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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-28520
-------------------------------------------------------
n-Vision, Inc.
(Exact name of registrant as specified in its charter)
-------------------------------------------------------
Delaware 54-1741313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7680 Old Springhouse Road
Madison Building, First Floor
McLean, Virginia 22102
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 506-8808
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or Section 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 ( X ) No ( )
The number of outstanding shares of the registrant's Common Stock, par
value $.01 per share, was 2,651,523 on August 6, 1999.
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<PAGE>
FORM 10-QSB
INDEX
PAGE
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 1999
and December 31, 1998.......................... 3
Statements of Operations for the
three months and six months ended
June 30, 1999 and June 30, 1998................ 4
Statements of Cash Flows for the six
months ended June 30, 1999 and June
30, 1998....................................... 5
Notes to Financial Statements.................. 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations..................................... 7
PART II OTHER INFORMATION
Item 1 Legal Proceedings.............................. 11
Item 4 Submission of Matters to a Vote of
Security Holders............................... 11
Item 6 Exhibits and Reports on Form 8-K............... 11
SIGNATURES..................................... 13
Exhibit 10.2 Consulting Agreement with Christopher.......... 14
J. Lewis
Exhibit 27 Financial Data Schedule........................ 17
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
n-VISION, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,009,085 $ 1,669,302
Accounts Receivable 245,600 236,454
Inventories 859,643 974,099
Prepaid Expenses 90,086 53,580
------------------- ------------------
TOTAL CURRENT ASSETS 2,204,414 2,933,435
PROPERTY AND EQUIPMENT 352,940 420,049
(Net of Accumulated Depreciation)
OTHER ASSETS 7,105 13,801
------------------- ------------------
$ 2,564,459 $ 3,367,285
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities-Long Term Note Due ATS $ 120,000 $ 120,000
Current Portion of Capital Lease Obligation 0 2,225
Accounts Payable 106,159 359,561
Accrued Salaries and Benefits 64,235 64,280
Deferred Revenue and Accrued Warranty Costs 63,150 102,432
------------------- ------------------
TOTAL CURRENT LIABILITIES 353,544 648,498
LONG TERM LIABILITIES
Note Payable-ATS 180,000 240,000
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, 2,651,523 shares issued and 26,515 26,515
outstanding
Paid in Capital 10,473,679 10,473,679
Accumulated Deficit (8,469,279) (8,021,407)
------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 2,030,915 2,478,787
------------------- ------------------
$ 2,564,459 $ 3,367,285
=================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
n-VISION, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------------ -----------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 339,869 $ 870,027 $ 647,469 $ 1,969,899
Cost of Sales 184,764 422,633 310,282 997,509
-------------- ------------- -------------- --------------
Gross Margin 155,105 447,394 337,187 972,390
Operating Expenses
General and Administrative 224,177 222,699 453,868 518,993
Product Development 90,869 95,683 140,654 181,640
Marketing and Sales 99,301 122,948 200,989 263,225
-------------- ------------- -------------- --------------
Income (Loss) from operations (259,242) 6,064 (458,324) 8,532
Non-Operating Income
(Expense)
Interest Income 12,124 21,104 24,877 45,286
Interest Expense (7,200) (10,236) (14,425) (20,672)
-------------- ------------- -------------- --------------
Loss before income taxes (254,318) 16,932 (447,872) 33,146
Income Tax expense - - - -
-------------- ------------- -------------- --------------
Net Income (Loss) $ (254,318) $ 16,932 $ (447,872) $ 33,146
============== ============= =============== ==============
Weighted average shares outstanding 2,651,523 2,646,836 2,651,523 2,646,836
============== ============= =============== ==============
Income (Loss) per Share $ (.10) $ .01 $ (.17) $ .01
============== ============= =============== ==============
Weighted average shares 2,651,523 2,687,897 2,651,523 2,688,083
Outstanding - Diluted
============== ============= =============== ==============
Income (Loss) per Share -
Diluted (.10) .01 (.17) .01
============== ============= =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
n-VISION, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------------
1999 1998
-------------- -- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (447,872) $ 33,146
--------------- -----------------
Adjustments to reconcile Net Income (Loss) to net cash used
in operating activities
Depreciation and amortization 132,432 127,531
Loss on Disposal of Fixed Assets 4,897 1,404
Changes in assets and liabilities
(Increase) Decrease in accounts receivable (9,546) (469,258)
(Increase) Decrease in inventories 114,455 156,183
(Increase) Decrease in prepaid expenses (36,506) 6,331
(Increase) Decrease in Other Receivable 400 (36,448)
(Decrease) Increase in accounts payable (253,401) (191,048)
(Decrease) Increase in accrued salaries and benefits (45) (42,694)
(Decrease) Increase in Deferred Revenue and Warranty (39,282) 53,018
Reserve
--------------- -----------------
Total Adjustments (86,596) (394,981)
--------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (534,468) (361,835)
--------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (64,265) (15,452)
Proceeds from sale of fixed assets 741 -
--------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (63,524) (15,452)
--------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of Long Term Note - ATS (60,000) (60,000)
Payments of Capital Lease Obligations (2,225) (12,025)
--------------- -----------------
NET CASH USED IN FINANCING ACTIVITIES (62,225) (72,025)
--------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (660,217) (449,312)
CASH AND CASH EQUIVALENTS AT JANUARY 1 1,669,302 876,805
=============== =================
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 1,009,085 $ 427,493
=============== =================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
n-VISION, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A INTERIM FINANCIAL STATEMENTS
The condensed financial statements for the three month and six month
periods ended June 30, 1999 and June 30, 1998 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim period. The condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto, together with management's discussion and analysis of
financial condition and results of operations, contained in the Company's Annual
Report to Shareholders for the year ended December 31, 1998. The results of
operations for the three months ended June 30, 1999 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 1999.
In preparing financial statements in conformity with generally accepted
accounting principles management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 128 - "Earnings per Share." Statement 128 replaces the
presentation of primary and fully diluted earnings per share ("EPS") pursuant to
Accounting Principles Board Opinion No. 15 with the presentation of basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing net income
available to common shareholders by the weighted number of shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or converted
into common shares and then shared in the earnings of the Company. Options
granted to employees are accounted for in accordance with APB 25, whereby if
options are priced at fair market value or above at the date of the grant, no
compensation expense is recognized.
The following table sets forth the reconciliation between basic and
diluted EPS.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMERATOR
Net Income (Loss) available for common shareholders - Basic (447,872) 33,146
Income Adjustments - -
--------------- --------------
Net Income (Loss) available for common shareholders - Diluted (447,872) 33,146
DENOMINATOR
Denominator for Basic EPS-weighted average shares 2,651,523 2,646,836
Effect for Dilutive Securities
Employee Stock Options - 41,247
--------------- --------------
Denominator for diluted EPS 2,651,523 2,688,083
- ---------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some statements in this Management's Discussion and Analysis contain
forward-looking information that involve a number of risks and uncertainties,
the possible realization of which could have material adverse effects on the
Company's operating results. Factors that may cause actual results to differ
materially include: development of new products, and rapid change in technology
that may displace products sold by the Company; the highly competitive market in
which the Company operates; dependence upon a limited number of suppliers for
product components, fluctuation in the Company's quarterly results of operations
due to the timing of orders from customers; and other risk factors listed in the
Company's SEC filings including but not limited to Form SB-2 Registration
Statement dated April 2, 1996 and any amendments thereto, as well as the Annual
Report to Shareholders for the year ended December 31, 1998.
GENERAL
n-Vision, Inc. ("Company"), a Delaware corporation, designs, develops,
manufactures, and markets state-of-the-art 3D immersive displays for use in
advanced visualization applications, products, and systems for a variety of
commercial, industrial, and military applications. The Company's products and
systems are marketed worldwide, but principally to customers in North America,
Europe, and the Pacific Rim. The Company's customers include BMW, Boeing, Johns
Hopkins University, Lockheed Martin, NASA, Raytheon, U.S. Air Force, U.S. Navy,
Volvo, and a subsidiary of The Walt Disney Company, among others.
FINANCIAL CONDITION
SIX MONTHS PERIOD ENDED JUNE 30, 1999
For the six months ended June 30, 1999, the Company reported cash and cash
equivalents of $1,009,085, a 39% decrease from December 31, 1998 when the
Company reported cash and cash equivalents of $1,669,302. This decrease is due
to the lower level of revenue and increase in losses in the first six months of
the year. Accounts receivable at June 30, 1999 was 245,600, an increase of 4%
from the December 31, 1998 balance of $236,454. Inventories decreased by 12% to
$859,643 from $974,099 at December 31, 1998. Net Property Plant and Equipment
decreased by 16% from $420,049 at December 31, 1998 to $352,940 at June 30,
1999. This decrease is the result of current year depreciation rates. Current
liabilities decreased by 45% to $353,544 on June 30, 1999 from $648,948 on
December 31, 1998. Accounts payable decreased by 70% to 106,159 on June 30, 1999
from $359,561 on December 31, 1998. This decrease is attributable to inventory
purchases made at the end of 1998 that were paid in the first quarter of 1999.
Accrued salaries and vacation remained relatively unchanged. Deferred revenue
and accrued warranty costs decreased by 38% to $63,150 from $102,432 at December
31, 1998. The long-term portion of the unsecured note payable to ATS decreased
by 25% during the past six months to $180,000. The outstanding balance of this
loan now stands at $300,000 with interest due on principal outstanding of 8% per
annum. Principal payments of $60,000 are payable twice each year in June and
December. Annual maturities of this note for each of the next three years are
$120,000, after which the note will be paid in full.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998
For the three months ended
7
<PAGE>
June 30, 1999, the Company reported revenue of $339,869 from the sale of 8 units
of its immersive display products and systems, a 61% decrease compared to the
same period ended June 30, 1998 when the Company reported revenue of $870,027
from the sale of 59 units. The Company's 1998 level of revenue was primarily
attributable to the delivery of display systems to a subsidiary of The Walt
Disney Company, which was completed in 1998. The Company's gross margin on sales
was 46% in the second quarter of 1999 compared to 52% in the second quarter of
1998. As of June 30, 1999 the Company had a backlog of delivered and undelivered
products and services of approximately $204,147.
Operating expenses for the three months ended June 30, 1999 decreased to
$414,347 when compared to the same three month period in 1998 where operating
expenses where $441,330. The decrease in operating expenses was the combined
result of lower product development and marketing and sales costs. Management is
continuing to evaluate the cost structure of the Company so as to determine if
additional savings can be made. No assurances can be made that costs can be
decreased or maintained at the current rate of growth of the Company.
For the quarter ended June 30, 1999, the Company reported a loss from operations
of $259,242 compared to income from operations of $6,064 for the same period in
1998. The decrease is primarily attributable to decreased revenues. The Company
intends to continue to aggressively market its current products as well as
introduce new products so as to improve revenue growth. No assurances can be
made, however, that revenue will increase and that margins can be improved or
sustained at the current levels.
Non-operating income for the three months ended June 30, 1999 was $12,124
compared to $21,104 for the same three month period in 1998. Non-operating
expenses were $7,200 for the second quarter in 1999 compared to $10,236 in the
second quarter in 1998, resulting in a positive net interest margin of $4,924
for the second quarter in 1999 compared to a positive net interest margin of
$16,932 for the second quarter in 1998. The decrease in interest margin was
primarily attributable to lower cash on hand.
For the quarter ended June 30, 1999, the Company reported a net loss of $254,318
and loss per share of $0.10 compared to a net profit of $16,932 and earnings per
share of $0.01 for the same three month period in 1998. The primary cause is a
decrease in revenues.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1999, the Company reported revenue of $647,469
from the sale of 13 units of its immersive display products and systems, a 67%
decrease compared to the same period ended June 30, 1998 when the Company
reported revenue of $1,969,899 from the sale of 90 units. The Company's 1998
level of revenue was primarily attributable to the delivery of display systems
to a subsidiary of The Walt Disney Company, which was completed in 1998. The
Company's gross margin on sales was 52% in the first six months of 1999 compared
to 49% in the first six months of 1998.
Operating expenses for the six months ended June 30, 1999 decreased to $795,511
when compared to the same six-month period in 1998 where operating expenses were
$963,858. The decrease in operating expenses was the combined result of lower
product development, general and administrative, and marketing and sales costs.
For the six months ended June 30, 1999, the Company reported a loss from
operations of $458,324 compared to income from operations of $8,532 for the same
period in 1998. The decrease is primarily attributable to decreased revenues
during 1999 when compared to the same period in 1998. The Company intends to
continue to aggressively market its current products as well as introduce new
products so as to improve revenue growth. No assurances can be made, however,
that this will have a positive impact on revenues or margins.
Non-operating income for the six months ended June 30, 1999 was $24,877 compared
to $45,286 for the same six month period in 1998. Non-operating expenses were
$14,425 for the first six months of 1999 compared to $20,672 during the same
period in 1998, resulting in a positive net interest margin of $10,452 for the
first six months of 1999 compared to a positive net interest margin of $24,614
for the same period in 1998. The decrease in interest margin was primarily
attributable to lower cash on hand.
8
<PAGE>
For the six months ended June 30, 1999, the Company reported a net loss of
$447,872 and loss per share of $0.17 compared to a net profit of $33,146 and
earnings per share of $0.01 for the same six month period in 1998. The primary
cause is a decrease in revenues during 1999.
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $1,850,870 as of June 30, 1999 compared to a working
capital balance of $2,785,943 as of June 30, 1998. The decrease is primarily
attributable to operating losses sustained during the past twelve months. The
Company believes that the current level of working capital is sufficient to meet
its needs through the end of the second quarter of 2000. However, no assurances
can be made to that effect. Longer-term cash requirements, other than normal
operating expenses, are anticipated for the development of new products,
financing of growth, and the possibility of acquisitions of related businesses
or technologies.
The Company has 1,380,000 Class A warrants for $11.00 per share outstanding
which may be exercised during a four-year period expiring May 29, 2001. The
warrants are also subject to redemption at the Company's election if the
Company's common stock price equals or exceeds $18.00 per share for 20
consecutive trading days within a period of 30 days. The Company, however, can
make no assurances that investors will elect to exercise the warrants or that
the required conversion price or redemption price can be reached since the
current trading price has been approximately in the $0.12-$0.50 range. Until
operations improve, and the Company obtains additional underwriting support to
replace its prior underwriter, who is no longer in business, the Company's
ability to generate proceeds from the conversion of the warrants may be
adversely affected.
INCOME TAXES
The Company is organized as a C Corporation and pays income taxes based upon
accrual based taxable income adjusted for differences in the timing of reporting
certain expenses for tax and financial statement purposes. The Company's income
taxes payable, if any, that may arise in the future may be offset by credits
available for certain research and development expenditures incurred.
As of December 31, 1998, the Company had a net operating loss carryforward
available to offset future taxable income generated through 2018 of
approximately $3,800,000. The deferred tax asset associated with these benefits
has been fully reserved in the Company's financial statements because of the
uncertainty surrounding future profitability. In the event of a change in
control of the Company, use of such a carryforward could be reduced.
YEAR 2000 ISSUES
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000 Problem"
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two-digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. If this situation occurs, the potential exists for
computer system failures or miscalculations by computer programs, which could
disrupt operations.
The Company has conducted a review of its internal computer and other systems
deemed to be date sensitive to assess its exposure to the Year 2000 problem. The
Company has already modified or replaced certain internal systems that are not
Year 2000 compliant. Based upon the review, management believes that the Year
2000 problem will not have a material adverse effect on the internal operations
of the Company.
9
<PAGE>
Additionally, the Company is communicating with its major vendors and suppliers
to determine their state of readiness relative to the Year 2000 problem and the
Company's exposure to third party Year 2000 issues. To date, the Company has
received responses from most major vendors and suppliers, indicating that they
will be Year 2000 ready. However, there can be no guarantee that the systems of
other companies, on which the Company's business relies will be converted in a
timely manner, or that representations made to the Company by third parties will
be accurate. As a result, the failure of a major vendor or supplier to
adequately address their Year 2000 problem could have a material adverse effect
on the operations of the Company.
The Company's Year 2000 conversion efforts have not been budgeted or tracked as
separate projects, but have been occurring in conjunction with normal sustaining
activities. All costs related to the Company's Year 2000 problem are being
expensed as incurred, while the cost of new hardware or software is being
capitalized or amortized over its expected useful life. The costs associated
with Year 2000 compliance have not been and are not anticipated to be material
to the Company's financial condition or results of operations. Specifically, as
of June 30, 1998, the Company has spent less than $60,000 and anticipates
spending less than $5,000 thereafter. These costs are based upon management's
best estimates. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from these plans. The Company's
contingency plan relative to the Year 2000 problem includes readiness to switch
to Year 2000 compliant vendors or stockpiling raw materials in the fourth
quarter of 1999.
The Company's products make no internal calculations regarding dates. Therefore,
the Company's products do not pose a Year 2000 compliance issue. Although the
Company has no reason to conclude that any specific supplier represents a
material risk, the most likely risk would entail production disruption due to
inability of suppliers, some of whom represent the sole source of component
parts for certain items, to deliver such critical parts. The Company is unable
to quantify such a scenario, but it could potentially result in a material
adverse effect on results of operations, liquidity or financial condition of the
Company.
The preceding Year 2000 issue discussion contains various forward-looking
statements, which represent the Company's belief or expectations regarding
future events. When used in the Year 2000 discussion, the words "believes,"
"expects," "estimates" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements include, without
limitation, the Company's expectations as to when it will complete the
renovation and testing phases of its Year 2000 program as well as its Year 2000
contingency plans; its estimated cost of achieving Year 2000 readiness; and the
Company's belief that its internal systems will be Year 2000 compliant in a
timely manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results. Factors that may cause these differences include, but are not
limited to, the availability of qualified personnel and other information
technology resources; the ability to identify and renovate all date sensitive
lines of computer code or to replace embedded computer chips in affected systems
and equipment; and the actions of government agencies or other third parties
with respect to Year 2000 problems.
SEASONALITY
Based on its limited experience to date, the Company believes that its future
operating results will not be subject to seasonal changes. Such effects, should
they occur, might become apparent in the Company's operating results during a
period of expansion. However, the Company can make no assurances that its
business can be significantly expanded.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than
legal proceedings occurring in the ordinary course of business. Management
believes that none of these legal proceedings, individually or in the aggregate,
will have a material adverse impact on the results of operations or financial
condition of the Company.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1999, the Annual Meeting of Shareholders of the Company was held. At
that meeting, (a) the following person was elected as director to serve until
the expiration of the terms indicated and (b) the shareholders ratified the
appointment of Grant Thornton LLP as the Corporation's independent public
accountants for the year 1999 with 2,511,643 votes for, 3,350 votes against and
800 abstentions.
The number of votes cast for, against, as well as abstentions to each such
matter, including a separate tabulation with respect to each director nominee
was as follows:
(a) Election of Director:
Expiration Votes
Director of Term Votes For Against Abstentions
- -------- ------- --------- ------- -----------
Ronald C. Wilgenbusch 2002 2,485,668 30,125 0
The term of office as a director continued after the meeting for the following
persons (expiration of term in parenthesis):
Christopher J. Lewis (2000); Delmar J. Lewis (2001); and Claude H. Rumsey, Jr.
(2001).
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<S> <C> <C>
List of Exhibits.
3.1** Amended and Restated Certificate of Incorporation of the Company.
3.2* Amended and Restated Bylaws of the Company.
4.1* Specimen Copy of Common Stock Certificate.
4.2* Specimen Copy of Class A Warrant.
4.3* Form of Warrant Agreement.
10.1* Employment Agreement with Delmar J. Lewis, as amended.
10.2 Consulting Agreement with Christopher J. Lewis.
10.3* Asset Purchase Agreement dated November 1, 1994.
11.0 Computation of Per Share Earnings (Incorporated by reference to Notes to Financial Statements included
herein).
27.0 Financial Data Schedule
</TABLE>
11
<PAGE>
(B) REPORTS ON FORM 8-K
Reports on Form 8-K were filed on the following dates during the quarter ending
June 30, 1999.
FILE DATE ITEM REPORTED
- --------- -------------
April 12, 1999 Sale of stock by n-Vision President Christopher J. Lewis.
May 28, 1999 Resignation of n-Vision President Christopher J. Lewis and
appointment of Claude H. Rumsey, Jr. as Acting President.
- -----------------
* Incorporated herein by reference into this document from the Exhibits to
Form SB-2 Registration Statement, filed on April 19, 1996, and any
amendments thereto (Registration No. 333-3098).
** Incorporated herein by reference into this document from the Proxy
Statement for the Special Meeting of Stockholders of the Company dated
October 19, 1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Dated: August 13, 1999
n-VISION, INC.
(Registrant)
/s/Eric A. Hall
------------------------------------------
Eric A. Hall
Chief Financial Officer
Principal Financial and Accounting Officer)
13
Exhibit 10.2
CONSULTING AGREEMENT
THIS AGREEMENT, dated as of June 1, 1999, is made and entered into by and
between n-Vision, Inc., a Delaware corporation, (the "Company") and Christopher
J. Lewis (the "Consultant").
W I T N E S S E T H
WHEREAS, the Company wishes to utilize Consultant's services in connection with
its business; and WHEREAS, Consultant desires to provide such services subject
to the terms and conditions set forth herein. NOW, THEREFORE, FOR GOOD AND
VALUABLE CONSIDERATION, THE SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, IT IS
AGREED AS FOLLOWS:
1. Retention of Independent Consultant. The Company does hereby retain
Consultant as an independent consultant to assist the Company on the terms
and conditions hereinafter stated; and Consultant does hereby accept such
retention.
2. Services to be Provided. The parties agree, that from and after the date
hereof, Consultant shall render consulting services to the Company as and
when reasonably requested by the Company. These consulting services shall
include, without limitation, the following services: advising the Company
with respect to its operations, business, suppliers and staffing;
representing the Company at trade shows and conferences; and assisting the
Company with its business development, planning and the development and
promotion of new products and services.
3. Compensation. Consultant shall receive compensation during the term of
this Agreement for his services rendered pursuant to this Agreement as
follows:
(A) A sum of $35,000 per year to be paid in semi-monthly
installments;
(B) Reimbursement for pre-approved tuition expenses incurred by the
Consultant during the term of this Agreement; and
(C) Use of the Company's asset #0070 Toshiba Laptop (Serial
#29436716) during the term of the Agreement.
4. Independent Contractors. Consultant acknowledges that he is an
independent contractor and not an employee of the Company. Accordingly,
Consultant acknowledges that he will not be entitled to any employee
benefits which may be provided by the Company for its employees; and that
amounts earned by Consultant will not be subject to FICA taxes or state or
federal withholding.
5. Intellectual Property; Non Disclosure Obligations. The parties
acknowledge that Consultant has had and will have access to various trade
secrets and other proprietary and confidential information which are owned
by the Company and which are used in operation of the Company's business.
"Trade secrets and other proprietary and confidential information" consist
of, for example, and not intending to be inclusive: (i) information
concerning any matters relating to the business of the Company, any of its
customers, customer contacts, business prospects, business opportunities,
licenses, contracts, the prices it obtains, has obtained or offers for
supplies, products or services or any other information concerning the
business of the Company and the Company's good will, and (ii) techniques,
methodologies, software, algorithms, systems, formulae, processes,
compilations of information, drawings, proposals, business plans, job
notes, reports, records and specifications. Consultant shall not disclose
or use in any manner, directly or indirectly, any such trade secrets and
other proprietary and confidential information either during the term of
this Agreement or for period of not less than two (2)
14
<PAGE>
years thereafter, except as required in the course of the Consultant's
performance of services and work for the Company under this Agreement or as
approved in writing by the President of the Company.
6. Intellectual Property Rights. Consultant acknowledges and agrees that
all right, title and interest of any kind and nature, whether known or
unknown, in any trade secrets and other proprietary and confidential
information and any other intellectual property, including, but not limited
to, any inventions, patents, trademarks, service marks, copyrights and
other properties invented, created, written, developed, furnished, produced
or disclosed by Consultant, in the course of rendering services to the
Company under and pursuant to this Agreement (said properties hereinafter
referred to as the "Work Product") shall, as between the Company and
Consultant, (a) be within the scope of Consultant's engagement, and (b) be
and remain always the sole and exclusive property of the Company for any
and all purposes and uses, and Consultant shall have no right, title, or
interest of any kind or nature in or to such property, or in or to any
results and/or proceeds of such property. Consultant agrees to disclose all
discoveries, improvements and inventions conceived, made or developed in
the course of his employment promptly and fully to the Company and to
execute any and all documents deemed necessary by the Company to secure
fully to the Company the Work Product, including, without limitation,
patent and/or copyright assignments and to cooperate with the Company in
any subsequent actions deemed necessary by the Company to perfect its
interest in the Work Product. Consultant agrees that he will not create or
permit any security interest, lien or other encumbrance upon the Work
Product or any materials furnished by the Company to Consultant in the
course of Consultant's employment.
7. Non-Compete; Non-Solicitation. In consideration for the compensation
provided herein, Consultant agrees, while he is providing services to the
Company, and for a period of two (2) years thereafter, not to directly or
indirectly, either alone or in partnership or jointly or in conjunction
with any person or persons, firm, association, company, corporation or
other entity as principal, agent, employee, director, shareholder or in any
other manner whatsoever (i) carry on or be engaged in the business of the
production, manufacture, sale and marketing of video conferencing
technology and related data communication systems and installations, and/or
(ii) solicit business from, or sell to, any of the customers of the
Company. Nothing herein shall prohibit Consultant from owning not more than
five percent (5%) of the outstanding stock of any class of an entity
described herein which is publicly traded, so long as Consultant has no
active participation in the business of such entity. Consultant further
agrees that during the Non-Compete Period, he will not directly or
indirectly offer employment to or hire any person who is currently or was
within the last year employed by the Company, or is or will be employed by
the Company, except with prior written consent of the Company.
8. Specific Performance; Severability. It is specifically understood and
agreed that any breach of the provisions set forth in Sections 5, 6 and 7
by Consultant is likely to result in irreparable injury to the Company,
that the remedy at law alone will be an inadequate remedy for such breach
and that, in addition to any other remedy it may have, the Company shall be
entitled to enforce the specific performance of this Agreement by
Consultant through both temporary and permanent injunctive relief, and
through any other appropriate equitable relief, without the necessity of
showing or proving actual damages. In case any of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, including without limitation geographic
scope, duration or functional coverage, any such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had been limited or modified (consistent with its
general intent) to the extent necessary to make it valid, legal and
enforceable, or if it shall not be possible to so limit or modify such
invalid, illegal or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or part of a provision had never been contained in this
Agreement.
15
<PAGE>
9. Term of Contract. The initial term of this Agreement shall be from the
date of this Agreement until June 1, 2000. This agreement shall be
automatically renewed for an additional one-year term, unless either
Consultant or the Company gives contrary written notice to the other party
hereto not less than 15 days before the scheduled expiration of the term of
this Agreement. Each term and all such renewed terms are collectively
referred to herein as the term of this Agreement.
10. Governing Law. This Agreement shall be governed by the law of the State
of Delaware, and each party consents to jurisdiction and venue regarding
any dispute arising out of or related to this Agreement being vested in the
Federal and State Courts of Delaware.
11. Binding Effect. This Agreement shall be binding upon the parties hereto
and their respective heirs, person representatives and successors.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first set forth above.
n-VISION, INC. CONSULTANT
/s/Claude H. Rumsey, Jr. /s/ Christopher J. Lewis
- ------------------------ -------------------------
By: Claude H. Rumsey, Jr. Christopher J. Lewis
Title: President
Dated: June 1, 1999 Dated: June 1, 1999
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the form 10-QSB for the period ended June 30, 1999 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,009,085
<SECURITIES> 0
<RECEIVABLES> 270,600
<ALLOWANCES> 25,000
<INVENTORY> 859,644
<CURRENT-ASSETS> 2,204,416
<PP&E> 989,884
<DEPRECIATION> 352,939
<TOTAL-ASSETS> 2,564,461
<CURRENT-LIABILITIES> 353,544
<BONDS> 180,000
0
0
<COMMON> 26,515
<OTHER-SE> 2,004,400
<TOTAL-LIABILITY-AND-EQUITY> 2,564,461
<SALES> 647,469
<TOTAL-REVENUES> 672,346
<CGS> 310,282
<TOTAL-COSTS> 1,105,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,425
<INCOME-PRETAX> (458,324)
<INCOME-TAX> 0
<INCOME-CONTINUING> (447,872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (447,872)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
