UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 |
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly period ended June 30, 2002. | |
 |
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 (State or other jurisdiction of incorporation or organization) |
38-2191935 (I.R.S. Employee Identification Number) |
|
| 38700 Grand River Avenue, Farmington Hills, Michigan |
48335 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (248) 471-2660
Former name, former address and former fiscal year, if changed since last report:
Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
| YES |
|
NO | _______ |
The number of shares outstanding of the registrant’s Common Stock, no par value, stated value $.20 per share, as of July 31, 2002 was 9,429,901.
1
PART I
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
Integral Vision, Inc. and Subsidiary
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (in thousands) | ||||||||||
ASSETS |
||||||||||
CURRENT ASSETS |
||||||||||
Cash |
$ | 71 | $ | 125 | ||||||
Accounts receivable, less allowance of $380,000
($179,000 in 2001) |
284 | 332 | ||||||||
Inventories |
53 | 208 | ||||||||
Prepaid rent — Note J |
— | 91 | ||||||||
Note
receivable — Note M |
83 | — | ||||||||
Other current assets — Note M |
33 | 71 | ||||||||
TOTAL CURRENT ASSETS |
524 | 827 | ||||||||
PROPERTY, PLANT AND EQUIPMENT |
||||||||||
Production and engineering equipment |
704 | 704 | ||||||||
Furniture and fixtures |
458 | 457 | ||||||||
Vehicles |
47 | 47 | ||||||||
Computer equipment |
1,180 | 1,153 | ||||||||
| 2,389 | 2,361 | |||||||||
Less accumulated depreciation |
(2,325 | ) | (2,202 | ) | ||||||
| 64 | 159 | |||||||||
OTHER ASSETS |
||||||||||
Capitalized computer software development costs, less
accumulated amortization |
613 | 710 | ||||||||
Patents, less accumulated amortization |
212 | 268 | ||||||||
| 825 | 978 | |||||||||
| $ | 1,413 | $ | 1,964 | |||||||
See notes to consolidated financial statements.
2
CONSOLIDATED BALANCE SHEETS — Continued
Integral Vision, Inc. and Subsidiary
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (in thousands) | ||||||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||||
CURRENT LIABILITIES |
||||||||||
Notes payable — Notes F & M |
$ | 618 | $ | 358 | ||||||
Accounts payable |
725 | 993 | ||||||||
Accrued
compensation and related costs — Note M |
348 | 427 | ||||||||
Accrued
state income taxes — Note B |
200 | 195 | ||||||||
Accrued
interest |
84 | 30 | ||||||||
Other
accrued liabilities |
98 | 206 | ||||||||
Deferred revenue |
67 | — | ||||||||
Current maturities of long term debt |
265 | 90 | ||||||||
TOTAL CURRENT LIABILITIES |
2,405 | 2,299 | ||||||||
LONG-TERM DEBT, less current maturities and
O.I.D. — Note F |
676 | 337 | ||||||||
STOCKHOLDERS’
EQUITY (DEFICIT) |
||||||||||
Common stock, without par value, stated value $.20
per share; 15,000,000 shares authorized; 9,429,901
shares issued and outstanding |
1,886 | 1,886 | ||||||||
Additional paid-in capital |
31,362 | 31,265 | ||||||||
Retained earnings deficit |
(34,847 | ) | (33,362 | ) | ||||||
Notes receivable from officers — Note M |
(69 | ) | (250 | ) | ||||||
Accumulated translation adjustment — Note Q |
— | (211 | ) | |||||||
Total
Stockholders’ Equity (Deficit) |
(1,668 | ) | (672 | ) | ||||||
| $ | 1,413 | $ | 1,964 | |||||||
See notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
Integral Vision, Inc. and Subsidiary
| Three Months Ended June 30, | ||||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands, except per share data) | ||||||||||
Net revenues |
$ | 503 | $ | 669 | ||||||
Costs of sales: |
||||||||||
Direct costs of sales |
256 | 519 | ||||||||
Depreciation and amortization — Notes J, K & L |
89 | 478 | ||||||||
Total costs of sales |
345 | 997 | ||||||||
Gross margin |
158 | (328 | ) | |||||||
Other costs and expenses: |
||||||||||
Marketing |
160 | 426 | ||||||||
General and administrative |
393 | 416 | ||||||||
Engineering and development: |
||||||||||
Expenditures |
204 | 528 | ||||||||
Allocated to capitalized software and direct
cost of sales |
— | (111 | ) | |||||||
Net engineering and development expenses |
204 | 417 | ||||||||
Total costs and expenses |
757 | 1,259 | ||||||||
Operating loss |
(599 | ) | (1,587 | ) | ||||||
Interest income and other — Note B |
13 | 35 | ||||||||
Interest expense — Notes F & J |
(56 | ) | (56 | ) | ||||||
Foreign currency translation loss — Note Q |
(208 | ) | ||||||||
Loss from operations before income taxes |
(850 | ) | (1,608 | ) | ||||||
Provision (credit) for income taxes |
— | — | ||||||||
Net loss |
$ | (850 | ) | $ | (1,608 | ) | ||||
Basic and diluted earnings per share |
$ | (0.09 | ) | $ | (0.18 | ) | ||||
Weighted average number of shares of common stock
and common stock equivalents, where applicable
|
9,430 | 9,030 | ||||||||
See notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS
Integral Vision, Inc. and Subsidiary
| Six Months Ended June 30, | ||||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands, except per share data) | ||||||||||
Net revenues |
$ | 826 | $ | 1,651 | ||||||
Costs of sales: |
||||||||||
Direct costs of sales |
472 | 1,055 | ||||||||
Depreciation and amortization — Notes J, K & L |
183 | 961 | ||||||||
Total costs of sales |
655 | 2,016 | ||||||||
Gross margin |
171 | (365 | ) | |||||||
Other costs and expenses: |
||||||||||
Marketing |
346 | 947 | ||||||||
General and administrative |
709 | 778 | ||||||||
Engineering and development: |
||||||||||
Expenditures |
395 | 1,242 | ||||||||
Allocated to capitalized software and direct
cost of sales |
— | (242 | ) | |||||||
Net engineering and development expenses |
395 | 1,000 | ||||||||
Total costs and expenses |
1,450 | 2,725 | ||||||||
Operating loss |
(1,279 | ) | (3,090 | ) | ||||||
Interest income and other — Note B |
25 | 92 | ||||||||
Interest expense — Notes F & J |
(113 | ) | (128 | ) | ||||||
Foreign currency translation loss — Note Q |
(208 | ) | — | |||||||
Loss from operations before income taxes |
(1,575 | ) | (3,126 | ) | ||||||
Provision (credit) for income taxes — Note N |
(90 | ) | — | |||||||
Loss from operations |
(1,485 | ) | (3,126 | ) | ||||||
Loss on sale of note receivable — Note B |
— | (441 | ) | |||||||
Net loss |
$ | (1,485 | ) | $ | (3,567 | ) | ||||
Basic and diluted earnings per share: |
||||||||||
Loss from operations |
$ | (0.16 | ) | $ | (0.35 | ) | ||||
Loss on sale of note receivable — Note B |
— | (0.05 | ) | |||||||
Net loss |
$ | (0.16 | ) | $ | (0.40 | ) | ||||
Weighted average number of shares of common
stock and common stock equivalents, where applicable |
9,430 | 9,030 | ||||||||
See notes to consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Integral Vision, Inc. and Subsidiary
| Six Months Ended June 30, | ||||||||||||
| 2002 | 2001 | |||||||||||
| (Unaudited, in thousands) | ||||||||||||
Operating Activities |
||||||||||||
Net loss |
$ | (1,485 | ) | $ | (3,567 | ) | ||||||
Loss on sale of note receivable |
— | 441 | ||||||||||
Loss from operations |
(1,485 | ) | (3,126 | ) | ||||||||
Adjustments to reconcile loss from operations to
net cash used in operating activities: |
||||||||||||
Depreciation |
97 | 353 | ||||||||||
Amortization |
178 | 819 | ||||||||||
Changes in operating assets and liabilities of
continuing operations: |
||||||||||||
Accounts receivable |
48 | 157 | ||||||||||
Inventories |
155 | 163 | ||||||||||
Prepaid and other |
227 | 37 | ||||||||||
Accounts payable and other current liabilities |
(320 | ) | 696 | |||||||||
Net Cash Used In Operating Activities |
(1,100 | ) | (901 | ) | ||||||||
Investing Activities |
||||||||||||
Payments received on note receivable |
— | 1,189 | ||||||||||
Proceeds from the sale of a portion of note receivable |
— | 300 | ||||||||||
Repurchase of portion of note receivable |
— | (221 | ) | |||||||||
Sale (Purchase) of property and equipment |
— | 31 | ||||||||||
Investment in capitalized software |
— | (242 | ) | |||||||||
Other |
(5 | ) | 1 | |||||||||
Net Cash Provided By (Used In) Investing Activities |
(5 | ) | 1,058 | |||||||||
Financing Activities |
||||||||||||
Repayments of mortgage note payable |
— | (14 | ) | |||||||||
Repayments on revolving line of credit |
— | (270 | ) | |||||||||
Proceeds from sale of Class 2 Notes |
250 | |||||||||||
Proceeds from sale of debentures, net of discount |
493 | 96 | ||||||||||
Proceeds from sale of warrants |
97 | 24 | ||||||||||
Net Cash Provided By (Used In) Financing Activities |
840 | (164 | ) | |||||||||
Effect of Exchange Rate Changes |
211 | (68 | ) | |||||||||
Decrease in Cash |
(54 | ) | (75 | ) | ||||||||
Cash at Beginning of Period |
125 | 78 | ||||||||||
Cash at End of Period |
$ | 71 | $ | 3 | ||||||||
See notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Integral Vision, Inc. and Subsidiary
June 30, 2002
(Unaudited)
Note A – Basis of Presentation
| The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and notes thereto included in Integral Vision’s Annual Report on Form 10-K for the year ended December 31, 2001. |
Note B – Sale of Welding Controls Division
| On June 30, 1999, the Company completed an agreement to sell substantially all the assets of its Welding Controls division for $25.7 million, net of costs of the sale, for cash, the assumption of certain liabilities, and a subordinated note (WTC note). The interest bearing portion of the note, approximately $1.9 million, carried an interest rate approximating prime plus 1% and required quarterly payments beginning on February 15, 2000, with a February 15, 2001 maturity date. The non-interest bearing portion of the note, $1.5 million, was discounted using an imputed interest rate of 9% and matured on February 15, 2001. | |
| In January 2001, the Company sold 19.9% of the $1.7 million then outstanding under the note agreement to third party investors in exchange for consideration of $300,000. In May 2001, the Company completed a transaction whereby it repurchased the portion of the note previously sold to the investors and then sold the entire note receivable, which had an outstanding balance of $1.1 million at April 30, 2001, to a third party for $750,000. The Company recognized a loss on sale of the note receivable of $441,000 in the quarter ended March 31, 2001. | |
| The Company also incurred both Federal and State income tax liabilities as a result of the transaction. The Company paid approximately $90,000 for its 1999 alternative minimum tax liability, which resulted primarily from the gain on the sale of the Welding Controls Division. This amount was refunded to the Company in 2002 (see Note N to consolidated financial statements). Additionally, the Company incurred a Michigan Single Business Tax (SBT) liability of approximately $120,000 for the 1999 tax year as a result of the transaction. At June 30, 2002, this liability was not yet paid and was included in accrued state income taxes in the consolidated balance sheet. Approximately $80,000 for interest and penalties on this obligation have also been accrued and included in accrued state income taxes in the consolidated balance sheet. |
7
Note C – Comprehensive Income
| The components of comprehensive income (loss) for the three and six month periods ended June 30, 2002 and 2001 are as follows (see Note Q to consolidated financial statements): | |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
Net loss |
$ | (850 | ) | $ | (1,608 | ) | ||||||||||