Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
¨		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:  000-50081

 

INVISA, INC.

(Name of registrant as specified in its charter)

  

Nevada		65-1005398
(State or Other Jurisdiction of Organization)		(IRS Employer Identification Number)

1800 2nd Street, Suite 965, Sarasota, Florida 34236

(Address of principal executive offices)

 

(941) 870-3950

(Issuer’s telephone number)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 Data 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 þ  No ¨

 

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 (Check one):

 

	Large accelerated filer    ¨	Accelerated filer    ¨
	Non-accelerated filer    ¨	Smaller reporting company    þ

 

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

 

State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:  November 14, 2013; 14,214,398

 

Transitional Small Business Disclosure Format (check one):   Yes ¨ No þ

 

---

 

INVISA, INC.

 

Form 10-Q

Table of Contents

 

			Page
PART I.  FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements		3
	Condensed Balance Sheets		3
	Condensed Statements of Operations		4
	Condensed Statements of Cash Flows		5
	Notes to Condensed Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Plan of Operations		8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		9
Item 4.	Controls and Procedures		10
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings		11
Item 1A.	Risk Factors		11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		11
Item 3.	Defaults Upon Senior Securities		11
Item 4.	Mine Safety Disclosures		11
Item 5.	Other Information		11
Item 6.	Exhibits		11
Signatures			12

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

 

 INVISA, INC.

 

CONDENSED BALANCE SHEETS

 

 

		December 31, 2012				September 30, 2013
						(Unaudited)
Assets
Current Assets:
Cash and cash equivalents		$	1,015			$	626
Accounts receivable			5,756				2,458
Inventories			18,741				15,456
Prepaids and other assets			3,447				9,714
Total Current Assets			28,959				28,254
Total Assets		$	28,959			$	28,254
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable, trade		$	64,161			$	23,847
Accrued Interest			—				82,056
Due to stockholders and officers			20,260				20,260
Total Current Liabilities			84,421				126,163
Long-Term Debt			987,951				1,080,331
Total Liabilities			1,072,372				1,206,494
Stockholders’ Deficit:
Convertible Preferred Stock, 5,000,000 shares authorized ($100 par value):
Series A, 9,715 shares issued and outstanding			798,500				798,500
Series B, 2,702 shares issued and outstanding			270,160				270,160
Series C, 16,124 shares issued and outstanding			1,600,467				1,600,467
Common Stock, 95,000,000 shares authorized, $.001 par value, 14,214,398 shares issued and outstanding			14,214				14,214
Additional paid-in capital			32,519,717				32,576,717
Accumulated Deficit			(36,246,471	)			(36,438,298	)
Total Stockholders’ Deficit			(1,043,413	)			(1,178,240	)
Total Liabilities and Stockholders’ Deficit		$	28,959			$	28,254

 

See notes to condensed financial statements.

 

INVISA, INC.

 

CONDENSED STATEMENTS OF OPERATIONS 

(Unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2012				2013				2012				2013
Net Sales		$	7,017			$	8,962			$	21,470			$	19,020
Costs and other expenses:
Cost of goods sold			3,715				4,168				8,228				7,101
Selling, general and administrative expenses			51,733				42,438				192,406				168,743
(Loss) from operations			(48,431	)			(37,644	)			(179,164	)			(156,824	)
Other income (expense):
Interest (expense) and other, net			5,808				(26,464	)			(46,576	)			(80,047	)
Gain on Debt extinguishment			8,937				1,437				8,937				45,044
(Loss) before income taxes			(33,686	)			(62,671	)			(216,803	)			(191,827	)
Income taxes			—				—				—				—
Net Loss		$	(33,686	)		$	(62,671	)		$	(216,803	)		$	(191,827	)
Net Loss per share applicable to Common Stockholders:
Basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.02	)		$	(0.01	)
Weighted average Common Stock Shares Outstanding:
Basic and diluted			14,214,398				14,214,398				14,214,398				14,214,398

 

See notes to condensed financial statements.

 

INVISA, INC.

 

CONDENSED STATEMENTS OF CASH FLOWS 

(Unaudited)

 

		Nine Months Ended September 30,
		2012				2013
Net cash (used in) operating activities		$	(143,919	)		$	(92,769	)
Net cash (used in) investing activities			—				—
Cash flows from financing activities:
Proceeds from Long-Term Debt			144,052				92,380
Net cash provided by financing activities			144,052				92,380
Net increase (decrease) in cash			133				(389	)
Cash at beginning of period			589				1,015
Cash at end of period		$	722			$	626

 

See notes to condensed financial statements.

 

INVISA, INC

 

Notes to Condensed Financial Statements

September 30, 2013

(Unaudited)

 

 

Note A – Basis of Presentation

 

The accompanying unaudited Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and Rule 8.03 of Regulation SX. The December 31, 2012 balance sheet data was derived from audited financial statements, the accompanying financial statements do not include all of the information and notes required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Annual Report on Form 10-K of Invisa, Inc. for the year ended December 31, 2012. When used in these notes, the terms “Company”, “we,” “us” or “our” mean Invisa, Inc. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

 

Invisa, Inc., (the “Company” or “Invisa”) is an enterprise that incorporates safety system technology and products into automated closure devices, such as parking gates, sliding gates, overhead garage doors and commercial overhead doors. Invisa has also demonstrated production-ready prototypes of security products for the museum and other markets. The Company is currently manufacturing and selling powered closure safety devices.

 

Note B – Operating Matters and Liquidity

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ending September 30, 2013, the Company has had a net loss of $(191,827). See Note D – Long-Term Debt for substantial restructuring of the Company’s debt, including extension of the Company’s debt payment dates.

 

Note C – Due to Stockholders and Officers

 

Due to Stockholders and Officers at December 31, 2012 and September 30, 2013 is as follows:

 

Edmund C. King

$

20,260

 

Note D – Long-Term Debt

 

The Company has six credit facilities with its Senior Lender totaling $1,056,511 under which $987,951 has been borrowed at September 30, 2013. The Senior Lender has also established a revolving line of credit to finance operations of the Company totaling $200,000 of which $92,380 is outstanding at September 30, 2013, and $107,620 is available to the Company. The terms of the credit facilities include due dates of June 30, 2015, with interest accruing at ten percent per annum and all of the Company’s assets being pledged as security. In addition, the credit facilities are secured by 31,413,333 shares of the Company’s common stock which is held in escrow.

 

At September 30, 2013, $82,056 in interest has been accrued on the credit facilities.

 

 

Note E – Stockholders’ Deficit

 

As of September 30, 2013, no stock options were outstanding, granted or exercised.

 

During the nine months ended September 30, 2013, an officer contributed services with a fair value of $27,000 to the capital of the Company.

 

Note F – Recent Accounting Pronouncements

 

The Company does not believe that any recently issued accounting pronouncements will have a material effect on its financial statements.

 

Note G – Inventory

 

Inventory is stated at the lower of cost or market. Cost is determined using an averaging method, which approximates the first in – first out method. Inventory consists principally of finished goods and raw materials.

 

Note H – Earnings (loss) per Common Share

 

Basic and diluted earnings (loss) per share are computed based on the weighted average number of common stock outstanding during the period. Common stock equivalents are not considered in the calculation of diluted earnings (loss) per share for the periods presented because their effect would not be material or would be anti-dilutive.

 

Note I – Gain on the Derecognition of Debt

 

During the period ended September 30, 2013, the Company wrote off $45,044 in debt as it determined that the period of enforceability of the debt had expired pursuant to the Florida statute of limitations.

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Plan of Operations

 

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this filing. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements. The cautionary statements made herein should be read as being applicable to all related forward-looking statements in this Quarterly Report on Form 10-Q.

 

Background of Our Company

 

We manufacture and sell sensors using the Company’s patented InvisaShield™ presence-sensing technology in the safety market. We market our line of safety sensors under the name of SmartGate ® brand safety sensors used in or with parking barrier gates to protect life and property. All of our sales revenues are derived from the sale of our SmartGate safety sensors.

 

We financed our operations in 2012 and 2013 through revenues derived from the sale of our SmartGate ® brand safety sensors and short-term and long-term debt financing. We are focusing our efforts on increasing our sales of our products and reducing operating costs, where possible. In December 2012, the Company’s Senior Lender agreed to extend the maturity date of the Senior Secured Promissory Notes and the related accrued interest until June 30, 2015, and put in place a line of credit which we believe is sufficient to finance our operations through December 31, 2013.

 

Nine months Ended September 30, 2012 Compared to the Nine months Ended September 30, 2013

 

Net Sales and Cost of Sales - During the nine months ended September 30, 2012 and 2013; net sales totaled $21,470 and $19,020 respectively. In June of 2010 our sales and revenue began to decline. We believe the decline is associated with general economic and industry conditions and does not reflect a change in acceptance of our product. Cost of sales totaled $8,228 and $7,101, respectively, or 39% and 37% of related sales.

 

Selling, General and Administrative Expenses - During the nine months ended September 30, 2012 and 2013, selling, general and administrative expenses totaled $192,406 and $168,743 The decrease in these expenses is attributable to a reduction in certain consulting fees and product tooling fees not incurred in 2013.

 

Interest Expense and other, Net - During the nine months ended September 30, 2012 and 2013, net interest expense totaled $46,576 and $80,047 . The interest expense relates primarily to financing costs and interest due our senior lender under lines of credit to the Company.

 

The Company realized a $45,044 gain on de recognition of debt during the nine months ended September 30, 2013, related to the expiration of the statute of limitations expiring on the enforceability of these debts.

 

Net Income (Loss) - The Company’s net loss for these periods decreased from $(216,803) in 2012 to a loss of $(191,827) in 2013.

 

 

Quarter Ended September 30, 2012 Compared to the Quarter Ended September 30, 2013

 

Net Sales – During the quarter ended September 30, 2012 and 2013, product sales totaled $7,017 and $8,962 respectively. Cost of sales totaled $3,715 or 53% in 2012 compared to $4,168 or 47% in 2013.

 

Selling, General and Administrative Expenses - During the third quarter of 2012 and 2013 selling, general and administrative expenses totaled $51,733 and $42,438, respectively. The decrease in these expenses is attributable to a reduction in certain consulting fees and product tooling fees not incurred in 2013.

 

Interest Expense and other, Net - During third quarter of 2012 and 2013 interest expense totaled $(5,808), and $26,464. The interest expense during both 2012 and 2013 relates primarily to financing costs and interest due our senior lender under lines of credit. The credit in 2012 relates to an adjustment for year to date interest at September 30, 2012.

 

The Company realized a $1,437 gain on derecognition of debt during the quarter ended September 30, 2013, related to the expiration of the statute of limitations expiring on the enforceability of these debts.

 

Net Income (Loss) - Net loss increased from $(33,686) in 2012 to a net loss of $(62,671) in 2013.

 

Plan of Development and Operations

 

We obtained funding of $144,052 during the nine months in 2012 and $92,380 in the same period in 2013, which together with our cash from sales supported our operations. We have extended the maturity of our debt to June 30, 2015, and put in place a line of credit which we believe is sufficient to finance our operations through December 31, 2013 (See Note D- Long-Term Debt to the accompanying condensed financial statements) and will explore other business opportunities such as licensing and business combinations as they may arise.

 

Liquidity and Capital Resources

 

At September 30, 2013, we had a cash and cash equivalents totaling $626.

 

The Company has six credit facilities with its Senior Lender totaling $1,056,511 under which $987,951 has been borrowed at September 30, 2013. The Senior Lender has also established a revolving line of credit to finance operations of the Company totaling $200,000 of which $92,380 is outstanding at September 30, 2013, and $107,620 is available to the Company. The terms of the credit facilities include due dates of June 30, 2015, with interest accruing at ten percent per annum and all of the Company’s assets being pledged as security. In addition, the credit facilities are secured by 31,413,333 shares of the Company’s common stock which is held in escrow.

 

Additionally, the Company has pledged an aggregate of 25,413,333 shares of its common stock as additional security for the notes and the line. These shares are being held in reserve as additional collateral against such notes and line. Upon full repayment of the notes, said shares will be no longer be held in reserve. The shares held in reserve are not deemed outstanding as the notes are not in default.

 

While we are confident that the current funding and sales revenue available to us will be sufficient to finance our operations through December 31, 2013, it is important to note that additional funding, if needed, may not be available when required or it may not be available on acceptable terms. Should we require additional funding, we may need to reduce or refocus our operations or obtain funds through arrangements that would be less attractive to us or which may require us to relinquish rights to certain or potential markets, either of which could have a material adverse effect on our business, financial condition and results of operations.

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

None.

 

Item 4.

Controls and Procedures

 

The Company maintains “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer, and Board of Directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2013 and concluded that our disclosure controls and procedures were effective as of September 30, 2013.

 

Changes in Internal Controls over Financial Reporting

 

During the quarter ended September 30, 2013, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d–15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

None.

 

Item 1A.

Risk Factors

 

There have been no material changes from the risk factors as previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2012.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

None.

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

(a)	Exhibits filed herewith.

 

Exhibit No.		Description
31.1		Chief Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a)
31.2		Chief Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a)
32.1		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350
32.2		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

Signatures

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Invisa, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	INVISA, INC.
Dated:  November 14, 2013	By:	/s/  Edmund C. King
		Edmund C. King Chief Executive Officer

 

Dated:  November 14, 2013	By:	/s/  Edmund C. King
		Edmund C. King Chief Financial Officer