
Interest expense increased $46,000 to $116,000 in the first quarter of
2004 compared to $70,000 in the first quarter of 2003. The increase is
primarily attributable to the interest on Class 1 and Class 2 Notes that
were placed subsequent to March 31, 2003 (see Note C to consolidated
financial statements) and the discount on the debentures amortized in
2004.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for the first quarter of 2004 used cash of
approximately $535,000 primarily due to the Company's loss from operations
of $596,000. Decreases in accounts receivable and inventories were offset
by an increase in other assets and a decrease in accounts payable.
The Company investing activities included only the purchase of
approximately $4,000 of equipment in the first quarter of 2004.
The Company's financing activities included the receipt of $280,000 from
the sale of Class 2 Notes and $268,000 from the sale of Class 3 Notes.
During the quarter ended March 31, 2004 employee stock options were
exercised generating approximately $10,000.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis, to obtain additional financing as may be required, and
ultimately to attain profitability. Additionally, at March 31, 2004,
substantially all of the Company's $369,000 in trade accounts payable was
overdue, of which $126,000 was paid subsequent to March 31, 2004. The
Company also has an estimated $369,000 in amounts owed to certain
regulatory agencies. The Company is making monthly payments of
approximately $6,300 to one of the regulatory agencies.
For further discussion regarding the Company's obligations, see Note A --
Summary of Significant Accounting Policies -- Stock Options and Warrants.
MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES
The Company's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires Management to make
estimates and judgments that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The accounting policies discussed
below are considered by management to be the most important to an
understanding of our financial statements, because their application
places the most significant demands on management's judgment and estimates
about the effect of matters that are inherently uncertain. Our assumptions
and estimates were based on the facts and circumstances known at March 31,
2004, future events rarely develop exactly as forecast, and the best
estimates routinely require adjustment. These policies are also described
in Note A of the Notes to Consolidated Financial Statements included in
this Quarterly Form 10-Q.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with SOP 97-2, Software
Revenue Recognition and Staff Accounting Bulletin No. 101 ("SAB 101"),
Revenue Recognition in Financial Statements. Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the selling price is fixed or determinable
and collectibility is reasonably assured.
The Company accounts for certain product sales of its flat panel display
inspection systems as multiple-element arrangements. If specific customer
acceptance requirements are met, the Company recognizes revenue for a
portion of the total contract price due and billable upon shipment, with
the remainder recognized when it becomes due (generally upon acceptance).
The Company recognizes all other product sales with customer acceptance
provisions upon final customer acceptance. The Company recognizes revenue
from the sale of spare parts upon shipment. Revenue from service contracts
is recognized over the life of the contract. Revenue is reported net of
sales commissions.
18
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates
actual cost determined on a first-in, first-out basis, or market.
Inventories are recorded net of allowances for unsalable or obsolete raw
materials, work-in-process and finished goods. We evaluate on a quarterly
basis the status of our inventory to ensure the amount recorded in our
financial statements reflects the lower of our cost or the value we expect
to receive when we sell the inventory. This estimate is based on several
factors, including the condition and salability of our inventory and the
forecasted demand for the particular products incorporating these
components. Based on current backlog and expected orders, we forecast the
upcoming usage of current stock. We record reserves for obsolete and
slow-moving parts ranging from 0% for active parts with sufficient
forecasted demand up to 100% for excess parts with insufficient demand or
obsolete parts. Amounts in work-in-process and finished goods inventory
typically relate to firm orders and, therefore, are not subject to
obsolescence risk.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets, including property, equipment
and intangibles, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be
fully recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the
asset and its eventual disposition are less than the carrying amount of
the asset.
CONTINGENCIES AND LITIGATION
The Company makes an assessment of the probability of an adverse judgment
resulting from current and threatened litigation. The Company accrues the
cost of an adverse judgment if, in Management's estimation, an adverse
settlement is probable and Management can reasonably estimate the ultimate
cost of such litigation. The Company has made no such accruals at March
31, 2004.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk stemming from changes in foreign
exchange rates, interest rates and prices of inventory purchased for
assembly into finished products. Changes in these factors could cause
fluctuations in earnings and cash flows. In the normal course of business,
exposure to interest rates is managed by fixing the interest rates on the
Company's long-term debt whenever possible. The Company does not generally
enter into long-term purchase contracts but instead purchases inventory to
fill specific sales contracts thereby minimizing risks with respect to
inventory price fluctuations.
While sales are generally denominated in US dollars, from time to time the
Company may denominate sales in the following additional currencies:
- US Dollars
- Pound Sterling
- Euros
- Yen
In management's opinion, as the currencies of Western Europe and the UK
are generally stable, there is no significant exposure to losses due to
currency fluctuations. However, because the Yen has not been stable over
the past several years, the Company does enter into forward sales
contracts equal to the future amount of Yen to be received at the time the
order is accepted. These hedging transactions are on an order by order
basis and at no time are they speculative in nature. At March 31, 2004,
the Company had no open positions and had no sales denominated in a
foreign currency.
ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures
a) Evaluation of disclosure controls and procedures
Our chief executive officer and chief financial officer have
each reviewed and evaluated the effectiveness of our
disclosure controls and procedures (as defined in Securities
Exchange Act of
19
1934 Rules 13a-14(c) and 15d-14(c)) as of a date within 90
days before the filing date of this report. Based on that
evaluation, our chief executive officer and chief financial
officer have each concluded that our current disclosure
controls and procedures are effective to ensure that
information required to be disclosed in our periodic reports
filed under the Exchange Act is recorded, processed,
summarized, and reported, in each case, within the time period
specified by the SEC's rules and regulations.
b) Changes in internal controls
There have not been any significant changes in our internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
There were no significant deficiencies or material weakness,
and therefore no corrective actions were taken.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
For a discussion regarding the Company's notes and warrants, see Note A
-- Summary of Significant Accounting Policies -- Stock Options and
Warrants.
The notes and warrants were sold in private transactions exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
There are fifteen purchasers, some of whom have purchased on more than
one occasion. Of these, two of the purchasers are related entities or
insiders of the Company. Thirteen of the purchasers are either a
client, or relative of the principal, of one State of California
registered investment advisor. To the best of the Company's knowledge,
all of the purchasers are either "accredited investors" as that term is
defined in Regulation D under the Securities Act of 1933 or, either
alone or with their purchaser representative, have such knowledge and
experience in financial and business matters that they are capable of
evaluating the merits and risks of the investment.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on May 6, 2004. The matters
voted upon were the election of directors, an amendment to the articles
of incorporation, the approval of a new stock option plan, and other
business, which may come before the meeting (of which there was none).
The results of votes were as follows:
1) Election of directors:
For Withheld
--- --------
Max A. Coon 11,680,711 158,390
Charles J. Drake 11,687,221 151,880
Samuel O. Mallory 11,694,966 144,135
Vincent Shunsky 11,687,796 151,305
William B. Wallace 11,675,166 163,935
2) Amendment to Articles of Incorporation
The Company is authorized to amend its articles of
incorporation to increase the number of shares of common stock
that it is authorized to issue from 25,000,000 to 31,000,000.
For Against Abstain
--- ------- -------
11,529,016 296,925 13,160
3) Approval of new stock option plan
A new stock option plan authorizing shares on which qualified
and nonqualified options may be granted for the purchase of up
to 1,000,000 shares of common stock of the Company was approved.
For Against Abstain Broker Non-Vote
--- ------- ------- ---------------
6,964,683 347,826 16,320 4,510,272
21
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
3.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to
the registrant's Form 10-K for the year ended December 31,
1995, SEC file 0-12728, and incorporated herein by reference).
3.2 Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
the registrant's Form 10-K for the year ended December 31,
1994, SEC file 0-12728, and incorporated herein by reference).
4.1 Note and Warrant Purchase Agreement (filed as Exhibit 4.1 to
the registrant's Form 8-K dated July 15, 1997, SEC file
0-12728, and incorporated herein by reference).
4.3 Form of Integral Vision, Inc. Common Stock Purchase Warrant
Certificate (filed as Exhibit 4.3 to registrant's Form 8-K
dated July 15, 1997, SEC file 0-12728, and incorporated herein
by reference).
4.4 Note and Warrant Purchase Agreement dated March 29, 2001
including Form of Integral Vision, Inc. 15% Senior
Subordinated Secured Note and Integral Vision, Inc. Common
Stock Purchase Warrant Certificate (filed as Exhibit 4.4 to
registrant's Form 10-K for the year ended December 31, 2000,
SEC file 0-12728, and incorporated herein by reference).
4.5 Form of amended Note and Warrant Purchase Agreement including
Form of Integral Vision, Inc. 10% Secured Note and Integral
Vision, Inc. Common Stock Purchase Warrant Certificate (filed
as Exhibit 4.5 to registrant's Form 10-Q for the quarter ended
June 30, 2001, SEC file 0-12728, and incorporated herein by
reference).
4.6 Form of Second Amended Note and Warrant Purchase Agreement
including Form of Integral Vision, Inc. Class 2 Note and
Integral Vision, Inc. Class 2 Common Stock Purchase Warrant
Certificate (filed as Exhibit 4.6 to registrant's Form 10-Q
for the quarter ended March 31, 2002, SEC file 0-12728, and
incorporated herein by reference).
4.7 Consent to Modifications dated March 17, 2003 modifying the
terms of the Second Amended Note and Warrant Purchase
Agreement (filed as Exhibit 4.7 to registrant's Form 10-K for
the year ended December 31, 2002, SEC file 0-12728, and
incorporated herein by reference).
4.8 Form of Fourth Amended Note and Warrant Purchase Agreement
including Form of Integral Vision, Inc. Class 3 Note (filed as
Exhibit 4.8 to registrant's Form 10-K for the year ended
December 31, 2003, SEC file 0-12728, and incorporated herein
by reference).
10.1 Incentive Stock Option Plan of the Registrant as amended
(filed as Exhibit 10.4 to the registrant's Form S-1
Registration Statement effective July 2, 1985, SEC File
2-98085, and incorporated herein by reference).
10.2 Second Incentive Stock Option Plan (filed as Exhibit 10.2 to
the registrant's Form 10-K for the year ended December 31,
1992, SEC File 0-12728, and incorporated herein by reference).
10.3 Non-qualified Stock Option Plan (filed as Exhibit 10.3 to the
registrant's Form 10-K for the year ended December 31, 1992,
SEC File 0-12728, and incorporated herein by reference).
10.4 Amendment to Integral Vision, Inc. Incentive Stock Option Plan
dated May 10, 1993 (filed as Exhibit 10.3 to the registrant's
Form 10-K for the year ended December 31, 1993, SEC File
0-12728, and incorporated herein by reference).
22
10.5 Integral Vision, Inc. Employee Stock Option Plan (filed as
Exhibit 10.5 to the registrant's Form 10-Q for the quarter
ended September 30, 1995, SEC file 0-12728, and incorporated
herein by reference).
10.6 Form of Confidentiality and Non-Compete Agreement Between the
Registrant and its Employees (filed as Exhibit 10.4 to the
registrant's Form 10-K for the year ended December 31, 1992,
SEC File 0-12728, and incorporated herein by reference).
10.7 Integral Vision, Inc. 1999 Employee Stock Option Plan (filed
as Exhibit 10.5 to the registrant's Form 10-Q for the quarter
ended June 30, 1999, and incorporated herein by reference).
10.8* Patent License Agreement dated October 4, 1995 by and between
Integral Vision, Inc. and Square D Company (filed as Exhibit
10.24 to the registrant's Form 10-Q for the quarter ended
September 30, 1995, SEC File 0-12728, and incorporated herein
by reference).
10.9 Asset Sale Purchase Agreement between the registrant and n.v.
DIMACO, s.a. (filed as exhibit 10.12 to the registrant's Form
10-Q for the quarter ended September 30, 2001 and incorporated
herein by reference).
10.10 Asset Sale Purchase Agreement between the registrant and
DaTARIUS Technologies, Inc. (filed as exhibit 10.13 to the
registrant's Form 10-Q for the quarter ended September 30,
2002 and incorporated herein by reference).
16 Letter regarding change in certifying accountant (filed as
exhibit 16 to the registrant's Form 10-K for the year ended
December 31, 2002, SEC file 0-12728, and incorporated herein
by reference).
31.1 Certification of Chief Executive Officer of periodic report
pursuant to Rule 13a-15(e) or Rule 15d-15(e).
31.2 Certification of Chief Financial Officer of periodic report
pursuant to Rule 13a-15(e) or Rule 15d-15(e).
32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C.Section1350, as adopted).
* The Company has been granted confidential treatment with respect to certain
portions of this exhibit pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
(b) Reports on Form 8-K:
None
23
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.
INTEGRAL VISION, INC.
Date: May 17, 2004 /S/ CHARLES J. DRAKE
------------------------ ---------------------------------------
Charles J. Drake
Chairman of the Board and
Chief Executive Officer
Date: May 17, 2004 /S/ MARK R. DOEDE
------------------------ ---------------------------------------
Mark R. Doede
President, Chief Operating Officer, and
Chief Financial Officer
24
EXHIBIT INDEX
Exhibit
Number Description of Document
------ -----------------------
31.1 Certification of Chief Executive Officer of periodic report
pursuant to Rule 13a-15(e) or Rule 15d-15(e).
31.2 Certification of Chief Financial Officer of periodic report
pursuant to Rule 13a-15(e) or Rule 15d-15(e).
32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. Section 1350, as adopted).
25