Attached files
file | filename |
---|---|
EX-31.1 - INTEGRAL VISION INC | v206151_ex31-1.htm |
EX-32.1 - INTEGRAL VISION INC | v206151_ex32-1.htm |
EX-31.2 - INTEGRAL VISION INC | v206151_ex31-2.htm |
EX-32.2 - INTEGRAL VISION INC | v206151_ex32-2.htm |
United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
AMENDMENT
NO. 2 TO FORM 10-K
x
|
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the fiscal year ended December
31, 2009.
o
|
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
INTEGRAL
VISION, INC.
(Exact
name of registrant as specified in its charter)
Michigan
|
38-2191935
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
49113
Wixom Tech Drive, Wixom, Michigan
|
48393
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code:
|
(248)
668-9230
|
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, No Par Value or Stated Value
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes ¨ No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes ¨ No þ
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes þ No¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes¨ No¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Smaller
reporting company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Act). Yes ¨ No þ
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter. $836,979 as of June 30, 2009.
(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date. 34,333,409 shares of common stock as
of April 23, 2010.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
EXPLANATORY
NOTE
The
registrant filed a Form 10-K on March 31, 2010 and filed an Amendment No. 1 to
Form 10-K on April 30, 2010. The registrant is filing this Amendment
No. 2 to Form 10-K with the SEC in order to update our financial statements and
Item 13 of Part III with respect to certain related party
transactions.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K 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-K 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.
Part I
ITEM
1. Business
Overview
Integral
Vision, Inc., a Michigan corporation (or the "Company"), was incorporated in
1978. We develop, manufacture and market flat panel display
inspection systems to ensure product quality in the display manufacturing
process. We primarily inspect microdisplays and small flat panel
displays, though the technology used is scalable to allow inspection of full
screen displays and components. Our products primarily use machine
vision to evaluate operating displays for cosmetic and functional defects, but
can also provide electrical testing if required for a given
application. Our customers and potential customers are primarily
large companies with significant investment in the manufacture of
displays. Nearly all of our sales originate in the United States,
Asia, or Europe. Our products are generally sold as capital
goods. Depending on the application, display inspection systems have
an indefinite life and are more likely to require replacement due to possible
technological obsolescence than from physical wear.
Automated
inspection has become a necessity for manufacturers who need to continually
improve production efficiency to meet the increasing demand for high quality
products. Our automatic inspection systems can inspect parts at a
lower cycle time and with greater repeatability than is possible with human
inspectors. While we have several large companies as customers, these
customers are working with new microdisplay technologies. Our success
will be substantially dependant on these customers getting their emerging
display technologies into high volume production.
Products
Our
products are generally sold under the trade name SharpEye™. SharpEye™
systems provide Flat Panel Display (“FPD”) inspection for reflective, emissive
and transmissive display technologies. SharpEye is designed for the
detection of functional and cosmetic defects in Liquid Crystal Display (LCD)
displays as well as Liquid Crystal on Silicon (LCoS), OLED,
Microelectromechanical systems (MEMS), 3LCD/High Temperature Poly-Silicon
(HTPS), e-paper and other emerging display technologies. These
technologies are applied to consumer products including a broad range of hand
held devices, e-books, computer monitors, digital still cameras, HDTV,
projectors, and video headsets. 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.
Marketing
and Sales
We
generally market our vision products to end users, but we have had success
integrating our products with original equipment manufacturers in certain
circumstances. Although sales are made worldwide, our strongest
presence is maintained in the US (through Company employees), and in Asia and
Europe (through sales representatives).
2
Competition
Presently,
most final inspection of small flat panel displays is manual. Higher
resolution, increased brightness, and increased contrast in newer versions of
the displays are stretching human capabilities to do the inspections. Automated
inspection offers a good return on investment as it uses less clean room space,
requires fewer fixtures and hardware because of a faster cycle time, and reduces
the labor required for inspection. Competition for machine vision
based microdisplay and small flat panel display inspection comes primarily from
Westar Display Technologies, Inc.
Production
and Suppliers
Our
production process is principally the assembling of standard electrical,
electronic and optical components and hardware subassemblies purchased from
suppliers into finished products. We generally do not rely on a
single source for parts or subassemblies, although certain components and
subassemblies included in our products may only be available from a limited
number of suppliers. Management believes alternative sources or
designs could be developed for any of the components used in its products
thereby mitigating any exposure to product interruption from shortages of parts
or limited suppliers.
Major
Customers
The
nature of our product offerings may produce sales to one or a limited number of
customers in excess of 10% of total net sales in any one year. It is
possible that the specific customers reaching this threshold may change from
year to year. Loss of any one of these customers could have a
material impact on our results of operations. For 2009, sales to Qualcomm
represented 94% of net sales. Approximately $49,500 was due from Qualcomm at
December 31, 2009. For 2008, sales to Plastic Logic GmbH and Qualcomm
MEMS Technologies represented 51% and 37% of net sales,
respectively. Approximately $4,000 was due from these two
customers at December 31, 2008.
Intellectual
Property
Management
believes that the technology incorporated in its products gives it advantages
over its competitors and prospective competitors. Protection of
technology is attempted through a combination of patents, applied for patents,
confidentiality agreements and trade secrets. We presently have 14
U.S. patents. There can be no assurance that we will have the
resources to defend our patents or that patents we hold will be considered valid
if challenged. In addition, it is possible that some patents will be
rendered worthless as the result of technological obsolescence.
Governmental
Approvals and Regulations
We are
not subject to government approvals for any of our primary products or
services. Certain applications using laser technology require
compliance with regulations issued by the Center for Devices and Radiological
Health of the US Food and Drug Administration (21 CFR 1040).
Product
Development
The
market for machine vision is characterized by rapid and continuous technological
development and product innovation. We believe that continued and
timely development of new products and enhancements to existing products is
necessary to maintain our competitive position. Accordingly, we
devote a significant portion of our personnel and financial resources to product
development programs and seek to maintain close relationships with customers to
remain responsive to their needs. Our net engineering and product
development costs amounted to $939,000 and $1.0 million in 2009 and 2008,
respectively. Our current product development efforts are primarily
directed to flat panel display.
Environmental
Factors
Our costs
of complying with federal, state and local provisions regulating protection of
the environment are not material.
Employees
As of
February 28, 2010 and February 28, 2009, we had 10 and 14 permanent employees
respectively, all full time. None of our employees are
represented by a labor union.
3
ITEM
2. Properties
We lease
a light industrial building containing approximately 14,000 square feet at 49113
Wixom Tech Drive, Wixom, Michigan. The lease is for a five year period, which
commenced January 1, 2006. An extension or renewal will need to be negotiated if
we are to remain in this facility beyond January 1, 2011. Our
manufacturing, engineering and administrative functions are performed at this
location. The building is approxmately 12 years old and is in
excellent condition.
ITEM 3. Legal
Proceedings
We are
not currently involved in any litigation other than ordinary routine litigation
that is incidental to our business.
ITEM 4. (Removed and
Reserved)
Part II
ITEM 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market
Information
Integral
Vision’s common stock is traded on the Over the Counter Bulletin Board (“OTCBB”)
under the symbol INVI. The table below shows the high and low sales
prices for our common stock for each quarter in the past two
years. These prices reflect inter-dealer prices and do not include
allowance for retail mark-up or mark-down, or commissions and may not
necessarily represent actual transactions.
2008
|
2009
|
|||||||||||||||||||||||||||||||
Mar 31
|
Jun 30
|
Sept 30
|
Dec 31
|
Mar 31
|
Jun 30
|
Sept 30
|
Dec 31
|
|||||||||||||||||||||||||
High
|
$ | 0.35 | $ | 0.40 | $ | 0.55 | $ | 0.54 | $ | 0.18 | $ | 0.18 | $ | 0.15 | $ | 0.09 | ||||||||||||||||
Low
|
0.09 | 0.14 | 0.21 | 0.12 | 0.10 | 0.06 | 0.05 | 0.04 |
Information
on the current quotes on the stock, which will continue to use the ticker symbol
INVI, are available at the OTCBB's website, www.otcbb.com and most financial
information portals, such as that provided at http://finance.yahoo.com or
http://quote.bloomberg.com. Integral Vision expects to continue to provide
information through filings with the Securities and Exchange Commission (“SEC”)
as required for continued listing on the OTCBB. These filings can be found at
the SEC's website at www.sec.gov.
Holders
As of
February 23, 2010, there were approximately 302 holders of record of our Common
Stock. This figure does not reflect the approximately 1,174
beneficial stockholders whose shares are in nominee names.
Dividend
Policy
We have
never declared or paid any cash dividends on our Common Stock. We
currently intend to retain any earnings for use in our operations and expansion
of our business and therefore do not anticipate paying any cash dividends in the
foreseeable future.
Issuer
Purchases
We did
not repurchase any equity securities during the years ended December 31, 2008
and 2009.
Information
Regarding Equity Compensation Plans
The
following table sets forth information regarding our equity compensation plans
in effect as of December 31, 2009.
4
Equity Compensation Plan
Information
|
||||||||||||
Plan Category
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants,
and rights
|
Weighted-average
exercise price of
outstanding
options, warrants,
and rights
|
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected in column (a)) |
|||||||||
(a)
|
(b)
|
c
|
||||||||||
Equity
compensation plans approved by security holders
|
3,785,000 | $ | 0.23 | 3,717,000 |
We have
two terminated equity compensation plans which still have active options
outstanding (the “1995 Employee Stock Option Plan” and the “1999 Employee Stock
Option Plan”) and two active equity compensation plans (the “2004 Employee Stock
Option Plan” and the “Integral Vision, Inc. 2008 Equity Incentive Plan”), both
of which have been approved by our shareholders. Each of the plans
may grant nonqualified stock options or incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended. The plans are administered by the Compensation Committee of
the Board of Directors. Each of the plans terminates after 10 years,
though termination of the plan does not affect the rights of beneficiaries under
options granted prior to the termination of the plan. Options are to
be granted at a price equal to or greater than the closing price of the common
stock on the day the option is granted and may be exercisable for up to 10 years
from the date of grant so long as the beneficiary is employed by the Company,
but such options terminate 3 months after the beneficiary is no longer employed
by the Company unless due to permanent and total disability, in which case the
options terminate 12 months after employment ceases. For further
information on equity compensation, see Note I – Share Based Compensation in the
Notes to the Financial Statements.
ITEM 6. Selected
Financial Data
This Item
6 is not applicable to us as, pursuant to Item 301(c) of Regulation S-K, a
smaller reporting company is not required to provide the information required by
Item 301 of Regulation S-K.
ITEM 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Integral
Vision, Inc., a Michigan corporation, develops, manufactures, and markets flat
panel display inspection systems to ensure product quality in the display
manufacturing process. Our revenues are primarily derived from the
sale of flat panel display inspection equipment. Except for the
historical information contained herein, the matters discussed in this document
are forward-looking statements made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Such statements are based on management’s current expectations
and are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. Such factors and uncertainties include, but are not
limited to: the ability of the company to obtain volume orders from
its larger customers; general economic conditions and conditions in the specific
industries in which we have significant customers; price fluctuations in the
materials we purchase for assembly into final products; competitive conditions
in our markets and the effect of competitive products and pricing; and
technological development by us, our customers and our
competition. Based on the foregoing and other possible factors and
uncertainties, our results may fluctuate. Additional information
concerning risk factors that could cause actual results to differ materially
from those projected in the forward-looking statements is contained in our
filings with the Securities and Exchange Commission. These
forward-looking statements represent our best estimates as of the date of this
document. We assume no obligation to update such estimates except as
required by the rules and regulations of the Securities and Exchange
Commission.
5
Results
of Operations - Year Ended December 31, 2009, compared to the Year Ended
December 31, 2008
Net
revenues for 2009 increased $727,000 (70.8%) to $1,754,000 from $1,027,000 in
2008. Revenue is reported net of sales commission expense which was
approximately $136,000 in 2009 compared to approximately $27,000 in
2008. Revenue for 2008 includes $25,000 from Product Development
Agreements. There was no such revenue in 2009. Sales from
the flat panel display inspection product line were $1,749,000 in 2009, an
increase of $750,000 (4.7%) from $999,000 in 2008.
Direct
costs of sales for 2009 increased $281,000 (47.6%) to $871,000 (approximately
49.7% of sales) from $590,000 (approximately 57.4% of sales) in
2008. This was primarily due to an increase of $277,000 in costs
related to flat panel display inspection equipment related to an increase in
sales.
Marketing
costs for 2009 were $487,000, a $186,000 (27.6%) decrease over
the $673,000 spent in 2008. This is primarily attributable
to decreases in trade show activity, travel and promotion costs of $114,000, and
compensation and related benefits of $71,000. Expense allocated to
marketing costs for amortization of share based compensation as required by FASB
ASC Topic 718 “Stock Compensation” was approximately $33,000 for 2009 and
$85,000 for 2008.
General
and administrative costs for 2009 were $1,383,000, a $330,000 (19.3%) decrease
over the $1,713,000 spent in 2008. The decrease was primairly attributable to
decreases in professional fees of $75,000, compensation and related benefits of
$237,000 and travel and small equipment purchases of $18,000. Expense
allocated to G&A for amortization of share based compensation as required by
FASB ASC Topic 718 “Stock Compensation” for 2009 was approximately $211,000
compared to $402,000 in 2008.
Engineering
and product development expenditures decreased $93,000 (9.0%) to $939,000 in
2009 compared to $1,032,000 in 2008. This is primarily attributable
to a decrease in staffing and related costs of $173,000, partially offset by
increases in travel costs of $17,000, outside services of $30,000 and
depreciation expense of $33,000. Expense allocated to engineering and
product development costs for the amortization of share-based compensation as
required by FASB ASC Topic 718 “Stock Compensation” for 2009 was $49,000
compared to $163,000 in 2008.
Other
income decreased $32,000 to ($3,000) in 2009 compared to $29,000 in 2008. The
decrease is primarily attributeable to not having royalty income in 2009.
Interest
expense decreased $107,000 to $814,000 in 2009 compared to $921,000 in
2008. The decrease is primarily attributable to the decrease in the
exercise price on warrants issued for payment of interest on Class 2 Notes which
created additional interest expense in 2008.
Seasonality
and Quarterly Fluctuations
Integral
Vision’s revenues and operating results have varied substantially from quarter
to quarter and management believes these fluctuations may continue. Our reliance
on large orders has contributed to the variability of our operating
results.
Liquidity
and Capital Resources
Net cash
used in operating activities was $1,665,000 for the year ended December 31,
2009, compared to $1,766,000 for the year ended December 31, 2008. Operating
cash flow for both years primarily reflected net losses of $2,761,000 for 2009
and $10,733,000 for 2008. Adjustments for 2009 non-cash charges were
depreciation, amortization, warrants issued in settlement of
interest, employee share based compensation expense, issuance of
Class 3 Notes in settlement of interest, and changes in working
capital. Adjustments for 2008 non-cash charges were depreciation,
amortization, warrants issued in settlement of interest, non-cash interest
related to warrant modification, employee share based compensation expense,
issuance of Class 3 Notes in settlement of interest, modification and issuance
of warrants to PIPE Equity Investors, extinguishment loss from modification and
exchange of debt instruments, and changes in working capital. Working capital
changes for 2009 primarily reflected decreases in accounts receivable due to
collection efforts, and inventories as a result of lower raw material levels and
increases in accounts payable and other accrued liabilities as a result of
increases in customer deposits accrued product warranty, and an increase in
accrued interest as a result of additional issuances of Class 2 and Class 3
Notes. Deferred revenue at December 31, 2009 decreased since revenue
was recognized. Working capital changes for 2008 primarily reflected
increases in accounts receivable and inventories as a result of increases in our
product sales and increases in accounts payable and other accrued liabilities as
a result of increases in deferred revenue, and an increase in accrued interest
as a result of additional issuances of Class 2 and Class 3 Notes.
6
Investing
activities for the year ended December 31, 2009 included an increase in
production and engineering equipment of $9,000 and an increase in patents of
$36,000. Investing activities for the year ended December 31, 2008
included an increase in computer equipment of $3,000 and an increase in patents
of $8,000.
Financing
activities for the year ended December 31, 2009 included proceeds of $1,325,000
from the issuance of Class 2 Notes and $429,000 of Class 3 Notes. We made
principal payments of $160,000 on Class 3 Notes. Financing activities
for the year ended December 31, 2008 included proceeds of $2,051,000 from the
issuance of Class 2 Notes, the payment of $88,000 of principal on Class 2 Notes,
a principal payment of $5,000 for Class 3 Notes, and a payment of $48,000 for
financing fees. We paid $39,000 of interest on Class 3 Notes during
the year ended December 31, 2009 and $32,000 on Class 3 Notes during the year
ended December 31, 2008.
On
January 8, 2009, we issued $159,733 of Class 3 Convertible Notes and paid cash
of $19,385 for payment of interest due January 1, 2009 on Class 3 Convertible
Notes. The $159,733 of Class 3 Convertible Notes bear interest at 12%, are
convertible at $0.15 per share and are due July 1, 2010. The payment of the
interest with Class 3 Notes with a right to convert immediately at $0.15 per
share, which was less than the fair market value of the stock on the date of
issuance, resulted in a beneficial conversion feature of $10,649.
This is reflected in the Statement of Operations as “Extinguishment
loss from exchange of debt instruments”.
On
February 2, 2009, the Board and the Note Holders approved an Amendment to the
Fifth Amended and Restated Note and Warrant Purchase Agreement. This amendment
(a) increased the total allowable secured debt from $6,000,000 to $7,000,000;
(b) allowed for the accrual rate of warrants earned by Class 2 Notes to be set
by the Board; (c) allowed for a minimum accrual period of 30 days for Class 2
Notes earning warrants; and (d) allowed the Company to elect to issue, or the
Class 2 Note Holder to elect to receive, warrants accruing once every 30
days. The Board further authorized the rate of warrant accrual to be
set at five (5) warrants per year per dollar invested at an exercise price of
$0.15 per share. During the quarter ended March 31, 2009, we issued
$780,000 of new Class 2 Notes of which $450,000 receive 10% interest and
warrants and $330,000 of which receive 12% interest and no
warrants. $680,000 of Class 2 Notes issued in the first quarter of
2009 were scheduled to mature in April of 2009 and $100,000 of Class 2 Notes
issued in the first quarter of 2009 were scheduled to mature in June of 2009 and
have been subsequently extended. See Note N – Subsequent Events in
the Notes to Financial Statements for recent activity associated with the
maturity of Class 2 Notes. For the quarter ended March 31, 2009, we
issued 184,931 warrants and accrued 28,083 warrants that were earned but not
issued as additional interest. The value of the issued warrants was $7,807 and
the value of accrued warrants was $1,410 as determined using the Black-Scholes
option-pricing model. A Class 2 Note issued December 31, 2008 in the amount of
$110,000 matured on January 23, 2009 and was exchanged along with its related
accrued interest for a Class 3 Note in the amount of $110,289 due July 1,
2010. The exchange of the Class 2 Note and related interest for the
Class 3 Note with a right to convert immediately at $0.15 per share, which was
less than the fair market value of the stock on the date of exchange, resulted
in a beneficial conversion feature of $7,353. This is reflected in
the Condensed Statement of Operations as “Extinguishment loss from exchange of
debt instruments”.
On June
10, 2009, the Board and the Note Holders approved an Amendment to the Fifth
Amended and Restated Note and Warrant Purchase Agreement. This
amendment (a) increased the total allowable secured debt from $7,000,000 to
$8,000,000; (b) allowed for a minimum accrual period of 90 days for Class 2
Notes earning warrants; (c) authorized the offering of $800,000 of Class 2 Notes
with a 90 day minimum accrual period and $500,000 of Class 2 Notes with a 30 day
minimum accrual period; and (d) authorized the offering of up to $1,500,000 of
Class 3 Notes at no more than 12% interest and convertible into shares at no
less than $0.15 per share.
7
On July
1, 2009, we extended the terms on $783,000 of Class 2 Notes due on July 1, 2009
to October 1, 2009 and issued 965,336 warrants (actual issue date was July 3,
2009) to purchase stock at $0.15 per share.
On July
3, 2009, we extended the terms on $100,000 of Class 2 Notes due on July 3, 2009
to December 31, 2009 and issued 41,096 warrants to purchase stock at $0.15 per
share.
On
September 16, 2009, the Board and the Note Holders approved an Amendment to the
Fifth Amended and Restated Note and Warrant Purchase Agreement. This
amendment (a) increased the total allowable secured debt from $8,000,000 to
$10,000,000; and (b) modified a paragraph limiting the future issuance of Common
Stock to except securities which are Notes or Warrants.
On
October 1, 2009, we extended the terms on $1,566,000 of Class 2 Notes due on
October 1, 2009 to January 15, 2010 and issued 1,040,425 associated warrants to
purchase stock at $0.15 on October 8, 2009. The remaining $5,000 of
notes due October 1, 2009 and associated interest were paid in
full.
On
December 21, 2009, we extended the terms on $1,289,112 of Class 2 Notes due on
December 31, 2009 to January 15, 2010.
During
the quarter ended June 30, 2009, we issued $819,112 of new Class 2 Notes of
which $694,112 were issued in payment of $680,000 of existing Class 2 Notes and
their accrued interest of $14,122. All of the new Class 2 Notes
receive 10% interest and warrants and mature on December 31,
2009. For the quarter ended June 30, 2009, we issued 379,773 warrants
and accrued 613,695 warrants that were earned but not issued. The value of the
issued warrants was $34,543 and the value of accrued warrants was $10,220 as
determined using the Black-Scholes option-pricing model. We also paid
off $100,000 of Class 2 Notes with accrued interest of $394.
During
the quarter ended September 30, 2009, we issued $270,000 of new Class 2
Notes. All of the new Class 2 Notes receive 10% interest and warrants
and mature on December 31, 2009. For the quarter ended September 30,
2009, we issued 1,117,390 warrants (includes the 1,006,432 of warrants issued in
July 2009) and accrued 1,754776 warrants that were earned but not issued. The
value of the issued warrants was $19,519 and the value of accrued but not issued
warrants was $39,539 as determined using the Black-Scholes option-pricing model.
We also paid off $55,000 of Class 2 Notes with accrued interest of
$5,738.
During
the quarter ended December 31, 2009, we issued $150,000 of new Class 2
Notes. All of the new Class 2 Notes received 10% interest and
warrants and mature on December 31, 2009. For the quarter ended
December 31, 2009, we issued 1,102,068 (includes the 1,040,425 of warrants
issued on October 1, 2009) warrants and accrued 4,114,888 warrants that were
earned but not issued. The value of the issued warrants was $24,730
and the value of accrued but not issued warrants was $71,940 as determined using
the Black-Scholes option-pricing model. See Note N – Subsequent
Events in the Notes to Financial Statements for recent activity associated with
the issuance of Class 2 Notes.
During
the year ended December 31, 2009, we sold $429,000 of Class 3 Convertible Notes
and also issued $311,392 Class 3 Convertible Notes for the payment of
interest. The notes bear interest at 12%, mautre July 1, 2010, and
are convertible at $0.15 per share.
During
the quarter ended September 30, 2009, we issued $19,000 of unsecured Notes to
Officers of the Company. The Notes bear interest at 12% and are due December 31,
2009. The notes were paid in December of 2009.
For
further discussion regarding our obligations, see Note C – Long Term Debt and
Other Financing Arrangements to the Company’s audited financial statements and
Note N – Subsequent Events to the Company’s audited financial
statements.
Impact
of Inflation
The
amounts presented in the financial statements do not provide for the effect of
inflation on our operations or our financial position. Amounts shown
for property, plant and equipment and for costs and expenses reflect historical
cost and do not necessarily represent replacement cost or charges to operations
based on replacement cost. Our operations together with other sources
are intended to provide funds to replace property, plant and equipment as
necessary. Net income would be lower than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation
adjustments.
8
Off-Balance
Sheet Arrangements
We have
no significant off-balance sheet arragements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to
investors.
Recently
Issued Accounting Standards
Please
see Note B – Summary of Significant Accounting Policies to the Company’s audited
financial statements included in this report for information about new
accounting pronouncements affecting the Company.
Management’s
Discussion of Critical Accounting Policies
Our
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 year. 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 December 31,
2009. Future events rarely develop exactly as forecast; the best
estimates routinely require adjustment. These policies are also discussed in
Note B of the Notes to Financial Statements included in Item 8 of this
report.
Revenue
Recognition
We
recognize revenue in accordance with FASB ASC 695 “Revenue Recognition” and
Staff Accounting Bulletin No. 101 (“SAB 101”), and Staff Accounting Bulletin No.
104 (“SAB 104”) 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.
We
recognize revenue at the time of shipment for product sales where the customer’s
acceptance criteria can be demonstrated as met prior to shipment and where title
transfers on shipment. We recognize revenue at the time of final
acceptance at the customer site when title does not transfer on shipment or if
acceptance criteria at the customer site are substantially different than
acceptance criteria for shipment. We recognize revenue for product
sales with no specific customer acceptance criteria, including spare parts, on
shipment. Revenue from service contracts is recognized over the term
of the contract. Revenue is reported net of sales
commissions.
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 the financial
statements reflects the lower of our cost or the value we expect to receive when
the inventory is sold. This estimate is based on several factors, including the
condition and salability of the 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 inventory. 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.
9
Impairment
of Long-lived Assets
We review
our 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.
Share-Based
Compensation
We
account for our share based compensation plans according to the provisions of
FASB ASC Topic 718 “Stock Compensation.” Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and are expensed over the expected vesting
period.
The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model. The fair value of all awards is
amortized on a straight line basis over the requisite service
periods. The expected life of all awards granted represents the
period of time that they are expected to be outstanding. The expected
life is determined using historical and other information available at the time
of grant. Expected volatilities are based on historical volatility of
our common stock, and other factors. The risk-free rate for periods
within the contractual life of the option is based on the U.S. Treasury yield
curve in effect at the time of grant. We use historical data to
estimate pre-vesting option forfeitures.
Product
Warranties
We
provide standard warranty coverage for most of our products, generally for one
year from the date of customer acceptance. We record a liability for estimated
warranty claims based on historical claims and other factors. We review these
estimates on a regular basis and adjust the warranty reserves as actual
experience differs from historical estimates or other information becomes
available. This warranty liability primarily includes the anticipated cost of
materials, labor and travel, and shipping necessary to repair and service the
equipment.
Contingencies
and Litigation
We make
an assessment of the probability of an adverse judgment resulting from current
and threatened litigation. We accrue 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. We have
made no such accruals at December 31, 2009 or 2008.
ITEM 7A. Quantitative
and Qualitative Disclosures about Market Risk
This Item
7A is not applicable to us as, pursuant to Item 305(e) of Regulation S-K, a
smaller reporting company is not required to provide the information required by
Item 305 of Regulation S-K.
ITEM 8. Financial
Statements and Supplementary Data
The
annual financial statements and results of operations are submitted in separate
sections of this report. Pursuant to Item 302(c) of Regulation S-K, a
smaller reporting company is not required to provide the information required by
Item 302 of Regulation S-K.
ITEM 9. Changes in
and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
10
ITEM 9A. Controls and
Procedures
Management’s
Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adaquate internal control over
financial reporting for the registrant, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). We have designed such internal control
over financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles in the United States of America.
Management
has evaluated the effectiveness of our internal control over financial reporting
using the “Internal Control – Integrated Framework (1992)” created by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
framework using “SarboxPro”, a commercially available software package designed
to implement the COSO framework in compliance with SEC Release No.
34-55929. Management has determined that internal controls over
financial reporting were effective as of December 31, 2009. We have
also disclosed in this report any change in our internal control over financial
reporting that occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
This
annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's independent registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to
provide only management's report in this annual report.
Management’s
Evaluation of Disclosure Controls and Procedures
The
Company’s chief executive officer and chief financial officer have each reviewed
and evaluated the effectiveness of the Company’s disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
the end of the period covered by this report, as required by Exchange Act Rules
13a-15(b) and Rule 15d-15(b). Based on that evaluation, the chief executive
officer and chief financial officer have each concluded that the Company’s
current disclosure controls and procedures are effective. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
Changes
in Internal Controls
There
have been no changes in the Company’s internal controls over financial reporting
that occurred during the Company’s fourth quarter of the fiscal year that
materially affected, or are reasonably likely to materially affect, the
Company’s internal controls over financial reporting.
ITEM 9B. Other
Information
None
11
Part III
ITEM 10. Directors,
Executive Officers and Corporate Governance
Directors
The
following table sets forth information concerning Directors of the
Company. Each director is elected to hold office until the next
annual meeting of shareholders or until their successors are
elected.
Present
Position with the
|
||||||
Company
and Principal
|
Served
as
|
|||||
Name
|
Occupation
|
Age
|
Director Since
|
|||
Max
A. Coon
|
Secretary
and Vice Chairman of the Board of Integral Vision, Inc.; President and
Chairman of the Board of Maxco, Inc.
|
75
|
1978
|
|||
Charles
J. Drake
|
Chairman
of the Board and Chief Executive Officer of Integral Vision,
Inc.
|
69
|
1978
|
|||
Vincent
Shunsky
|
Treasurer
and Director of Integral Vision, Inc.;
|
61
|
1978
|
|||
William
B. Wallace
|
Director
of Integral Vision, Inc.; Senior Managing Director of Equity Partners
Ltd., a West Bloomfield, Michigan based private investment banking
firm
|
65
|
1990
|
|||
Mark
R. Doede
|
Director,
President, Chief Operating Officer, and Chief Financial Officer of
Integral Vision, Inc.
|
52
|
N/A
|
All of
the foregoing Directors have been engaged in the principal occupation specified
for the previous five years except Vincent Shunsky who was a Director, Treasurer
and Vice President of Finance of Maxco, Inc. until December 1, 2005, was
affiliated with the Gannon Group, P.C., a Lansing, Michigan based business and
real estate valuation firm, from January 2006 through March 2008, and has been
Managing Principal for Corporate Planning & Consulting, LLC from April 2008
to the present.
Mr. Coon
is also a Director of Maxco, Inc., the common stock of which is traded on the
Pink Sheets over-the-counter (OTC) market and Managing Member of Charlevoix
Drive Properties, LLC.
During
the year ended December 31, 2009, there were a total of two (2) meetings of the
Board of Directors. Max A. Coon and Vincent Shunsky were present at
fewer than 50% of the meetings held during the period.
The Board
of Directors has established a Compensation Committee whose members are Max A.
Coon and Vincent Shunsky. The Compensation Committee is responsible
for establishing compensation for the Company’s Chief Executive Officer,
approving executive compensation levels of all other executives and authorizing
the levels and timing of bonus payments. In addition, this committee
is responsible for administering the Company's Employee Stock Option Plans and
the 2008 Equity Incentive Plan, including designating the recipients and terms
of specific grants. The Compensation Committee acted one (1)
time during the year ended December 31, 2009 to establish compensation
criteria. No new stock awards were approved in 2009 though a grant
approved in 2008 became effective January 1, 2009.
Executive
Officers
The
following table sets forth information concerning the Executive Officers of the
Company.
12
Present
Position with the
|
||||||
Company
and Principal
|
Served as
|
|||||
Name
|
Occupation
|
Age
|
Officer Since
|
|||
Charles
J. Drake
|
Chairman
of the Board and Chief Executive Officer of Integral Vision,
Inc.
|
69
|
1978
|
|||
Mark
R. Doede
|
President,
Chief Operating Officer and Chief Financial Officer of Integral Vision,
Inc.
|
52
|
1989
|
|||
|
||||||
Jeffery
Becker
|
Senior
Vice President of Integral Vision, Inc.
|
48
|
2007
|
|||
Andrew
Blowers
|
Chief
Technical Officer of Integral Vision, Inc.
|
42
|
2002
|
|||
Paul
M. Zink
|
Vice
President of Applications Engineering of Integral Vision,
Inc.
|
44
|
2007
|
|||
|
||||||
Max
A. Coon
|
Secretary
and Vice Chairman of the Board of Integral Vision, Inc.; President and
Chairman of the Board of Maxco, Inc.
|
75
|
1978
|
|||
|
||||||
Vincent
Shunsky
|
Treasurer
and Director of Integral Vision, Inc.
|
61
|
1978
|
All of
the foregoing officers of the Company have been engaged in the principal
occupations specified above for the previous five years except as
follows:
Mr.
Jeffrey Becker was appointed Senior Vice President in May 2007. Mr.
Becker served as a Sales Engineer from 2005 to 2007. Prior to 1999,
Mr. Becker worked for the Company in various capacities, including spending
extensive time in China for the Company. From 1999 to 2005, Mr.
Becker was not employed by the Company or involved in any activities associated
with our business. We rehired Mr. Becker in 2005 because of our prior
relationship with him, especially due to his extensive experience with
China.
Mr. Paul
Zink was appointed Vice President of Applications Engineering in May 2007. Prior
to that time, Mr. Zink served as Director Vision Applications from November
1998, Manager Vision Engineering from March 1995 to 1998, Software Supervisor
from June 1993 to 1995 and Software Engineer from March 1991 to
1993.
Vincent
Shunsky was a Director, Treasurer and Vice President of Finance of Maxco, Inc.
until December 1, 2005, was affiliated with the Gannon Group, P.C., a Lansing,
Michigan based business and real estate valuation firm, from January 2006
through March 2008, and has been Managing Principal for Corporate Planning &
Consulting, LLC from April 2008 to the present.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company's Directors and Executive
Officers or beneficial owners of over 10% of any class of the Company's equity
securities to file certain reports regarding their ownership of the Company's
securities or any changes in such ownership.
Based
solely upon our review of copies of such reports (and amendments thereto) which
we have received during the year ended December 31, 2009, and written
representations of the persons required to file said reports, we believe that
all reporting persons complied with these reporting requirements during fiscal
year 2009 except for the following late reports: Mr. Max A. Coon was late filing
Form 4’s for a January 8, 2009 and a July 1, 2009 transaction. Mr.
Mark Doede was late filing Form 4 for a January 1, 2009
transaction.
13
Code
of Ethics
We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. Integral Vision, Inc.’s Code of
Ethics has been filed with the Commission as Exhibit 14 to the registrant’s Form
10-KSB for the year ended December 31, 2007, SEC file 000-12728, and is
incorporated herein by reference.
Corporate
Governance
There
have been no material changes to the procedures by which security holders may
recommend nominees to our board of directors since the filing of our Definitive
Proxy Statement dated April 6, 2009.
The Board
of Directors has appointed a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act whose
members are William B. Wallace and Vincent Shunsky. Because the
common stock of the Company is traded on the Over the Counter Bulletin Board,
the Company is not subject to the listing requirements of any securities
exchange or the Nasdaq Stock Market regarding the independence of the members of
the Board of Directors. Nevertheless, it is the opinion of the Board
of Directors that the members of the Audit Committee are each independent as
defined in the listing standards of the Nasdaq Stock Market. In
addition, the Board of Directors has determined that both William B. Wallace and
Vincent Shunsky meet the definition of an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K.
ITEM 11. Executive
Compensation
Compensation
Discussion and Analysis
Overview
and Philosophy
The
Compensation Committee is responsible for developing and making recommendations
to the Board with respect to the Company's executive compensation
policies. In addition, the Compensation Committee, pursuant to
authority delegated by the Board, determines on an annual basis the compensation
to be paid to the Chief Executive Officer and each of the other executive
officers of the Company. The Chief Executive Officer has been granted
the authority to grant bonuses to other executive officers of the Company up to
a pre-approved amount.
The
objectives of the Company's executive compensation program are to:
- | Support the achievement of desired Company performance. | |
|
-
|
Provide
compensation that will attract and retain superior talent and reward
performance.
|
|
-
|
Align
the executive officers' interests with the success of the Company by
placing a portion of pay at risk, with payout dependent upon corporate
performance, and through the granting of equity
incentives.
|
The
executive compensation program provides an overall level of compensation
opportunity that is competitive with companies of comparable size and
complexity. The Compensation Committee will use its discretion to set
executive compensation where, in its judgment, external, internal or an
individual's circumstances warrant it.
Executive
Officer Compensation Program
The
Company's executive officer compensation program is composed of base salary,
bonus, long-term incentive compensation in the form of equity, and various
benefits, including medical and employee savings plans, generally available to
employees of the Company.
Base
Salary
Base
salary levels for the Company's executive officers are competitively set
relative to other comparable companies. In determining salaries, the
Compensation Committee also takes into account individual experience and
performance. Due to the Company’s circumstances, base salary levels
for certain of the Company's executive officers were unchanged from the prior
year.
14
Stock
Option Program
The stock
option program is the Company's long-term incentive plan for executive officers
and key employees. The objectives of the program are to align
executive and shareholder long-term interests by creating a strong and direct
link between executive pay and shareholder return, and to enable executives to
develop and maintain a significant, long-term stock ownership position in the
Company's common stock.
In May
2008, the 2008 Equity Incentive Plan (“Plan”) allowing the issuance of equity
based incentives on up to 4,828,000 shares of the Company’s common stock was
approved by the Shareholders. The Plan is designed to promote the
interests of the Company and its shareholders by providing a means by which the
Company can grant equity-based incentives to eligible employees of the Company
or any Subsidiary as well as non-employee directors, consultants, or advisors
who are in a position to contribute materially to the Company’s success
(“Participants”). The Plan permits the Compensation Committee of the
Company's Board of Directors to grant Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock, and Shares.
In May
2009, the 2008 Equity Incentive Plan was modified by shareholders to allow the
issuance of up to 7,328,000 shares of the Company’s common stock.
In May
2004, a stock option plan allowing the issuance of options on up to 1,000,000
shares of the Company's common stock was approved by the
Shareholders. This stock option plan provides for the grant of both
options intended to qualify as "incentive stock options" within the meaning of
Section 422A of the Internal Revenue Code, as amended, and non-statutory stock
options which do not qualify for such treatment. The stock option
plan authorizes a committee of directors to award executive and key employee
stock options, as well as options to directors and non-employees who are in a
position to materially benefit the Company. Stock options are granted
at an option price equal to the fair market value of the Company's common stock
on the date of grant, have ten-year terms and can have exercise restrictions
established by the committee, provided that the Compensation Committee of the
Board of Directors is authorized to approve modifications to the option price
and other terms of stock options at or subsequent to their
issuance.
Stock
option plans, each authorizing options on 500,000 shares of our common stock on
substantially the same terms, were approved by our shareholders in 1999 and
1995.
Employee
Savings Plan
Effective
July 1, 1986, the Company adopted a 401(k) Employee Savings Plan. The
401(k) is a “cash or deferred” plan under which employees may elect to
contribute a certain portion of their compensation which they would otherwise be
eligible to receive in cash. The Company has agreed to make a
matching contribution of 20% of the employees' contributions of up to 6% of
their compensation. In addition, the Company may make a profit
sharing contribution at the discretion of the Board. All full time
employees of the Company who have completed six months of service are eligible
to participate in the plan. Participants are immediately 100% vested
in all contributions. The plan does not contain an established
termination date and it is not anticipated that it will be terminated at any
time in the foreseeable future.
Benefits
The
Company provides medical benefits to the executive officers that are generally
available to Company employees. Additionally, executive officers may
be provided with other benefits, such as life insurance and an automobile
allowance. See the
Summary Compensation Table below for further detail.
Chief
Executive Officer
Charles
J. Drake has served as the Company's Chief Executive Officer since
1978. His base salary for the 2009 fiscal year was
$160,000. The bonus paid to Mr. Drake for 2009 was
$80,000. Due to the Company’s circumstances, Mr. Drake’s salary was
unchanged from the prior year.
15
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation for each of the
last two fiscal years awarded to or earned by the Chief Executive Officer of the
Company and the two most highly compensated executive officers other than the
Chief Executive Officer who were serving as executive officers at the end of the
last completed fiscal year:
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock
Awards ($)
|
Option
Awards ($)
1
|
All Other
Compensation ($)
|
Total
|
|||||||||||||||||||
Charles
J. Drake
|
2009
|
160,000 | 80,000 | 15,410 |
3
|
255,410 | ||||||||||||||||||||
Chief
Executive Officer
|
2008
|
160,000 | 80,000 | 300,000 | 168,216 | 18,113 |
3
|
726,329 | ||||||||||||||||||
Mark
R. Doede
|
2009
|
120,000 | 36,000 | 18,560 | 13,265 |
4
|
187,825 | |||||||||||||||||||
President
& Chief Operating Officer
|
2008
|
120,000 | 36,000 | 55,200 | 40,453 | 15,592 |
4
|
267,245 | ||||||||||||||||||
Jeffery
J. Becker
|
2009
|
126,534 |
2
|
12,000 | 10,865 |
5
|
149,401 | |||||||||||||||||||
Senior
Vice President
|
2008
|
104,665 |
2
|
12,000 | 85,531 | 10,384 |
5
|
212,582 |
1 Refer to
Note I of the Financial Statements as presented in this Form 10-K for more
information.
2 Includes
$20,439 and $19,665 of commissions in 2009 and 2008, respectively.
3 Includes
term life insurance premiums of $300 in 2009 and 2008.
4 Includes
term life insurance premiums of $346 in 2009 and 2008.
5 Includes
term life insurance premiums of $252 and $253 in 2009 and 2008,
respectively.
Options
Exercised During Fiscal Year
There
were no options exercised during the fiscal year by executive officers named in
the Summary Compensation Table above.
Grants
of Plan Based Awards During Fiscal Year 2009
The
following table lists plan based awards granted to executive officers named in
the Summary Compensation Table above:
Grants of Plan Based Awards during Fiscal Year 2008
|
|||||||||||||||||||||||
Name
|
Grant Date
|
Estimated Future
Payout Target (#)
|
Stock Award
|
Stock Options
|
Option Exercise
Price ($)
|
Grant Date Fair
Value ($)
|
|||||||||||||||||
Mark
R.
Doede
|
1/1/2009
|
1
|
116,000 | 2 | - | - | - | 18,560 |
1 These
stock awards were issued from the 2008 Equity Incentive Plan.
2 Grant
terms restrict the sale of stock awarded until all Class 2 Notes are
repaid.
16
Outstanding
Equity Awards at Fiscal Year-End 2009
The
following table lists unexercised options as of December 31, 2009 for the
executive officers named in the Summary Compensation Table above.
Option Awards
|
Stock Awards
|
||||||||||||||||||||
Number of Securities Underlying
Unexercised Options at FY-End (#)
|
Equity Incentive Plan
Awards
|
||||||||||||||||||||
Name
|
Exercisable
|
Unexercisable
|
Option Exercise
Price ($)
|
Option Expiration
Date
|
Market
value of
unearned
shares ($) 6
|
Number of
unearned
shares (#)
|
|||||||||||||||
Charles
J. Drake
|
500,000 | 0.17 |
5/15/2018
|
37,000 | 7 | 1,000,000 | |||||||||||||||
500,000 | 0.30 |
9/16/2018
|
|||||||||||||||||||
Mark
R. Doede
|
50,000 | 0.13 |
8/1/2011
|
11,100 | 7 | 300,000 | |||||||||||||||
50,000 | 0.24 |
3/12/2012
|
|||||||||||||||||||
40,000 | 0.15 |
5/7/2013
|
|||||||||||||||||||
33,000 | 0.13 |
1/20/2018
|
|||||||||||||||||||
117,500 | 117,500 | 0.26 | 4 |
2/14/2018
|
|||||||||||||||||
50,000 | 50,000 | 0.15 | 3 |
4/3/2018
|
|||||||||||||||||
116,000 | 0.17 |
5/15/2018
|
|||||||||||||||||||
Jeffery
J. Becker
|
33,000 | 0.13 |
1/20/2018
|
||||||||||||||||||
65,000 | 65,000 | 0.26 | 1 |
2/14/2018
|
|||||||||||||||||
57,000 | 0.22 |
4/30/2018
|
|||||||||||||||||||
90,000 | 0.17 |
5/15/2018
|
1 These
stock options were issued in exchange for options originally granted on various
dates with a weighted average exercise price of $0.60.
2 These
stock options were issued in exchange for options originally granted on various
dates with a weighted average exercise price of $0.70.
3 These
stock options were issued in exchange for options originally granted on October
22, 1999 with an exercise price of $1.065.
4 These
stock options were issued in exchange for options originally granted on various
dates with a weighted average exercise price of $0.87.
5 These
stock options were issued in exchange for options originally granted on various
dates with a weighted average exercise price of $0.83.
6 Valued
at the closing price of $0.037 on April 23, 2009.
7 Shares
do not vest until outstanding Class 2 Notes are paid.
Refer to
Note I - Share Based Compensation of the Financial Statements as presented in
this Form 10-K for more information.
Director
Compensation Table - 2009
The
following table sets forth the cash compensation paid to directors of the
Company for the last fiscal year. No directors received any non-cash
compensation. For compensation paid to Charles J. Drake, refer to the
Summary Compensation table above.
Name
|
Fees
Earned ($)
|
|||
Vincent
Shunsky
|
7,200 | |||
William
Wallace
|
11,400 |
17
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee of the Board of Directors consists of Max A. Coon and
Vincent Shunsky. Mr. Coon, although an officer of the Company, is
also an officer and director of Maxco, Inc., is paid by Maxco, Inc. and receives
no compensation from the Company. Mr. Coon holds $134,012 of Class 3
notes and earned interest of $2,979 and $10,739 in 2008 and 2009,
respectively. Charlevoix Drive Properties, LLC, of which Max A. Coon
is the managing member, holds $125,000 of Class 2 notes and $152,106 of Class 3
notes and earned interest of $39,318 and $26,570 in 2008 and 2009, respectively.
See Note C – Long Term Debt and Other Financing of the Notes to Financial
Statements included in Item 8 of this Form 10-K. Mr. Shunsky,
although an officer of the Company, receives no compensation from the Company
other than a director fee of $600 per month and $200 per meeting. The
Compensation Committee acted one (1) time during the year ended December 31,
2009 to establish compensation criteria and levels and to grant
options. The Compensation Committee does not have a
charter.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with the management of
the Company. Based on such review and discussion, the Compensation
Committee recommended to the Board of Directors that such discussion and
analysis be included herein. As stated above, the Compensation
Committee consists of Max A. Coon and Vincent Shunsky.
ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table sets forth information as of December 31, 2009 regarding the
status of our equity compensation plans approved by
shareholders. There are no equity compensation plans that have not
been approved by shareholders.
Number of common
shares to be issued on
exercise of outstanding
options
|
Weighted average
exercise price of
outstanding options
|
Number of common shares
remaining available for future issuance under equity compensation plans |
||||||||||
Equity
compensation plans approved
by share holders
|
3,785,000 | $ | 0.24 | 3,717,000 |
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information as of April 13, 2010 about the
shareholders who we believe are the beneficial owners of more than five percent
(5%) of our outstanding common stock, as well as information about ownership of
our common stock by each of our directors, our chief executive officer, our
chief financial officer, our other three most highly compensated executive
officers and our directors and executive officers as a group. Except
as described below, we know of no person that beneficially owns more than 5% of
our outstanding common stock. Except as otherwise noted below, each person or
entity named in the following table has the sole voting and investment power
with respect to all shares of our common stock that he, she or it beneficially
owns. Except as otherwise noted below, the address of each person or entity
named in the following table is c/o Integral Vision, Inc., 49113 Wixom Tech
Drive, Wixom, Michigan 48393.
18
Amount and Nature of Beneficial Ownership
|
||||||||||
Name and Address
|
Amount and Nature of
|
Percent of
|
||||||||
of Beneficial Owner
|
Type of Class
|
Beneficial Ownership
|
Class
|
|||||||
Austin
W. Marxe
|
Common
Stock
|
5,759,841 | 15.18 | % | ||||||
David
M. Geenhouse (1)
|
||||||||||
153
East 53rd Street, 55th Floor
|
||||||||||
New
York, NY 10022
|
||||||||||
Bonanza
Master Fund, LTD (2)
|
Common
Stock
|
4,970,600 | 14.48 | % | ||||||
300
Crescent Court, Suite 1740
|
||||||||||
Dallas,
TX 75201
|
||||||||||
J.
N. Hunter (3)
|
Common
Stock
|
8,725,579 | 21.67 | % | ||||||
Industrial
Boxboard Corporation
|
||||||||||
2249
Davis Court
|
||||||||||
Hayward,
CA 94545
|
||||||||||
John
R. Kiely, III (4)
|
Common
Stock
|
9,142,170 | 22.88 | % | ||||||
17817
Davis Road
|
||||||||||
Dundee,
MI 48131
|
||||||||||
Charles
J. Drake (5)
|
Common
Stock
|
4,445,803 | 12.58 | % | ||||||
Max
A. Coon (6)
|
Common
Stock
|
1,727,173 | 4.92 | % | ||||||
Mark
R. Doede (7)
|
Common
Stock
|
965,500 | 2.76 | % | ||||||
Jeffery
B. Becker (8)
|
Common
Stock
|
591,200 | 1.69 | % | ||||||
Andrew
Blowers (9)
|
Common
Stock
|
863,050 | 2.55 | % | ||||||
Paul
M. Zink (10)
|
Common
Stock
|
511,800 | 1.47 | % | ||||||
Vincent
Shunsky (11)
|
Common
Stock
|
24,253 | * | |||||||
William
B. Wallace
|
Common
Stock
|
0 | * | |||||||
All
Directors and Officers as a Group (12)
|
Common
Stock
|
9,163,779 | 23.71 | % |
*
Beneficial ownership does not exceed 1%.
(1)
|
Austin
W. Marxe and David M. Greenhouse are the principal owners of AWM, SSTA and
MG. AWM is the general partner of and investment adviser to the Special
Situations Cayman Fund, L.P. SSTA is the general partner of and investment
adviser to the Special Situations Technology Fund, L.P. and the Special
Situations Technology Fund II, L.P. MG is the general partner of and
investment adviser to the Special Situations Private Equity Fund, L.P.
Through their control of AWM, SSTA and MG, Messrs. Marxe and
Greenhouse share voting and investment control over the portfolio
securities of each of the funds listed below. The total beneficial
ownership of Messrs. Marxe and Greenhouse
includes:
|
|
(i)
|
105,000
shares of common stock and warrants for the purchase of 204,325 shares
which expire on September 15, 2013, held by Special Situations Technology
Fund, L.P.;
|
|
(ii)
|
645,000
shares of common stock and warrants for the purchase of 1,255,135 shares
which expire on September 15, 2013 held by Special Situations Technology
Fund II, L.P.;
|
|
(iii)
|
350,000
shares of commons stock and warrants for the purchase of 681,081 shares
which expire on September 15, 2013 held by Special Situations Cayman Fund,
L.P.;
|
|
(iv)
|
750,000
shares of common stock and warrants for the purchase of 1,459,459 shares
which expire on September 15, 2013 held by Special Situations Private
Equity Fund, L.P.; and
|
|
(v)
|
309,841
shares of common stock currently held by Special Situations Fund III QP,
L.P.
|
(2)
|
The
total beneficial ownership includes 4,970,600 shares of common stock
currently held but does not include warrants for the purchase of 3,000,000
shares which expire on September 15, 2013 and are subject to a 4.99%
blocker clause.
|
(3)
|
The
total beneficial ownership J.N. Hunter
includes:
|
|
(i)
|
263,846
shares of common stock held directly by J.N. Hunter in the J.N. Hunter
IRA;
|
|
(ii)
|
187,846
shares held by the Industrial Boxboard Company, of which Mr. Hunter
and his spouse are the sole general
partners;
|
|
(iii)
|
2,343,272
shares held by the Industrial Boxboard Corporation Profit Sharing Plan and
Trust, of which Mr. Hunter and his spouse are the sole
trustees;
|
|
(iv)
|
5,237,484
shares issuable upon the conversion of convertible notes held by the
Industrial Boxboard Corporation Profit Sharing Plan and Trust which mature
on July 1, 2010; and
|
19
|
(v)
|
693,131
shares issuable upon the exercise of warrants held by the Industrial
Boxboard Corporation Profit Sharing Plan and Trust which expire September
15, 2012;
|
but does
not include 4,538,505 shares issuable on the conversion of convertible notes and
exercise of warrants held by the Industrial Boxboard Corporation Profit Sharing
Plan and Trust which are subject to blocker clauses as follows:
Shares
|
Issued
|
Expire
|
Type and Price
|
Blocker %
|
|||||
432,567
|
1/8/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
4.90 | |||||
372,033
|
7/1/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
4.90 | |||||
400,707
|
1/1/10
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
4.90 | |||||
115,068
|
2/24/09
|
2/24/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
28,767
|
2/24/09
|
2/24/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
57,535
|
4/10/09
|
4/10/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
14,384
|
4/10/09
|
4/10/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
285,252
|
4/10/09
|
4/10/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
22,603
|
6/4/09
|
6/4/13
|
Warrant
@ $0.15 per share
|
9.90 | |||||
28,767
|
7/3/09
|
7/3/13
|
Warrant
@ $0.15 per share
|
4.90 | |||||
65,753
|
7/28/09
|
7/28/13
|
Warrant
@ $0.15 per share
|
4.90 | |||||
45,205
|
8/28/09
|
8/28/13
|
Warrant
@ $0.15 per share
|
4.90 | |||||
349,518
|
7/3/09
|
7/3/13
|
Warrant
@ $0.15 per share
|
4.90 | |||||
376,705
|
10/8/09
|
10/8/13
|
Warrant
@ $0.15 per share
|
4.90 | |||||
699,041
|
2/1/10
|
2/1/14
|
Warrant
@ $0.15 per share
|
4.90 | |||||
551.469
|
3/23/10
|
3/23/14
|
Warrant
@ $0.15 per share
|
4.90 |
(4)
|
The
total beneficial ownership for John R. Kiely, III
includes:
|
|
(i)
|
2,211,988
shares of common stock held
directly;
|
|
(ii)
|
156,281
shares of common stock issuable upon the exercise of warrants which expire
July 30, 2011 and are held
directly;
|
|
(iii)
|
2,622,032
shares of common stock issuable upon the conversion of convertible notes
which mature July 1, 2010 and are held by John R. Kiely, III in his
personal living trust;
|
|
(iv)
|
191,733
shares of common stock issuable upon the exercise of warrants which expire
January 2, 2012 and are held by John R. Kiely, III in his personal living
trust;
|
|
(v)
|
1,291,693
shares held by John R. and Margaret Lee Kiely Revocable Trust, of which
John R. Kiely, III is the sole
trustee;
|
|
(vi)
|
2,410,465
shares issuable upon the conversion of convertible notes held by the John
R. and Margaret Lee Kiely Revocable Trust, which mature on July 1,
2010;
|
|
(vii)
|
67,730
shares and 180,048 shares of common stock issuable upon the exercise of
warrants which expire July 30, 2011 and January 2,
2012, respectively, and are held by the John R. and Margaret
Lee Kiely Revocable Trust; and
|
|
(viii)
|
10,200
shares held by Michael H. Kiely Trust, of which John R. Kiely is the
co-trustee;
|
but does
not include 2,762,638 shares issuable on the conversion of convertible notes and
exercise of warrants held by the John R. and Margaret Lee Kiely Revocable Trust
(Revocable Trust), by John R. Kiely, III in his personal trust (Personal Trust),
or held jointly in a trust of which Michael H. Kiely and John R. Kiely are
co-trustees (Joint Trust), all of which are subject to a blocker clauses as
follows:
20
Shares
|
Issued
|
Expire
|
Type and Price
|
Held By
|
Blocker %
|
||||||
158,027
|
7/1/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
170,207
|
1/1/10
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
184,467
|
7/3/09
|
7/3/13
|
Warrant
@ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
198,817
|
10/8/09
|
10/8/13
|
Warrant
@ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
368,938
|
2/1/10
|
2/1/14
|
Warrant
@ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
291,054
|
3/23/10
|
3/23/14
|
Warrant
@ $0.15 per share
|
Revocable
Trust
|
4.90 | ||||||
172,127
|
7/1/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Personal
Trust
|
4.90 | ||||||
185,393
|
1/1/10
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Personal
Trust
|
4.90 | ||||||
246,575
|
2/18/10
|
2/18/14
|
Warrant
@ $0.15 per share
|
Joint
Trust
|
4.90 | ||||||
139,161
|
7/3/09
|
7/3/13
|
Warrant
@ $0.15 per share
|
Personal
Trust
|
4.90 | ||||||
149,985
|
10/8/09
|
10/8/13
|
Warrant
@ $0.15 per share
|
Personal
Trust
|
4.90 | ||||||
278,322
|
2/1/10
|
2/1/14
|
Warrant
@ $0.15 per share
|
Personal
Trust
|
4.90 | ||||||
219,565
|
3/23/10
|
3/23/14
|
Warrant
@ $0.15 per share
|
Personal
Trust
|
4.90 |
(5)
|
The
total beneficial ownership for Mr. Drake
includes:
|
|
(i)
|
2,945,803
shares of common stock currently
held;
|
|
(ii)
|
500,000
shares of restricted common stock which vest when all Class 2 Notes are
repaid; and
|
|
(iii)
|
1,000,000
options to purchase common stock which are immediately
exercisable.
|
(6)
|
The
total beneficial ownership for Mr. Coon
includes:
|
|
(i)
|
929,072
shares of common stock held
directly;
|
|
(ii)
|
34,467
shares of common stock issuable upon the conversion of convertible notes
which mature July 1, 2010 and are held directly by Max A.
Coon;
|
|
(iii)
|
17,059
shares held by Max A. Coon IRA;
|
|
(iv)
|
541,096
shares of common stock issuable upon the conversion of convertible notes
which mature July 1, 2010 and are held by Charlevoix Drive Properties, LLC
of which Mr. Coon is a member;
|
|
(v)
|
205,479
shares of common stock issuable upon the exercise of warrants which expire
September 15, 2012 and are held by Charlevoix Drive Properties, LLC of
which Mr. Coon is a member; but does not include 1,151,601 shares issuable
on the conversion of convertible notes and exercise of warrants held by
Max A. Coon or held by Charlevoix Drive Properties, LLC, all of which are
subject to a blocker clauses as
follows:
|
21
Shares
|
Issued
|
Expire
|
Type and Price
|
Held By
|
Blocker %
|
|||||||
503,452
|
1/2/08
|
7/1/10
|
Convertible
Note @ $0.25 per share
|
Max
A. Coon
|
4.90 | |||||||
19,860
|
1/8/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Max
A. Coon
|
4.90 | |||||||
37,127
|
1/1/10
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Max
A. Coon
|
4.90 | |||||||
72,147
|
1/8/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
40,067
|
7/1/09
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
43,160
|
1/1/10
|
7/1/10
|
Convertible
Note @ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
77,055
|
7/3/09
|
7/3/13
|
Warrant
@ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
83,048
|
10/8/09
|
10/8/13
|
Warrant
@ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
154,110
|
2/1/10
|
2/1/14
|
Warrant
@ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 | |||||||
121,575
|
3/23/10
|
3/23/14
|
Warrant
@ $0.15 per share
|
Charlevoix
Drive Properties
|
4.90 |
(7)
|
The
total beneficial ownership for Mr. Doede
includes;
|
|
(i)
|
41,500
shares of common stock currently
held;
|
|
(ii)
|
300,000
shares of restricted common stock which vest when all Class 2 Notes are
repaid; and
|
|
(iii)
|
624,000
options to purchase common stock which are immediately
exercisable.
|
(8)
|
The
total beneficial ownership for Mr. Becker
includes:
|
|
(i)
|
24,200
shares of common stock currently held;
and
|
|
(ii)
|
567,000
options to purchase common stock which are immediately
exercisable.
|
(9)
|
The
total beneficial ownership for Mr. Blowers
includes:
|
|
(i)
|
55,050
shares of common stock currently held;
and
|
|
(ii)
|
843,500
options to purchase common stock which are immediately
exercisable.
|
(10)
|
The
total beneficial ownership for Mr. Zink
includes:
|
|
(i)
|
15,800
shares of common stock currently held;
and
|
|
(ii)
|
496,000
options to purchase common stock which are immediately
exercisable.
|
(11)
|
The
total beneficial ownership includes 22,253 shares of common stock held
directly by Vincent Shunsky and 2,000 shares held by Mr. Shunsky’s
IRA.
|
(12)
|
The
total beneficial ownership includes 4,850,737 shares of common stock
currently held by our officers and directors which includes 1,300,000
shares which vest when all Class 2 Notes are paid; options to purchase
3,530,000 shares held by five officers, which they are eligible to
exercise immediately; and 781,042 shares of common stock issuable on the
conversion or exercise of convertible notes and warrants held by Max A.
Coon and Charlevoix Properties, LLC as detailed in note 7 above; but does
not include 1,151,601 shares of common stock issuable on the conversion or
exercise of convertible notes and warrants held by Max A. Coon and
Charlevoix Drive Properties, LLC as detailed in note 7
above.
|
22
ITEM 13. Certain
Relationships and Related Transactions, and Director
Independence
The
following table sumarizes debt transactions with the Company involving our
Directors and certain shareholders that own more than five percent (5%) of the
outstanding shares of common stock of the Company.
Greater than 5% shareholder
|
Director
|
|||||||||||||||
John Hunter
|
John R. Kiely, III.
|
Max A. Coon
|
Total
|
|||||||||||||
Outstanding
balance as of December 31,
2008
|
||||||||||||||||
Class
2 Notes
|
$ | 667,000 | $ | 525,000 | $ | 125,000 | ||||||||||
Class
3 Notes
|
$ | 1,309,371 | $ | 1,160,266 | $ | 261,137 | ||||||||||
Total
|
$ | 1,976,371 | $ | 1,685,266 | $ | 386,137 | $ | 4,047,774 | ||||||||
Largest
aggregate amount of principle outstanding during period
|
||||||||||||||||
2009
|
$ | 3,086,173 | $ | 1,893,504 | $ | 411,118 | ||||||||||
2008
|
$ | 1,976,371 | $ | 1,685,266 | $ | 386,137 | ||||||||||
Aggregate
amount of transactions (See "Related Party Transaction Detail" table
below)
|
||||||||||||||||
2009
|
$ | 1,109,802 | $ | 108,238 | $ | 24,981 | ||||||||||
2008
|
$ | 792,371 | $ | 635,266 | $ | 136,137 | ||||||||||
Outstanding
balance as of 12/31/2009
|
||||||||||||||||
Class
2 Notes
|
$ | 1,656,112 | $ | 525,000 | $ | 125,000 | ||||||||||
Class
3 Notes
|
$ | 1,430,061 | $ | 1,268,504 | $ | 286,118 | ||||||||||
Total
|
$ | 3,086,173 | $ | 1,793,504 | $ | 411,118 | $ | 5,290,795 | ||||||||
Outstanding
balance as of 11/22/2010
|
||||||||||||||||
Class
2
|
$ | 1,781,112 | $ | 710,945 | $ | 125,000 | ||||||||||
Class
3
|
$ | 1,490,167 | $ | 1,321,844 | $ | 298,161 | ||||||||||
Total
|
$ | 3,271,279 | $ | 2,032,789 | $ | 423,161 | $ | 5,727,229 | ||||||||
Amount
of principal paid during year
|
||||||||||||||||
2009
|
$ | - | $ | 100,000 | $ | - | ||||||||||
2008
|
$ | 88,000 | $ | - | $ | - | ||||||||||
Amount
of interest paid during year
|
||||||||||||||||
Cash
2009
|
$ | - | $ | 395 | $ | - | ||||||||||
Notes
issued in payment of interest 2009
|
$ | 134,802 | $ | 108,238 | $ | 24,981 | ||||||||||
Value
of warrants issued 2009
|
$ | 58,404 | $ | 13,221 | $ | 3,148 | ||||||||||
Total
2009
|
$ | 193,206 | $ | 121,854 | $ | 28,129 | $ | 343,189 | ||||||||
Cash
2008
|
$ | 567 | $ | - | $ | - | ||||||||||
Notes
issued in payment of interest 2008
|
$ | 66,370 | $ | 60,267 | $ | 11,137 | ||||||||||
Value
of warrants issued 2008
|
$ | 187,561 | $ | 778 | $ | 55,602 | ||||||||||
Total
2008
|
$ | 254,498 | $ | 61,045 | $ | 66,739 | $ | 382,282 | ||||||||
Accrued
interest at December 31
|
||||||||||||||||
Cash
2009
|
$ | 294,460 | $ | 205,117 | $ | 51,360 | ||||||||||
Value
of warrants accrued not issued 2009
|
$ | 56,690 | $ | 5,029 | $ | 1,197 | ||||||||||
Total
2009
|
$ | 351,150 | $ | 210,146 | $ | 52,557 | $ | 613,853 | ||||||||
Cash
2008
|
$ | 167,822 | $ | 151,333 | $ | 39,033 | ||||||||||
Value
of warrants accrued not issued 2008
|
$ | - | $ | - | $ | - | ||||||||||
Total
2008
|
$ | 167,822 | $ | 151,333 | $ | 39,033 | $ | 358,188 |
23
For an
explanation of the terms of the Class 2 Notes, Class 3 Notes, and Warrants,
refer to Note C – Long Term Debt and Other Financing in the notes to the
financial statements.
The
following tables detail debt transactions with the Company involving our
Directors and certain shareholders that own more than five percent (5%) of the
outstanding shares of common stock of the Company for the years ended December
31, 2009 and December 31, 2008.
Note
Number
|
Related Party
Transaction Detail
for 2009
|
Class 2 Note
|
Classs 3 Note
|
Date issued
|
Date due
|
Interest
rate
|
Warrant
accrual rate (5)
|
|||||||||||||||
63
|
J.N.
Hunter (1)
|
64,885 |
01/08/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
121
|
J.N.
Hunter
|
280,000 |
01/23/09
|
02/27/09
|
12 | % | N/A | |||||||||||||||
122
|
J.N.
Hunter (2)
|
(280,000 | ) |
02/24/09
|
N/A
|
N/A | N/A | |||||||||||||||
122
|
J.N.
Hunter
|
280,000 |
02/24/09
|
06/15/09
|
10 | % | 5 | |||||||||||||||
123
|
J.N.
Hunter
|
100,000 |
02/24/09
|
06/15/09
|
12 | % | N/A | |||||||||||||||
124
|
J.N.
Hunter
|
70,000 |
02/24/09
|
06/15/09
|
10 | % | 5 | |||||||||||||||
126
|
J.N.
Hunter
|
130,000 |
03/03/09
|
06/15/09
|
12 | % | N/A | |||||||||||||||
Various
|
J.N.
Hunter (2)
|
(680,000 | ) |
04/10/09
|
N/A
|
N/A | N/A | |||||||||||||||
128
|
J.N.
Hunter (3)
|
694,112 |
04/10/09
|
12/31/09
|
10 | % | 5 | |||||||||||||||
129
|
J.N.
Hunter
|
55,000 |
06/04/09
|
12/31/09
|
10 | % | 5 | |||||||||||||||
130
|
J.N.
Hunter
|
70,000 |
06/24/09
|
12/31/09
|
10 | % | 5 | |||||||||||||||
81
|
J.N.
Hunter (1)
|
55,805 |
07/01/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
131
|
J.N.
Hunter
|
160,000 |
07/27/09
|
12/31/09
|
10 | % | 5 | |||||||||||||||
132
|
J.N.
Hunter
|
110,000 |
08/25/09
|
12/31/09
|
10 | % | 5 | |||||||||||||||
Total
net transactions
|
$ | 989,112 | $ | 120,690 | ||||||||||||||||||
64
|
John
R. Kiely, III (1)
|
30,611 |
01/08/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
65
|
John
R. Kiely, III (1)
|
28,104 |
01/08/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
127
|
John
R. Kiely, III
|
100,000 |
03/25/09
|
04/16/09
|
12 | % | N/A | |||||||||||||||
127
|
John
R, Kiely, III (4)
|
(100,000 | ) |
04/03/09
|
N/A
|
N/A | N/A | |||||||||||||||
82
|
John
R. Kiely, III (1)
|
25,819 |
07/01/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
83
|
John
R. Kiely, III (1)
|
23,704 |
07/01/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
Total
net transactions
|
$ | - | $ | 108,238 | ||||||||||||||||||
72
|
Max
A. Coon (1)
|
2,979 |
01/08/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
73
|
Max
A. Coon (1)
|
10,822 |
01/08/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
79
|
Max
A. Coon (1)
|
5,170 |
07/01/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
87
|
Max
A. Coon (1)
|
6,010 |
07/01/09
|
07/01/10
|
12 | % | N/A | |||||||||||||||
Total
net transactions
|
$ | 0 | $ | 24,981 | ||||||||||||||||||
Total
net transactions at December 31, 2009
|
$ | 989,112 | $ | 253,909 |
(1)
|
Issued
to pay interest due.
|
(2)
|
Principal
paid with new note.
|
(3)
|
Includes
$14,112 of interest paid.
|
(4)
|
Principal
paid with cash.
|
|
(5)
|
Expressed
as warranants/$/year. Note holder can elect to receive no
warrants and earn an additional 2%
interest.
|
24
Note
Number
|
Related Party
Transaction Detail for
2009
|
Class 2 Note
|
Classs 3 Note
|
Date
|
Date due
|
Interest
rate
|
Warrant
accrual rate (8)
|
||||||||||||||
93
|
J.N.
Hunter
|
$ | 125,000 | $ | - |
01/22/08
|
02/15/08
|
12 | % |
None
|
|||||||||||
95
|
J.N.
Hunter
|
$ | 100,000 | $ | - |
03/26/08
|
04/30/08
|
12 | % |
None
|
|||||||||||
96
|
J.N.
Hunter
|
$ | 100,000 | $ | - |
04/24/08
|
05/31/08
|
12 | % |
None
|
|||||||||||
99
|
J.N.
Hunter
|
$ | 100,000 | $ | - |
05/23/08
|
06/30/08
|
12 | % |
None
|
|||||||||||
102
|
J.N.
Hunter
|
$ | 100,000 | $ | - |
06/27/08
|
07/31/08
|
12 | % |
None
|
|||||||||||
109
|
J.N.
Hunter
|
$ | 114,000 | $ | - |
08/26/08
|
09/30/08
|
12 | % |
None
|
|||||||||||
109
|
J.N.
Hunter (1)
|
$ | (13,000 | ) | $ | - |
09/08/08
|
n/a
|
n/a | n/a | |||||||||||
50
|
J.N.
Hunter (2)
|
$ | - | $ | 1,309,371 |
09/15/08
|
07/01/10
|
8 | % |
n/a
|
|||||||||||
Various
|
J.N.
Hunter (3)
|
$ | (1,243,000 | ) | $ | - |
09/15/08
|
n/a
|
n/a |
n/a
|
|||||||||||
118
|
J.N.
Hunter
|
$ | 75,000 | $ | - |
10/28/08
|
11/30/08
|
12 | % |
None
|
|||||||||||
118
|
J.N.
Hunter
|
$ | (75,000 | ) | $ | - |
11/19/08
|
n/a
|
n/a |
n/a
|
|||||||||||
119
|
J.N.
Hunter
|
$ | 100,000 | $ | - |
12/17/08
|
01/23/09
|
12 | % |
None
|
|||||||||||
Total
net transactions
|
$ | (517,000 | ) | $ | 1,309,371 | ||||||||||||||||
92
|
John
R. Kiely, III
|
$ | 175,000 | $ | - |
01/23/08
|
02/15/08
|
12 | % |
None
|
|||||||||||
94
|
John
R. Kiely, III
|
$ | 100,000 | $ | - |
03/26/08
|
04/30/08
|
12 | % |
None
|
|||||||||||
97
|
John
R. Kiely, III
|
$ | 100,000 | $ | - |
04/29/08
|
05/31/08
|
12 | % |
None
|
|||||||||||
98
|
John
R. Kiely, III
|
$ | 100,000 | $ | - |
05/22/08
|
06/30/08
|
12 | % |
None
|
|||||||||||
100
|
John
R. Kiely, III
|
$ | 50,000 | $ | - |
06/19/08
|
07/31/08
|
12 | % |
None
|
|||||||||||
101
|
John
R. Kiely, III
|
$ | 50,000 | $ | - |
06/23/08
|
07/31/08
|
12 | % |
None
|
|||||||||||
51
|
John
R. Kiely, III (4)
|
$ | - | $ | 608,668 |
09/15/08
|
07/01/10
|
8 | % |
n/a
|
|||||||||||
Various
|
John
R. Kiely, III (3)
|
$ | (575,750 | ) | $ | - |
09/15/08
|
n/a
|
n/a |
n/a
|
|||||||||||
52
|
John
R. Kiely, III (5)
|
$ | - | $ | 551,598 |
09/15/08
|
07/01/10
|
8 | % |
n/a
|
|||||||||||
Various
|
John
R. Kiely, III (3)
|
$ | (524,250 | ) | $ | - |
09/15/08
|
n/a
|
n/a |
n/a
|
|||||||||||
Total
net transactions
|
$ | (525,000 | ) | $ | 1,160,266 | ||||||||||||||||
108
|
Max
A. Coon
|
$ | 125,000 | $ | - |
08/25/08
|
09/30/08
|
12 | % |
None
|
|||||||||||
56
|
Max
A. Coon (6)
|
$ | - | $ | 135,274 |
09/15/08
|
07/01/10
|
8 | % |
n/a
|
|||||||||||
63
|
Max
A. Coon (3)
|
$ | (125,000 | ) | $ | - |
09/15/08
|
n/a
|
n/a |
n/a
|
|||||||||||
58
|
Max
A. Coon (7)
|
$ | - | $ | 125,863 |
09/15/08
|
07/01/10
|
8 | % |
n/a
|
|||||||||||
108
|
Max
A. Coon (3)
|
$ | (125,000 | ) | $ | - |
09/15/08
|
n/a
|
n/a |
n/a
|
|||||||||||
Total
net transactions
|
$ | (125,000 | ) | $ | 261,137 | ||||||||||||||||
Total
net transactions at
December
31,
2008
|
$ | (1,167,000 | ) | $ | 2,730,774 |
(1)
|
Principal
paid with cash.
|
(2)
|
Includes
$66,370 of interest.
|
(3)
|
Principal
paid with new note.
|
(4)
|
Includes
$32,918 of interest.
|
(5)
|
Includes
$27,348 of interest.
|
(6)
|
Includes
$10,274 of interest.
|
(7)
|
Includes
$863 of interest.
|
(8)
|
Expressed
as warranants/$/year. Note holders elected to receive no
warrants and earn an additional 2%
interest.
|
On
September 15, 2008, John Hunter exchanged Class 2 Notes for Class 3 Notes with
the right to convert immediately at $0.25 per share, which was less than the
fair market value of the stock on the date of exchange, which resulted in a
beneficial conversion feature of $1,007,078. This was reflected in
the statement of operations as “Extinguishment loss from modification and
exchange of debt instruments”. On the same date, John R. Kiely, III
exchanged Class 2 Notes for Class 3 Notes with the right to convert immediately
at $0.25 per share, which was less than the fair market value of the stock on
the date of exchange, which resulted in a beneficial conversion feature of
$892,397. This was reflected in the statement of operations as
“Extinguishment loss from modification and exchange of debt
instruments”. On the same date, Max A. Coon exchanged Class 2 Notes
for Class 3 Notes with the right to convert immediately at $0.25 per share,
which was less than the fair market value of the stock on the date of exchange,
which resulted in a beneficial conversion feature of $143,119. This
was reflected in the statement of operations as “Extinguishment loss from
modification and exchange of debt instruments”. The aggregate of
these related party transactions was $2,042,594.
25
On
September 15, 2008, we modified the strike price of 1,850,000 warrants from
$1.00 to $0.001 and issued 3,600,000 warrants for the purchase of common stock
at $0.001 in the aggregate to Special Situations Cayman Fund, L.P., Special
Situations Private Equity Fund, L.P., Special Situations Technology Fund, L.P.,
and Special Situations Technology Fund II, L.P., and recorded an expense for the
modification and issuance of warrants of $2,186,767. On September 15,
2008, we modified the strike price of 1,250,000 warrants from $1.00 to $0.001
and issued 3,000,000 warrants for the purchase of common stock at $0.001 to
Bonanza Master Fund, Ltd., and recorded an expense for the modification and
issuance of warrants of $1,716,190. There were no such transactions
during the fiscal year ended December 31, 2009. The aggregate amount of these
related party transactions was $3,902,957.
The
securities referenced above were obtained from the Company in transactions under
the same terms as concurrent transactions with unrelated
parties. While the Company does not have a written policy regarding
related party transactions, in general, the Company will allow related parties
to participate in transactions under the same terms and conditions as unrelated
parties. Where no unrelated parties are participating, the proposed
transaction is reviewed by the Board to determine whether the terms of the
transaction are fair to, and in the best interest of, the Company. In
this respect, the Board uses the overriding “arms length transaction” criteria
to analyze the following factors, in addition to any other factors it deems
appropriate depending on the circumstances, in determining whether to approve a
related party transaction: (i) fairness of the terms for the Company as related
to market and current industry practice; (ii) whether the transaction is in the
Company’s best interest; (iii) materiality of the transaction as related to the
Company; (iv) role of the related party in the transaction; (v) structure of the
transaction; and (vi) interests of all related parties in the transaction.
Approval of a related party transaction may be conditioned upon the Company and
the related party taking certain recommended actions that the Board deems
appropriate and necessary, including, without limitation, any or all of the
following: (x) limiting the duration or magnitude of the transaction by changing
specific terms; (y) requiring that information about the related party
transaction be documented and that reports reflecting the nature and amount of
the transaction be delivered to the Board on a regular basis; and (z) appointing
a Company representative to monitor various aspects of the related party
transaction.
ITEM 14. Principal
Accounting Fees and Services
Relationship
with Independent Public Accountants
The firm
of Rehmann Robson served the Company as its independent auditors for the year
ended December 31, 2009. During the years ended December 31, 2008 and
December 31, 2009, Rehmann Robson billed the Company for its services as
follows:
Audit Fees. For aggregate
fees billed for professional services rendered for the audit of the Company’s
annual financial statements for the years ended December 31, 2008 and December
31, 2009 and the reviews of the financial statements included in the Company’s
quarterly reports filed with the Securities and Exchange Commission during those
fiscal years:
2008:
|
$ | 56,500 | ||
2009:
|
$ | 50,950 |
Tax Fees. For
aggregate fees billed for professional services rendered for the preparation of
the Company’s annual tax returns for the years ended December 31, 2008 and
December 31, 2009:
2008:
|
$ | 3,000 | ||
2009:
|
$ | 3,000 |
All Other
Fees. For aggregate fees
billed for professional fees with regard to the SEC comment letter on the
registration statement and specific tax consulting projects for the years ended
December 31, 2008 and December 31, 2009:
26
2008:
|
$ | 11,000 | ||
2009:
|
$ | 12,950 |
The Audit
Committee of the Company's Board of Directors is of the opinion that the
provision of services described above was compatible with maintaining the
independence of Rehmann Robson. All services
rendered to the Company by Rehmann Robson are permissible under applicable laws
and regulations, and are pre-approved by the Audit Committee. A
statement of work and associated fees for audit and tax services is negotiated
by the Audit Committee before work is begun. Professional services
outside of the statement of work are requested on an as needed
basis. These services are actively monitored (both spending level and
work content) by the Audit Committee to maintain the appropriate objectivity and
independence in Rehmann Robson’s core work, which is the audit of the Company’s
financial statements. The Company’s Board of Directors has accepted
the recommendation of the Audit Committee that the Company retain the firm of
Rehmann Robson to serve as the Company’s independent auditors for the year ended
December 31, 2010.
Part IV
ITEM
15. Exhibits, Financial Statement Schedules
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 000-12728, 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 000-12728, and
incorporated herein by reference).
|
|
3.3
|
Certificate
of Designation effective April 11, 2005 and amendment to the By-Laws of
the Registrant effective March 23, 2005 (filed as Exhibit 4(b) to the
registrant’s Form 8-K dated April 14, 2005, SEC file 000-12728, and
incorporated herein by reference).
|
|
3.4
|
Certificate
of Amendment of Restated Articles of Incorporation, filed with the
Secretary of State of the State of Michigan on May 27, 2005 (filed as
Exhibit 3.4 to the registrant’s Registration Statement on Form SB-2 filed
on June 9, 2005, SEC File No. 333-125669, and incorporated herein by
reference).
|
|
3.5
|
Certificate
of Amendment of Restated Articles of Incorporation, filed with the
Secretary of State of the State of Michigan on April 19, 2007 (filed as
Exhibit 3.5 to the registrant’s Registration Statement on Form S-1 filed
on April 18, 2008, SEC file No. 333-125669, and incoprorated herein by
reference).
|
|
3.6
|
Certificate
of Amendment of Restated Articles of Incorporation, filed with the
Secretary of State of the State of Michigan on May 28, 2008 (filed as
Exhibit 3.6 to the registrant’s Form 10-Q for the quarter ended June 30,
2008, SEC file No. 000-12728, and incorporated herein by
reference).
|
|
3.7
|
Certificate
of Amendment of Restated Articles of Incorporation, filed with the
Secretary of State of the State of Michigan on May 21, 2009 (filed as
Exhibit 3.7 to the registrant’s Form 10-Q for the quarter ended September
30, 2009, SEC file No. 000-12728, and incorporated herein by
reference).
|
|
4.1
|
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 000-12728, and
incorporated herein by reference).
|
|
4.2
|
Securities
Purchase Agreement, Effective April 12, 2005 (filed as Exhibit 4.(A) to
registrant’s Form 8-K filed April 14, 2005, SEC file 000-12728, and
incorporated herein by reference).
|
|
4.3
|
Form
of Consent to Modifications dated November 14, 2006 modifying the terms of
the Fourth Amended Note and Warrant Purchase Agreement including Form of
Integral Vision, Inc. Class 2 Warrant (filed as Exhibit 4.9 to
registrant’s Form 10-Q for the quarter ended September 30, 2006, SEC file
000-12728, and incorporated herein by reference).
|
|
4.4
|
Form
of Consent to Modifications dated August 13, 2007 modifying the terms of
the Fourth Amended Note and Warrant Purchase Agreement (filed as Exhibit
4.4 to registrant’s Form 10-QSB for the quarter ended June 30, 2007, SEC
file 000-12728, and incorporated herein by
reference).
|
27
4.5
|
Form
of Consent to Modifications dated October 10, 2007 modifying the terms of
the Fourth Amended Note and Warrant Purchase Agreement (filed as Exhibit
4.6 to registrant’s Form 10-QSB for the quarter ended September 30, 2007,
SEC file 000-12728, and incorporated herein by
reference).
|
|
4.6
|
Form
of Consent to Modifications dated January 18, 2008 modifying the terms of
the Fourth Amended Note and Warrant Purchase Agreement (filed as Exhibit
4.6 to the registrant’s Form 10-KSB for the year ended December 31, 2007,
SEC file 000-12728, and incorporated herein by
reference).
|
|
4.7
|
Form
of Amended Collateral Assignment of Proprietary Rights dated March 5, 2008
(filed as Exhibit 4.7 to the registrant’s Form 10-KSB for the year ended
December 31, 2007, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.8
|
Form
of Amended Security Agreement dated March 6, 2008 (filed as Exhibit 4.8 to
the registrant’s Form 10-KSB for the year ended December 31, 2007, SEC
file 000-12728, and incorporated herein by reference).
|
|
4.9
|
Form
of Consent to Amend and Replace Agreements dated March 12, 2008 (filed as
Exhibit 4.9 to the registrant’s Form 10-KSB for the year ended December
31, 2007, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.10
|
Form
of Fifth Amended and Restated Note and Warrant Purchase Agreement (filed
as Exhibit 4.10 to the registrant’s Form 10-KSB for the year ended
December 31, 2007, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.11
|
Waiver
and Amendment Agreement, effective September 15, 2008, and the
Registration Rights Agreement and common stock Warrants, made a part
thereof, among the respective parties thereto (filed as Exhibit 4.1 to the
registrant’s Form 8-K filed September 15, 2008, SEC file 000-12728, and
incorporated herein by reference).
|
|
4.12
|
Exchange
Agreements, effective September 15, 2008, among the respective parties
thereto (filed as Exhibit 4.3 to the registrant’s Form 8-K filed September
15, 2008, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.13
|
Form
of Consent to Amend and Replace Agreements dated June 10, 2009 (filed as
Exhibit 4.13 to the registrant’s Form 10-Q for the quarter ended September
30, 2009, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.14
|
Form
of Consent to Amend and Replace Agreements dated June 24, 2009 (filed as
Exhibit 4.13 to the registrant’s Form 10-Q for the quarter ended September
30, 2009, SEC file 000-12728, and incorporated herein by
reference).
|
|
4.15
|
Form
of Consent to Amend and Replace Agreements dated September 16, 2009 (filed
as Exhibit 4.13 to the registrant’s Form 10-Q for the quarter ended
September 30, 2009, SEC file 000-12728, and incorporated herein by
reference).
|
|
10.1
|
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
000-12728, and incorporated herein by reference).
|
|
10.2
|
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 000-12728, and incorporated herein
by reference).
|
|
10.3
|
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, SEC file
000-12728, and incorporated herein by reference).
|
|
10.4
|
Integral
Vision, Inc. 2004 Employee Stock Option Plan (filed as exhibit 10.11 to
the registrant’s Form 10-Q for the quarter ended June 30, 2004, SEC file
000-12728, and incorporated herein by reference).
|
|
10.5
|
Integral
Vision, Inc. 2008 Equity Incentive Plan (filed as Exhibit 10.5 to the
registrant’s Form 10-KSB for the year ended December 31, 2007, SEC file
000-12728, and incorporated herein by reference).
|
|
10.6
|
Amendment
and Restatement of Integral Vision, Inc. 2008 Equity Incentive Plan (filed
as Exhibit 10.6 to the registrant’s Schedule 14A filed March 26, 2009, SEC
file 000-12728, and incorporated herein by reference).
|
|
14
|
Code
of Ethics (filed as Exhibit 14 to the registrant’s Form 10-KSB for the
year ended December 31, 2007, SEC file 000-12728, and incorporated herein
by reference).
|
|
23.1
|
Consent
of Rehmann Robson, independent registered public accounting
firm.*
|
28
31.1
|
Certification
of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a)
or Rule 15d-14(a).
|
|
31.2
|
Certification
of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(e)
or Rule 15d-14(a).
|
|
32.1
|
Certification by Chief Executive
Officer of Periodic Report Pursuant to 18 U.S.C. Section
1350.
|
|
32.2
|
Certification
by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
* Filed as an Exhibit to
registrant’s Form 10-K filed March 31, 2010, SEC file 000-12728, and
incorporated herein by reference.
29
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
By:
|
/S/ CHARLES J. DRAKE
|
|
Charles
J. Drake, Chairman of the Board
and Chief Executive Officer |
||
Date:
December 20, 2010
|
||
By:
|
/S/ MARK R. DOEDE
|
|
Mark
R. Doede, President, Chief Operating Officer,
Chief Financial Officer, and Principal Accounting Officer |
||
Date: December
20, 2010
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/S/ CHARLES J. DRAKE
|
Chairman
of the Board, Chief
|
|
Charles
J. Drake
|
Executive
Officer, and Director
|
|
Date: December
20, 2010
|
||
/S/ MAX A. COON
|
Vice
Chairman and Director
|
|
Max
A. Coon
|
||
Date: December
20, 2010
|
||
/S/ VINCENT SHUNSKY
|
Director
|
|
Vincent
Shunsky
|
||
Date: December
20, 2010
|
||
/S/ WILLIAM B. WALLACE
|
Director
|
|
William
B. Wallace
|
||
Date: December
20, 2010
|
||
/S/ MARK R. DOEDE
|
Director
|
|
Mark
R. Doede
|
||
Date: December
20, 2010
|
30
Report of
Independent Registered Public Accounting Firm
Stockholders
and Board of Directors
Integral
Vision, Inc.
Wixom,
Michigan
We have
audited the accompanying balance sheets of Integral Vision, Inc. (the “Company”)
as of December 31, 2009 and 2008, and the related statements of operations,
stockholders' deficit and cash flows for each of the years in the two-year
period then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit on its internal
contrlol over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but nor for purposes of
expressing an opinion on the effectiveness of the company’s internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Integral Vision, Inc. as of
December 31, 2009 and 2008, and the results of its operations and its cash flows
for each of the years in the two-year period, in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As described in Note M to the financial
statements, the Company is sustaining recurring losses from operations and is
having difficulties in achieving the necessary sales to attain
profitability. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
in regard to this matter are also described in Note M. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/S/
Rehmann Robson, P.C.
|
|
Troy,
Michigan
|
|
March
30, 2010
|
31
Balance
Sheets
Integral
Vision, Inc.
December 31
|
||||||||
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 28 | $ | 144 | ||||
Accounts
receivable
|
50 | 208 | ||||||
Inventories
|
190 | 325 | ||||||
Other
current assets
|
98 | 131 | ||||||
Total
current assets
|
366 | 808 | ||||||
Property
and equipment
|
||||||||
Building
improvements
|
4 | 4 | ||||||
Production
and engineering equipment
|
354 | 234 | ||||||
Furniture
and fixtures
|
80 | 80 | ||||||
Computer
equipment
|
193 | 191 | ||||||
Marketing/demonstration
equipment
|
139 | 139 | ||||||
770 | 648 | |||||||
Less
accumulated depreciation
|
580 | 491 | ||||||
Net
property and equipment
|
190 | 157 | ||||||
Other assets - net
of accumulated amortization of $1,559,000 for
2009 and $1,512,000 for 2008
|
61 | 72 | ||||||
61 | 72 | |||||||
Total
assets
|
$ | 617 | $ | 1,037 | ||||
Liabilities
and Stockholders' Deficit
|
||||||||
Current
liabilities
|
||||||||
Notes
payable
|
$ | 2,086 | $ | 469 | ||||
Notes
payable to related parties and directors (See Note D)
|
$ | 5,291 | $ | 1,317 | ||||
Accounts
payable
|
114 | 141 | ||||||
Customer
deposits
|
249 | - | ||||||
Accrued
compensation and related costs
|
276 | 283 | ||||||
Accrued
interest
|
160 | 88 | ||||||
Accrued
interest related parties and directors (See Note D)
|
614 | 358 | ||||||
Accrued
product warranty
|
108 | 84 | ||||||
Other
accrued liabilities
|
95 | 54 | ||||||
Deferred
revenue
|
72 | 656 | ||||||
Total
current liabilities
|
9,065 | 3,450 | ||||||
Long-term
debt
|
||||||||
Notes
payable
|
- | 940 | ||||||
Notes
payable related parties and directors (See Note D)
|
- | 2,731 | ||||||
Total
liabilities
|
9,065 | 7,121 | ||||||
Stockholders'
deficit
|
||||||||
Preferred
stock, 400,000 shares authorized; none issued
|
- | - | ||||||
Common
stock, without par value, stated value $.20 per share; 90,000,000 shares
authorized; 30,866,409 shares issued and outstanding (29,566,409 in
2008)
|
6,173 | 5,913 | ||||||
Additional
paid-in capital
|
47,528 | 47,391 | ||||||
Accumulated
deficit
|
(62,149 | ) | (59,388 | ) | ||||
Total
stockholders' deficit
|
(8,448 | ) | (6,084 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 617 | $ | 1,037 |
The
accompanying notes are an integral part of these financial
statements.
32
Statements
of Operations
Integral
Vision, Inc..
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(In
thousands, except per share data)
|
||||||||
Revenues:
|
||||||||
Net
product sales
|
$ | 1,754 | $ | 1,002 | ||||
Net
revenue from product development agreements
|
- | 25 | ||||||
Total
net revenues (See Note B)
|
1,754 | 1,027 | ||||||
Costs
of sales:
|
||||||||
Costs
of sales for products
|
850 | 573 | ||||||
Depreciation
and amortization
|
21 | 17 | ||||||
Total
costs of sales
|
871 | 590 | ||||||
Gross
margin
|
883 | 437 | ||||||
Other
costs and expenses:
|
||||||||
Marketing
|
487 | 673 | ||||||
General
and administrative - net
|
1,383 | 1,713 | ||||||
Engineering
and development - net
|
939 | 1,032 | ||||||
Total
other costs and expenses
|
2,809 | 3,418 | ||||||
Operating
loss
|
(1,926 | ) | (2,981 | ) | ||||
Other
(expense) income
|
(3 | ) | 29 | |||||
Interest
expense
|
(228 | ) | (130 | ) | ||||
Interest
expense related parties and directors (See Note D)
|
(586 | ) | (791 | ) | ||||
Extinguishment
loss from modification and exchange of debt instruments (See Note
C)
|
(10 | ) | (602 | ) | ||||
Extinguishment
loss from modification and exchange of debt instruments for related
parties (See Notes C and D)
|
(8 | ) | (2,042 | ) | ||||
Modification
and issuance of warrants to PIPE Equity Investors (see Note
C)
|
- | (314 | ) | |||||
Modification
and issuance of warrants to PIPE Equity Investors for related parties (see
Notes C and D)
|
- | (3,903 | ) | |||||
Foreign
currency translation gain
|
- | 1 | ||||||
Loss
from operations before income taxes
|
(2,761 | ) | (10,733 | ) | ||||
Income
taxes
|
- | - | ||||||
Net
loss
|
$ | (2,761 | ) | $ | (10,733 | ) | ||
Basic
and diluted loss per share
|
$ | (0.09 | ) | $ | (0.36 | ) | ||
Weighted
average number of shares outstanding of common stock and common
stock equivalents, where applicable
|
30,268 | 29,566 |
The
accompanying notes are an integral part of these financial
statements.
33
Statements
of Stockholders' Deficit
Integral
Vision, Inc.
Number of
Common
Shares
Outstanding
|
Common
Stock
|
Preferred
Stock
|
Additional
Paid-In
Capital
|
Accumulated
Deficit
|
Total
|
|||||||||||||||||||
(in
thousands, except number of common shares outstanding)
|
||||||||||||||||||||||||
Balances
at January 1, 2008
|
29,566,409 | $ | 5,913 | $ | - | $ | 39,407 | $ | (48,655 | ) | $ | (3,335 | ) | |||||||||||
Net
loss for the year
|
(10,733 | ) | (10,733 | ) | ||||||||||||||||||||
Issuance
of warrants for settlement of interest on Class 2 Notes (See Note C
)
|
243 | 243 | ||||||||||||||||||||||
Modification
and issuance of warrants to PIPE Equity Investors (See Note I
)
|
4,217 | 4,217 | ||||||||||||||||||||||
Extinguishment
loss from modification and exchange of debt instruments (See Note
C)
|
2,644 | 2,644 | ||||||||||||||||||||||
Modification
of warrants previously issued in settlement of interest (See Note
C)
|
230 | 230 | ||||||||||||||||||||||
Issuance
of restricted stock
|
207 | 207 | ||||||||||||||||||||||
Share-based
compensation
|
443 | 443 | ||||||||||||||||||||||
Balances
at December 31, 2008
|
29,566,409 | $ | 5,913 | $ | - | $ | 47,391 | $ | (59,388 | ) | $ | (6,084 | ) | |||||||||||
Net
loss for the year
|
(2,761 | ) | (2,761 | ) | ||||||||||||||||||||
Vested
Stock Grants
|
1,300,000 | 260 | - | (260 | ) | - | - | |||||||||||||||||
Issuance
of warrants for settlement of interest on Class 2 Notes (See Note C
)
|
- | - | - | 86 | - | 86 | ||||||||||||||||||
Extinguishment
loss from exchange of debt instruments (See Note C)
|
- | - | - | 18 | - | 18 | ||||||||||||||||||
Share-based
compensation
|
- | - | - | 293 | - | 293 | ||||||||||||||||||
Balances
at December 31, 2009
|
30,866,409 | $ | 6,173 | $ | - | $ | 47,528 | $ | (62,149 | ) | $ | (8,448 | ) |
The
accompanying notes are an integral part of these financial
statements.
34
Statements
of Cash Flows
Integral
Vision, Inc.
Year Ended December 31
|
||||||||
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Cash
Flows From Operating Activities:
|
||||||||
Net
loss
|
$ | (2,761 | ) | $ | (10,733 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
|
89 | 61 | ||||||
Amortization
|
47 | 19 | ||||||
Provision
for losses on inventory obsolence
|
- | 71 | ||||||
Warrants
issued in settlement of interest
|
12 | - | ||||||
Warrants
issued in settlement of interest to related parties (1)
|
74 | 243 | ||||||
Non-cash
interest related to warrant modification
|
- | 70 | ||||||
Non-cash
interest related to warrant modification for related parties
(1)
|
- | 160 | ||||||
Share-based
compensation
|
293 | 443 | ||||||
Issuance
of restricted stock
|
- | 207 | ||||||
Issuance
of Class 3 Notes in settlement of interest
|
184 | 19 | ||||||
Issuance
of Class 3 Notes in settlement of interest to related parties
(1)
|
128 | 138 | ||||||
Issuance
of Class 2 Notes in settlement of interest to related parties
(1)
|
14 | - | ||||||
Modification
and issuance of warrants to PIPE Equity Investors (See Notes
I)
|
- | 314 | ||||||
Modification
and issuance of warrants to PIPE Equity Investors to related
parties (See Notes D and I)
|
- | 3,903 | ||||||
Extinguishment
loss from modification and exchange of debt instruments (See Notes
C)
|
10 | 602 | ||||||
Extinguishment
loss from modification and exchange of debt instruments for related
parties (See Notes C and D)
|
8 | 2,042 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
158 | (133 | ) | |||||
Inventories
|
22 | (131 | ) | |||||
Other
current assets
|
33 | (34 | ) | |||||
Accounts
payable and other current liabilities
|
359 | 317 | ||||||
Customer
deposits
|
249 | - | ||||||
Deferred
revenue
|
(584 | ) | 656 | |||||
Net
cash used in operating activities
|
(1,665 | ) | (1,766 | ) | ||||
Cash
Flows From Investing Activities:
|
||||||||
Purchase
of property and equipment
|
(9 | ) | (3 | ) | ||||
Additional
patent expenditures
|
(36 | ) | (8 | ) | ||||
Net
cash used in investing activities
|
(45 | ) | (11 | ) | ||||
Cash
Flows From Financing Activities:
|
||||||||
Proceeds
from sale of Class 2 Notes
|
250 | 537 | ||||||
Proceeds
from sale of Class 2 Notes to related parties (1)
|
1,075 | 1,514 | ||||||
Payment
of Class 2 Note
|
(60 | ) | - | |||||
Payment
of Class 2 Note to related parties (1)
|
(100 | ) | (88 | ) | ||||
Proceeds
from sale of Class 3 Notes
|
429 | - | ||||||
Payment
of Class 3 Note
|
- | (5 | ) | |||||
Debt
financing fees
|
- | (48 | ) | |||||
Net
cash provided by financing activities
|
1,594 | 1,910 | ||||||
(Decrease)
Increase in cash
|
(116 | ) | 133 | |||||
Cash
at beginning of year
|
144 | 11 | ||||||
Cash
at end of year
|
$ | 28 | $ | 144 | ||||
Supplemental
cash flows information:
|
||||||||
Interest
paid
|
$ | 40 | $ | 32 |
(1) See
Note D
The
accompanying notes are an integral part of these financial
statements.
35
Notes
to Financial Statements
Integral
Vision, Inc.
Note A –
Nature of Business
Integral
Vision, Inc. develops, manufactures, and markets flat panel display inspection
systems to ensure product quality in the display manufacturing
process. We primarily inspect Microdisplays and small flat panel
displays, though the technology used is scalable to allow inspection of full
screen displays and components. Our customers and potential customers
are primarily large companies with significant investment in the manufacture of
displays. Nearly all of our sales originate in the United States,
Asia, or Europe. Our products are generally sold as capital
goods. Depending on the application, display inspection systems have
an indefinite life and are more likely to require replacement due to possible
technological obsolescence than from physical wear.
Major
Customers
The
nature of our product offerings may produce sales to one or a limited number of
customers in excess of 10% of total net sales in any one year. It is
possible that the specific customers reaching this threshold may change from
year to year. Loss of any one of these customers could have a
material impact on our results of operations. For 2009, sales to Qualcomm
represented 94% of net sales. Approximately $49,500 was due from Qualcomm at
December 31, 2009. For 2008, sales to Plastic Logic GmbH and Qualcomm
MEMS Technologies represented 51% and 37% of net sales, respectively.
Approximately $4,000 was due from these two customers at December 31,
2008.
Note B -
Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires us 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 year. Actual results could differ
from those estimates.
Cash
Equivalents
Cash and
cash equivalents consist of cash on deposit.
Accounts
Receivable
Trade
accounts receivable during the year primarily represent amounts due from
equipment manufacturers and end-users in North America, Asia and
Europe. At times, we maintain 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. An allowance for doubtful accounts was not required at
December 31, 2009 and 2008.
Inventories
Inventories
are stated at the lower of first-in, first-out (“FIFO”) cost or
market. Cost is computed using currently adjusted standards which
approximates actual costs on a FIFO basis. We assess the
recoverability of all inventory to determine whether adjustments for impairment
are required. At December 31, 2009 and 2008, inventories consisted of
the following amounts (net of an obsolescence allowance of $0 in 2009 and
$150,000 in 2008):
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Raw
materials
|
$ | 85 | $ | 187 | ||||
Work
in process
|
69 | 27 | ||||||
Finished
goods
|
36 | 111 | ||||||
$ | 190 | $ | 325 |
36
We
periodically perform an analysis of our inventory to determine if its cost
exceeds estimated net realizable value. Over the last several years,
given the market conditions and the direction of the Company, we discontinued
certain product lines and attempted to liquidate the remaining inventory related
to those product lines.
Property
and Equipment
Property
and equipment are 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 (building improvements - 5 years; other property and equipment - 3 to
10 years).
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). We continually review 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.
No
software development costs were capitalized during 2009 or
2008. Prior capitalized costs have been fully
amortized. These costs were primarily made up of payroll, fringe
benefits, and other direct expenses such as facilities
allocation. The software amortized over the period is for our
microdisplay inspection software toolbox including vision processing algorithms
and our patented sequence development and execution software. These
software components are used in the products we sell.
Patents
Total
patent costs incurred and capitalized were $36,000 and $9,000 in 2009 and 2008,
respectively. Patents are stated at cost less accumulated
amortization. Amortization of the patents amounted to $16,000 and
$12,000 in 2009 and 2008, respectively. These costs are amortized on
a straight-line basis over the estimated useful lives of the assets (not to
exceed 5 years).
Impairment
of Long-lived Assets
We review
our 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.
Deferred
Revenue
Deferred
revenue represents amounts periodically invoiced for sales orders in excess of
amounts recognized as revenues. Deferred revenue was $72,000 and $656,000 at
December 31, 2009 and 2008, respectively.
Fair
Value of Financial Instruments
Our
financial instruments are cash and cash equivalents, accounts receivable,
accounts payable, notes payable, and long-term debt. The recorded values of cash
and cash equivalents, accounts receivable, and accounts payable approximate
their fair values based on their short-term nature. The recorded values of notes
payable and long-term debt approximate their fair values, as interest
approximates market rates.
37
Revenue
Recognition
We
recognize revenue in accordance with FASB ASC 605 “Revenue Recognition”, Staff
Accounting Bulletin No. 101 (“SAB 101”), and Staff Accounting Bulletin No. 104
(“SAB 104”) “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.
We
recognize revenue at the time of shipment for product sales where the customer’s
acceptance criteria can be demonstrated as met prior to shipment and where title
transfers on shipment. We recognize revenue at the time of final
acceptance at the customer site when title does not transfer on shipment or if
acceptance criteria at the customer site are substantially different than
acceptance criteria for shipment. We recognize revenue for product
sales with no specific customer acceptance criteria, including spare parts, on
shipment. Revenue from service contracts is recognized over the term
of the contract. Revenue is reported net of sales commissions which
were $136,000 and $27,000 in 2009 and 2008, respectively.
Revenue
is also derived through business agreements for product
development. We conduct specified product development projects
related to one of our principal technology specializations for an agreed-upon
fee. Typically, the agreements require “best efforts” with no
specified performance criteria. Revenue from product development
agreements, where there are no specific performance terms, are recognized in
amounts equal to the amounts expended on the programs. Generally, the
agreed-upon fees contemplate reimbursing us, after our agreed-upon cost share,
if any, for costs considered to be associated with project
activities. These include expenses for direct product development and
research, operating expenses, general and administrative expenses, and
depreciation. Accordingly, expenses related to product development
agreements are recorded as cost of revenues from product development
agreements.
Supplemental
Disclosure of Non-cash Investing and Financing Activities
During
2009, we transferred $113,000 of inventory to production and engineering
equipment.
During
2009, we exchanged $110,000 of Class 2 Notes for $110,000 of Class 3 Notes.
During 2008, we exchanged $3,280,000 of Class 2 Notes for $3,280,000 of Class 3
Notes and exchanged 139,000 of Class 3 Notes for 139,000 of Class 2
Notes.
During
2009, we issued $312,000 of Class 3 Notes in settlement of interest. During
2008, we issued $157,000 of Class 3 Notes in settlement of
interest.
During
2009, we issued $14,000 of Class 2 Notes in settlement of interest.
Concentrations
of Credit and Other Risk
Financial
instruments that potentially subject us to concentrations of credit risk consist
principally of accounts receivable. A significant portion of our
customers are located in Asia, primarily Taiwan and Korea, and in Europe.
Therefore, our 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. We generally do not require
collateral for most of our trade accounts receivable. For sales to some of our
customers in certain geographic regions, we require letters of credit.
Substantially all of our revenue is invoiced in U.S. dollars. For 2009 and 2008,
sales to four of the Company’s customers represented 99% and 96%, respectively,
of our total net revenue. We believe our credit evaluation and
monitoring mitigates our credit risk.
Advertising
Advertising
costs are expensed as incurred. Advertising costs were approximately
$17,000 and $27,000 in 2009 and 2008, respectively.
Shipping
and Handling Costs
Our
shipping and handling costs are included in cost of sales for all periods
presented.
38
Income
Taxes
In
accordance with FASB ASC Topic 740 “Income Taxes,” we assess our uncertain tax
positions for tax years that are still open for examination. Because
of our historical significant net operating losses, we have not been subject to
income tax since 1995. There were no unrecognized tax benefits during
all of the periods presented. We classify all interest and penalties
as income tax expense. We did not have any accrued interest and
penalties related to uncertain tax positions as of December 31,
2009. We file income tax returns in the United States federal
jurisdiction and various state jurisdictions. The tax years 2006
through 2009 remain open to examination by taxing jurisdictions to which we are
subject. As of December 31, 2009, we did not have any tax
examinations in process.
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 deferred tax
assets if it is more likely than not that these items will either expire before
we are able to realize their benefit, or future deductibility is
uncertain. All deferred tax assets are fully offset by a valuation
allowance because of our history of losses.
Common
Stock Options
We
account for our share-based compensation plans according to the provisions of
FASB ASC Topic 718 “Stock Compensation”. Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and expensed over the expected vesting
period. FASB ASC Topic 718 “Stock Compensation” requires excess tax
benefits be reported as a financing cash inflow rather than as a reduction of
taxes paid.
Foreign
Currency Transactions
Most
sales are made in US dollars. Occasionally, a sale or purchase may be
made in Euros or Japanese Yen. Any transaction gains and losses are
reflected in operating results and are not significant.
Reclassifications
Certain
amounts have been reclassified in prior periods’ statements to conform to the
current year's presentation.
Contingencies
and Litigation
We make
an assessment of the probability of an adverse judgment resulting from current
and threatened litigation. We accrue the cost of an adverse judgment if, in our
estimation, an adverse settlement is probable and management can reasonably
estimate the ultimate cost of such litigation. We had no such
accruals at December 31, 2009 and 2008.
Recently
Issued Accounting Standards
Codification
Effective
July 1, 2009, the Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”) became the single official source of
authoritative, nongovernmental generally accepted accounting principles (“GAAP”)
in the United States. The historical GAAP hierarchy was eliminated and the
ASC became the only level of authoritative GAAP, other than guidance issued by
the Securities and Exchange Commission. Our accounting policies were not
affected by the conversion to ASC.
39
ASU
2010-06
Accounting
Standards Update (“ASU”) 2010-06, “Improving Disclosures about Fair Value
Measurements,” requires new disclosures about recurring or nonrecurring
fair-value measurements including significant transfers into or out of Level 1
and Level 2 fair-value classifications. It also requires information on
purchases, sales, issuances and settlements on a gross basis in the
reconciliation of Level 3 fair-value assets and liabilities. These disclosures
are required for fiscal years beginning on or after December 15, 2009. The
ASU also clarifies existing fair-value measurement disclosure guidance about the
level of disaggregation, inputs and valuation techniques, which are required to
be implemented in fiscal years beginning on or after December 15, 2010.
Since the requirements of this ASU only relate to disclosure, the adoption of
the guidance will not have any effect on our financial position, results of
operations or cash flows.
ASU
2009-14
ASU
2009-14, “Certain Revenue Arrangements that Include Software Elements,” amends
ASC Subtopic 985-605, “Software-Revenue Recognition,” to exclude from its scope
tangible products that contain both software and non-software components that
function together to deliver a product’s essential functionality. The ASU is
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early
adoption is permitted. If a company elects early adoption and the period of
adoption is not the beginning of its fiscal year, the requirements must be
applied retrospectively to the beginning of the fiscal year. While we are still
analyzing the effects of the adoption of ASU 2009-13, we do not believe that the
adoption of ASU 2009-13 will have a material effect on our financial position,
results of operations or cash flows.
ASU
2009-13
ASU
2009-13, “Multiple-Delivered Revenue Arrangements,” amends ASC Subtopic 650-25,
“Revenue Recognition – Multiple Element Arrangements,” to eliminate the
requirement that all undelivered elements have vendor-specific objective
evidence (“VSOE”) or third-party evidence (“TPE”) before an entity can recognize
the portion of an overall arrangement fee that is attributable to items that
already have been delivered. In the absence of VSOE or TPE of fair value for one
or more delivered or undelivered elements in a multiple element arrangement,
entities will be required to estimate the selling prices of those elements. The
overall arrangement fee will be allocated to each element (both delivered and
undelivered items) based on their relevant selling prices, regardless of whether
those selling prices are evidenced by VSOE or TPE or are based on the entity’s
estimated selling price. Upon adoption, application of the “residual method”
will no longer be permitted and entities will be required to disclose more
information about their multiple-element revenue arrangements. The ASU is
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early
adoption is permitted. If a company elects early adoption and the period of
adoption is not the beginning of its fiscal year, the requirements must be
applied retrospectively to the beginning of the fiscal year. While we are still
analyzing the effects of the adoption of ASU 2009-13, we do not believe that the
adoption of ASU 2009-13 will have a material effect on our financial position,
results of operations or cash flows.
ASU
2009-05
ASU
2009-05, “Fair Value Measurements and Disclosures (Topic 820) – Measuring
Liabilities at Fair Value,” amends ASC Topic 820, “Fair Value Measurements,” to
allow companies determining the fair value of a liability to use the perspective
of an investor that holds the related obligation as an asset. The new guidance
is effective for interim and annual periods beginning after August 27,
2009, and applies to all fair-value measurements of liabilities required by
GAAP. No new fair-value measurements are required. We do not believe that the
adoption of this ASU will have a material effect on our financial position,
results of operations or cash flows.
Note C -
Long-Term Debt and Other Financing Arrangements
As of
January 1, 2009, we had $1,786,000 of outstanding Class 2 Notes. The Class 2
Notes are working capital notes secured by accounts receivable, inventory, and
intellectual property and have been issued primarily to related parties. The
Class 2 Notes bear interest at 12%. The maturities of these notes were scheduled
to be $210,000 in the first quarter 2009, $857,500 on July 1, 2009 and $718,500
on October 1, 2009. $10,000 of these notes were paid when due and the
balance of these notes have had their maturity dates extended.
See Note N – Subsequent Events for recent activity associated with
the maturity dates of Class 2 Notes.
40
As of
January 1, 2009, we also had $3,671,000 of outstanding Class 3 Notes. The Class
3 Notes bear interest at 8% that is payable January 1 and July 1 of each year.
The Notes are secured by our intellectual property and have been issued
primarily to related parties. Also, the Notes are convertible into the Company’s
common stock at $0.25 per share and mature on July 1, 2010. The Board of
Directors (“Board”), effective December 16, 2008, amended the Fifth Amended Note
and Warrant Purchase Agreement to provide for any Class 3 Notes issued after
December 15, 2008 to bear interest at 12% and to be immediately convertible into
common shares at no less than $0.15 per share.
On
January 8, 2009, we issued $159,733 of Class 3 Convertible Notes and paid cash
of $19,385 for payment of interest due January 1, 2009 on previously issued
Class 3 Convertible Notes. The $159,733 of Class 3 Convertible Notes, bear
interest at 12%, are convertible at $0.15 per share and are due July 1, 2010.
The payment of the interest with Class 3 Convertible Notes with a right to
convert immediately at $0.15 per share, which was less than the fair market
value of the stock on the date of issuance, resulted in a beneficial conversion
feature of $10,649. This is reflected in the Statements of
Operations as “Extinguishment loss from exchange of debt
instruments”.
On
February 2, 2009, the Board and the Note Holders approved an Amendment to the
Fifth Amended and Restated Note and Warrant Purchase Agreement. This amendment
(a) increased the total allowable secured debt from $6,000,000 to $7,000,000;
(b) allowed for the accrual rate of warrants earned by Class 2 Notes to be set
by the Board; (c) allowed for a minimum accrual period of 30 days for Class 2
Notes earning warrants; and (d) allowed the Company to elect to issue, or the
Class 2 Note Holder to elect to receive, warrants accruing once every 30
days. The Board further authorized the rate of warrant accrual to be
set at five (5) warrants per year per dollar invested at an exercise price of
$0.15 per share. During the quarter ended March 31, 2009, we issued $780,000 of
new Class 2 Notes of which $450,000 receive 10% interest and warrants and
$330,000 of which receive 12% interest and no warrants. $680,000 of Class 2
Notes issued in the first quarter of 2009 were scheduled to mature in April of
2009 and $100,000 of Class 2 Notes issued in the first quarter of 2009 were
scheduled to mature in June of 2009 and have been subsequently
extended. See Note N – Subsequent Events in the Notes
to Financial Statements for recent activity associated with the
maturity of Class 2 Notes. For the quarter ended March 31, 2009, we
issued 184,931 warrants and accrued 28,083 warrants that were earned but not
issued as additional interest. The value of the issued warrants was $7,807 and
the value of accrued warrants was $1,410 as determined using the Black-Scholes
option-pricing model. A Class 2 Note issued December 31, 2008 in the amount of
$110,000 matured on January 23, 2009 and was exchanged along with its related
accrued interest for a Class 3 Convertible Note in the amount of $110,289 due
July 1, 2010. The exchange of the Class 2 Note and related interest
for the Class 3 Note with a right to convert immediately at $0.15 per share,
which was less than the fair market value of the stock on the date of exchange,
resulted in a beneficial conversion feature of $7,353. This is
reflected in the Statements of Operations as “Extinguishment loss from exchange
of debt instruments”.
On June
10, 2009, the Board and the Note Holders approved an Amendment to the Fifth
Amended and Restated Note and Warrant Purchase Agreement. This
amendment (a) increased the total allowable secured debt from $7,000,000 to
$8,000,000; (b) allowed for a minimum accrual period of 90 days for Class 2
Notes earning warrants; (c) authorized the offering of $800,000 of Class 2 Notes
with a 90 day minimum accrual period and $500,000 of Class 2 Notes with a 30 day
minimum accrual period; (d) and authorized the offering of up to $1,500,000 of
Class 3 Notes at no more than 12% interest convertible into shares at no less
than $0.15 per share.
On July
1, 2009, we extended the terms on $783,000 of Class 2 Notes due on July 1, 2009
to October 1, 2009 and issued 965,336 warrants (actual issue date was July 3,
2009) to purchase stock at $0.15.
On July
3, 2009, we extended the terms on $100,000 of Class 2 Notes due on July 3, 2009
to December 31, 2009 and issued 41,096 warrants to purchase stock at
$0.15.
On
September 16, 2009, the Board and the Note Holders approved an Amendment to the
Fifth Amended and Restated Note and Warrant Purchase Agreement. This
amendment (a) increased the total allowable secured debt from $8,000,000 to
$10,000,000; and (b) modified a paragraph limiting the future issuance of Common
Stock to except securities which are Notes or Warrants.
On
October 1, 2009, we extended the terms on $1,566,000 of Class 2 Notes due on
October 1, 2009 to January 15, 2010 and issued 1,040,425 associated warrants to
purchase stock at $0.15 on October 8, 2009. The remaining $5,000 of
notes due October 1, 2009 and associated interest were paid in
full.
41
On
December 21, 2009, we extended the terms on $1,289,112 of Class 2 Notes due on
December 31, 2009 to January 15, 2010.
During
the quarter ended June 30, 2009, we issued $819,112 of new Class 2 Notes of
which $694,112 were issued in payment of $680,000 of existing Class 2 Notes and
their accrued interest of $14,122. All of the new Class 2 Notes
receive 10% interest and warrants and mature December 31, 2009. For
the quarter ended June 30, 2009, we issued 379,773 warrants and accrued 613,685
warrants that were earned but not issued. The value of the issued warrants was
$34,543 and the value of the accrued warrants was $10,220 as determined using
the Black-Scholes option-pricing model. We also paid off $100,000 of
Class 2 Notes with accrued interest of $394.
During
the quarter ended September 30, 2009, we issued $270,000 of new Class 2
Notes. All of the new Class 2 Notes receive 10% interest and warrants
and mature December 31, 2009. For the quarter ended September 30,
2009, we issued 1,117,390 warrants (includes the 1,006,432 of warrants issued in
July 2009) and accrued 1,754,776 warrants that were earned but not issued. The
value of the issued warrants was $19,519 and the value of accrued but not issued
warrants was $29,539 as determined using the Black-Scholes option-pricing model.
We also paid off $55,000 of Class 2 Notes with accrued interest of
$5,738.
During
the quarter ended December 31, 2009, we issued $150,000 of new Class 2
Notes. All of the new Class 2 Notes received 10% interest and
warrants and mature December 31, 2009. For the quarter ended December
31, 2009, we issued 1,102,068 warrants (includes the 1,040,425 of warrants
issued on October 1, 2010) and accrued 4,114,888 warrants that were earned but
not issued. The value of the issued warrants was $24,730 and the
value of accrued but not issued warrants was $71,940 as determined using the
Black-Scholes option-pricing model.
$1,566,000
of Class 2 notes have the right to convert the face value of their note and
accrued interest of $481,057 (as of March 31, 2010) into Class 3 Convertible
Notes at any time through April 30, 2010, provided there are sufficient
available authorized shares that all such notes and interest could convert if
they desired. Such right is presently suspended because there are not
sufficient shares available if all of the notes were to be converted. We
do not expect any of these Class 2 Notes to be converted prior to the expiration
of the right on April 30, 2010.
See Note
N – Subsequent Events for recent activity associated with the issuance of Class
2 Notes.
The
following table summarizes Class 2 Note activity for the year ended December 31,
2009:
Notes Issued
for Cash
|
Class 3 Notes
Issued for
Class 2 Note
Payment
|
Cash
Redemption
|
Notes Issued
for Interest
Payment
|
Class 2 Note
Balance
|
Warrants
Issued for
Interest
|
|||||||||||||||||||
Balance
January 1, 2009
|
$ | - | $ | - | $ | - | $ | - | $ | 1,786,000 | $ | - | ||||||||||||
Quarter
Ended March 31, 2009
|
780,000 | (110,000 | ) | - | - | 670,000 | 7,807 | |||||||||||||||||
Quarter
Ended June 30, 2009
|
125,000 | - | (100,000 | ) | 14,112 | 39,112 | 34,543 | |||||||||||||||||
Quarter
Ended September 30, 2009
|
270,000 | - | (55,000 | ) | - | 215,000 | 19,519 | |||||||||||||||||
Quarter
Ended December 31, 2009
|
150,000 | - | (5,000 | ) | - | 145,000 | 24,730 | |||||||||||||||||
Balance
December 31, 2009
|
$ | 1,325,000 | $ | (110,000 | ) | $ | (160,000 | ) | $ | 14,112 | $ | 2,855,112 | $ | 86,599 |
During
the year ended December 31, 2009, we sold $429,000 of Class 3 Convertible Notes
and also issued $311,392 of Class 3 Convertible Notes for the payment of
interest. The Notes bear interest at 12%, mature July 1, 2010, and
are convertible at $0.15 per share.
42
The
following table summarizes Class 3 Note activity for the year ended December 31,
2009:
Notes
Issued For
Cash
|
Exchange of
Class 2 Note
and Related
Interest
|
Cash
Redemption
|
Notes Issued
For Interest
|
Class 3 Note
Balance
|
||||||||||||||||
Balance
January 1, 2009
|
$ | - | $ | - | $ | - | $ | - | $ | 3,671,644 | ||||||||||
Quarter
Ended March 31, 2009
|
90,000 | 110,000 | - | 160,022 | 360,022 | |||||||||||||||
Quarter
Ended June 30, 2009
|
19,000 | - | - | - | 19,000 | |||||||||||||||
Quarter
Ended September 30, 2009
|
170,000 | - | - | 151,659 | 321,659 | |||||||||||||||
Quarter
Ended December 31, 2009
|
150,000 | - | - | - | 150,000 | |||||||||||||||
Balance
December 31, 2009
|
$ | 429,000 | $ | 110,000 | $ | - | $ | 311,681 | $ | 4,522,325 |
During
the quarter ended September 30, 2009, we issued $19,000 of unsecured Notes to
Officers of the Company. The Notes bear interest at 12% and are due December 31,
2009. The notes were paid in December of 2009.
On
September 15, 2008, we entered into Exchange Agreements with the Note Holders
which changed the terms of and/or exchanged certain notes whereby:
|
a)
|
The
holders of Class 2 Notes earning 10% interest and warrants elected to
receive the additional 2% interest and cease accruing warrants effective
January 2, 2008, and requested that all outstanding earned warrants be
issued as of that date. This resulted in the issuance of
898,610 warrants with a conversion price of $0.25 per share with a value
of $243,163 determined using the Black-Scholes option-pricing
model. See Note I – Share Based Compensation for information on
the re-pricing of previously issued warrants associated with
debt.
|
|
b)
|
The
holders of the Class 2 Notes issued prior to December 2, 2007 (i)
exchanged $1,477,000 of their outstanding Class 2 Notes and associated
accrued interest of $90,800 for Class 3 Notes due July 1, 2010 and
convertible into common stock at $0.25 per share; (ii) amended the
maturity date on $718,500 of their outstanding Class 2 Notes to July 1,
2009; and (iii) amended the maturity date on the remaining $718,500 of
their outstanding Class 2 Notes to October 1, 2009. This
resulted in the issuance of $1,567,800 of Class 3 Notes. The
exchange of the Class 2 Notes for the Class 3 Notes with a right to
convert immediately at $0.25 per share, which was less than the fair
market value of the stock on the date of exchange, resulted in a
beneficial conversion feature of $1,128,817. This was reflected
in the Statements of Operations as “Extinguishment loss from modification
and exchange of debt instruments”.
|
|
c)
|
The
holders of $1,803,000 of Class 2 Notes issued after December 2, 2007
exchanged their outstanding Notes and associated accrued interest of
$66,846 for Class 3 Notes due July 1, 2010. The exchange of the
Class 2 Notes for the Class 3 Notes with a right to convert immediately at
$0.25 per share, which was less than the fair market value of the stock on
the date of exchange, resulted in a beneficial conversion feature of
$1,346,289. This was reflected in the Statements of Operations as
“Extinguishment loss from modification and exchange of debt
instruments”.
|
|
d)
|
The
holders $139,000 of Class 3 Notes issued in 2004 exchanged their Class 3
Notes for Class 2 Notes earning 12% interest. $69,500 of these
notes were due July 1, 2009 and $69,500 were due October 1,
2009.
|
|
e)
|
The
holders of $234,000 of Class 3 Notes issued in 2004 amended their terms to
be the same as the newly issued Class 3 Notes. The change in
the strike price to $0.25 with a right to convert immediately resulted in
a beneficial conversion feature of $168,480. This was reflected in the
Statements of Operations as “Extinguishment loss from modification and
exchange of debt instruments”. These notes are now due July 1,
2010.
|
For more
information on the Exchange Agreements, please refer to Note I – Share Based
Compensation.
43
The
aggregate amount of outstanding Class 2 and Class 3 Notes is $7,377,432 as of
December 31, 2009.
A summary
of the Company’s debt obligations is as follows as of December 31:
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Short
Term Notes Payable:
|
||||||||
Class
2 Notes
|
$ | 2,855 | $ | 1,786 | ||||
Class
3 Notes
|
4,522 | - | ||||||
Net
Short Term Notes Payable
|
$ | 7,377 | $ | 1,786 | ||||
Long
Term Notes Payable:
|
||||||||
Class
2 Notes
|
$ | - | $ | - | ||||
Class
3 Notes
|
- | 3,671 | ||||||
Total
Long Term Notes Payable
|
$ | - | $ | 3,671 |
See Note
N – Subsequent Events for recent activity associated with Class 2 and Class 3
Notes.
Note D -
Related Party Transactions
The
portion of debt described in Note C above that has been issued to Directors and
to certain shareholders that own more than five percent (5%) of the outstanding
shares of common stock of the Company is disclosed in the table
below.
Greater
than 5% shareholder
|
Director
|
|||||||||||||||
John
Hunter
|
John
R. Kiely, III.
|
Max
A. Coon
|
Total
|
|||||||||||||
Outstanding
balance as of December 31, 2009
|
||||||||||||||||
Class
2 Notes
|
$ | 1,656,112 | $ | 525,000 | $ | 125,000 | ||||||||||
Class
3 Notes
|
$ | 1,430,061 | $ | 1,268,504 | $ | 286,118 | ||||||||||
Total
|
$ | 3,086,173 | $ | 1,793,504 | $ | 411,118 | $ | 5,290,795 | ||||||||
Amount
of principal paid during year
|
||||||||||||||||
2009
|
$ | - | $ | 100,000 | $ | - | ||||||||||
2008
|
$ | 88,000 | $ | - | $ | - | ||||||||||
Amount
of interest paid during year
|
||||||||||||||||
Cash
2009
|
$ | - | $ | 395 | $ | - | ||||||||||
Notes
issued in payment of interest 2009
|
$ | 134,802 | $ | 108,238 | $ | 24,981 | ||||||||||
Value
of warrants issued 2009
|
$ | 58,404 | $ | 13,221 | $ | 3,148 | ||||||||||
Total
2009
|
$ | 193,206 | $ | 121,854 | $ | 28,129 | $ | 343,189 | ||||||||
Cash
2008
|
$ | 567 | $ | - | $ | - | ||||||||||
Notes
issued in payment of interest 2008
|
$ | 66,370 | $ | 60,267 | $ | 11,137 | ||||||||||
Value
of warrants issued 2008
|
$ | 187,561 | $ | 778 | $ | 55,602 | ||||||||||
Total
2008
|
$ | 254,498 | $ | 61,045 | $ | 66,739 | $ | 382,282 | ||||||||
Accrued
interest at December 31
|
||||||||||||||||
Cash
2009
|
$ | 294,460 | $ | 205,117 | $ | 51,360 | ||||||||||
Value
of warrants accrued not issued 2009
|
$ | 56,690 | $ | 5,029 | $ | 1,197 | ||||||||||
Total
2009
|
$ | 351,150 | $ | 210,146 | $ | 52,557 | $ | 613,853 | ||||||||
Cash
2008
|
$ | 167,822 | $ | 151,333 | $ | 39,033 | ||||||||||
Value
of warrants accrued not issued 2008
|
$ | - | $ | - | $ | - | ||||||||||
Total
2008
|
$ | 167,822 | $ | 151,333 | $ | 39,033 | $ | 358,188 |
Interest
expense for the fiscal year ended December 31, 2009 was $814,000, for which
$545,790 and $39,941 were for related parties and Directors,
respectively. Interest expense for the fiscal year ended December 31,
2008 was $921,000, for which $695,497 and $95,061 were for related parties and
Directors, respectively.
44
For more
information on Class 2 and Class 3 notes, see Note C – Long Term Debt and Other
Financing.
On
September 15, 2008, John Hunter exchanged Class 2 Notes for Class 3 Notes with
the right to convert immediately at $0.25 per share, which was less than the
fair market value of the stock on the date of exchange, which resulted in a
beneficial conversion feature of $1,007,078. This was reflected in
the statement of operations as “Extinguishment loss from modification and
exchange of debt instruments”. On the same date, John R. Kiely, III exchanged
Class 2 Notes for Class 3 Notes with the right to convert immediately at $0.25
per share, which was less than the fair market value of the stock on the date of
exchange, which resulted in a beneficial conversion feature of
$892,397. This was reflected in the statement of operations as
“Extinguishment loss from modification and exchange of debt instruments”. On the
same date, Max A. Coon exchanged Class 2 Notes for Class 3 Notes with the right
to convert immediately at $0.25 per share, which was less than the fair market
value of the stock on the date of exchange, which resulted in a beneficial
conversion feature of $143,119. This was reflected in the statement
of operations as “Extinguishment loss from modification and exchange of debt
instruments”. The aggregate of these related party transactions was
$2,042,594.
On
September 15, 2008, we modified the strike price of 1,850,000 warrants from
$1.00 to $0.001 and issued 3,600,000 warrants for the purchase of common stock
at $0.001 in the aggregate to Special Situations Cayman Fund, L.P.,
Special Situations Private Equity Fund, L.P., Special Situations Technology
Fund, L.P., and Special Situations Technology Fund II, L.P., and recorded an
expense for the modification and issuance of warrants of
$2,186,767. On September 15, 2008, we modified the strike price of
1,250,000 warrants from $1.00 to $0.001 and issued 3,000,000 warrants for the
purchase of common stock at $0.001 to Bonanza Master Fund, Ltd., and recorded an
expense for the modification and issuance of warrants of
$1,716,190. There were no such transactions during the fiscal year
ended December 31, 2009. The aggregate of these related party transactions was
$3,902,957.
Note E -
Income Taxes
The
Company establishes valuation allowances in accordance with the provisions of
FASB ASC Topic 740, “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.
As of
December 31, 2009, the Company has cumulative net operating loss carryforwards
approximating $53.0 million (expiring: $6.9 million in 2010, $3.9 million in
2011, $3.8 million in 2012, $2.3 million in 2018, $6.6 million in 2020, $1.9
million in 2021, $5.7 million in 2022, $5.5 million in 2023, $2.7 million in
2024, $2.7 million in 2025, $2.9 million in 2026, $3.0 million in 2027, $2.9
million in 2028, and $2.2 million in 2029) for federal income tax purposes
available to reduce taxable income of future periods and unused investment,
alternative minimum tax, and research and development tax credits approximating
$331,000. Additionally, the Company’s inactive subsidiary in the
United Kingdom has cumulative net operating loss carryforwards approximating
$3.8 million that do not expire. For financial reporting purposes,
the net operating losses and credits have been offset against net deferred tax
liabilities based upon their expected amortization during the loss carryforward
period. The remaining valuation allowance is necessary due to the
uncertainty of future income estimates. The valuation allowance
increased $777,000 in 2009 and $2,993,000 in 2008.
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:
45
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Deferred
tax liabilities:
|
||||||||
Tax
depreciation
|
$ | 16 | $ | 21 | ||||
Total
deferred tax liabilities
|
16 | 21 | ||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
18,085 | 17,318 | ||||||
Credit
carryforwards
|
331 | 331 | ||||||
Inventory
reserve
|
(51 | ) | 51 | |||||
Accrued
vacation
|
18 | 21 | ||||||
Warranty
reserve
|
37 | 29 | ||||||
Accrued
interest
|
263 | 152 | ||||||
Deferred
revenue
|
24 | 223 | ||||||
Stock
compensation expense
|
411 | 221 | ||||||
Warrants
issued to PIPE investors
|
1,434 | 1,434 | ||||||
Other
|
4 | 4 | ||||||
Total
deferred tax assets
|
20,556 | 19,784 | ||||||
Valuation
allowance for deferred tax assets
|
20,540 | 19,763 | ||||||
Net
deferred tax assets
|
16 | 21 | ||||||
Net
deferred taxes
|
$ | - | $ | - |
The
reconciliation of income taxes computed at the U.S. federal statutory tax rates
to income tax expense (credit) is as follows for the years ended December
31:
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Net
income (loss)
|
$ | (2,761 | ) | $ | (10,733 | ) | ||
Foreign
net income (loss)
|
- | - | ||||||
U.S.
net income (loss)
|
$ | (2,761 | ) | $ | (10,733 | ) | ||
Tax
provision (benefit) at U.S. statutory rates
|
$ | (939 | ) | $ | (3,649 | ) | ||
Change
in valuation allowance
|
777 | 2,993 | ||||||
Extinguishment
loss from exchange of debt
|
6 | 898 | ||||||
Stock
compensation expense
|
100 | (221 | ) | |||||
Other
|
56 | (21 | ) | |||||
$ | - | $ | - |
There
were no income tax payments made in 2009 or 2008.
We
account for uncertain tax positions under the provisions of FASB ASC Topic 740,
”Income Taxes”. We have not identified any material uncertain tax positions for
the open tax years 2006 through 2009. Therefore, no unrecognized tax benefits
were presented for the years ended 2009 and 2008. Because of our
historical significant net operating losses, we have not been subject to income
taxes since 1995.
We
classify all interest and penalties related to uncertain tax positions as income
tax expense. We did not have any accrued interest and penalties
related to uncertain tax positions as of December 31, 2009 and
2008.
We file
income tax returns in the United States federal jurisdiction and various state
jurisdictions. The tax years 2006 through 2009 remain open to
examination by taxing jurisdictions to which we are subject. As of
December 31, 2009, we did not have any tax examinations in
process.
46
Note F –
Loss per Share
Basic net
loss per common share is computed by dividing net loss applicable to common
shareholders by the weighted-average number of common shares outstanding during
the year. Diluted net loss per common share is determined using the
weighted-average number of common shares outstanding during the year, adjusted
for the dilutive effect of common stock equivalents, consisting of shares that
might be issued upon the exercise of common stock options and purchase
warrants.
The
following table sets forth the computation of basic and diluted loss per
share:
2009
|
2008
|
|||||||
(in
thousands, except per share data)
|
||||||||
Numerator
for basic and diluted loss per share - loss available to common
stockholders
|
||||||||
Net
loss
|
$ | (2,761 | ) | $ | (10,733 | ) | ||
*there
was no effect of dilutive securities, see below
|
||||||||
Denominator
for basic and diluted loss per share - weighted average
shares
|
30,268 | 29,566 | ||||||
*there
was no effect of dilutive securities, see below
|
||||||||
Basic
and diluted loss per share:
|
||||||||
Net
loss
|
$ | (0.09 | ) | $ | (0.36 | ) |
Warrants
and options outstanding were not included in the computation of diluted earnings
per share because the inclusion of these instruments would have an anti-dilutive
effect. For additional disclosures regarding stock options and
warrants, see Note I.
Note G -
Employee Savings Plan
We have
an Employee Savings Plan covering substantially all employees. We
contribute $0.20 to the Plan for every dollar contributed by the employees up to
6% of their compensation. The Plan also provides for discretionary
contributions by the Company as determined annually by our Board of
Directors. The contributions we charged to operations under the Plan
were approximately $8,600 and $10,000 for 2009 and 2008,
respectively.
Note H –
Lease Commitments and Contingencies
We use
equipment and office space under operating lease agreements requiring rental
payments approximating $103,000 in 2010, $4,000 in 2011 and $3,000 in
2012. Rent expense charged to operations approximated $107,000 and
$105,000 in 2009 and 2008, respectively. Our operating lease for
office and manufacturing space expires January 1, 2011 and an extension or
renewal will need to be negotiated.
Note I –
Share-Based Compensation
We
currently have two active stock option plans, the 2004 Employee Stock Option
Plan (“2004 Plan”) and the 2008 Integral Vision, Inc. Equity Incentive Plan
(“2008 Plan”) (collectively the “Plans”). The purpose of the Plans
generally is to retain and attract persons of appropriate education, experience
and ability to serve as our employees, to encourage a sense of proprietorship of
such persons, and to stimulate an active interest in our development and
financial success.
The 2004
Plan is designed to promote the interests of the Company and its shareholders by
providing a means by which the Company can grant equity-based incentives to
eligible employees of the Company or any Subsidiary as well as non-employee
directors, consultants, or advisors who are in a position to contribute
materially to the Company’s success (“Participants”). The Plan
permits the Compensation Committee of the Company's Board of Directors to grant
Incentive Stock Options and Non-Qualified Stock Options. The maximum
number of shares cumulatively available is 1,000,000
shares.
47
The 2008
Plan is designed to promote the interests of the Company and its shareholders by
providing a means by which the Company can grant equity-based incentives to
eligible employees of the Company or any Subsidiary as well as non-employee
directors, consultants, or advisors who are in a position to contribute
materially to the Company’s success (“Participants”). The Plan
permits the Compensation Committee of the Company's Board of Directors to grant
Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock, and
Shares. The maximum number of shares cumulatively available is
4,828,000 plus (i) any shares that are forfeited or remain unpurchased or
undistributed upon termination or expiration of the awards from the Plan or
options from the 2004 Plan and (ii) any shares exchanged as full or partial
payment for the exercise price of any award under the 2008 Plan. On March 24,
2009, on the recommendation of the Compensation Committee, the Board of
Directors approved amending and restating the 2008 Integral Vision, Inc. Equity
Compensation Plan to provide for an additional 2,500,000 shares for awards under
the Plan of which an additional 1,500,000 may be awarded over the two year
period beginning March 24, 2009 to the Company’s Chief Executive
Officer. The shareholders approved the amendment and restatement at
the annual shareholders meeting held May 20, 2009. As of December 31,
2009, 2,328,000 Stock Option shares and 1,300,000 Restricted Shares have been
granted from the 2008 Equity Incentive Plan leaving a balance of 3,700,000
shares available for future grants.
The Plans
are administered by the Compensation Committee of the Board of Directors (the
“Committee”). The Committee determines which eligible employees will
receive awards, the timing and manner of the grant of such option awards, the
exercise price of the stock options (which may not be less than market value on
the date of grant) and the number of shares. We may at any time amend
or terminate the Plans, however no amendment that would impair the rights of any
participant with respect to outstanding grants can be made without the
participant’s prior consent.
The
Compensation Committee of the Board of Directors on January 1, 2009 awarded
116,000 shares of restricted stock to a certain officer of the
Company. The issuance resulted in an expense of $18,560, which was recognized
ratably as compensation expense over the nine month vesting period.
We
granted 2,426,000 options and 1,184,000 shares of restricted stock to employees
during 2008. We also exchanged and repriced 1,070,000 previously issued options
under the 2004 Plan.
The
Compensation Committee of the Board of Directors on January 22, 2008 granted
129,000 options with an exercise price of $0.13 per share to certain officers of
the Company. The issuance resulted in an expense of $11,278, which was
recognized ratably as compensation expense over the one-year vesting
period.
On
February 15, 2008, the Compensation Committee of the Board of Directors approved
a plan to offer key employees the opportunity to surrender certain 2004 Plan
options in exchange for replacement 2004 Plan options effective February 15,
2008. The replacement options “cliff vest” 50% after 1 year and the
balance after 2 years. The program received 100%
participation. 942,000 options with an average exercise price
of $0.75 were surrendered and 942,000 options with an exercise price of $0.26
were issued as replacements. The exchange resulted in an additional
expense of $53,513 which is recognized ratably as compensation expense over the
remaining vesting period from February 15, 2008 to February 15, 2010 along with
the remaining $85,438 of unamortized compensation expense for the unvested
portion of the options exchanged.
On April
3, 2008, the Compensation Committee of the Board of Directors approved a plan to
offer key employees the opportunity to surrender 128,000 options in exchange for
replacement options effective April 4, 2008. The replacement options “cliff
vest” 50% after 1 year and the balance after 2 years. The program
received 100% participation. The exchange resulted in an expense of
$13,188, which is recognized ratably as compensation expense over the vesting
period from April 4, 2008 to April 4, 2010.
On May 1,
2008, the Compensation Committee of the Board of Directors granted options on
97,000 shares with an exercise price of $0.22 to certain key employees of the
Company. The options vest in 1 year and resulted in an expense of
$15,037, which was recognized ratably as compensation expense over the vesting
period from May 1, 2008 to May 1, 2009.
On May
16, 2008, the Compensation Committee of the Board of Directors granted options
on 1,000,000 shares with an exercise price of $0.17 to certain officers and
employees of the Company. The options vest in 1 year and resulted in an expense
of $119,978, which was recognized ratably as compensation expense over the
vesting period from May 16, 2008 to May 16, 2009.
48
On
September 17, 2008, the Compensation Committee of the Board of Directors granted
options on 1,200,000 shares with an exercise price of $0.30 to certain officers
of the Company. On the grant date, 500,000 options immediately vested which
resulted in the recognition of $108,227 of compensation expense. The remaining
700,000 options vest as follows: 1) 500,000 options with a fair value of
$108,227 will be expensed over a four month vesting period through December 31,
2008; 2) 140,000 options with a fair value of $30,303 will be expensed over a
twelve month vesting period through September 30, 2009 and 3) 60,000 options
with a fair value of $12,987 will be expensed over a twenty four month vesting
period through September 30, 2010.
On
September 17, 2008, the Compensation Committee of the Board of Directors granted
1,184,000 shares of restricted stock with a per share value of $0.30 to certain
key officers of the Company. The total compensation expense of $355,200 will be
amortized as compensation expense as follows: 1) 500,000 shares with a value of
$150,000 was expensed over a four month vesting period through December 31, 2008
and 684,000 shares with a value of $205,200 was expensed over a twelve month
vesting period through September 30, 2009.
The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model with the assumptions noted in the following
table. The fair value of all awards is amortized on a straight line basis over
the requisite service periods. The expected life of all awards
granted represents the period of time that they are expected to be
outstanding. The expected life is determined using historical and
other information available at the time of grant. Expected
volatilities are based on historical volatility of our common stock, and other
factors. The risk-free rate for periods within the contractual life
of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. No dividends are expected to be paid. We use
historical data to estimate pre-vesting option forfeitures.
The
values in the table below reflect weighted averages for stock awards made in the
designated years. There were no stock options awarded in
2009.
Year
Ended December 31
|
||||
2008
|
||||
Expected
Life (in years)
|
5.0 | |||
Expected
volatility
|
198.6 | % | ||
Risk-free
interest rate
|
2.8 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
forfeiture rate
|
0 | % |
A summary
of option activity under all Plans for the years ended December 31, 2009, and
2008 follows:
2009
|
2008
|
|||||||||||||||
Shares
|
Weighted
Average
Exercise Price
|
Shares
|
Weighted
Average
Exercise Price
|
|||||||||||||
(number
of shares in thousands)
|
||||||||||||||||
Outstanding
at January 1
|
3,795 | $ | 0.23 | 1,496 | $ | 0.71 | ||||||||||
Granted
|
0 | 0.00 | 3,496 | 0.24 | ||||||||||||
Exercised
|
0 | 0.00 | 0 | 0.00 | ||||||||||||
Expired
|
(10 | ) | 0.26 | (1,197 | ) | 0.75 | ||||||||||
Outstanding
at December 31 ($.10 to $0.30 per share)
|
3,785 | $ | 0.23 | 3,795 | $ | 0.23 | ||||||||||
Exercisable
($.10 to $.30 per share)
|
3,195 | $ | 0.23 | 1,299 | $ | 0.27 |
49
A summary
of the status of our nonvested shares as of December 31, 2009, and changes
during years ended December 31, 2009, and December 31, 2008, is presented
below:
2009
|
2008
|
|||||||||||||||
Shares
|
Weighted
Average Grant-
Date Fair Value |
Shares
|
Weighted
Average Grant-
Date Fair Value
|
|||||||||||||
Nonvested
at January 1
|
2,496,000 | $ | 0.27 | 650,000 | $ | 0.42 | ||||||||||
Granted
|
0 | 0.00 | 3,496,000 | 0.24 | ||||||||||||
Cancellations
|
(10,000 | ) | 0.26 | (650,000 | ) | 0.73 | ||||||||||
Vested
|
(1,896,000 | ) | 0.20 | (1,000,000 | ) | 0.30 | ||||||||||
Nonvested
at December 31
|
590,000 | $ | 0.25 | 2,496,000 | $ | 0.27 |
The
weighted average grant date fair value of options granted during 2008 was $0.24.
No options were granted in 2009.
The
following table summarizes share-based compensation expense for the years ended
December 31, 2009 and 2008 related to share-based awards under FASB ASC Topic
718 “Stock Compensation” as recorded in the Statements of Operations in the
following expense categories:
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Marketing
|
$ | 33 | $ | 85 | ||||
Engineering
and Development
|
49 | 163 | ||||||
General
and Administrative
|
211 | 402 | ||||||
Total
share-based compensation expense
|
$ | 293 | $ | 650 |
As of
December 31, 2009, we had $9,792 of unrecognized expense related to un-vested
share-options which will be recognized ratably as compensation
expense over the remaining vesting period through September
2010.
Additional
information regarding the range of exercise prices and weighted average
remaining life of options outstanding at December 31, 2009 and 2008
follows:
2009
|
2008
|
|||||||||||||||||||||||
Range of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
|
Number
Exercisable
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
|
Number
Exercisable
|
||||||||||||||||||
(number of shares in thousands)
|
(number of shares in thousands)
|
|||||||||||||||||||||||
$0.10
to $0.30
|
3,785 | 7.9 | 3,195 | 3,795 | 8.9 | 1,299 |
On
September 15, 2008, we entered into certain agreements with the holders of
securities issued under the Securities Purchase Agreement dated April 12, 2005
(the “PIPE Equity Investors”), and the holders of Class 2 and Class 3 Notes (the
“Note Holders”), whereby:
|
a)
|
The
strike price on 3,500,000 outstanding and immediately exercisable warrants
was changed from $1.60 to $0.001 resulting in a value of $1,273,392 as
determined using the Black-Scholes option-pricing model. This
is reflected in the Statement of Operations for 2008 as “Modification and
issuance of warrants to PIPE Equity
Investors.”
|
50
|
b)
|
7,000,000
new and immediately exercisable warrants were issued with a strike price
of $0.001 resulting in a value of $2,943,283 as determined using the
Black-Scholes option-pricing model. This is reflected in the
Statement of Operations for 2008 as “Modification and issuance
of warrants to PIPE Equity
Investors.”
|
|
c)
|
The
strike price on 1,209,542 outstanding and immediately exercisable warrants
issued to the Note Holders was reduced from $1.00 to $0.25 resulting in a
value of $229,048 which was determined using the Black-Scholes
option-pricing model. This is reflected as “Interest Expense”
in the Statement of Operations for
2008.
|
For more
information on the agreements, please refer to Note C – Long Term Debt and Other
Financing Arrangements.
A summary
of the outstanding warrants, options, and shares available upon the conversion
of debt at December 31, 2009 and 2008 is as follows:
2009
|
2008
|
|||||||||||||||||||||||||||||||
Weighted
Average
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
|
Number
Exercisable
|
|||||||||||||||||||||||||
(number
of shares in thousands)
|
(number
of shares in thousands)
|
|||||||||||||||||||||||||||||||
PIPE
Warrants
|
$ | 0.001 | 10,500 | 2.57 | 10,500 | $ | 0.001 | 10,500 | 3.57 | 10,500 | ||||||||||||||||||||||
Class
2 Note Warrants
|
$ | 0.190 | 4,616 | 3.06 | 4,616 | $ | 0.250 | 2,090 | 2.82 | 2,090 | ||||||||||||||||||||||
Class
3 Convertible Notes
|
$ | 0.220 | 20,358 | 0.50 | 20,358 | $ | 0.250 | 14,687 | 1.50 | 14,687 | ||||||||||||||||||||||
1995
Employee Stock Option Plan
|
$ | 0.170 | 184 | 1.96 | 184 | $ | 0.170 | 184 | 2.95 | 184 | ||||||||||||||||||||||
1999
Employee Stock Option Plan
|
$ | 0.170 | 290 | 6.19 | 290 | $ | 0.170 | 290 | 7.19 | 115 | ||||||||||||||||||||||
2004
Employee Stock Option Plan
|
$ | 0.250 | 983 | 8.13 | 517 | $ | 0.250 | 993 | 9.13 | - | ||||||||||||||||||||||
2008
Equity Compensation Plan
|
$ | 0.240 | 2,328 | 8.55 | 2,204 | $ | 0.240 | 2,328 | 9.54 | 1,000 | ||||||||||||||||||||||
$ | 0.159 | 39,259 | 2.07 | 38,669 | $ | 0.164 | 31,072 | 3.20 | 28,576 |
Note J –
Contingencies and Litigation
Product
Warranties
We
provide standard warranty coverage for most of our products, generally for one
year from the date of customer acceptance. We record a liability for estimated
warranty claims based on historical claims and other factors. We review these
estimates on a regular basis and adjust the warranty reserves as actual
experience differs from historical estimates or other information becomes
available. This warranty liability primarily includes the anticipated cost of
materials, labor and travel, and shipping necessary to repair and service the
equipment.
The
following table illustrates the changes in our warranty liability for the years
ended December 31, 2009 and 2008:
51
Amount
|
Amount
|
|||||||
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Balance
as of January 1
|
$ | 84 | $ | 82 | ||||
Charges
to expense
|
30 | 9 | ||||||
Utilization/payment
|
(6 | ) | (7 | ) | ||||
Balance
as of December 31
|
$ | 108 | $ | 84 |
Note K –
Operations by Geographic Area
FASB
Topic ASC 280, “Disclosures about Segments of an Enterprise and Related
Information”, established standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to
stockholders. It also established standards for related disclosures
about products and services, and geographic areas. Operating segments
are defined as components of the enterprise about which separate financial
information is available that is evaluated regularly by management in deciding
how to allocate resources and in assessing performance.
We are
engaged in one business segment: vision-based inspection
products. The following presents information by geographic
area.
Year
Ended December 31
|
||||||||
2009
|
2008
|
|||||||
(in thousands)
|
||||||||
Net
revenues by geographic area:
|
||||||||
North
America
|
$ | 64 | $ | 527 | ||||
Europe
|
17 | 500 | ||||||
Asia
|
1,673 | - | ||||||
$ | 1,754 | $ | 1,027 |
*
Geographic areas that are considered individually material are listed (more than
10% of net revenues), all others are included in North America and in total are
considered immaterial.
Note L –
Royalty Payments
The
Company earned approximately $23,000 in royalties in
2008. No royalties were earned in 2009.
Note M –
Going Concern Matters
The
accompanying 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, we incurred losses from operations in the years of 2009 and 2008 of
$2.7 million and $10.7 million, respectively. The continuing losses
raise substantial doubt about our ability to continue operating as
a going concern.
We are
currently working with a number of large customers who are using our
technologies to evaluate their microdisplay production or are evaluating our
technology for the inspection of LCD displays and components. We
expect that additional sales orders will be placed by these customers throughout
2010 and into 2011 provided that markets for these products continue to grow and
the customers continue to have interest in our technology-assisted inspection
systems. Ultimately, our ability to continue as a going concern will
be dependent on these large companies getting their emerging display technology
products into high volume production and placing sales orders with us for
inspection products to support that production. However, there can be
no assurance that we will be succesful in securing sales orders sufficient to
continue operating as a going concern.
52
From
November 2006 through March 27, 2010, we have used $7,923,743 of Class 2 and
Class 3 Notes to fund operations. $4,868,631 of these are Class 3
Notes which mature July 1, 2010; $1,566,000 are Class 2 Notes which mature April
30, 2010; and the balance of $1,489,112 are Class 2 Notes which mature on June
30, 2010. We will need to raise additional funds in the second
quarter of 2010 to pay these notes as they mature or negotiate the extension of
their due date. Taking into account existing and anticipated orders,
we expect that we may need to raise an additional $500,000 to fund operations
through the first quarter of 2011. If the anticipated orders do not
materialize as expected, we will need to raise additional capital.
For
further information regarding our obligations, see Note C – Long Term Debt and
Other Financing Arrangements and Note N – Subsequent Events.
The
financial statements do not include any adjustments that might be necessary
should we be unable to continue as a going concern.
Note N –
Subsequent Events
From
January 1, 2010 through March 27, 2010, we issued an aggregate of $546,308 of
new Class 2 and Class 3 Notes to pay interest obligations and to fund
operations. We also exchanged $171,118 of Class 2 notes issued in
2010 and associated interest for an equal amount of Class 3 notes. As
of March 27, 2010, the aggregate amount of Class 2 and Class 3 Notes
outstanding is $7,923,743.
On
January 5, 2010, we extended the terms on $2,855,112 of Class 2 Notes due
January 15, 2010. $1,289,112 of Class 2 Notes were extended to
January 31, 2010 and $1,566,000 were extended to April 30, 2010 and were given
the right to exchange all or any part of the Class 2 Notes for 90
days for Class 3 Notes paying 12% interest and convertible at $0.15
per share subject to sufficient shares being authorized by the shareholders at
the annual meeting to support the exchange of all outstanding Class 2 Notes with
the right of exchange.
On
January 31, 2010, we extended the $1,289,112 of Class 2 Notes due January 31,
2010 to June 30, 2010 and gave the right to exchange all or any part of the
Class 2 Notes for 90 days for Class 3 Notes paying 12% interest and convertible
at $0.15 per share subject to sufficient shares being authorized by the
shareholders at the annual meeting to support the exchange of all outstanding
Class 2 Notes with the right of exchange.
On March
17, 2010 the Board of Directors changed the stated value of our common stock
from $0.20 to “no stated value”.
From
January 1, 2010 through March 27, 2010, we issued 3,700,363 warrants, to
purchase stock at $0.15, to Class 2 Noteholders for payment of
interest.
On March
25, 2010, Maxco, Inc. (a related party) distributed all of its 2,410,183 shares
of common stock of the Company to its shareholders under Maxco, Inc.’s complete
liquidation plan. Maxco, Inc.’s Class 3 Convertible Notes, Class 2
Notes and warrants were not distributed at this time and are still held by
Maxco, Inc.
On March
26, 2010, 1,850,000 of warrants for common stock of the Company issued April 12,
2005 and repriced September 15, 2008 to $0.001 per share were exercised for
$1,850.00. These shares are included in the outstanding shares listed
on the face of this document.
On March
31, 2010, Maxco, Inc. (a related party) sold its interest in Class 2 and Class 3
secured notes and its interest in warrants for common stock of the Company to
Charlevoix Drive Properties, LLC (a related party).
The
Compensation Committee offered holders of 3,301,000 of stock options ranging in
price from $0.13 to $0.30 per share the opportunity to surrender those options
by April 2, 2010 and receive an equivelant number of new options. All
3,301,000 shares were surrendered and reissued at the April 2, 2010 closing
price of $0.679.
On April
12, 2010, 1,650,000 of warrants for common stock of the Company issued April 12,
2005 and repriced September 15, 2008 to $0.001 per share were exercised on a
cashless basis resulting in the issuance of 1,617,000 shares of common
stock. These shares are included in the outstanding shares listed on
the face of this document.
53
Corporate Officers
|
Corporate Directory
|
|
Charles J. Drake, 69, is
CEO and Chairman of the Board of Integral Vision, Inc. Mr.
Drake founded the Company (originally known as Medar) in 1969 and has
served as Chief Executive Officer since 1978.
|
Corporate
Headquarters
49113
Wixom Tech Drive
Wixom,
MI 48393
+1
(248) 668-9230
+1
(248) 668-9384 fax
|
|
Mark R. Doede, 52, is
President, Chief Operating Officer, and Chief Financial Officer of
Integral Vision Inc. Mr. Doede has served as an officer since
1989.
|
Independent
Auditors
Rehmann
Robson
Troy,
MI
|
|
General
Counsel
|
||
Jeffrey J. Becker, 48,
is Senior Vice President of Integral Vision, Inc.
|
J.M.
Warren Law Offices, P.C.
Lansing,
MI
|
|
Andrew Blowers, 42, is
Chief Technical Officer of Integral Vision, Inc.
|
Stock
Trading
Over
the Counter Bulletin Board (OTCBB)
Symbol: INVI
|
|
Paul Zink, 44, is Vice
President of
|
||
Applications
of Integral Vision, Inc.
|
Stock Registrar and Transfer
Agent
Registrar
and Transfer Company
Cranford,
NJ
+1
(908) 497-2300
|
|
Board
of Directors
|
||
Form
10-K
|
||
Charles
J. Drake
Chairman
of the Board of Directors, Integral Vision,
|
Interested
stockholders may obtain, without charge, a copy of the Company’s
Annual
|
|
Inc.
Chief
Executive Officer, Integral Vision, Inc.
|
Report
on Form 10-K, as filed with the Securities and Exchange Commission, upon
written request to:
|
|
Max
A. Coon
|
||
Vice
Chairman and Secretary of the Board of
|
Investor
Relations
|
|
Directors,
Integral Vision, Inc.
|
Integral
Vision, Inc.
|
|
President
and Chairman of the Board, Maxco, Inc.
|
49113
Wixom Tech Drive
|
|
Wixom,
MI 48393
|
||
Vincent
Shunsky
|
||
Director,
Integral Vision, Inc.
|
Investor/Analyst
Information
|
|
Treasurer,
Integral Vision, Inc.
|
Stockholder
and analyst inquiries concerning the Company should be addressed
to:
|
|
William
B. Wallace
|
Investor
Relations
|
|
Director,
Integral Vision, Inc.
|
Integral
Vision, Inc.
|
|
Senior
Managing Director, Equity Partners Ltd.
|
49113
Wixom Tech Drive
|
|
Wixom,
MI 48393
|
||
Mark
R. Doede
Director,
Integral Vision, Inc.
|
||
President,
Integral Vision, Inc.
Chief
Operating Officer, Integral Vision, Inc.
Chief
Finacial Officer, Integral Vision, Inc.
|
Guerrant
Associates
Laura
Guerrant
+1
(808) 882-1467
|
|
E-Mail
Investor Relations
|
||
cdrake@iv-usa.com
|
||
lguerrant@guerrantir.com
|
||
On
the World Wide Web
|
||
|
www.iv-usa.com
|
54
Exhibits
to Form 10-K
Integral
Vision, Inc.
Year
Ended December 31, 2009
Commission
File Number 0-12728
Exhibit
Number
|
Exhibit Index Description
|
|
23.1
|
Consent
of Rehmann Robson, independent registered public accounting
firm.*
|
|
31.1
|
Certification
of Chief Executive Officer of periodic report pursuant to Rule 13a-14(a)
or Rule 15d-14(a).
|
|
31.2
|
Certification
of Chief Financial Officer of periodic report pursuant to Rule 13a-14(a)
or Rule 15d-14(a).
|
|
32.1
|
Certification
by Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
|
32.2
|
|
Certification
by Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section
1350.
|
*Filed as Exhibit to
registrant’s Form 10-K filed March 31, 2010, SEC file 000-12728, and
incorporated herein by reference.
55