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United States Securities And Exchange Commission
Washington, D.C. 20549

FORM 10-K

	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2000.

	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)

Registrant’s telephone number, including area code: (248) 471-2660

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, Stated Value $.20 Per Share
(Title of Class)

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 and (2) has been subject to the filing requirements for at least the past 90 days. YES      NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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.

The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 2001:

Common Stock, No Par Value, Stated Value $.20 Per Share — $2,781,746

The number of shares outstanding on each of the issuer’s classes of common stock, as of February 28, 2001:

Common Stock, No Par Value, Stated Value $.20 Per Share — 9,029,901

Documents Incorporated By Reference: Portions of the proxy statement for the annual shareholders meeting to be held May 23, 2001 are incorporated by reference into Part III.

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Part I

ITEM 1. Business

General

			On June 30, 1999, the Company sold the assets of its Welding Controls division. As a result of the sale, the Company changed its name to Integral Vision. “Integral Vision” (or the “Company”), formerly known as Medar, Inc., is a Michigan corporation incorporated in 1978. Integral Vision develops, manufactures and markets microprocessor-based process monitoring and control systems for use in industrial manufacturing environments. The principle applications for the Company’s products include optical inspection systems and general purpose vision software and applications thereof (collectively “machine vision products”). The Company’s products are generally sold as capital goods. Depending on the application, machine vision systems have an indefinite life. Machine vision applications are more likely to require replacement due to possible technological obsolescence rather than physical wear.
			Sales of machine vision products are effected through Integral Vision and through Integral Vision LTD., a wholly owned subsidiary of the Company, located in Bedford, England.

Overview

			Integral Vision is a supplier of machine vision systems and applications development software used to ensure product quality during the manufacturing process.
			Machine vision has become a necessity for manufacturers who need to continually improve production efficiency to meet the increasing demand for high quality products. The Company’s vision systems automatically identify, gauge or inspect parts with speed and accuracy. Quantitative information about each part is evaluated to check for functional or cosmetic defects. Our systems can be configured to statistically monitor the production process and send data to other equipment in the manufacturing cell. Such data could be used for example, by a diverter to send defective parts to a reject bin, or by process controllers to automatically adjust process variables.
			Target markets for our turnkey systems include the small flat panel display, optical disc, print, and packaging industries. Applications development software, such as our Industrial Vision Controller(IVC) technology, can be applied to an extensive array of applications in industries that run the gamut from aerospace to medical to textiles, and everything in between.

Products

			Optical Disc Inspection Compact disc inspection is considered an integral part of the replication process. Product quality has become an ever-growing concern among disc manufacturers during the evolution from CDs to DVDs and recordable media. Integral Vision has been serving the inspection needs of the optical disc inspection industry for over 12 years. During this time, we have seen many changes in the industry, including smaller in-line systems, faster production speeds, multiple inspections and many different disc formats. We have addressed these issues and much more with the introduction of our Series 2000 family of products.
			The Series 2000 is the latest generation of Integral Vision’s optical disc inspection products. The series features systems designed for all stages of the production process, including replication, printing and packaging. We have upgraded our electronic and optical components, designing products with reliability, low maintenance and ease of use in mind. The Series 2000 family of products includes the OMNI, CDiD, CDiP, and CDiA.

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	Omni is the base inspection scanner system for all disc formats, consisting of a CPU, monitor, keyboard, optics and software. Users can add optical inspection channels to customize the OMNI to inspect the DVD, recordable and rewritable media. The OMNI is intended for easy integration into any replication line.

	CDiD safeguards against mixed product by verifying disc orientation codes during any stage of the production process. The system performs optical character verification (OCV), bar code reading, Show & Go or any combination of the above.

	CDiP is designed for monitoring the consistency of printed labels on optical discs. CDiP controls print quality in screen, offset and pad printing technologies.

	CDiA is designed for use on the in-feed of an automatic sleeving machine. The system provides rotational information to guarantee all discs are packaged in the exact same manner.

			InteliCheck The InteliCheck product line monitors the consistency of label printing, at the printing stage itself, or as the printed labels are being applied to product packaging. Consisting of a CPU, optical head and optional industrial cabinet, InteliCheck operates on-line to control print quality objectively and accurately.
			InteliCheck monitors print quality for the screen, offset, pad printing and hot foil stamping technologies. Once an operator has completed the required production set up for a label, the vision system is trained to recognize the label print and registration using good sample labels. InteliCheck inspects each label as it is produced and can reject the label print quality and the quality of application if either fails to meet manufacturing specifications.
			InteliCheck can detect typographical, batch/lot coding, color, or other label defects and can reject any label that is torn, creased or misaligned. This system is available for both color and monochrome label inspection of flat or oval products, or with a specially designed optical head for the inspection of cylindrical products.
			Small Flat Panel Display Inspection Integral Vision has over five years of experience in the display industry, with over 300 systems installed worldwide. Our initial product, LCI-Professional, is used for inspection of LCD Displays as components or final assemblies. Applications include cell phones, car radios, pagers, electronic organizers and hand-held video games. Integral Vision’s display inspection systems are designed to detect two classes of defects: cosmetic and functional. Cosmetic defects do not affect the functionality of the display, but they cause user annoyance and reduce product value. Functional defects are flaws that cause the device to be inoperable or have a significant effect on functionality.
			In addition to our LCI Professional, we have recently begun delivering systems capable of inspecting LCOS (Liquid Crystal on Silicon) and other microdisplay devices. These technologies are applied to consumer products such as camcorders, rear projection computer monitors, digital still cameras, HDTV, projectors, video headsets and video telephones.
			Other The InCase M2000 is a powerful, configurable, automatic inspection system designed to monitor the “in case” bottle filling process. The system is designed to accommodate multiple “check stations” connected to a single processor, enabling cartons to be inspected before and after the filling process, if required. The InCase system does not require product specific operator set-up, meaning no lost production time when different products are being inspected.

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Production and Suppliers

			The Company’s production process consists principally of assembling standard electrical, electronic and optical components and hardware subassemblies purchased from suppliers into finished products. When proprietary circuit boards are needed, the Company generally contracts for outside vendors to build the boards based on internal company designs.
			The Company generally does not rely on a single source for parts and subassemblies, although certain components and subassemblies included in the Company’s products may only be obtained 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.

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. The Company presently has 15 patents and has applied for 5 more. There can be no assurance that patents applied for will be granted, that the Company will have the resources to defend its patents or that patents the Company holds will be considered valid if challenged. In addition, it is possible that some patents will be rendered worthless as the result of technological obsolescence.

Product Development

The market for Machine Vision is characterized by rapid and continuous technological development and product innovation. The Company believes that continued and timely development of new products and enhancements to existing products is necessary to maintain its competitive position. Accordingly, the Company devotes a significant portion of its personnel and financial resources to product development programs and seeks to maintain close relationships with customers to remain responsive to their needs. The Company’s net engineering and development cost amounted to $2.7 million, $3.1 million, and $3.5 million for the years ended December 31, 2000, 1999, and 1998, respectively. The Company’s current product development efforts are primarily directed to Small Display Inspection products, enhancement and expansion of the InteliCheck product line and application software development tools for vision for use as part of Common VisionBlox.

Marketing

The Company generally markets its vision products to end users, but the Company has had success integrating its products with OEM’s in certain circumstances. More recently, the Company has begun to use distributors for its application software development tools for vision. Although sales are made worldwide, the Company’s strongest presence is maintained in the US (through Company employees), Europe (through employees of Integral Vision, LTD), and Asia (through a combination of representatives and of Company employees). Company sales employees are compensated by a combination of salary and commission.

Environmental Factors

The costs to the Company of complying with federal, state and local provisions regulating protection of the environment are not material.

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Competition

The Company experiences competition in all areas in which it operates. Competition is strongest in the optical disc market where the Company’s optical inspection systems compete with equipment from Dr. Schenk GmbH and Basler GmbH. Competition for InteliCheck, Small Display Inspection, and the Company’s general vision application work comes from numerous niche producers, each providing competition within a particular product line. Cognex Corp. competes either directly or indirectly via systems integrators in some of the Company’s product lines, except optical disc inspection products.

Export Sales

			Sales outside of the United States accounted for 61%, 54% and 70% of the Company’s net sales in 2000, 1999 and 1998. Management expects that such sales will continue to represent a significant percentage of its net sales. Most of the Company’s export billings are denominated in US dollars. Billings in the UK and Japan are generally in pound sterling and yen, respectively. On occasion other export billings are denominated in the currency of the customer’s country.
			See notes to the Consolidated Financial Statements Part II – ITEM 8 for details of geographic area information.

Major Customers

The nature of the Company’s product offerings may produce sales to one or a small number of customers in excess of 10% of total 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 the Company’s result of operations. During the year ended December 31, 2000 sales to Machines Dubuit, Hanky America and Protronix Ltd represented 33% of sales. Amounts due from these customers amounted to 40% of the respective outstanding trade receivable balance at December 31, 2000.

Backlog

As of December 31, 2000, the Company had an order backlog of approximately $566,000 compared to $783,000 at December 31, 1999. Management expects that the Company will ship products representing this entire backlog in 2001.

Employees

As of February 28, 2001, the Company had approximately 67 permanent employees, as compared to 89 at February 29, 2000 and 107 at February 28, 1999. None of the Company’s employees are represented by a labor union.

ITEM 2. Properties

Manufacturing, engineering and administrative functions of Integral Vision are performed at an approximately 50,000 square foot facility owned by the Company in Farmington Hills, Michigan. In addition, Integral Vision LTD leases a 5,000 square foot facility in Bedford, England for sales and administrative functions.

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ITEM 3. Legal Proceedings

The Company is not currently involved in any material litigation.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

Part II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

			The Company’s common stock is traded on the over-the-counter market (NASDAQ) as a National Market Issue under the symbol INVI. As of February 28, 2001, there were approximately 4,500 stockholders of the Company including individual participants in security position listings.
			Subsequent to December 31, 2000, the Company received notification from Nasdaq that it has failed to maintain a minimum bid price of $1.00 for 30 consecutive trading days as required by Nasdaq rules. If the Company is unable to maintain a bid price of at least $1.00 for 10 consecutive trading days before April 9, 2001, Nasdaq will send the Company written notification that its securities will be delisted, and would no longer be eligible to be quoted in the Nasdaq system. At that time, the Company would be permitted to appeal that decision to a Nasdaq Listing Qualifications Panel.
			The table below shows the high and low sales prices for the Company’s common stock for each quarter in the past two years. The closing sales price for the Company’s common stock on February 28, 2001 was $0.438 per share.

The market for securities of small market-capitalization companies has been highly volatile in recent years, often for reasons unrelated to a company’s results of operations. Management believes that factors such as quarterly fluctuations in financial results, failure of new products to develop as expected, sales of common stock by existing shareholders, and substantial product orders may contribute to the volatility of the price of the Company’s common stock. General economic trends such as recessionary cycles and changing interest rates may also adversely affect the market price of the Company’s common stock. No cash dividends on common stock have been paid during any period.

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Item 6. Selected Financial Data

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The above selected financial data should be read in conjunction with Consolidated Financial Statements, including the notes thereto (Part II - - ITEM 8) and Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II — ITEM 7). The Company has never paid a dividend and does not anticipate doing so in the foreseeable future. The Company expects to retain earnings to finance the expansion and its development of business.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and
                Results of Operations

Overview

On June 30, 1999, the Company sold the assets of its Welding Controls division. As a result of the sale, the Company changed its name to Integral Vision. Integral Vision develops, manufactures and markets microprocessor-based process monitoring and control products for use in industrial manufacturing environments. The Company’s revenues are primarily derived from the sale of optical inspection equipment and general purpose vision software. Optical inspection equipment is principally sold to end users and suppliers of CD-R and DVD disc manufacturing equipment. General-purpose vision software is sold into numerous applications in a wide variety of industries. 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 and Section 21E of the Securities Act of 1934. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties which 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 impact of the level of the Company’s indebtedness; general economic conditions and conditions in the specific industries in which the Company has significant customers; price fluctuations in the materials purchased by the Company for assembly into final products; competitive conditions in the Company’s markets and the effect of competitive products and pricing; and technological development by the Company, its customers and its competition. As a result, the Company’s 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 the Company’s filings with the Securities and Exchange Commission. These forward-looking statements represent the Company’s best estimates as of the date of this document. The Company assumes no obligation to update such estimates except as required by the rules and regulations of the Securities and Exchange Commission.

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Results of Operations

The following table sets forth for the periods indicated certain items from the Company’s Statements of Operations as a percentage of net revenues. The impact of inflation for the periods presented was not significant.

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Year Ended December 31, 2000, compared to the year ended December 31, 1999

			Net revenues decreased $4.7 million (44.3%) from $10.7 million in 1999 to $6.0 million in 2000. The decrease is primarily attributable to a lack of demand for the Company’s OMNI inspection system. In 2000, the Company’s ability to sell into the overseas market was hampered by the strength of the U.S. Dollar versus the German Mark, as the Company has major competitors based in Germany. The average exchange rate of the U.S. Dollar to the German Mark increased approximately 16% in 2000 versus 1999. The Company was unable to lower its price enough to compete. In the U.S., manufacturers and replicators in the disc market spent very little to increase capacity in 2000 for a variety of reasons including increased electronic distribution (versus disc media) of music and computer software and the relocation of manufacturing operations to Asia. However, the Company did experience a modest increase in sales of its liquid crystal inspection (LCI) and disc identification/print inspection (CDiD/CDiP) products which partially offset the decline in OMNI sales.
			Direct costs of sales decreased to $6.5 million in 2000 from $10.8 million in 1999 and increased as a percentage of sales to 109% from 101%. In 2000, Management made a change in estimate, primarily related to inventory, that resulted in a $666,000 charge to direct costs of sales. The Company is in the process of liquidating the inventory related to previously discontinued product lines, however, due to disappointing results of the inventory liquidation effort to this point, Management decided that a change in estimate was necessary. The direct costs of sales for 1999 includes an inventory charge-off of $1.5 million resulting from a review of the marketability of remaining inventory related to a previously discontinued product line. Exclusive of the aforementioned adjustments, direct costs of sales as a percentage of sales would have been 97.8% in 2000 compared to 86.8% in 1999. The gross margin in 2000 was positively affected by a change in product mix as sales of our LCI and CDiD/CDiP products have less material cost than that of the OMNI systems. However, the gross margin in both periods was negatively affected by low sales volumes as fixed charges, depreciation, and amortization made up a significant portion of the costs of sales.
			Marketing expense decreased slightly in dollar terms, but increased as a percentage of net revenues from 22.9% to 39.2%. The increase as a percentage of net revenues was primarily attributable to the decreased sales volume.
			General and administrative expenses increased to $1.7 million from $1.3 million and as a percentage of net revenues from 12.2% to 29.1%. This was primarily due to the fact that a portion of the G&A was allocated to the Welding Controls division in 1999. The actual general and administrative expenditures decreased in 2000 compared to 1999.
			Product development expenses decreased to $2.7 million from $3.1 million and increased as a percentage of net revenues from 28.7% to 45.2%. The reduction in development expenditures was primarily the result of the Company’s decision to focus its resources on a few specific projects in 2000.
			In 1999, other income of $1.5 million and interest income of $374,000 ($347,000 in 2000) resulted from the sale of the Welding Controls division to Weltronic (WTC). The other income represents fees paid for services provided by Integral Vision for WTC during the transition period. These services included management services, use of facilities and software usage. The interest income represents the interest on the note receivable from WTC.
			Interest expense decreased to $177,000 from $539,000 and as a percentage of net revenues to 3.0% from 5.0%. The decrease is a result of the pay-off of substantially all debt at June 30, 1999 using the proceeds from the sale of the Welding Controls division.

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			In 1999, the gain on disposal of the Welding division of $8.7 million, net of tax, resulted from the sale of substantially all of the assets of the Welding Controls division on June 30, 1999.
			In 1999, the extraordinary charge of $583,000, net of tax credit, was a result of charges related to the early retirement of debt. These charges included unaccreted value assigned to warrants and unamortized discounts. The Company used proceeds from the sale of the Welding Controls division to pay-off substantially all outstanding debt on June 30, 1999.

Year Ended December 31, 1999, compared to the year ended December 31, 1998

			Net revenues increased $1.3 million (13.9%) from $9.4 million in 1998 to $10.7 million in 1999. The increase resulted primarily from a recovery in optical inspection system revenues as the Company’s Series 2000 product lines became established in the field.
			Direct costs of sales increased to $10.8 million in 1999 from $8.2 million in 1998 or as a percentage of sales to 101% from 86.6%. The direct costs of sales for 1999 includes an inventory charge-off of $1.5 million resulting from a review of the marketability of remaining inventory related to a previously discontinued product line. The direct costs of sales for 1998 includes an inventory charge-off of $1.4 million resulting from our decision to no longer sell inspection systems for the audio CD market. Additionally, in 1998, revenue of $1.5 million from the sale of patent technology was included in net revenue which resulted in a lower direct cost of sales as a percentage of sales. Exclusive of the aforementioned adjustments, direct costs of sales as a percentage of sales would have been 86.8% in 1999 compared to 86.1% in 1998. This is the result of lower margins in the CD-R inspection portion of the optical disc inspection product line.
			Marketing expense stayed relatively constant in dollar terms, but decreased as a percentage of net revenues from 25.6% to 22.9%. This resulted principally from the fixed nature of these expenses.
			General and administrative expenses decreased to $1.3 million from $1.4 million and as a percentage of net revenues from 14.9% to 12.2%. This resulted primarily from a reduction in the overall G&A structure after the sale of the Welding Controls division.
			Product development expenses decreased to $3.1 million from $3.5 million and as a percentage of net revenues from 37.0% to 28.7%. Development of the Series 2000 product line was substantially completed in early 1999, resulting in a significant reduction in product development expenditures. The savings were partially, though not completely, offset by increased product development expenditures for the Small Display Inspection Systems product line and the InteliCheck product line.
			Other income of $1.5 million and interest income of $374,000 resulted from the sale of the Welding Controls division to Weltronic (WTC). The other income represents fees paid for services provided by Integral Vision for WTC during the transition period. These services included management services, use of facilities and software usage. The interest income represents the interest on the note receivable from WTC.
			Interest expense decreased to $539,000 from $915,000 and as a percentage of net revenues to 5.0% from 9.7%. The decrease is a result of the pay-off of substantially all debt at June 30, 1999 using the proceeds from the sale of the Welding Controls division.
			The gain on disposal of the Welding division of $8.7 million, net of tax, resulted from the sale of substantially all of the assets of the Welding Controls division on June 30, 1999.
			An extraordinary charge of $583,000, net of tax credit, was a result of charges related to the early retirement of debt. These charges included unaccreted value assigned to warrants and unamortized discounts. The Company used proceeds from the sale of the Welding Controls division to pay-off substantially all outstanding debt on June 30, 1999.

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Quarterly Information

The following table sets forth Consolidated Statements of Operations data for each of the eight quarters in the two-year period ended December 31, 2000. The unaudited quarterly information has been prepared on the same basis as the annual information and, in management’s opinion, includes all adjustments necessary for a fair presentation of the information for the quarters presented.

			Quarter Ended
			2000
			Dec 31				Sep 30				Jun 30				Mar 31
			(in thousands except per share data)
Net revenues			$	672			$	1,535