| Table of Contents |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| þ | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: |
| For the fiscal year ended: December 31, 2014 | |
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: |
| For the transition period from: |
000-50081
(Commission File Number)
Invisa, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
65-1005398
(I.R.S. employer identification number)
1800 2nd Street Suite 965
Sarasota, Florida 34236
(Address of principal executive offices)
(941) 870-3950
(Registrant’s telephone number)
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ¨
Indicate by check mark whether the registrant (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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No þ
Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ |
| Non-accelerated filer (Do not check if a smaller reporting company) ¨ | Smaller reporting company þ |
As of June 30, 2014, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $7,805,786.
As of March 30, 2015, the registrant had 14,524,498 shares of Invisa Common Stock, $0.001 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Invisa, Inc. definitive 2015 Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2014, are incorporated by reference into Part III of this Form 10-K.
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PART I
Note regarding forward-looking statements:
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” and words of similar import, as well as all references to future results. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements of Invisa, Inc. to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: risks involved in implementing our business strategy, our ability to obtain financing on acceptable terms, competition, our ability to manage growth, risks of technological change, our dependence on key personnel, our ability to protect our intellectual property rights, risks of new technology and new products, and government regulation. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update any such forward-looking statements to reflect events, developments or circumstances after the date hereof.
| ITEM 1. | B USINESS |
On November 10, 2014 Invisa, Inc. (“Invisa” or the “Company”) acquired all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”), a U.S. manufacturer of textured coatings, and all of the ordinary common stock of Engineered Products Acquisition Limited (“EPAL”), the holding company for Wardle Storeys (Group) Limited (“Wardle Storeys”), a European manufacturer of textured coatings and polymer films. Management of the acquired entities was not altered in the acquisitions.
Invisa made the acquisition of Uniroyal through its newly formed subsidiary, UEP Holdings, LLC (“UEPH”), to which it contributed certain of its assets and liabilities as part of the organization of that subsidiary. The aggregate purchase consideration paid for 100% of the outstanding equity of Uniroyal was preferred ownership interests issued by UEPH having an aggregate face value of $35 million. In a separate transaction, Invisa also purchased EPAL for aggregate consideration of 100 shares of Invisa’s Common Stock and Invisa’s guaranty of outstanding EPAL preferred stock retained by the seller having a face value of £12,601,198 (approximately $20 million at closing). Details of the acquisitions are set forth in the Current Report on Form 8-K filed by the Company on November 10, 2014, which is incorporated herein by reference.
As a result of the acquisitions, we are a manufacturer and seller of vinyl coated fabrics products that have various high performance characteristics and capabilities and derive our revenue principally through our subsidiaries Uniroyal and Wardle Storeys. Our coated fabrics products are durable, stain resistant, easily processed, cost-effective and better performing than traditional leather or fabric coverings. Our products are frequently used in applications that require rigorous performance characteristics such as automotive and non-automotive transportation, certain indoor/outdoor furniture, commercial and hospitality seating, healthcare facilities and athletic equipment. In the automotive industry our products are used primarily in seating, door panels, head and arm rests, security shades and trim components, including instrument panels, door casings, seating, gear lever and steering column gaiters, headliners and load space covers. Non-automotive applications include outdoor seating for utility and sports vehicles, and sheeting used in medical, nuclear protection, personal protection, moisture barriers, pram and nursery, movie screen and decorative surface applications. Our primary brands names include Naugahyde ® , BeautyGard ® , Flameblocker™, Spirit Millennium ® , Ambla ® , Amblon ® , Velbex ® , Cirroflex ® , Plastolene ® and Vynide ® .
We are the successor to a long line of businesses that have manufactured vinyl coated fabrics. Our best known brand, Naugahyde, is the product of many improvements on a rubber-coated fabrics developed a century ago in Naugatuck, Connecticut. We design, manufacture and market a wide selection of vinyl coated fabric products under a portfolio of recognized brand names. We believe that our business has continued to be a leading supplier in its marketplace because of our ability to provide specialized materials with performance characteristics customized to the end-user specifications, complemented by technical and customer support for the use of our products in manufacturing.
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We continue to maintain our legacy Smartgate technology business. Our sensors are based on presence sensing technology that we call InvisaShield.
Our Principal Products and Their Markets
Our products have undergone considerable evolution and today are distinguished by superior performance in a wide variety of applications as alternatives to leather, cloth and other synthetic fabric coverings. Our standard product lines consist of more than 600 SKUs with combinations of colors, textures, patterns and other properties. Our products are differentiated by unique protective top finishes, adhesive back coatings and transfer print capabilities. Additional process capabilities include embossing grains and patterns, and rotogravure printing, which imparts character prints and non-registered prints, lamination and panel cutting.
Our vinyl coated fabrics products have various high performance characteristics and capabilities. They are durable, stain resistant, easily processed, more cost-effective and better performing than traditional leather or fabric coverings. Our products are frequently used in applications that require rigorous performance characteristics such as automotive and non-automotive transportation, certain indoor/outdoor furniture, commercial and hospitality seating, healthcare facilities and athletic equipment. Materials that we manufacture come in a wide range of colors and textures and can be hand or machine sewn, laminated to an underlying structure, thermoformed to cover various substrates or made into a variety of shapes for diverse end-uses. We are a long-established supplier to the global automotive industry and manufacture products for interior trim components from floor to headliner which are produced to meet specific component production requirements such as cut and sew, vacuum forming/covering, compression molding, and high frequency welding. Some products are supplied with micro perforations, which are necessary on most compression molding processes. Materials can also be combined with polyurethane or polypropylene foam laminated with either flame or hot melt adhesive for seating, fascia and door applications.
The automotive sector represented approximately 63% of our total sales in 2014. Our products are used primarily in the following automotive applications:
| · | Seating |
| · | Door panels |
| · | Head and arm rests |
| · | Security shades |
| · | Components |
The non-automotive transportation sector represented 13% of our 2014 sales and primarily consisted of seating products for original equipment manufacturers of non-automotive and light truck vehicles in the following five categories:
| · | Personal watercraft, ATV’s, snowmobiles, golf carts |
| · | Light and heavy industrial equipment and agricultural equipment (tractors, bulldozers) |
| · | Recreational vehicles, vans and motor homes |
| · | Heavy and medium trucks |
| · | Mass transit (trains, buses) |
The distribution market sector represented approximately 11% of our 2014 sales and consists primarily of sales of the standard Naugahyde and Ambla product lines to local furniture shops, smaller furniture manufacturers and companies serving the hospitality and automotive and marine aftermarkets for refurbishing and replacement. The sales organization employed to service this market is a network of approximately 40 distributor locations.
The contract sector, which represented approximately 13% of our 2014 sales, includes contract furniture/upholstery, marine, healthcare, child care, and industrial equipment.
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Products are developed and marketed based upon the performance characteristics required by end-users. For example, for recreational products used outdoors, such as boats, personal watercraft, golf carts and snowmobiles, a product designed primarily for durability and weatherability is used. We also manufacture a line of products called BeautyGard , with water-based topcoats that contain agents to protect against bacterial and fungal micro-organisms and can withstand repeated cleaning, a necessity in the restaurant and health care industries. These topcoats are environmentally friendlier than solvent-based topcoats. The line is widely used in hospitals and other healthcare facilities. Flame and smoke retardant vinyl coated fabrics are used for a variety of commercial and institutional furniture applications, including hospitals, restaurants and residential care centers and seats for school busses and aircraft.
We produce vinyl coated fabrics and laminated composites through a continuous cast manufacturing process. The continuous cast method yields a material with a soft finish, deep grain pattern, wide temperature tolerance range and high malleability factor for thermoforming. In addition, we possess plastisol-compounding capability, a variety of proprietary formulations and highly versatile finishing processes. We believe that our products are differentiated in the market by unique protective topcoat finishes and adhesive back coats, as well as rotogravure printing, which imparts multiple features, character prints and non-registered prints. We also have the in-house capability to perform transfer printing as well as micro-perforation, which provides product breathability.
We seek to ensure that every product fully meets customer requirements of specification, reliability and performance.
We believe that we maintain our market leadership position through a strong research and development effort that provides strong product development capability. This yields enhanced product characteristics, lower cost of material combinations and new proprietary product formulations. We estimate that approximately 17% of our sales relate to products developed to customer specifications.
Our Stoughton, Wisconsin facility achieved ISO 9001:2008 status in 1999 and has renewed it annually since then. Our UK facility achieved ISO TS 16949 status in 2004 and is approved to the European Council Directive 96/98 EX on Marine Equipment as amended for Module D Production Quality
We hold no patents but maintain certain of our process technologies as trade secrets.
Our legacy Smartgate safety sensors are used in or with parking gates to protect life and property. Our sensors are based on presence-sensing technology that we call InvisaShield. Although we believe that our InvisaShield technology may have additional applications for safety products, substantially all of our revenue from this business has been derived from the sale of SmartGate sensors used in parking gates.
Our Distribution Methods
Products are developed and marketed based upon the performance characteristics required by end-users. We currently serve customers world-wide with 18 full-time sales persons in offices in Sarasota, Florida, Nappanee, Indiana and Earby, Lancashire and three exclusive agents in Italy, Germany and Turkey and an extensive distributor network in the U.S., the United Kingdom, Scandinavia, France, Germany and Hong Kong. 11% of our worldwide sales in 2014 were made through distributors. The industrial business is supported mainly from stock and via a catalogue.
We maintain websites for our principal U.S. non-automotive products at www.naugahyde.com and for our global products at www.wardlestoreys.com and www.ambla.com .
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Our top 25 customers account for approximately 70% our sales. No single customer accounted for more than 18% of our total sales in 2014.
We sell our safety sensor products directly to manufacturers, dealers and end users. We have attended trade shows and have continued our relationships with our customer list, which comprises manufacturers, dealers and end users. We also receive unsolicited orders by telephone, fax or the internet. In addition, we have sought relationships with architectural engineering firms and municipalities that are implementing projects requiring parking barrier gates, such as municipal parking lots and airport reconstruction. Although we have not maintained a full-time sales force for this business, we have engaged outside consultants.
Competition
We compete primarily on the basis of style, color, product breadth and quality, as well as price and customer service.
The global vinyl coated fabrics market is highly fragmented. The uses of vinyl coated fabrics include automotive, furniture, industrial, protective clothing, wall coverings, book coverings, non-automotive transportation and awnings and tents.
The following table sets forth product applications in the markets in which we actively compete domestically and our primary competitors in those markets.
| Markets | Key Uses | Primary Competitors | ||
| Automotive |
Interior components Seating applications Security shades |
Canadian General-Tower Limited Benecke-Kaliko AG Hornschuch Group GmbH Vulcaflex S.p.A. Haartz Corporation Morbern, Inc. |
||
|
Transportation
and Contract |
ATV/snowmobile/PWC/golf carts Heavy/light equipment RVs/motor homes |
Canadian General-Tower Limited Morbern, Inc. Spradling International Inc. |
||
| Distribution | Approximately 40 distributor and reseller locations |
OMNOVA Solutions Spradling International Inc. Hornschuch Group GmbH Morbern, Inc. |
||
| Contract |
Office/contract/institutional furniture Restaurant booth Health care Marine |
OMNOVA Solutions Morbern, Inc. Hornschuch Group GmbH Alcor Gislaved Folie AB Griffine Enduction |
||
| Other | Home furnishings/dinettes | Spradling International Inc. |
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Raw Materials
The principal raw materials for our coated fabrics are casting paper, knit fabric, PVC plastic resins, pigments and plasticizers. We have multiple sources for most of these materials. We believe that in the few instances where we have a sole supplier we can re-engineer around the sole-sourced materials if necessary with minimal effort and cost.
Concentration of Customers
The only customer that accounts for ten percent or more of our consolidated revenues is Lear Corporation. 70% of our global sales in 2014 were contributed by our top 25 customers. Our largest customer contributed 18% to our total sales in 2014.
Trademarks and Material Contracts
We own the following proprietary brands and trademarks, among others:
| · | All-American ® |
| · | Ambla ® |
| · | Amblon ® |
| · | BeautyGard ® |
| · | Chameá™ |
| · | Cirroflex ® |
| · | Flameblocker™ |
| · | Naugaform ® |
| · | Naugahyde ® |
| · | NaugaSatin ™ |
| · | NaugaSoft ® |
| · | NaugaSylk™ |
| · | Plastolene ® |
| · | Spirit Millennium ® |
| · | Velbex ® |
| · | Vynide ® |
Employees
We believe that we maintain a stable, experienced and productive workforce, currently employing a total of 410 employees.
Most of our employees who are involved in the production process are located at manufacturing facilities in Stoughton, Wisconsin and Earby, England. The production employees at the Stoughton, Wisconsin facility are represented by Local 1207 of the United Steel Workers (formerly P.A.C.E.). The term of the collective bargaining agreement for Stoughton represented employees extends to March 2023. Most of the employees at our Earby facility are represented by UNITE. The collective bargaining agreement with UNITE does not specify a termination date.
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Our executive and corporate employees work in our executive office in Sarasota, Florida, and our domestic automotive sales support employees work in our sales office in Nappanee, Indiana.
Effect of Existing or Probable Government Regulations on Our Business
Our manufacturing processes are subject to increasingly stringent regulation by environmental, health and safety authorities. It is difficult to predict future changes in environmental, health and safety regulations on our future financial results. Continued compliance could result in significant increases in capital expenditures and operating costs. Any increase in these costs, or unanticipated liabilities, arising out of a release of regulated material, discovery of previously unknown conditions, more aggressive enforcement actions or new requirements, could adversely affect our financial results.
Our safety sensor product is subject to regulation of radio frequency (RF) by the Federal Communications Commission. Our safety sensor product does have FCC Certification. On March 1, 2001, Underwriters Laboratory (UL) implemented a new safety standard for the powered gate, door and window industry. This rule, while not a governmental regulation, is considered an indication of reasonable safety for powered gates, doors and windows. Manufacturers of gates and operators that rely upon UL certification or consider UL certification to be significant could require that our product be certified by UL. Our safety sensor product is not UL certified. The absence of UL certification could present a barrier to sales to potential customers.
Research and Development
We are actively engaged in research and development programs designed to develop new products, manufacturing processes, systems and technologies, while reducing costs to customers and enhancing existing product lines. We believe that investment in research and development has been an important factor in establishing and maintaining our competitive position in many of the specialized niche markets in which our products are sold. Product performance capabilities and characteristics are continually adjusted to meet customer needs.
In-house design and innovative product development are key features of our business. Our in-house design studio enables us to develop new designs for customers and then deliver them in sample form or by computer-aided design (CAD). We have access to a vast range of grain, prints and surface effects, which are constantly evolving and increasing. Further trends are captured and expressed in our own concept work and exclusive designs are developed from customer requests. Our CAD systems allow fast creation and display of design innovation. “Drape” software enables computer generated designs to be shown in situ in interiors of vehicles before the expense of production is incurred. A silicone cast surface-modeling system permits the transfer of material surface finishes, including leather and fabrics, onto vinyl foils for customer review before investment in tooling. Diverse production systems and equipment create an extensive automotive product range. Hi-Loft and anti-squeak finish (ASF) are examples of product developments providing customers with cost reduction and material performance enhancements.
We spent $1,527,589 for research and development in 2014 and $1,394,267 in 2013.
Compliance with Environmental Laws
We believe that we are in compliance with all applicable environmental laws and regulations. We have not needed to make any material expenditure to maintain such compliance during the past two fiscal years, nor do we anticipate having to make any material expenditure to maintain such compliance in the foreseeable future.
We aim to comply with all existing regulatory legislation at European, national and local levels and adopt a positive stance in anticipating future, more stringent regulatory requirements. We endeavor to minimize waste throughout the production facility with better utilization of raw materials, energy and water and to prevent at the source the emission of pollutants into the environment. We are committed to continual improvements in environmental performance
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| ITEM 1A. | RISK FACTORS |
Not applicable.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 2. | PROPERTIES |
We lease our production facility in Stoughton, Wisconsin (near Madison). The term of the lease extends to October 31, 2033 with an option to renew the lease for an additional five years. This facility consists of an approximately 230,000 square foot building with production, laboratory and administrative office space and a warehouse. Our lease includes several nearby buildings used for storage. The plant achieved ISO 9001:2008 certification and renews this certification on an annual basis. Major equipment at the production facility includes two cast coating lines, five rotogravure printers, four paper reconditioning machines one buffer, four standard embossers, one GAP embosser, two micro-perforators, nine inspection stations with automatic data collection, bulk material handling systems and warehouse bar coding and locator systems. Laboratory facilities at the Stoughton facility replicate the production floor capabilities and enhance our research and development capability.
We also lease our production facility in West Craven Business Park, Earby, Barnoldswick, Lancashire, England. This facility consists of approximately 250,000 square feet. The term of the lease extends to March 2, 2029. Major equipment at the production facility includes three coating lines, six inspection tables, four printers, one calender, three laminators, one embosser, and one perforating process.
Our executive and sales offices occupy approximately 9,010 square feet of premises in Sarasota, Florida under a lease that extends to May 31, 2018.
| ITEM 3. | LEGAL PROCEEDINGS |
From time to time w e may be a party to or be involved with legal proceedings, governmental investigations or inquiries, claims or litigation that are related to our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business or financial condition.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
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PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our Common Stock trades on the NASD OTC BB under the symbol INSA.OB. The following table sets forth the range of high and low bids to purchase our Common Stock during the last two fiscal years. Such prices represent quotations between dealers, without dealer markup, markdown, or commissions, as reported on NASDAQ.com and may not represent actual transactions.
As of March 30, 2015, there were 400 stockholders of record of Invisa Common Stock.
| Quarter | High Bid | Low Bid | ||||||
| First Quarter 2013 | $ | 0.30 | $ | 0.30 | ||||
| Second Quarter 2013 | $ | 0.30 | $ | 0.30 | ||||
| Third Quarter 2013 | $ | 0.42 | $ | 0.42 | ||||
| Fourth Quarter 2013 | $ | 0.70 | $ | 0.70 | ||||
| First Quarter 2014 | $ | 1.50 | $ | 0.50 | ||||
| Second Quarter 2014 | $ | 2.00 | $ | 1.10 | ||||
| Third Quarter 2014 | $ | 2.00 | $ | 1.35 | ||||
| Fourth Quarter 2014 | $ | 2.41 | $ | 1.50 | ||||
On March 24, 2015, the high and low prices for shares of our Common Stock in the over-the-counter market, as reported by NASD.OTC.BB were $2.99 and $2.94 per share.
We believe that there are presently approximately eight (8) market makers for our Common Stock. When stock is traded in the public market, characteristics of depth, liquidity and orderliness of the market may depend upon the existence of market makers as well as the presence of willing buyers and sellers. We do not know if these or other market makers will continue to make a market in our Common Stock. Further, the trading volume in our Common Stock has historically been both sporadic and light.
Currently, the payment by the Company of dividends on its Common Stock rests within the sole discretion of its Board of Directors. The payment of dividends will depend upon our earnings, our capital requirements and our financial condition, as well as other relevant factors. The Company has not been required to or declared any cash dividends since its inception, and has no present intention of paying any cash dividends on its Common Stock in the foreseeable future.
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Transfer Agent
The Transfer Agent for the Common Stock of the Company is Continental Stock Transfer and Trust Company 17 Battery Place, New York, NY 10004.
Recent Sales of Unregistered Securities
During the years ended December 31, 2014 and December 31, 2013 a total of 140,000 shares of common stock were issued to an aggregate of four directors and officers for services rendered in 2013. The Company charged the fair value of these shares to operations in 2013. However, the par value of these shares was recorded at the time of issuance of these shares in the first quarter of 2014.
| ITEM 6. | SELECTED FINANCIAL DATA |
Not applicable.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion provides an analysis of the Company’s financial condition and results of its operations and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Annual Report on Form 10-K.
Results of Operations
Invisa, Inc.
Consolidated Operating Results
For the Years Ended December 31, 2014 and December 31, 2013
| 2014 | 2013 | Change | % | |||||||||||||
| Net Sales | $ | 98,323,226 | $ | 94,766,651 | $ | 3,556,575 | 3.8 | % | ||||||||
| Cost of Sales | 79,004,240 | 77,560,044 | 1,444,196 | 1.9 | % | |||||||||||
| Gross Profit | 19,318,986 | 17,206,607 | 2,112,379 | 12.3 | % | |||||||||||
| Other Expenses: | ||||||||||||||||
| Selling | 4,691,974 | 3,706,656 | 985,318 | 26.6 | % | |||||||||||
| General and administrative | 8,437,348 | 6,424,005 | 2,013,343 | 31.3 | % | |||||||||||
| Research and development | 1,527,589 | 1,394,267 | 133,322 | 9.6 | % | |||||||||||
| Total operating expenses | 14,656,911 | 11,524,928 | 3,131,983 | 27.2 | % | |||||||||||
| Operating Income | 4,662,075 | 5,681,679 | (1,019,604 | ) | -17.9 | % | ||||||||||
| Interest expense | (1,552,541 | ) | (1,282,532 | ) | (270,009 | ) | 21.0 | % | ||||||||
| Gain on bargain purchase | — | 4,646,046 | (4,646,046 | ) | -100.00 | % | ||||||||||
| Other income | 190,234 | 109,438 | 80,796 | 73.8 | % | |||||||||||
| Income before taxes | 3,299,768 | 9,154,631 | (5,854,863 | ) | -64.0 | % | ||||||||||
| Tax (benefit) provision | (1,340,682 | ) | 175,491 | (1,516,173 | ) | -100.0 | % | |||||||||
| Net income | 4,640,450 | 8,979,140 | (4,338,690 | ) | -48.3 | % | ||||||||||
| Preferred dividends | (403,582 | ) | — | (403,582 | ) | — | ||||||||||
| Net income available to common shareholders | $ | 4,236,868 | $ | 8,979,140 | $ | (4,742,272 | ) | -52.8 | % | |||||||
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Overview:
On November 10, 2014, the Company acquired all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”), and all of the ordinary common stock of Engineered Products Acquisition Limited (“EPAL”), the holding company for Wardle Storeys (Group) Limited (“Wardle Storeys”). As further explained in the consolidated financial statements and notes thereto this transaction was treated as a combination between entities under common control and was accounted for in a manner similar to the pooling-of-interest method.
Prior to its acquisition by Invisa, EPAL had acquired 100% of the common stock of Wardle Storeys on March 4, 2013 using acquisition accounting. Therefore the combined operating results for 2013 only include the results of Wardle Storeys for the period March 4, 2013 through December 31, 2013 or approximately 10 months partially explaining the increases from year to year.
Wardle Storeys’ functional currency is the British Pound Sterling. The average exchange rate for the Pound Sterling to the U.S. Dollar was approximately 5% higher in 2014 compared to 2013. Although it affected and increased each line item in 2014, the overall effect on net income was approximately $80,000 for the 2014 year compared to 2013.
Revenue:
Total revenue in 2014 increased $3,556,575 or 3.8% to $98,323,226 from $94,766,651 in 2013. The 2013 results only included 10 months for Wardle Storeys whereas 2014 included a full 12 months. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, total consolidated revenues would have shown a decrease of $5.4 million. The decrease was primarily due to the end of a one-year 2013 special automotive program that totaled approximately $6 million and the roll off of some legacy automotive platforms. The decrease in revenue was partially offset by new automotive platform launches and favorable impact of the change in the average Sterling exchange rate for 2014 compared to 2013.
Gross Profit:
Total gross profit in 2014 was $19,318,986 or 19.6% of sales compared with $17,206,607 or 18.2% of sales in 2013. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, the consolidated gross profit would have been $18,375,994 or 17.7% of sales, an increase of approximately $943,000 despite lower revenue. The gross profit percentage increased in 2014 primarily due to the rolling off of lower margin automotive platforms which were replaced with higher margin platforms and the positive results of cost efficiency programs implemented in 2013 and 2014.
Operating Expenses:
Selling expenses in 2014 increased $985,318 or 26.6% to $4,691,974 from $3,706,656 in 2013. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, selling expenses would have only increased $456,326. The increase resulted primarily due to increases in administrative, marketing and support staff expenses and partially to the change in the exchange rate.
General and administrative expenses in 2014 increased by $2,013,343 to $8,437,348 from $6,424,005 in 2013. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, general and administrative expenses would have only increased by $1,632,062. Expenses increased in 2014 due to costs associated with the acquisition in the amount of $414,000 and increasing labor costs and administrative expenses necessary to prepare the Company to become a multinational SEC reporting company. Included in general and administrative expense is approximately $492,000 and $123,826 for 2014 and 2013, respectively, of statutory severance payments as a result of labor reduction programs at our U.K. facility. The severance program was fully expensed in 2014.
Research and development expenses in 2014 increased by $133,322 to $1,527,589 from $1,394,267 in 2013. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, research and development expenses would have only increased by $51,652, primarily due to increased development for new automotive platforms in 2014 and to the change in the exchange rate.
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Interest expense:
Interest expense in 2014 increased by $270,009 to $1,552,541 from $1,282,532 in 2013. Assuming the Wardle Storeys transaction had occurred on January 1, 2013, interest expense would have increased by $228,110, primarily due to the capital lease transaction on the Company’s US manufacturing facility that was signed in November 2013.
Gain on bargain purchase:
The gain on bargain purchase was associated with the acquisition of Wardle Storeys by EPAL on March 4, 2013. The purchase price was £2,910,000 or approximately $4,381,000. The assets acquired and the liabilities assumed were adjusted to their fair values. Because the fair value of the net assets was greater than the purchase price, the Company recorded the difference of $4,646,046 as a gain on bargain purchase.
Tax (benefit) provision:
The income tax provision in 2013 is related to EPAL and calculated in accordance with the U.K. tax regulations. Prior to its acquisition by the Company, Uniroyal, for tax purposes, was a pass-through LLC with the members being responsible to pay any federal and state income taxes. Invisa, Inc., as a separate company, had a net operating loss and therefore did not incur a tax liability.
The benefit for 2014 in the amount of $1,340,682 is primarily related to a reduction in the Company’s U.S. deferred tax asset valuation allowance. The Company had a deferred tax asset resulting from accumulated net operating losses but they had been fully reserved as of December 31, 2013 because the Company concluded that it was more likely than not that some portion or all of the deferred tax assets would not be realized. At December 31, 2014, the Company concluded after an analysis that it was now more likely than not that some of the asset would be realized and accordingly reduced the valuation allowance by $1,253,000, creating a tax benefit which is recognized in the operating results.
During 2014, the Company filed in the U.K. a special return to claim tax deductions related to research and development expenses incurred during the tax periods 2012 and 2013. This resulted in an addition to the deferred tax asset in the amount of $414,600 and, net of our regular provision on the U.K. operating results of $326,917, created a net benefit for the period of $87,682.
Preferred stock dividend:
The terms of the acquisitions in November 2014 resulted in the issuance of preferred ownership units/stock of UEP Holdings, LLC and EPAL to the sellers. These preferred units carried quarterly dividend requirements on a total value of $55,000,000 at rates ranging from 5% to 5.5%. The dividend reflected in the financial statements for the 2014 is the dividend payable for the period November 10, 2014 through December 31, 2014 which was paid in January 2015.
Liquidity and Sources of Capital
The Company maintains zero based cash accounts at its corporate offices in the U.S and minimal cash balances in the U.K. accounts for outstanding checks. Cash as it is needed is provided by using the Company’s lines of credit. These lines provide for a total borrowing commitment in excess of $40,000,000 subject to the underlying borrowing base specified in the agreements. At December 31, 2014, $16,396,306 is outstanding under these lines with additional availability of $2,977,011. The balances due under the lines of credit are recorded as current liabilities on the balance sheet.
| 14 |
Given our capital resources in the U.S. and the potential for increased investment and acquisitions in foreign jurisdictions, we do not have a history of repatriating a significant portion of our foreign cash. Accordingly, we have not recognized a deferred tax liability for these unremitted earnings. In the event that circumstances should change in the future and we decide to repatriate these foreign amounts to fund U.S. operations, the Company would record a tax expense and pay the applicable U.S. taxes on these repatriated foreign amounts.
The ratio of current assets to current liabilities, including the amount due under our lines of credit, was 1.15 at December 31, 2014 compared to 1.16 at December 31, 2013.
Cash balances increased $293,205, after the effects of currency translation of $28,542, to $604,234 at December 31, 2014 from $311,029 at December 31, 2013. This was a result of cash flows generated from operations during the year and the net increase in outstanding debt, offset by equipment purchases and distributions to members of Uniroyal. Of the above noted amounts $480,803 and $290,455 were held outside the U.S. by our foreign subsidiaries as of December 31, 2014 and 2013, respectively.
Cash provided by operations was $4,195,458 for the year ended December 31, 2014 compared to $6,485,445 for the year ended December 31, 2013. Cash provided by operations during 2014 was primarily due to operating income and increased accounts payable due to the timing of vendor payments offset by increases in accounts receivable and inventories. Cash provided by operations during 2013 was primarily due to operating income and decreased accounts receivables and inventories and offset by decreases in accounts payable and accrued expenses.
Cash used in investing activities was $3,273,143 for the year ended December 31, 2014 compared to $2,421,559 for the year ended December 31, 2013. During 2014, cash used for investing activities was principally for purchases of machinery and equipment at our manufacturing locations. Of the $3,255,643 total capital expenditures for 2014, $2,504,998 was for the U.K. manufacturing facility and of this amount $1,603,236 was for the construction of a new production line. The total cost of the line will be approximately $2.3 million. We have arranged a financing lease for approximately $1.8 million which was funded in March 2015. The proceeds from this lease will primarily be used to reduce the Company’s U.K. line of credit. During 2013, the Company used $681,340 of net cash to acquire Wardle Storeys.
Cash used in financing activities was $600,568 for the year ended December 31, 2014 compared to $3,873,691 for the year ended December 31, 2013. During both 2014 and 2013, cash used in financing activities included distributions to the former members of Uniroyal of $1,800,604 and $1,927,836, respectively, for taxes payable by the members as required by the member agreement. Included in 2014 was an increase in long-term debt of $725,798 which primarily was from the term loan on equipment previously owned by the Company not previously financed. Included in 2013 was a net increase in related party debt obligations of $919,162 primarily used to acquireWardle Storeys and an increase in Company owned life insurance of $423,986.
We have revolving lines of credit commitment totaling in excess of $40,000,000 subject to the underlying borrowing base. The lines bears interest at LIBOR plus a range of 2.15% to 3.15%, depending on the underlying borrowing base, or, at our option, at the bank's prime or base lending rate. At December 31, 2014 the outstanding borrowings were $16,396,306 with additional availability of $2,977,011. We plan to use this availability to help finance our cash needs in fiscal 2015 and future periods.
Our credit agreements contains customary affirmative and negative covenants. We were in compliance with our debt covenants as of December 31, 2014.
We currently have several on-going capital projects that are important to our long term strategic goals. Machinery and equipment will also be added as needed to increase capacity or enhance operating efficiencies in our manufacturing plants. We will use a combination of financing arrangements to provide the necessary capital. We believe that our existing resources, including cash on hand and our credit facilities, together with cash generated from operations and additional bank borrowings, will be sufficient to fund our cash flow requirements through at least the next twelve months. However, there can be no assurance that additional financing will be available on favorable terms, if at all.
| 15 |
We have no material off balance sheet arrangements .
Contractual Obligations
| Payments Due | |||||||||||||||||||
| Total | Less Than 1 Year | 2 -3 Years | 4 - 5 Years | More Than 5 Years | |||||||||||||||
| Long-term debt | $ | 8,780,513 | $ | 518,562 | $ | 2,102,903 | $ | 2,657,877 | $ | 3,501,171 | |||||||||
| Capital lease obligations | 334,907 | 96,071 | 163,022 | 75,814 | — | ||||||||||||||
| Interest payments on long-term debt | 7,582,929 | 852,339 | 1,575,203 | 1,114,853 | 4,040,534 | ||||||||||||||
| Operating leases | 8,796,918 | 1,148,588 | 1,948,371 | 1,324,172 | 4,375,787 | ||||||||||||||
| Purchase obligations | 1,169,612 | 1,169,612 | — | — | — | ||||||||||||||
| Post-retirement funding obligations | 2,777,609 | 117,289 | 296,484 | 343,472 | 2,020,364 | ||||||||||||||
| Other long-term liabilities | — | ||||||||||||||||||
| $ | 29,442,488 | $ | 3,902,461 | $ | 6,085,983 | $ | 5,516,188 | $ | 13,937,856 | ||||||||||
______________
| (a) |
Certain of our notes payable, long-term debt and capital lease obligations pay interest at variable rates. In the contractual obligations table above, we have elected to apply estimated interest rates to determine the value of these future interest payments. |
|
| (b) |
Consists of purchase commitments entered into as of December 31, 2014 for property, plant and equipment pursuant to legally enforceable and binding agreements |
Critical Accounting Policies, Judgments and Estimates
The U.S. Securities and Exchange Commission ("SEC") requires companies to provide additional disclosure and commentary on their most critical accounting policies. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and requires management to make its most significant estimates and judgments in the preparation of its consolidated financial statements. Our critical accounting policies are described below.
Revenue Recognition
Revenue is generally recognized when goods are shipped, title and risk of ownership have passed, the price to the buyer is fixed or determinable and collectability is reasonably assured. Based on historical results and analysis, we estimate and calculate provisions for customer rebates and sales returns and allowances and record as an offset to revenue in the same period the related revenue is recognized.
Accounts Receivable
On an ongoing basis, we evaluate the accounts receivable based on individual customer circumstances, historical write-offs and collections, and current industry and customer credit conditions, and adjust the allowance for doubtful accounts accordingly. Our policy regarding write-offs and collection efforts varies based on individual customer circumstances. Past due accounts receivable are determined based on individual customer credit terms.
Inventories
We value inventory at the lower of cost using the first-in, first-out (FIFO) method, or market. We assess the recoverability of inventory and record a provision for obsolescence based upon specifically identified, discontinued, or obsolete items and a percentage of quantities on hand compared with historical and forecasted usage and sales levels. These assessments, which require management’s judgments and estimates, reduce inventories to their estimated net realizable value.
| 16 |
Goodwill, Intangible Assets, and Other Long-Lived Assets
Long-lived assets consist of goodwill, identifiable intangible assets, trademarks, and property and equipment. We have deemed that our trademarks have indefinite useful lives and are not amortized unless we determine their useful lives are no longer indefinite. Other intangible assets and property and equipment, excluding goodwill, are amortized using the straight-line method over their estimated useful life. We review long-lived assets, including property, equipment, and intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset.
Income Tax
We file income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. Our subsidiary, Uniroyal, is a limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits are allocated to its members. Prior to November 10, 2014, as the previous owners, the sellers were the sole members and reported the allocations on their personal tax returns. As a result, in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2014 and December 31, 2013, there is no tax provision on its income prior to November 10, 2014. After this date, Uniroyal’s income is allocated entirely to UEPH as its sole member. We then receive this income allocation as a member of UEPH less the dividends paid on the preferred units held by the former members of Uniroyal.
We follow ASC 740 Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. We have a federal net operating loss carryforward of approximately $18 million as of December 31, 2014, which expires in years beginning 2018 through 2033. We have deferred tax assets as a result of these loss carryforwards which have been reduced by a valuation allowance to $1,253,000 at December 31, 2014.
Foreign Currency Translation
The financial position and results of operations of our foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of operations denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the weighted average exchange rates during the year. The resulting translation gains and losses on assets and liabilities are recorded in Accumulated Other Comprehensive Income (Loss), and are excluded from net income until realized through a sale or liquidation of the investment.
Fair Value of Financial Instruments
Our short-term financial instruments consist primarily of the following: cash and cash equivalents, accounts receivable and accounts payable. We adjust the carrying value of financial assets denominated in other currencies such as cash, accounts receivable, accounts payable and the lines of credit using the appropriate exchange rates at the balance sheet date. We believe that the carrying values of these short-term financial instruments approximate their estimated fair values.
The fair value of our long-term debt is estimated based on current rates for similar instruments with the same remaining maturities. In determining the current interest rates for similar instruments, we take into account its risk of nonperformance. We believe that the carrying value of our long-term debt approximates its estimated fair value.
The fair value of the our interest rate swaps are based on the estimated amounts that we would receive, or pay, to sell or transfer the swaps to a third party, taking into account current and future interest rates and our nonperformance risk and the counterparty. Our interest rate swaps are recorded at their estimated fair values in the accompanying balance sheets.
| 17 |
Postretirement and Postemployment Benefit Liabilities
We provide certain health care and life insurance benefits for substantially all employees (active or retired) who were employed prior to February 20, 1987. In calculating our plan obligations and related expense, we make various assumptions and estimates. These assumptions include discount rates, mortality rates, retirement rates, termination rates and other factors. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our obligations and future expense.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board issued a new standard ASU No. 2014-09, "Revenue from Contracts with Customers." Under ASU 2014-09 recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for the Company January 1, 2017. The Company is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.
On February 18, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-02, " Consolidation (Topic 810): Amendments to the Consolidation Analysis." The new standard affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. It will be effective for the Company January 1, 2016. The Company is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
Not applicable.
| 18 |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Invisa, Inc.
Sarasota, Florida
We have audited the accompanying consolidated balance sheet of Invisa, Inc. and subsidiaries (the "Company") as of December 31, 2014 and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Frazier & Deeter, LLC
Frazier & Deeter, LLC
Tampa, Florida
March 30, 2015
| 19 |
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Invisa, Inc.
We have audited the consolidated balance sheet of Invisa, Inc. and subsidiaries (the “Company”) as of December 31, 2013, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the year then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of Engineered Products Acquisition Limited (“EPAL”), a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 45 percent and 43 percent, respectively, of the related consolidated totals. Those statements were audited by KPMG LLP whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for EPAL, is based solely on the report of the other auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of KPMG LLP, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s / Kingery & Crouse, P.A.
Kingery & Crouse, P.A.
Certified Public Accountants
Tampa, Florida
March 30, 2015
| 20 |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Engineered Products Acquisition Limited
We have audited the consolidated balance sheet of Engineered Products Acquisition Limited and subsidiaries as of December 31, 2013 and the related consolidated profit and loss account, cash flow statement and reconciliation of movements in shareholders’ funds for the year ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Engineered Products Acquisition Limited and subsidiaries as of December 31, 2013, and the results of their operations and their cash flows for the year ended December 31, 2013, in conformity with generally accepted accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in note 25 to the consolidated financial statements.
/s/ KPMG LLP
KPMG LLP
Manchester, United Kingdom
March 30, 2015
| 21 |
Consolidated Balance Sheets
As of December 31, 2014 and December 31, 2013
| December 31, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 604,234 | $ | 311,029 | ||||
| Accounts receivable, net | 14,607,787 | 15,003,030 | ||||||
| Inventories, net | 17,421,082 | 17,271,621 | ||||||
| Other current assets | 2,130,282 | 1,560,555 | ||||||
| Related party receivable | 74,931 | 42,475 | ||||||
| Total Current Assets | 34,838,316 | 34,188,710 | ||||||
| PROPERTY AND EQUIPMENT | 12,001,128 | 9,911,119 | ||||||
| OTHER ASSETS | ||||||||
| Intangible assets | 3,668,956 | 3,767,896 | ||||||
| Goodwill | 1,079,175 | 1,079,175 | ||||||
| Other long-term assets | 1,295,965 | 571,824 | ||||||
| Total Other Assets | 6,044,096 | 5,418,895 | ||||||
| TOTAL ASSETS | $ | 52,883,540 | $ | 49,518,724 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Checks issued in excess of bank balance | $ | 438,145 | $ | 622,590 | ||||
| Line of credit | 16,396,306 | 15,792,852 | ||||||
| Current maturities of long-term debt | 522,095 | 545,026 | ||||||
| Current maturities of capital lease obligations | 96,071 | 51,016 | ||||||
| Accounts payable | 9,409,062 | 8,981,303 | ||||||
| Accrued expenses | 3,408,143 | 3,217,493 | ||||||
| Related party payable | 20,260 | 20,260 | ||||||
| Current portion of postretirement benefit liability - health and life | 115,039 | 131,714 | ||||||
| Total Current Liabilities | 30,405,121 | 29,362,254 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term debt, less current portion | 1,355,297 | 967,113 | ||||||
| Capital lease obligations | 238,836 | — | ||||||
| Related party lease financing obligations | 2,162,393 | 2,014,440 | ||||||
| Long-term debt to related parties | 4,740,728 | 4,572,546 | ||||||
| Postretirement benefit liability - health and life, less current portion | 2,662,570 | 2,358,896 | ||||||
| Other long-term liabilities | 840,378 | 907,358 | ||||||
| Total Long-Term Liabilities | 12,000,202 | 10,820,353 | ||||||
| Total Liabilities | 42,405,323 | 40,182,607 | ||||||
(Continued)
See accompanying notes to the consolidated financial statements.
| 22 |
INVISA, INC.
Consolidated Balance Sheets
As of December 31, 2014 and December 31, 2013
(Continued)
| December 31, 2014 | December 31, 2013 | |||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Convertible Preferred Stock: 5,000,000 shares authorized ($100 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 | ||||||
| Preferred units, Series A UEP Holdings, LLC, 200,000 units issued and outstanding ($100 issue price) | 617,571 | — | ||||||
| Preferred units, Series B UEP Holdings, LLC, 150,000 units issued and outstanding ($100 issue price) | 463,179 | — | ||||||
| Preferred stock, Engineered Products Acquisition Limited, 50 shares issued and outstanding (£1.00 stated value) | 75 | — | ||||||
| Common stock, 95,000,000 shares authorized ($.001 par value) 14,351,398 and 13,881,598 shares issued and outstanding as of December 31, 2014 and 2013, respectively | 14,352 | 13,881 | ||||||
| Additional paid in capital | 32,549,585 | 33,651,743 | ||||||
| Accumulated deficit | (26,626,634 | ) | (29,062,898 | ) | ||||
| Accumulated other comprehensive income | 790,962 | 2,064,264 | ||||||
| Total Stockholders' Equity | 10,478,217 | 9,336,117 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 52,883,540 | $ | 49,518,724 | ||||
See accompanying notes to the consolidated financial statements.
| 23 |
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2014 and December 31, 2013
| December 31, 2014 | December 31, 2013 | |||||||
| NET SALES | $ | 98,323,226 | $ | 94,766,651 | ||||
| COST OF GOODS SOLD | 79,004,240 | 77,560,044 | ||||||
| Gross Profit | 19,318,986 | 17,206,607 | ||||||
| OPERATING EXPENSES: | ||||||||
| Selling | 4,691,974 | 3,706,656 | ||||||
| General and administrative | 8,437,348 | 6,424,005 | ||||||
| Research and development | 1,527,589 | 1,394,267 | ||||||
| OPERATING EXPENSES | 14,656,911 | 11,524,928 | ||||||
| Operating Income | 4,662,075 | 5,681,679 | ||||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest and other debt related expense | (1,552,541 | ) | (1,282,532 | ) | ||||
| Gain on bargain purchase | — | 4,646,046 | ||||||
| Other income | 190,234 | 109,438 | ||||||
| Net Other (Expense) Income | (1,362,307 | ) | 3,472,952 | |||||
| INCOME BEFORE TAX PROVISION | 3,299,768 | 9,154,631 | ||||||
| TAX PROVISION (BENEFIT) | (1,340,682 | ) | 175,491 | |||||
| NET INCOME | 4,640,450 | 8,979,140 | ||||||
| Preferred stock dividend | (403,582 | ) | — | |||||
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | 4,236,868 | 8,979,140 | ||||||
| OTHER COMPREHENSIVE INCOME (LOSS): | ||||||||
| Minimum benefit liability adjustment | (888,321 | ) | (183,380 | ) | ||||
| Foreign currency translation adjustment | (425,898 | ) | 516,395 | |||||
| Unrealized gain (loss) on effective hedge: | ||||||||
| Reclassification of amounts to earnings | 42,476 | 64,108 | ||||||
| Unrealized loss for the year | (1,559 | ) | (7,295 | ) | ||||
| COMPREHENSIVE INCOME TO COMMON SHAREHOLDERS | $ | 2,963,566 | $ | 9,368,968 | ||||
(Continued)
See accompanying notes to the consolidated financial statements.
| 24 |
INVISA, INC.
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2014 and December 31, 2013
(Continued)
| December 31, 2014 | December 31, 2013 | |||||||
| EARNINGS PER COMMON SHARE: | ||||||||
| Basic | $ | 0.30 | $ | 0.64 | ||||
| Diluted | $ | 0.22 | $ | 0.48 | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
| Basic | 14,180,963 | 14,012,959 | ||||||
| Diluted | 18,937,796 | 18,769,792 | ||||||
See accompanying notes to the consolidated financial statements.
| 25 |
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2014 and December 31, 2013
| Accumu- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| lated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EPAL | Additional | Accumu- | Compre- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred A | Preferred B | Preferred C | UEPH Series A | UEPH Series B | Preferred | Common Stock | Paid-in | lated | hensive | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Units | Amount | Units | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||||||||||||||||||
| Balance January31, 2013 | 9,715 | $ | 798,500 | 2,702 | $ | 270,160 | 16,124 | $ | 1,600,467 | — | $ | — | — | $ | — | — | $ | — | 14,214,398 | $ | 14,214 | $ | 33,592,868 | $ | (36,114,202 | ) | $ | 1,674,436 | $ | 1,836,443 | ||||||||||||||||||||||||||||
| 2013 Net Income | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 8,979,140 | — | 8,979,140 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of and subscription for common stock for directors/officers and consultants | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 131,750 | — | — | 131,750 | ||||||||||||||||||||||||||||||||||||||||
| Contributed officer compensation 2013 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 36,000 | — | — | 36,000 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 389,828 | 389,828 | ||||||||||||||||||||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (1,927,836 | ) | — | (1,927,836 | ) | ||||||||||||||||||||||||||||||||||||||
| Purchase treasury shares at cost | — | — | — | — | — | — | — | — | — | — | — | — | (332,800 | ) | (333 | ) | (108,875 | ) | — | — | (109,208 | ) | ||||||||||||||||||||||||||||||||||||
| Balance December 31, 2013 | 9,715 | 798,500 | 2,702 | 270,160 | 16,124 | 1,600,467 | — | — | — | — | — | — | 13,881,598 | 13,881 | 33,651,743 | (29,062,898 | ) | 2,064,264 | 9,336,117 | |||||||||||||||||||||||||||||||||||||||
| 2014 Net Income | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 4,640,450 | — | 4,640,450 | ||||||||||||||||||||||||||||||||||||||||
| Acquisitions (Note 16) | — | — | — | — | — | — | 200,000 | 617,571 | 150,000 | 463,179 | 50 | 75 | — | 1 | (1,080,826 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Issuance of and subscription for common stock for directors/officers and consultants | — | — | — | — | — | — | — | — | — | — | — | — | 555,100 | 555 | 81,136 | — | — | 81,691 | ||||||||||||||||||||||||||||||||||||||||
| Contributed officer compensation 2014 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 36,000 | — | — | 36,000 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (1,273,302 | ) | (1,273,302 | ) | ||||||||||||||||||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | — | — | — | — | — | — | (1,800,604 | ) | — | (1,800,604 | ) | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividend | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (403,582 | ) | — | (403,582 | ) | ||||||||||||||||||||||||||||||||||||||
| Purchase treasury shares at cost | — | — | — | — | — | — | — | — | — | — | — | — | (85,300 | ) | (85 | ) | (138,468 | ) | — | — | (138,553 | ) | ||||||||||||||||||||||||||||||||||||
| Balance December 31, 2014 | 9,715 | $ | 798,500 | 2,702 | $ | 270,160 | 16,124 | $ | 1,600,467 | 200,000 | $ | 617,571 | 150,000 | $ | 463,179 | 50 | $ | 75 | 14,351,398 | $ | 14,352 | $ | 32,549,585 | $ | (26,626,634 | ) | $ | 790,962 | $ | 10,478,217 | ||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 26 |
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2014 and December 31, 2013
| December 31, 2014 | December 31, 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 4,640,450 | $ | 8,979,140 | ||||
| Adjustments to reconcile net income to net cash flows from operating activities | ||||||||
| Depreciation | 1,381,452 | 1,578,807 | ||||||
| Gain on bargain purchase | — | (4,646,046 | ) | |||||
| Deferred tax benefit | (1,253,000 | ) | — | |||||
| Distribution of life insurance policy as compensation | 207,227 | — | ||||||
| Non-cash stock compensation expense | 81,691 | 124,000 | ||||||
| Contributed officer compensation | 36,000 | 36,000 | ||||||
| Interest expense added to principal of note payable | 80,317 | 111,090 | ||||||
| Amortization of intangible assets | 54,583 | 57,418 | ||||||
| Loss on disposal of property and equipment | 5,209 | 267,730 | ||||||
| Noncash postemployment health and life benefit | (589,896 | ) | (183,380 | ) | ||||
| Amortization of original issue note discount | — | 42,680 | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (120,768 | ) | 1,146,779 | |||||
| Inventories | (575,000 | ) | 666,953 | |||||
| Other current assets | (240,332 | ) | (27,113 | ) | ||||
| Related party receivable | (32,456 | ) | 132,525 | |||||
| Other long-term assets | (178,868 | ) | 22,228 | |||||
| Accounts payable | 747,459 | (1,142,813 | ) | |||||
| Accrued expenses | (56,858 | ) | (332,261 | ) | ||||
| Postretirement benefit liability - health and life | (11,020 | ) | (314,342 | ) | ||||
| Other long-term liabilities | 19,268 | (33,950 | ) | |||||
| Net Cash Flows from Operating Activities | 4,195,458 | 6,485,445 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (3,255,643 | ) | (1,490,219 | ) | ||||
| Purchase of Wardle Storeys less cash acquired | — | (681,340 | ) | |||||
| Cash paid for lease deposit | (17,500 | ) | (250,000 | ) | ||||
| Net Cash Flows used in Investing Activities | (3,273,143 | ) | (2,421,559 | ) | ||||
(Continued)
See accompanying notes to the consolidated financial statements
| 27 |
INVISA, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2014 and December 31, 2013
(Continued)
| December 31, 2014 | December 31, 2013 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Checks issued in excess of bank balance | (184,445 | ) | (259,386 | ) | ||||
| Net advances (reductions) on line of credit | 1,085,575 | (1,654,199 | ) | |||||
| Payments on long-term debt | (187,360 | ) | (459,970 | ) | ||||
| Proceeds from issuance of long-term debt | 725,798 | 125,019 | ||||||
| Payments on capital lease obligations | (100,979 | ) | (91,037 | ) | ||||
| Net payments on life insurance policies | — | (423,986 | ) | |||||
| Proceeds from related party obligation | — | 919,162 | ||||||
| Proceeds from issuance of units to members | — | 7,750 | ||||||
| Purchase of treasury stock | (138,553 | ) | (109,208 | ) | ||||
| Distributions to members | (1,800,604 | ) | (1,927,836 | ) | ||||
| Net Cash Flows used in Financing Activities | (600,568 | ) | (3,873,691 | ) | ||||
| Net Change in Cash and Cash Equivalents | 321,747 | 190,195 | ||||||
| Cash And Cash Equivalents - Beginning Of Year | 311,029 | 84,489 | ||||||
| Effects of currency translation on cash and cash equivalents | (28,542 | ) | 36,345 | |||||
| CASH AND CASH EQUIVALENTS - END OF YEAR | $ | 604,234 | $ | 311,029 | ||||
For noncash transactions and supplemental disclosure of cash flow information see Note 2.
See accompanying notes to the consolidated financial statements
| 28 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies
Description of the Business
INVISA, INC. (the “Company”) is primarily engaged in the development, manufacturing and distribution of vinyl coated fabrics primarily for use in transportation, residential, hospitality, health care, office furniture and automotive applications. The Company's customers are primarily located throughout North America and Europe.
On November 10, 2014, the Company acquired all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”), a U.S. manufacturer of textured coatings, and all of the ordinary common stock of Engineered Products Acquisition Limited (“EPAL”), the holding company for Wardle Storeys (Group) Limited (“Wardle Storeys”), a European manufacturer of textured coatings and polymer films.
Invisa made the acquisition of Uniroyal through its newly formed subsidiary, UEP Holdings, LLC (“UEPH”). The aggregate purchase consideration paid for 100% of the outstanding equity of Uniroyal was preferred ownership interests issued by UEPH having an aggregate face value of $35 million. See Note 15 for a description of the preferred units issued. In a separate transaction, Invisa purchased EPAL for 100 shares of Invisa’s Common Stock and Invisa’s guaranty of outstanding EPAL preferred stock retained by the seller having a liquidation preference of £12,518,240 (approximately $20 million at closing).
The principal owner of Uniroyal and EPAL also owned all of Invisa’s outstanding shares of Series A preferred stock and Series B preferred stock; a substantial portion of Invisa’s outstanding Series C preferred stock; and approximately 6.8 million shares of Invisa common stock. As a result of this beneficial ownership, the seller controls in excess of 80% of Invisa voting rights in all matters to come before the Invisa shareholders. As a result of this common ownership and as required by current accounting pronouncements, the November 10, 2014 transaction was treated as a combination between entities under common control and was accounted for in a manner similar to the pooling-of-interest method. The recognized assets and liabilities were transferred at their carrying amounts at the date of the transaction. Further, the companies were also combined retrospectively for prior year comparative information to the extent permitted.
On March 4, 2013, EPAL acquired 100% of the common stock of Wardle Storeys. The purchase price was £2,910,000 or approximately $4,381,000. Included in the statement of comprehensive income for the year ended December 31, 2013 is the operating results of Wardle Storeys for the period March 4, 2013 to December 31, 2013 or approximately ten months of Wardle Storeys’ operating results. Whereas, in the results for the year ended December 31, 2014 there is a full year of their operating results. The assets acquired and the liabilities assumed were adjusted to their fair value at the date of the acquisition. Since the fair value of the net assets was greater than the purchase price, the Company recorded the difference of $4,646,046 as a gain which is shown as gain on bargain purchase in the statement of comprehensive income.
The Company and its subsidiaries other than Uniroyal have a year-end of December 31. Uniroyal prior to the acquisition and since its inception has been on a 52/53 week year depending on the nearest Sunday to December 31. The years ended December 28, 2014 and December 29, 2013 were 52 week years and are included in the consolidated statements of the Company as of and for the years ended December 31, 2014 and 2013.
| 29 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries and are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). All intercompany balances have been eliminated. The Company manages its operations on a consolidated, integrated basis in order to optimize its equipment and facilities and to effectively service its global customer base, and concludes that it operates in a single business segment. The accounts of EPAL were translated into USD at the average rate for the reporting period for the consolidated statements of comprehensive income and at the rate at the end of the reporting period for the consolidated balance sheets.
Cash and Cash Equivalents
The Company defines cash and cash equivalents as highly liquid, short-term investments with a maturity at the date of acquisition of three months or less.
The Company maintains cash in bank accounts which, at times, exceeds federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks.
Accounts Receivable
Accounts receivable are recorded net of an allowance for doubtful accounts, returns and discounts of $278,000 and $249,813 as of December 31, 2014 and December 31, 2013.
On an ongoing basis, the Company evaluates its accounts receivable based on individual customer circumstances, historical write-offs and collections, and current industry and customer credit conditions, and adjusts its allowance for doubtful accounts accordingly. The Company's policy regarding write-offs and collection efforts varies based on individual customer circumstances. Past due accounts receivable are determined based on individual customer credit terms.
Customer Rebates
The Company records customer rebates as a reduction of net sales and accounts receivable. Accounts receivable are recorded net of an allowance for customer rebates of $167,778 and $150,226 as of December 31, 2014 and December 31, 2013.
Inventories
Inventories are valued at the lower of cost, using the first-in, first-out (FIFO) method, or market. The Company and its subsidiaries have policies which are consistently applied to maintain reserves for obsolescence based on specific identification or a percentage of the amount on hand exceeding a certain aging.
| 30 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are stated at cost. Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.
Property and equipment are depreciated using the straight-line method over their estimated useful lives. For income tax reporting purposes, depreciation is calculated using both applicable straight-line methods and accelerated methods or capital allowances based on the various taxing jurisdictions’ approved methods.
Cash Surrender Value of Insurance Policies
Cash surrender value of insurance policies are valued at the cash surrender value of the contract as determined by the life insurance company. The gross cash value of the insurance policies totaled $36,687 and $219,341 as of December 31, 2014 and December 31, 2013. The cash value of the insurance policies are recorded net of loans of $23,689 as of December 31, 2013 and are included in other long-term assets on the accompanying 2013 balance sheet. During 2014 and 2013, certain policies were sold or distributed as compensation to related parties (see Notes 2 and 11).
Impairment of Finite-Lived Long-Lived Assets
The Company reviews long-lived assets, including property, equipment, and intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset. To date, there have been no such losses.
Goodwill and In-Definite-Lived Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired. Trademarks are recorded at estimated fair value at the date they were acquired in certain business acquisitions. To the extent it has been determined that the carrying value of goodwill or trademarks are not recoverable and is in excess of its fair value, an impairment loss is recognized. Impairment is reviewed annually. No impairment loss adjustment was deemed necessary as of December 31, 2014 or December 31, 2013.
| 31 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company follows ASC 740 Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
The tax effects from an uncertain tax position are recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company does not believe there is any uncertainty with respect to its tax positions which would result in a material change to the financial statements.
The Company files income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. The Company’s subsidiary, Uniroyal, is a limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits are allocated to its members. Prior to November 10, 2014, as the previous owners, the sellers were the sole members and reported the allocations on their personal tax returns. As a result, in the accompanying Consolidated Statements of Comprehensive Income, there is no tax provision on its income prior to November 10, 2014. After this date, Uniroyal’s income is allocated entirely to UEPH as its sole member. Invisa then receives this income allocation as a member of UEPH less the dividends paid on the preferred units held by the former members of Uniroyal.
The Company's tax returns for tax years 2011 and thereafter are subject to examination by taxing authorities. The Company records interest and penalties associated with uncertain tax positions related to these tax filings as interest expense. For the years ended December 31, 2014 and December 31, 2013, the Company has recorded no expense for interest or penalties.
Derivatives
The Company recognizes all of its derivative instruments, which consist of interest rate swaps, as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, whether the hedge is a cash flow hedge or a fair value hedge.
The Company uses interest rate swaps to manage interest rate risk on its variable interest rate long-term debt instruments. The gain or loss on the effective portion of interest rate swaps treated as cash flow hedges is initially included as a component of other comprehensive income and is subsequently reclassified into earnings when interest on the related debt is paid. The gain or loss on the portion of interest rate swaps that are not effective is treated as financial instruments and are included as a component of interest expense on the accompanying statements of operations. The Company did not have any interest rate swaps outstanding as of December 31, 2014.
| 32 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Derivatives (Continued)
The Company incurs foreign currency risk on sales and purchases denominated in other currencies primarily the British Pound Sterling and the Euro. Foreign currency exchange contracts are used by the Company principally to limit the exchange rate fluctuations of the Euro. The Euro risk is partially limited due to natural cash flows offsets. Currency exchange contracts are purchased for approximately 25% of the net risk. These contracts are not designated as cash flow hedges for accounting purposes. Changes in the fair value of these contracts are reported in net earnings as part of other income and expense.
Fair Value of Financial Instruments
The Company’s short-term financial instruments consist of the following: cash and cash equivalents, receivables and accounts payable. The Company adjusts the carrying value of financial assets denominated in other currencies such as cash, receivables, accounts payable and the lines of credit using the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short-term financial instruments approximate their estimated fair values.
The fair value of the Company’s long-term debt is estimated based on current rates for similar instruments with the same remaining maturities. In determining the current interest rates for similar instruments the Company takes into account its risk of nonperformance. The Company believes that the carrying value of its long-term debt approximates its estimated fair value.
The fair value of the Company’s interest rate swaps are the estimated amounts that the Company would receive, or pay, to sell or transfer the swaps to a third party, taking into account current and future interest rates and the nonperformance risk of the Company and the counterparty. The Company's interest rate swaps are recorded at their estimated fair values in the accompanying balance sheets.
The Company uses foreign currency exchange contracts which are recorded at their estimated fair values in the accompanying Consolidated Balance Sheets. The fair values of the currency exchange contracts are based upon observable market transactions of spot and forward rates.
For the fiscal year ended December 31, 2014, there have been no changes in the application of valuation methods applied to similar assets and liabilities.
The Company follows accounting principles generally accepted in the United States of America for measuring, reporting, and disclosing fair value. These standards apply to all assets and liabilities that are measured, reported, and/or disclosed on a fair value basis.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities measured, reported and/or disclosed at fair value will be classified and disclosed in one of the following three categories:
| 33 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments (Continued)
| Level 1 | – | Inputs to the valuation methodology are unadjusted quoted market prices for identical assets in active markets that the Company has the ability to access. | ||
| Level 2 | – | Observable market based inputs or unobservable inputs that are corroborated by market data. Inputs to the valuation methodology include: | ||
| > | quoted prices for similar assets or liabilities in active markets; | |||
| > | quoted prices for identical or similar assets or liabilities in inactive markets; | |||
| > | inputs other than quoted prices that are observable for the asset or liability; | |||
| > | inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||
| Level 3 | – | Unobservable inputs that are unobservable and not corroborated by market data. | ||
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Foreign Currency Translation
The financial position and results of operations of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of operations denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the weighted average exchange rates during the year. The resulting translation gains and losses on assets and liabilities are recorded in Accumulated Other Comprehensive Income (Loss), and are excluded from net income until realized through a sale or liquidation of the investment.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is generally recognized when goods are shipped, title and risk of ownership have passed, the price to the buyer is fixed or determinable and collectability is reasonably assured. Based on historical results and analysis, we estimate and calculate provisions for customer rebates and sales returns and allowances and record as an offset to revenue in the same period the related revenue is recognized.
| 34 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Shipping and Handling Costs
Shipping and handling costs charged to customers and the costs incurred by the Company are netted. Shipping and handling costs incurred by the Company are included in cost of goods sold.
Warranties
The Company warrants that the materials and workmanship of its products will meet customer specifications. The Company estimates its accrued warranty expenses based upon prior warranty claims experience. Accrued warranty expenses were not material as of December 31, 2014 and December 31, 2013.
Advertising
Advertising costs, other than promotional materials, are charged to expense as incurred. Advertising expense was $249,144 and $171,852 for the years ended December 31, 2014 and December 31, 2013, respectively. Promotional materials are expensed as they are distributed. As of December 31, 2014 and December 31, 2013, $210,269 and $206,162 of promotional materials were included in other long-term assets in the accompanying consolidated financial statements.
Research and Development
Research and development costs are charged to expense as incurred. Research and development expense was $1,527,589 and $1,394,267 for the years ended December 31, 2014 and December 31, 2013, respectively.
Earnings Per Share
The Company calculates basic net income per common share by dividing net income after the deduction of preferred stock or preference dividends by the weighted average number of common shares outstanding. The calculation of diluted net income per share is consistent with that of basic net income per common share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive. At December 31, 2014 and 2013, the Company’s 28,541 shares of convertible preferred stock Series A, Series B and Series C can be converted into 4,756,833 common shares. This amount was added to the weighted average common shares to calculate the diluted earnings per share.
Future Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued a new standard ASU No. 2014-09, "Revenue from Contracts with Customers." Under ASU 2014-09 recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for the Company January 1, 2017. The Company is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.
| 35 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 1 – Summary of Significant Accounting Policies (Continued)
Future Accounting Pronouncements (Continued)
On February 18, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." The new standard affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. It will be effective for the Company on January 1, 2016. The Company is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.
Subsequent Events
The Company has evaluated subsequent events occurring through the date that the financial statements were issued, for events requiring recording or disclosure in the December 31, 2014 financial statements. There were no material events or transactions occurring during this period requiring recognition or disclosure.
NOTE 2 – Noncash Transactions and Supplemental Disclosure of Cash Flow Information
During 2014 and 2013, the Company had reduced borrowings on its line of credit by converting dollars to additional borrowings on its term loans with Wells Fargo Capital Finance, LLC of $573,972 and $200,000, respectively. During 2014 and 2013, the Company paid down its term loans using available borrowings on its various lines of credit of $556,348 and $382,428, respectively.
The Company entered into several new equipment leases during the year with a fair value of $380,000 which are accounted for as capital leases. The fair value was added to property and equipment and a corresponding amount to capital lease obligations.
During 2013, the Company sold real estate and certain insurance policies for $2,117,098 to a related party owned by the Company's majority owners. The proceeds were used to reduce the Company's term debt and line of credit obligations by same amount. Additionally, as part of the transaction with the related party, the Company leased real estate and entered into a lease financing obligation with the related party for $2,024,865. (see Note 11).
| December 31, 2014 | December 31, 2013 | |||||||
| Supplemental disclosure of cash paid for: | ||||||||
| Interest expense | $ | 1,413,943 | $ | 1,086,626 | ||||
| 36 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 3 – Inventories
Inventories consist of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Raw materials | $ | 5,225,361 | $ | 5,240,970 | ||||
| Work-in-process | 4,074,324 | 4,185,183 | ||||||
| Finished goods | 9,103,269 | 9,229,987 | ||||||
| 18,402,954 | 18,656,140 | |||||||
| Less: Allowance for inventory obsolescence | (981,872 | ) | (1,384,519 | ) | ||||
| Total Inventories | $ | 17,421,082 | $ | 17,271,621 | ||||
NOTE 4 – Other Current Assets
Other current assets consists of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Current deferred tax asset, net of valuation allowance | $ | 1,076,138 | $ | 569,221 | ||||
| Other | 1,054,144 | 991,334 | ||||||
| Total Other Current Assets | $ | 2,130,282 | $ | 1,560,555 | ||||
| 37 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 5 – Property and Equipment
The major categories of property and equipment are summarized as follows:
|
Depreciable Lives |
December 31, 2014 | December 31, 2013 | ||||||||||
| Building and building improvements | 8 – 25 yrs. | $ | 171,919 | $ | 36,101 | |||||||
| Machinery and equipment | 8 – 10 yrs. | 18,596,656 | 15,777,548 | |||||||||
| Computer equipment | 3 – 10 yrs. | 1,123,152 | 1,033,784 | |||||||||
| Furniture and fixtures | 7 – 10 yrs. | 60,791 | 54,600 | |||||||||
| Real estate under lease | 20 yrs. | 2,165,914 | 2,024,865 | |||||||||
| Construction-in-progress | — | 168,271 | 18,125 | |||||||||
| Total Property and Equipment | 22,286,703 | 18,945,023 | ||||||||||
| Less: Accumulated depreciation | (10,285,575 | ) | (9,033,904 | ) | ||||||||
| Net Property and Equipment | $ | 12,001,128 | $ | 9,911,119 | ||||||||
NOTE 6 – Intangible Assets
Intangible assets are summarized as follows:
| Amortizable Lives | December 31, 2014 | December 31, 2013 | ||||||||
| Trademarks and trade names | Indefinite | $ | 3,668,956 | $ | 3,767,896 | |||||
NOTE 7 – Other Long-term Assets
Other long-term assets consists of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Non-current deferred tax asset, net of valuation allowance | $ | 835,000 | $ | — | ||||
| Other | 460,965 | 571,824 | ||||||
| Total Other Long-term Assets | $ | 1,295,965 | $ | 571,824 | ||||
| 38 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 8 – Other Long-term Liabilities
Other long-term liabilities consist of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Non-current deferred tax liability | $ | 742,997 | $ | 747,321 | ||||
| Other | 97,381 | 160,037 | ||||||
| Total Other Long-term Liabilities | $ | 840,378 | $ | 907,358 | ||||
NOTE 9 – Line of Credit
The Company’s Uniroyal subsidiary has available a $30,000,000 line of credit financing agreement with Wells Fargo Capital Finance, LLC, which matures on October 17, 2019. Interest is payable monthly at the Eurodollar rate plus 2.50% or Wells Fargo Capital Finance, LLC's prime rate at the Company's election. The line of credit weighted average interest rate was approximately 2.66% as of December 31, 2014. Borrowings on the line of credit are subject to the underlying borrowing base specified in the agreement, which was amended in 2013 to exclude real estate, which was sold, from the base calculation. The underlying borrowing base is currently determined based upon eligible accounts receivable, inventories and equipment. The line of credit is secured by substantially all of Uniroyal's assets and includes certain financial and restrictive covenants.
The outstanding balance on the line of credit (“Uniroyal Line of Credit”) was $8,775,684 and $8,236,921 as of December 31, 2014 and December 31, 2013, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying consolidated balance sheets.
The Company’s Wardle Storeys subsidiary has available a £8,500,000 (approximately $13.2 million) line of credit financing agreement with Lloyds Bank Commercial Finance Limited and is subject a to six month notice by either party. The line has several tranches based on currency or underlying security. Interest is payable monthly at the base rate (UK LIBOR) plus 2.15% to 3.15% depending on the tranche. The line of credit weighted average interest rate was approximately 2.75% as of December 31, 2014. Borrowings on the line of credit are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable and inventories. The line of credit is secured by substantially all of the subsidiary's assets and includes certain financial and restrictive covenants.
The outstanding balance on the line of credit (“Wardle Storeys Line of Credit”) was £4,888,972 and £4,567,747 ($7,620,622 and $7,555,931) as of December 31, 2014 and December 31, 2013, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying balance sheets.
| 39 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 10 – Long-Term Debt
Long-term debt consists of the following as of December 31, 2014 and December 31, 2013:
| December 31, 2014 | December 31, 2013 | |||||||
| Uniroyal term loans with Wells Fargo Capital Finance, LLC, monthly interest only payments at the Eurodollar rate plus 2.50% or Wells Fargo Bank, National Association's prime rate. The term loans' weighted average interest rate was approximately 3.27% as of December 31, 2014. Monthly principal balances are reduced by $26,832 each month, resulting in a conversion, or increase, of the same amount in the line of credit each month (see Note 2). Term loans mature in October 2019 and are secured by substantially all of the Company's assets and include certain financial and restrictive covenants. | $ | 1,341,643 | $ | 1,060,667 | ||||
| Term loan with Lloyds Bank Commercial Finance Limited; issued to the Company’s subsidiary, Wardle Storeys Group at £340,000 (approximately $560,000; payable in 60 monthly payments of £5,667 (approximately $8,800); Interest is payable monthly at the rate of 3.15% above the base rate (UK LIBOR); monthly, the principal is reduced by required payment resulting in an increase of the same amount in the line of credit (see Note 9). The loan matures in February 2019 and is secured by substantially all of the subsidiaries’ assets and includes certain financial and restrictive covenants. | 441,642 | — | ||||||
| Capital expenditure term loans with Wells Fargo Capital Finance, LLC, monthly principal payments of $3,333 plus interest at 3.50%. The loans mature in October 2019 and are secured by certain equipment. In February 2014, the outstanding principal balance was incorporated into the master term loans and this separate term loan was terminated. | — | 170,000 | ||||||
| Note payable to Balboa Capital Corporation; assigned to Wells Fargo, payable in quarterly installments of $10,291 including interest and principal at a rate of 7.53% with the remaining principal due on October 1, 2014. The note was secured by certain equipment. | — | 43,840 | ||||||
| 40 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 10 – Long-Term Debt (Continued)
| 41 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 10 – Long-Term Debt (Continued)
Principal requirements on long-term debt for years ending after December 31, 2014 are as follows:
| Totals | |||||
| 2015 | $ | 522,095 | |||
| 2016 | 427,989 | ||||
| 2017 | 427,988 | ||||
| 2018 | 427,988 | ||||
| 2019 | 71,332 | ||||
| Totals | $ | 1,877,392 |
NOTE 11 – Related Party Obligations
Long-term debt to related parties consists of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Senior subordinated promissory notes issued to the Company’s majority shareholder; original issue note discount of $528,000 ($0 and $0 as of December 31, 2014 and December 31, 2013, respectively); monthly interest only payments at 9.25%; principal payment of $600,000 due on October 17, 2017 and the remaining unpaid principal due on October 17, 2018. The original issue note discount resulted from the value allocated to the Class A common unit warrants attached to the note. The warrants were terminated in the acquisition of Uniroyal by the Company. The note discount was amortized to interest expense over the initial term of the notes. The senior subordinated promissory notes are secured by substantially all assets of the Company subject to the notes' subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC. | $ | 2,000,000 | $ | 2,000,000 | ||||
| Secured promissory note issued to the Company’s majority shareholder related to EPAL’s acquisition of Wardle Storeys on March 4, 2013; quarterly interest only payments at 6.25%; principal payment of 10% of original principal amount (£81,529 or approximately $127,082) due on December 31, 2020; a 20% payment due on December 31, 2021, a 30% payment on December 31, 2022 and the final 40% due on December 31, 2023. The note is secured by EPAL’s investment in Wardle Storeys. | 1,270,671 | 1,348,486 | ||||||
| 42 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 11 – Related Party Obligations (Continued)
| December 31, 2014 | December 31, 2014 | |||||||
| Senior secured promissory note issued to Centurian Investors, Inc., an entity controlled by the Company’smajority shareholder; quarterly interest only payments at 10%; payment due April 1, 2015; quarterly principal payments of $91,879 starting April 1, 2016; the note is secured by substantially all the assets of the Company. | 1,470,057 | 1,224,060 | ||||||
| Total Long-term Debt to Related Parties | $ | 4,740,728 | $ | 4,572,546 | ||||
During 2013, the Company sold real estate and certain insurance policies for $2,117,098 to a related party owned by the Company's majority owners, resulting in a related loss of $249,578. The proceeds were used to reduce the Company's term debt and line of credit obligations by the same amount. Additionally, as part of the transaction with the related party, the Company leased real estate it sold, plus additional land owned by the related party. Due to the terms of the lease, it qualified for treatment as a capital lease and accordingly a lease financing obligation with the related party for $2,024,865 was recognized in addition to a corresponding capital lease asset of the same amount. The lease financing obligation, under which the Company leases its main manufacturing facility and certain other property from the related party lessor entity, accrues interest at 18.20% and requires monthly principal and interest payments of $30,000, which are adjusted annually based on the consumer price index. The lease financing obligation matures during October 2033. The Company made a security deposit of $250,000 with the lessor entity at the inception of the lease financing arrangement.
In November 2014, the Company signed a lease amendment to add new property to the lease increasing the monthly payment by $1,500 and the security deposit by $17,500. These changes to the lease added $141,049 principal to the lease financing obligation and a corresponding addition to the capital lease asset. For the years 2014 through 2016 the amount of interest owed exceeds the amount of payments made, resulting in a net increase to the outstanding principal balance of the lease financing obligation. This obligation is shown in the accompanying financial statements as Related Party Lease Financing Obligation which has a balance of $2,162,393 and $2,014,440 as of December 31, 2014 and 2013, respectively.
Principal payments on this obligation and the aforementioned long-term debt to related parties for years ending after December 31, 2014, are as follows:
| Totals | |||||
| 2015 | $ | (3,533 | ) | ||
| 2016 | 275,487 | ||||
| 2017 | 971,439 | ||||
| 2018 | 1,776,337 | ||||
| 2019 | 382,220 | ||||
| Thereafter | 3,501,171 | ||||
| Totals | $ | 6,903,121 |
| 43 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 12 – Derivatives
The Company held derivative instruments, which consisted of interest rate swaps. Accounting standards require that an entity recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. Certain swaps do not meet the criteria of cash flow hedges under generally accepted accounting principles; these swaps are accounted for as derivatives not designated as hedging instruments with changes in the fair value of the interest rate swaps included in interest expense in the accompanying statements of operations. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instrument representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
The Company had an interest rate swap with a notional amount of $6,000,000 accounted for as an effective cash flow hedge. The interest rate swap fixed the Company's one month LIBOR interest rate on the notional amounts at a rate of 1.25%. The interest rate swap expired on July 30, 2014. The Company did not have any interest rate swap outstanding at December 31, 2014
Derivative instruments reported in the balance sheet at fair value are as follows:
| Liability Derivative | Balance Sheet Location | Fair Value | |||||||
| December 31, 2014 | December 31, 2013 | ||||||||
| Interest rate swaps designated as hedging instruments | Other long-term liabilities | $ | — | $ | 40,917 | ||||
The effect of interest rate swaps designated as hedging instruments is reported in the Consolidated Statements of Comprehensive Income and Consolidated Statements of Stockholders’ Equity are as follows:
|
Unrealized Loss Recognized
in OCI on Derivative
(Effective Portion) |
Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount Reclassified from Accumulated
OCI into Income
(Effective Portion) |
|||||||||||||
| December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | ||||||||||||
| $ | (1,559 | ) | $ | (7,295 | ) | Interest expense | $ | 42,476 | $ | 64,108 | |||||
The LIBOR swap rates are observable at commonly quoted intervals for the full terms of the interest rate swaps and therefore are considered level 2 items. As such, the Company's interest rate swap was considered a level 2 item.
The preceding method described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value could result in a different fair value measurement at the reporting date.
| 44 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 13 – Income Taxes
The Company files income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. The Company’s subsidiary, Uniroyal, is a limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits are allocated to its members. Prior to November 10, 2014, as the previous owners, the sellers were the sole members and reported the allocations on their personal tax returns. As a result, in the accompanying Consolidated Statements of Comprehensive Income, there is no tax provision on its income prior to November 10, 2014. After this date, Uniroyal’s income is allocated entirely to UEPH as its sole member. Invisa then receives this income allocation as a member of UEPH less the dividends paid on the preferred units held by the former members of Uniroyal.
The Company made the acquisition of all the ownership interests in Uniroyal through its newly formed subsidiary, UEPH a limited liability corporation. The aggregate consideration for 100% of the outstanding equity of Uniroyal was preferred ownership interests issued by UEPH which provide for quarterly dividends. For federal income tax purposes UEPH is a pass through entity and the Company ' s share of its taxable income is reported on its tax return. The taxable income applicable to the distribution for the preferred ownership interests is reported to the members who report it on their respective individual tax returns.
The (benefit) provision for income taxes for the years ended December 31, 2014 and 2013 was:
| December 31, 2014 | December 31, 2013 | |||||||
| Current | ||||||||
| Federal | $ | — | $ | — | ||||
| State | — | — | ||||||
| Foreign | — | — | ||||||
| — | — | |||||||
| Deferred | ||||||||
| Federal | (1,253,000 | ) | — | |||||
| Foreign | (87,682 | ) | 175,491 | |||||
| Total deferred income tax (benefit) provision | (1,340,682 | ) | 175,491 | |||||
| Total income tax (benefit) provision | $ | (1,340,682 | ) | $ | 175,491 | |||
| 45 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 13 – Income Taxes (Continued)
The (benefit) provision for income taxes differs from the amount computed by applying the federal statutory income tax rate to income before income taxes. The Company’s combined federal, state and foreign effective tax rate as a percentage before taxes for the year ended December 31, 2014 and 2013, was 40.6%, and 1.9%, respectively. The following is a reconciliation of the income tax at the effective tax rate with the income tax at the U.S. federal statutory tax rate for the years ended December 31, 2014 and 2013:
| December 31, 2014 | December 31, 2013 | |||||||
| Income tax at statutory rates | $ | 1,121,921 | $ | 3,112,575 | ||||
| Tax on Uniroyal’s LLC income before acquisition | (721,825 | ) | (1,220,071 | ) | ||||
| Change in deferred tax valuation | (1,029,678 | ) | 121,671 | |||||
| Foreign tax rate differential | (196,963 | ) | (651,645 | ) | ||||
| UEPH preference dividend | (87,679 | ) | — | |||||
| Research and development credit | (414,600 | ) | — | |||||
| Gain on bargain purchase | — | (1,068,590 | ) | |||||
| Effect of change in tax rate on deferred items | — | (65,042 | ) | |||||
| Other | (11,858 | ) | (53,407 | ) | ||||
| Income tax at effective tax rate | $ | (1,340,682 | ) | $ | 175,491 | |||
| Effective income tax rate | 40.6 | % | 1.9 | % | ||||
The following table summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:
| December 31, 2014 | December 31, 2013 | |||||||
| Current: | ||||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | $ | 1,076,138 | $ | 569,221 | ||||
| Total current deferred tax assets | 1,076,138 | 569,221 | ||||||
| Noncurrent: | ||||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | 1,013,273 | 47,452 | ||||||
| Total noncurrent deferred tax assets | 1,013,273 | 47,452 | ||||||
| Deferred tax liabilities: | ||||||||
| Trademarks | (471,454 | ) | (500,326 | ) | ||||
| Deferred gain | (248,068 | ) | (281,213 | ) | ||||
| Capital allowances | (201,748 | ) | (13,234 | ) | ||||
| Total noncurrent deferred tax liabilities | (921,270 | ) | (794,773 | ) | ||||
| Total noncurrent deferred tax asset (liabilities), net | 92,003 | (747,321 | ) | |||||
| Net deferred tax assets (liabilities) | $ | 1,168,141 | $ | (178,100 | ) | |||
| 46 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 13 – Income Taxes (Continued)
Included in the noncurrent deferred tax asset as of December 31, 2014 are $835,000 resulting from carryforwards related to US net operating losses and $178,273 of carryforwards resulting from U.K. losses. The $835,000 deferred asset for U.S. losses is shown separately in the accompanying financial statements as a noncurrent deferred tax asset. The $178,273 deferred asset for U.K. losses is netted with the noncurrent deferred tax liabilities, which are all related to U.K. tax, and shown as a net deferred tax liability of $742,997.
The Company has a federal net operating loss carry forward of approximately $18 million as of December 31, 2014, which expires in years beginning 2018 through 2033. The Company has deferred tax assets as a result of these loss carryforwards which have been reduced by a valuation allowance to $1,253,000 at December 31, 2014.
NOTE 14 – Postretirement and Postemployment Benefit Liabilities
Postretirement Benefit Liability - Health and Life
The Company provides certain health care and life insurance benefits for substantially all employees (active or retired) who were employed prior to February 20, 1987. Accounting standards for postretirement benefits require an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income of a business entity.
During 2007, there was a change in the provisions of the plan which fixed the amount of benefit per participant for future and current retirees and their spouses. This had resulted in a $2,346,014 reduction in the liability and increase in the prior service credit. The actuarial gain is being amortized over approximately 7 years.
The accumulated postretirement benefit obligation, plan assets and accrued postretirement liability as of the plan's measurement date are as follows:
| December 31, 2014 | December 31, 2013 | |||||||
| Postretirement Benefit Liability - Health and Life | $ | 3,479,676 | $ | 4,080,998 | ||||
| Less: Plan assets | — | — | ||||||
| Accrued postretirement benefit cost | 3,479,676 | 4,080,998 | ||||||
| Less: Unrecognized net gain | (702,067 | ) | (1,590,388 | ) | ||||
| Accumulated postretirement benefit obligation | 2,777,609 | 2,490,610 | ||||||
| Less: Current portion | (115,039 | ) | (131,714 | ) | ||||
| Long-Term Portion | $ | 2,662,570 | $ | 2,358,896 | ||||
| 47 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 14 – Postretirement and Postemployment Benefit Liabilities (Continued)
Net pension benefit for the plan is comprised of the following:
| December 31, 2014 | December 31, 2013 | |||||||
| Service cost | $ | 3,563 | $ | 4,872 | ||||
| Interest cost on projected benefit obligation | 119,946 | 111,003 | ||||||
| Amortization of prior service cost | (324,483 | ) | (324,483 | ) | ||||
| Amortization of net gain | (265,412 | ) | (187,269 | ) | ||||
| Net pension benefit | $ | (466,386 | ) | $ | (395,877 | ) | ||
Reconciliation of losses in other comprehensive income (loss) is as follows:
| December 31, 2014 | December 31, 2013 | |||||||
| Net actuarial gain (loss) | $ | (298,425 | ) | $ | 328,372 | |||
| Amortization of prior service credit and actuarial gain | (589,896 | ) | (511,752 | ) | ||||
| Pension adjustment in other comprehensive income (loss) | $ | (888,321 | ) | $ | (183,380 | ) | ||
The amount in accumulated other comprehensive income at December 31, 2014 that has not yet been recognized as a component of net periodic benefit costs is $702,068, which consists of unrecognized net actuarial gains of $627,437 and unrecognized prior service credits of $74,631. The amount in accumulated other comprehensive income at December 31, 2014 that is expected to be recognized as a component of net periodic pension benefit during 2015 is $180,915, which consists of net actuarial gains of $106,284 and prior service credits of $74,631.
The significant assumptions used in determining the accumulated postretirement benefit obligation and net periodic benefit cost are as follows:
| December 31, 2014 | December 31, 2013 | |||||
| Health Care Cost Trend Rates: | ||||||
| 2015 and later | 4.00% | 4.00% | ||||
| Discount rate | 3.95% | 4.95% | ||||
| Measurement Date | December 31, 2014 | December 31, 2013 | ||||
| 48 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 14 – Postretirement and Postemployment Benefit Liabilities (Continued)
In addition to the significant assumptions listed above, other assumptions used in determining the accumulated postretirement benefit obligation and net periodic benefit cost are retirement and termination probabilities and mortality estimates. The Company assumes that employees participating in the plan will continue to participate during retirement. The Company also assumes that employees not participating in the plan will not participate in the plan prior to or during retirement.
Employer and employee contributions to the plan were $162,306 and $8,027 during the year ended December 31, 2014 and $164,907 and $10,162 during the year ended December 31, 2013, respectively. Contributions to the plan are made each year based on estimated benefit payments to be paid out of the plan. Estimated benefit payments from the plan for each of the next five years, and in the aggregate for the five years thereafter, are as follows:
| 2015 | $ | 115,039 | |
| 2016 | 136,834 | ||
| 2017 | 159,650 | ||
| 2018 | 168,032 | ||
| 2019 | 175,440 | ||
| 2020 - 2024 | 795,753 | ||
| Total | $ | 1,550,748 |
Postemployment Benefit Liability - Severance
The Company provides certain severance benefits for substantially all union employees who began their employment prior to 1986. Accounting standards for postemployment benefits require the Company to accrue the estimated cost of future severance payments during the years the employees provide services.
The accrued postemployment benefit liability as of December 31, 2014 and December 31, 2013 was $82,812 and $98,470, respectively, and is included in other long-term liabilities. The accrued postemployment benefit liability was determined using discount rates of 3.95% and 4.95% as of December 31, 2014 and December 31, 2013, respectively.
Postemployment Benefit Liability - Other
Under the terms of the union contract, the Company provides monthly payments of $300 to the spouses of employees who died prior to retirement from the Company. The payments cease upon the earlier of the spouse remarrying, the spouse's death or the spouse attaining age 62. The spouses of two former employees are currently receiving benefit payments under this provision of the union contract as of December 31, 2014 and December 31, 2013. The Company has recorded a long-term liability of $14,569 and $20,650 as of December 31, 2014 and December 31, 2013, respectively, which is included in other long-term liabilities in the accompanying balance sheets, related to the estimated future benefit payments to the two former employees' spouses.
| 49 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 15 – Equity
The Company has authorized 5,000,000 shares of convertible preferred stock with a $100 value per share. At December 31, 2014 the Company had the following outstanding:
| Issued and | |||
| Series | Outstanding | ||
| Series A | 9,715 | ||
| Series B | 2,702 | ||
| Series C | 16,124 | ||
On March 7, 2014, the Company filed amendments to the Designation of Preferences and Rights for each series to change the voting rights. The amendment provided 3,000 votes per Series A share, 2,500 votes per Series B share and 100 votes per Series C share.
On April 29, 2014, the Company filed amendments to the Designation of Preferences and Rights for each series. The filings were intended to delete provisions no longer applicable and in addition: (i) clarified that the holder of each share of Series A, B and C Convertible Preferred Stock has the right to convert into common stock at a fixed conversion price of $0.60 per share resulting in the number of shares of common stock to be issued upon conversion equaling 166.66 shares of common stock for each share of preferred stock (i.e., the Face Value divided by sixty cents ($0.60) per share), (ii) provided that the Company does not have a right to redeem or force conversion of shares of Series A, B or C Convertible Preferred Stock, (iii) eliminated the prohibition on conversion which would cause the holder to exceed 9.9% ownership, (iv) provided that the liquidation preference of shares of Series A, B and C Convertible Preferred Stock are equal among the holders of Series A, B and C, and (b) and senior to the liquidation preference of common stock of the Company, (v) clarified that the liquidation preference of each Series of preferred stock is in an amount equal to the face value of that Series of preferred stock and that distribution equal to the face value constitutes payment in full to the holders of preferred stock and (vi) clarified that a merger (except into a subsidiary), sale of all or substantially all of the assets of the Company, reorganization or other transaction in which control of the Company is transferred may be deemed by the holder to be a liquidation, dissolution or winding up for purposes of the liquidation preference.
During the year ended December 31, 2014, an officer contributed services with a fair value of $36,000 to the capital of the Company.
During the year ended December 31, 2014, 310,000 shares of common stock were issued to an aggregate of four directors and officers and a consultant for services rendered in 2013 and 2012. The Company charged the fair value of these shares to operations in 2013 and 2012. However, the par value of these shares was recorded at the time of issuance of these shares in the first quarter of 2014.
| 50 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 15 – Equity (Continued)
Acquisition
On November 10, 2014, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K to report that it acquired Uniroyal and EPAL, the holding company for Wardle Storeys. Uniroyal is a limited liability corporation that prior to its acquisition by the Company had Class A and Class B common unit holders with total invested capital of $1,080,750. The capital included 1,600,000 warrants that were issued in connection with the senior subordinated promissory note (discussed in Note 11). Pursuant to the acquisition, the warrants were terminated and the Class A and Class B common units held by the sellers were exchanged for 200,000 units of Series A preferred units and 150,000 units of Series B preferred units of UEPH Holding LLC a wholly-owned subsidiary of the Company. Each of the UEP Holdings Series A and Series B preferred units have an issue price of $100 per unit or a total value of $20,000,000 and $15,000,000, respectively. The Series A preferred units are entitled to a preferred return of an amount per annum equal to five percent (5.00%) of the issue price of such Series A preferred unit. The Series B preferred units are entitled to a preferred return of an amount per annum equal to five and one half percent (5.50%) of the issue price of such Series B preferred unit, increasing by one half percent (0.50%) on the first anniversary of the effective date and by an additional one half percent (0.50%) on each successive anniversary of the effective date thereafter, up to a maximum of eight percent (8.00%) on the fifth anniversary of the effective date.
In a separate transaction, the Company also purchased all the outstanding 50 common shares of EPAL, a UK limited company, for 100 shares of its common stock and its guaranty of outstanding EPAL preferred stock retained by the seller having a liquidation preference of £12,518,240 (approximately $20 million). As part of the transaction, 50 shares of the EPAL common stock held by the seller had been converted and reclassified as preferred shares. These preferred shares are entitled to a fixed cumulative preferential dividends of £625,912 per annum payable quarterly or approximately $1,000,000.
The preferred dividends and returns for the period November 10, 2014 to December 31, 2014 totalling $403,582 are included in the Consolidated Statement of Comprehensive Income for the year ended December 31, 2014. The dividends and returns were paid on January 15, 2015 and accordingly are included as payable in the Consolidated Balance Sheet as of December 31, 2014.
NOTE 16 – Business Acquisition
On March 4, 2013, EPAL acquired 100% of the common stock of Wardle Storeys. The purchase price was £2,910,000 or $4,380,830. The assets acquired and the liabilities assumed were adjusted to their fair value. Since the fair value of the net assets were greater than the purchase price, the Company recorded the difference of $4,646,046 as a gain which is shown as gain on bargain purchase in the statement of comprehensive income.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
| Cash | $ | 549,694 | ||
| Other current assets | 17,170,007 | |||
| Property and equipment | 2,536,378 | |||
| Intangible assets | 2,276,672 | |||
| Other assets | 3,161,424 | |||
| Line of credit | (8,389,070 | ) | ||
| Other current liabilities | (7,584,712 | ) | ||
| Other liabilities | (693,517 | ) | ||
| Net assets acquired | $ | 9,026,876 |
| 51 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 16 – Business Acquisition (Continued)
The $2,276,672 of acquired intangible assets was for the fair value of trademarks. The Company has deemed the trademarks have indefinite useful lives because they are expected to contribute to cash flows indefinitely. The trademarks will not be amortized and will be tested annually for impairment.
During the year ended December 31, 2013, the Company expensed transaction costs of $73,235 related to the Wardle Storeys acquisition within the Consolidation Statements of Comprehensive Income.
The operating results for the year ended December 31, 2013 include the operating results from Wardle Storeys between March 4, 2013 and December 31, 2013. During this period, Wardle Storeys contributed $40,797,599 in net sales and $1,102,506 of net income (excluding the gain on bargain purchase) to the Company’s Consolidated Statement of Comprehensive Income. The following unaudited pro forma financial information for the year ended December 31, 2013 represents the combined results of the Company’s operations as if the Wardle Storeys acquisition had occurred on January 1, 2013.
| Pro Forma | ||||
| Year Ended | ||||
| December 31, 2013 | ||||
| Net sales | $ | 103,690,084 | ||
| Net income | $ | 8,986,591 | ||
| Earnings per common share | ||||
| Basic | $ | 0.65 | ||
| Diluted | $ | 0.48 | ||
NOTE 17 – Capital Leases
The Company has several equipment capital leases which expire from January 2014 through August 2019 with monthly lease payments ranging from approximately $1,176 to $3,704 per month. The capital lease obligations are secured by the related equipment. As of December 31, 2014 and December 31, 2013, assets recorded under capital leases are included in property and equipment in the accompanying balance sheets. Amortization of items under capital lease obligations has been included with depreciation expense on owned property and equipment in the accompanying statements of operations. The principal balance of the capital lease obligations are $334,907 and $51,016 as of December 31, 2014 and 2013, respectively, and interest rates ranging from 3.84% to 14.4%..
Principal requirements on capital leases for years ending after December 31, 2014, are as follows:
| 2015 | $ | 132,070 | ||
| 2016 | 125,017 | |||
| 2017 | 73,537 | |||
| 2018 | 51,333 | |||
| 2019 | 32,354 | |||
| 414,311 | ||||
| Less interest | (79,404 | ) | ||
| 334,907 | ||||
| Less current portion | (96,071 | ) | ||
| Total | $ | 238,836 |
| 52 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 18 – Operating Leases
The Company leases office facilities and equipment under various lease agreements which expire from February 2015 through March 2029. The agreements include payments ranging from approximately $44 to $39,780 per month. Total operating lease expense was approximately $1,345,475 and $1,063,477 for the years ended December 31, 2014 and December 31, 2013, respectively.
Aggregate minimum rental expense under operating lease obligations for years ending after 2014 are as follows:
| 2015 | $ | 1,148,588 | ||
| 2016 | 1,013,654 | |||
| 2017 | 934,717 | |||
| 2018 | 771,994 | |||
| 2019 | 552,178 | |||
| 2020 and thereafter | 4,375,787 | |||
| Total | $ | 8,796,918 |
NOTE 19 – Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income (loss) were as follows:
| Minimum Benefit Liability Adjustments | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Effective Hedge | Total | |||||||||||||
| Balance at December 31, 2012 | $ | 1,773,768 | $ | (1,602 | ) | $ | (97,730 | ) | $ | 1,674,436 | ||||||
| Other comprehensive gains before reclassifications | 328,372 | 516,395 | — | 844,767 | ||||||||||||
| Reclassification adjustment for gain (loss) included in net income | (511,752 | ) | — | 56,813 | (454,939 | ) | ||||||||||
| Balance at December 31, 2013 | 1,590,388 | 514,793 | (40,917 | ) | 2,064,264 | |||||||||||
| Other comprehensive losses before reclassifications | (298,425 | ) | (425,898 | ) | — | (724,323 | ) | |||||||||
| Reclassification adjustment for gain (loss) included in net income | (589,896 | ) | — | 40,917 | (548,979 | ) | ||||||||||
| Balance at December 31, 2014 | $ | 702,067 | $ | 88,895 | $ | — | $ | 790,962 | ||||||||
| 53 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 19 – Accumulated Other Comprehensive Income (Continued)
The gain (loss) reclassified from accumulated other comprehensive income (loss) into income is recorded to the following income statement line items:
| Other Comprehensive Income Component | Income Statement Line Item | |
| Minimum Benefit Liability Adjustments | General and administrative expense | |
| Unrealized Gain (Loss) on Effective Hedge | Interest expense |
NOTE 20 – Retirement Plans
Effective February 3, 2004, the Company established a 401(k) plan which covers substantially all non-union U.S. employees. The Company did not make any contributions to the plan during the years ended December 31, 2014 and December 31, 2013.
The U.K. wage employees are covered by a statutory mandated defined contribution plan which initially provides that the Company will contribute 1% of the employee’s compensation when the employee contributes 1%. The statutory plan increases the Company’s percentage to 2% when the employee contributes 2% in 2017 and to 3% when the employee contributes 5% in 2018. The employees can opt out of the pension scheme which allows the Company to discontinue their contribution.
The UK salaried employees are covered by separate plan which meets the statutory minimum requirements and provides that the Company will contribute a percentage of the employee’s compensation based on the percentage contributed to the plan by the employee. The schedule of contribution is as follows:
| Employee | Company | |||
| 2% | 6% | |||
| 3% | 7% | |||
| 4% | 7-½% | |||
| 5% | 8% | |||
The Company made contributions of $316,150 and $291,377 to the U.K. plans for the years ended December 31, 2014 and December 31, 2013, respectively.
| 54 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 21 – Concentrations
Labor Union
The Company relies on P.A.C.E. International Union Local No. 7-1207 for its U.S. manufacturing employees. The current union contract expires on March 12, 2023. The contract will continue from year-to-year thereafter, unless notice terminating the agreement is given, by either party, sixty days prior to March 12th in any year after March 12, 2023. Most of the employees at U.K. facility are represented by UNITE. The collective bargaining agreement with UNITE does not specify a termination date.
Major Customers
Sales to eight automotive industry suppliers accounted for 35% and 38% of total Company sales during 2014 and 2013. Accounts receivables from these customers totaled 48% and 42% of total receivables as of December 31, 2014 and December 31, 2013, respectively.
Major Suppliers
The Company purchases a significant quantity of its raw materials from certain major suppliers. Management believes this concentration does not pose a significant risk to the Company's operations as other suppliers are readily available.
NOTE 22 – Related Party Transactions
Prior to its acquisition, Uniroyal had entered into an agreement with a company owned by the Company’s majority shareholder whereby the company provided management and administrative services to Uniroyal. Under the terms of the agreement, the company was paid management and administrative fees equal to 2% of the Uniroyal's annual sales payable monthly based on its sales for the immediately preceding calendar month. The fees provided or arranged for the provision of ordinary course legal, financial, information systems, treasury, human resources, risk management, environmental and other support systems necessary for the administrative support of Uniroyal. The company was also entitled to annual reimbursement of up to $100,000 of costs and expenses incurred while providing management and administrative services to the Company.
| 55 |
INVISA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and December 31, 2013
NOTE 22 – Related Party Transactions (Continued)
Uniroyal incurred fees and expenses of $921,210 and $1,078,957 related to this agreement for the years ended December 31, 2014 and December 31, 2013, respectively. Also as a result of the contract, the company paid for $57,600 of the Company's legal, collection and other administrative expenses during 2013. The agreement was terminated as part of the acquisition.
During 2013, the Company entered into a lease arrangement and obtained a lease financing obligation with a related party lessor entity (see Note 11).
Related party payable in the amount of $20,260 at December 31, 2014 and December 31, 2013 was owed to the Company’s CEO. The amount was paid in February 2015.
Related party receivable of $74,931 and $42,475 at December 31, 2014 and December 31, 2013, respectively, were short-term advances to employees that were repaid after December 31, 2014 and December 31, 2013, respectively.
NOTE 23 – Employment Agreements
The Company has employment agreements with three management employees as of December 31, 2014. The initial term of the employment agreements is three years. The term can be renewed or extended as provided for in the employment agreements. The agreements include various benefits to be provided to the employees including salary, bonus, life insurance and severance benefits.
| 56 |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure 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 December 31, 2014 and concluded that our disclosure controls and procedures were effective as of December 31, 2014.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework, published in 1992. Based on this assessment, and on those criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2014.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
| 57 |
Changes in Internal Controls over Financial Reporting
During the quarter ended December 31, 2014, there was no change 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.
| ITEM 9B. | OTHER INFORMATION |
None.
| 58 |
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors and Executive Officers of the Company
Information required by this Item concerning the Company’s directors and all persons nominated for election as directors at the Company’s Annual Meeting of Stockholders (the “2015 Annual Meeting”) will be included in the section of the Company’s definitive Proxy Statement in connection with our 2015 Annual Meeting (the “2015 Proxy Statement”) , which will be filed with the SEC within 120 days after our fiscal year end of December 31, 2014, entitled “Election of Directors” and is incorporated herein by reference. Information required by this Item concerning the Company’s executive officers will be set forth in the section of our 2015 Proxy Statement entitled “Executive Officers of the Company” and is incorporated herein by reference.
Corporate Governance
Information required by this Item concerning the Audit Committee and the Audit Committee’s financial expert will be included in the section of our 2015 Proxy Statement entitled “Audit Committee” and is incorporated herein by reference.
Section 16(a) Compliance
Information required by this Item concerning compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, will be included in the section of our 2015 Proxy Statement entitled “Compliance with Section 16(a) of the Exchange Act” and is incorporated herein by reference.
Code of Ethics
Our board of directors has adopted a Code of Business Conduct and Ethics and Compliance Program, which is applicable to the Company and to all our directors, officers and employees, including our principal executive officer and principal financial officer, principal accounting officer or controller, or other persons performing similar functions. A copy of the Company’s Code of Ethics may be obtained free of charge by making the request to the Company in writing.
Compensation Committee Interlocks and Insider Participation
Not applicable.
| ITEM 11. | EXECUTIVE COMPENSATION |
Information required by this Item will be included in the sections of our 2015 Proxy Statement entitled “Directors’ Compensation for Fiscal Year 2014,” “Compensation Discussion and Analysis,” “Executive Compensation” and “Compensation Committee Report” and is incorporated herein by reference.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Information concerning the security ownership of certain beneficial owners and management will be included in the section of our 2015 Proxy Statement entitled “Share Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.
| 59 |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Information required by this Item concerning certain relationships and related transactions and director independence will be included in the section of our 2015 Proxy Statement entitled “Governance of the Company – Related Person Transactions” and is incorporated herein by reference.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Annual fees approved for the year-end audit and interim reviews aggregated approximately $285,000 for 2013 and approximately $226,000 for 2014. In addition, during 2014 and 2013, tax-related fees approved for compliance aggregated approximately, $101,000 and $68,000, respectively.
The Audit Committee has established its pre-approval policies and procedures, pursuant to which the Audit Committee approved the foregoing audit services, provided by Kingery & Crouse, PA in 2013 and by Frazier & Deeter in 2014. Consistent with the Audit Committee’s responsibility for engaging the Company’s independent auditors, all audit and permitted non-audit services require pre-approval by the Audit Committee. The full Audit Committee approves proposed services and fee estimates for these services. The Audit Committee chairperson or its designee has been designated by the Audit Committee to approve any services arising during the year that were not pre-approved by the Audit Committee. Services approved by the Audit Committee chairperson are communicated to the full Audit Committee at its next regular meeting and the Audit Committee reviews services and fees for the year at each such meeting.
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PART IV
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this annual report on Form 10-K:
| Exhibit No. | Description | |
| 2.1 | Agreement of Merger and Plan of Reorganization dated 2/25/02 by and among SmartGate Inc., SmartGate/RadioMetrix Acquisition Corp. and Radio Metrix Inc., Letter of Clarification, and Amendment dated as of April 24, 2003 (Incorporated by reference to Form 10-KSB filed on June 23, 2003.) | |
| 3.1 | Articles of Amendment to the Articles of Incorporation of Invisa, Inc. (Incorporated by reference to Form 8-K filed on January 14, 2011.) | |
| 3.2 * | Amended and Restated Bylaws of Invisa, Inc. | |
| 4.1 | Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock dated August 16, 2004 (Incorporated by reference to Form 10-QSB filed on August 23, 2004.) | |
| 4.2 | Amended and Restated Certificate of Designations of Preferences and Rights of Series B of Convertible Preferred Stock of Invisa, Inc. dated January 11, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 4.3 | Certificate of Designations of Preferences and Rights of Series C Convertible Stock dated December 22, 2008 (Incorporated by reference to Form 8-K filed on January 13, 2009.) | |
| 4.4 | Second Amended and Restated Certificate of Designations and Preferences and Rights of Series A Convertible Preferred Stock dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 4.5 | Second Amended and Restated Certificate of Designations and Preferences and Rights of Series B Convertible Preferred Stock dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 4.6 | Amended and Restated Certificate of Designations and Preferences and Rights of Series C Convertible Preferred Stock dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 4.7 | Third Amended and Restated Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock (Incorporated by reference to w Form 8-K filed on May 5, 2014.) | |
| 4.8 |
Third Amended and Restated Certificate of Designations of Preferences and Rights of Series B Convertible Preferred Stock (Incorporated by reference to w Form 8-K filed on May 5, 2014.) |
|
| 4.9 |
Second Amended and Restated Certificate of Designations of Preferences and Rights of Series C Convertible Preferred Stock (Incorporated by reference to w Form 8-K filed on May 5, 2014.) |
|
| 10.1 | SDR Metro Inc. letter extension agreement (Incorporated by reference to Form 10-KSB filed on April 14, 2004.) | |
| 10.2 | SDR Metro Inc. confirmation letter agreement (Incorporated by reference to Form 10-KSB filed on April 14, 2004.) | |
| 10.3 | Subscription Agreement for issuance of 22,000 shares of Series A Convertible Preferred Stock and Common Stock Warrants (Incorporated by reference to Form 10-QSB filed on August 23, 2004.) | |
| 10.4 | Registration Rights Agreement (Incorporated by reference to Form 10-QSB filed on August 23, 2004.) | |
| 10.5 | Opinion of counsel regarding legality of Common Stock (Incorporated by reference to Form S-8 filed on August 14, 2006.) | |
| 10.6 | UCC Financing Statements (Incorporated by reference to Form 8-K/A filed on October 18, 2006.) | |
| 10.7 | Schedule of Advances: Permitted Payments (Incorporated by reference to Form 8-K/A filed on October 18, 2006.) | |
| 10.8 | Forbearance and Modification agreement dated July 27, 2007 (Incorporated by reference to Form 10-QSB filed on November 14, 2007.) | |
| 10.9 | Senior Secured Promissory Note dated November 9, 2007 (Incorporated by reference to Form 10-QSB filed on November 14, 2007.) | |
| 10.10 | Senior Secured Promissory Note dated February 28,2007 (Incorporated by reference to Form 8-K filed on March 12, 2007.) |
| 61 |
| Exhibit No. | Description | |
| 10.11 | General Security Agreement dated February 28, 2007 (Incorporated by reference to Form 8-K filed on March 12, 2007.) | |
| 10.12 | Agreement dated February 28, 2007 with creditors agreeing to delivery of Senior Secured Promissory Note (Incorporated by reference to Form 8-K filed on March 12, 2007.) | |
| 10.13 | Forbearance and Modification Agreement (Incorporated by reference to Form 10-QSB filed on November 14, 2007.) | |
| 10.14 | Audit Committee Charter (Incorporated by reference to Form 10-KSB filed on April 14, 2008.) | |
| 10.15 | Senior Secured Promissory Note date March 28, 2008 (Incorporated by reference to Form 10-KSB filed on April 14, 2008.) | |
| 10.16 | Forbearance and Modification Agreement dated March 28, 2008 (Incorporated by reference to Form 10-KSB filed on April 14, 2008.) | |
| 10.17 | Extension of Promissory Note dated April 11, 2008 (Incorporated by reference to Form 10-KSB filed on April 14, 2008.) | |
| 10.18 | Senior Secured Promissory Note dated July 1, 2008 (Incorporated by reference to Form 8-K filed on July 30, 2008.) | |
| 10.19 | Forbearance and Modification Agreement dated June 1, 2008 (Incorporated by reference to Form 8-K filed on July 30, 2008.) | |
| 10.20 | Note and Share Exchange Agreement dated July 31, 2008 (Incorporated by reference to Form 8-K filed on January 13, 2009.) | |
| 10.21 | Senior Secured Promissory Note dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) . | |
| 10.22 | Senior Secured Promissory Note (Line of Credit) dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.23 | Note Extension Agreement dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.24 | Note Extension Agreement dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.25 | Note Extension Agreement dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.26 | Note Extension Agreement dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.27 | Note Extension Agreement dated March 24, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.28 | Terms of Exchange dated January 11, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.29 | Letter Term Sheet and Consent Documents dated January 11, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.30 | Share Exchange Agreement dated January 11, 2010 (Incorporated by reference to Form 10-K filed on March 31, 2010.) | |
| 10.31 | Debt Conversion Agreement dated November 4, 2010 (Incorporated by reference to Form 10-Q filed on November 5, 2010.) | |
| 10.32 | Maturity Extension Agreement dated November 4, 2010 (Incorporated by reference to Form 10-Q filed on November 5, 2010.) | |
| 10.33 | Note Extension Agreement (note 4) dated December 31, 2011 (Incorporated by reference to Form 10-K filed on March 30, 2012.) | |
| 10.34 | Note Extension Agreement (note 5) dated December 31, 2011 (Incorporated by reference to Form 10-K filed on March 30, 2012.) | |
| 10.35 | Note Extension Agreement (note 6) dated December 31, 2011 (Incorporated by reference to Form 10-K filed on March 30, 2012.) | |
| 10.36 | Note Extension Agreement (note 7) dated December 31, 2011 (Incorporated by reference to Form 10-K filed on March 30, 2012.) | |
| 10.37 | Senior Secured Promissory Note (note 8) dated December 31, 2011 (Incorporated by reference to Form 10-K filed on March 30, 2012.) |
| 62 |
| Exhibit No. | Description | |
| 10.38 | Senior Secured Line of Credit Promissory Note (note 9) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on March 30, 2012.) | |
| 10.39 | Senior Secured Promissory Note (note 10 ) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.40 | Note Extension Agreement (note 4) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.41 | Note Extension Agreement (note 5) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.42 | Note Extension Agreement (note 6) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.43 | Note Extension Agreement (note 7) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.44 | Note Extension Agreement (note 9) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.45 | Note Extension Agreement (note 8) dated December 31, 2012 (Incorporated by reference to Form 10-K filed on February 21, 2013.) | |
| 10.46 | Agreement dated March 7, 2014 to extend maturity date of Senior Secured Notes (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.47 | Agreement to Extend Line of Credit dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.48 | Note Extension Agreement (Note 4) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.49 | Note Extension Agreement (Note 5) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.50 | Note Extension Agreement (Note 6) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.51 | Note Extension Agreement (Note 7) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.52 | Note Extension Agreement (Note 8) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.53 | Note Extension Agreement (Note 10) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.54 | Note Extension Agreement (Note 11) dated March 7, 2014 (Incorporated by reference to Form 8-K filed on March 10, 2014.) | |
| 10.55 | Share Contribution Agreement, dated November 10, 2014, by and between Invisa, Inc. and Howard R. Curd (Incorporated by reference to Form 8-K filed on November 10, 2014.) | |
| 10.56 | Asset Contribution Agreement, dated November 10, 2014, between Invisa, Inc. and UEP Holdings, LLC (Incorporated by reference to Form 8-K filed on November 10, 2014.) | |
| 10.57 | Contribution Agreement, dated November 10, 2014, by and among Invisa, Inc., a Nevada corporation, UEP Holdings, LLC, a Delaware limited liability company, Howard R. Curd, Howard F. Curd, George Sanchez, Mark Kunz and Ted Torres (Incorporated by reference to Form 8-K filed on November 10, 2014.) | |
| 10.58 | Certificate of Formation of UEP Holdings, LLC, dated November 10, 2014 (Incorporated by reference to Form 8-K filed on November 10, 2014.) |
| 63 |
| Exhibit No. | Description | |
| 10.59 | Limited Liability Company Agreement for UEP Holdings, LLC, dated November 10, 2014 (Incorporated by reference to Form 8-K filed on November 10, 2014.) | |
| 10.60 | Amended and Restated Limited Liability Company Agreement, dated November 10, 2014, among UEP Holdings, LLC, Invisa, Inc., Howard R. Curd, Howard F. Curd, George Sanchez, Mark Kunz and Ted Torres (Incorporated by reference to Form 8-K filed on November 10, 2014.) | |
| 10.61 | Guaranty in favor of Lloyds Bank Commercial Finance Limited (Incorporated by reference to Form 8-K filed on January 20, 2015.) | |
| 10.62 * | Guaranty in favor of Lloyds Bank Commercial Finance Limited | |
| 10.63 * | Agreement dated December 31, 2014 with Centurian Investors, Inc. to consolidate loan | |
| 10.64 * | Senior Secured Promissory Note dated December 31,2014 | |
| 10.65 * | Amendment to General Security Agreement dated December 31,2014 | |
| 14 | Code of Business Conduct and Ethics and Compliance Program (Incorporated by reference to Form 10-KSB filed on June 23, 2003.) | |
| 21.1 * | Subsidiaries of the Company | |
| 31.1 * | Chief Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 * | Chief Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 * | Certification Pursuant to 18 U.S.C. Section 1350. | |
| 32.2 * | 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 ** |
______________
| * | Filed herewith. | |
| ** | In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Financial Statement Schedules
None.
| 64 |
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INVISA, INC. | ||
| Dated: March 30, 2015 | By: | /s/ Edmund C. King |
| Edmund C. King | ||
| Chief Executive Officer | ||
| Dated: March 30, 2015 | By: | /s/ Edmund C. King |
| Edmund C. King | ||
| Chief Financial Officer | ||
| 65 |
KNOW ALL PERSONS BY THESE PRESENTS , that each of the undersigned hereby constitutes and appoints Edmund C. King as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and on his behalf to sign, execute and file this annual report on Form 10-K and any or all amendments without limitation to this annual report, and to file the same, with all exhibits thereto and any and all documents required to be filed with respect therewith, with the Securities and Exchange Commission or any regulatory authority, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: March 30, 2015 | /s/ Edmund C. King |
| Edmund C. King, Chief Executive Officer | |
| Dated: March 30, 2015 | /s/ Edmund C. King |
| Edmund C. King, Chief Financial Officer, Director | |
| Dated: March 30, 2015 | /s/ Gregory J. Newell |
| Gregory J. Newell, Director | |
| Dated: March 30, 2015 | /s/ John E. Scates |
| John E. Scates, Director |
| 66 |
Exhibit 3.2
BYLAWS
OF
INVISA, INC.
(a Nevada corporation)
AS AMENDED AND RESTATED TO MARCH 25, 2015
ARTICLE I
Stockholders
SECTION 1. Annual Meetings . The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Nevada, as the Board of Directors shall determine.
SECTION 2. Special Meetings . Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of a simple majority of the Board of Directors or the Chairman of the Board of Directors acting on his own initiative, and shall be held at such date and time, within or without the State of Nevada, as may be specified by such order.
SECTION 3. Notice of Meetings . Notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held.
SECTION 4. Adjournments . Any meeting of stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 5. Stockholder Lists . The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting in accordance with applicable law. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
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SECTION 6. Quorum . Except as otherwise provided by law or the Corporation's Articles of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Articles of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. Notwithstanding the immediately preceding sentence, at all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present, it is not broken by the subsequent withdrawal of any stockholder.
SECTION 7. Organization . Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman's absence the Vice Chairman, if any, or if none or in the Vice Chairman's absence the President, if any, or if none or in the President's absence a Vice President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting.
SECTION 8. Voting; Proxies; Required Vote . At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Articles of Incorporation or any Certificate of Designations of Preferences and Rights provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these Bylaws.
(a) Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.
(b) Where a separate vote by a class or classes, present in person or represented by proxy, shall constitute a quorum entitled to vote on that matter, the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class, unless otherwise provided in the Corporation's Articles of Incorporation.
SECTION 9. Notice of Stockholder Business and Nominations .
(A) Annual Meetings of Stockholders . (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 9 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 9.
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(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 9, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business other than the nominations of persons for election to the Board of Directors must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth day nor earlier than the close of business on the one hundred twentieth day prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than seventy days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (ii) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 9 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 9 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.
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(B) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 9 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 9. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Section 9 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
(C) General . (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 9 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 9. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 9 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee or proposal in compliance with such stockholder's representation as required by clause (A)(2)(c)(iv) of this Section 9) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 9, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 9, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(2) For purposes of this Section 9, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 9, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9. Nothing in this Section 9 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Articles of Incorporation.
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SECTION 10. Inspectors . The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers . The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.
SECTION 2. Qualification; Number; Term; Remuneration . Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Nevada. The number of directors constituting the entire Board shall be three or such larger number as may be fixed from time to time by action of the Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies.
(a) Unless otherwise provided in the Corporation's Articles of Incorporation, Directors who are elected at an annual meeting of stockholders shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation, disqualification, removal or death. Directors who are elected in the interim to fill vacancies and newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen and until their successors are elected and qualified or until their earlier resignation, disqualification, removal or death.
(b) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
SECTION 3. Quorum and Manner of Voting . Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. Except as otherwise provided in the Articles of Incorporation or these Bylaws, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
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SECTION 4. Places of Meetings . Meetings of the Board of Directors may be held at any place within or without the State of Nevada, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting.
SECTION 5. Annual Meeting . Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held.
SECTION 6. Regular Meetings . Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine, provided that meetings of the Board of Directors shall be held not fewer than six (6) times during any fiscal year. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors.
SECTION 7. Special Meetings . Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any three directors then in office.
SECTION 8. Telephone Meetings Permitted . Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.
SECTION 9. Notice of Meetings . A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least three days before the special meeting, or by telephoning the same or by sending the same by facsimile or electronic transmission or by delivering the same personally or by other lawful means not later than twenty-four hours before the time set for the meeting.
SECTION 10. Organization . At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman's absence or inability to act, the Vice Chairman, if any, or, in the Vice Chairman's absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary.
SECTION 11. Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such person's or persons' votes are counted for such purpose, if: the material facts as to the person's relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or the material facts as to the person's relationship or interest as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
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SECTION 12. Resignation . Unless otherwise provided in these Bylaws or the Corporation's Articles of Incorporation, any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed at any time, with or without cause, by a vote of the stockholders entitled to elect such director or directors. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if:
(x) the Director whose removal is proposed
| (1) | has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal, |
| (2) | has engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the Corporation, and |
| (3) | has been declared of unsound mind by order of a court of competent jurisdiction, and such declaration is no longer subject to direct appeal, or has committed an action which constitutes intentional misconduct or knowing violation of law if such action in either event results both in an improper substantial personal benefit and a material injury to the Corporation. |
and (y) removal would be in the best interests of the Corporation.
SECTION 13. Vacancies . Unless otherwise provided in the Articles of Incorporation or these Bylaws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders called for such purpose.
SECTION 14. Action by Unanimous Written Consent . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing or electronic transmission, and the writing or writings (or electronic transmission or electronic transmissions, as the case may be) are filed with the minutes of proceedings of the Board of Directors.
SECTION 15. Compensation of Directors . The Board of Directors or any committee it may designate shall have the authority to fix the compensation, if any, of directors.
ARTICLE III
Committees
SECTION 1. Appointment . From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment; provided , however , that the Board of Directors shall appoint an executive committee, an audit committee a compensation committee, and a corporate governance committee and shall delegate such powers and authority to such committees as the Board of Directors deems necessary and proper and as is customary in similar publicly held corporations.
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SECTION 2. Procedures, Quorum and Manner of Acting . Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors.
SECTION 3. Action by Unanimous Written Consent . Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing or by electronic transmission, and the writing or writings (or electronic transmission or electronic transmissions, as the case may be) are filed with the minutes of proceedings of the committee.
SECTION 4. Term; Termination . In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Qualifications . The Board of Directors shall elect the officers of the Corporation, which shall include a Chairman of the Board, a Chief Executive Officer, a President and a Secretary, and may include, by election or appointment, one or more Vice Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such other officers as the Board may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these Bylaws and as may be assigned by the Board of Directors, the Chief Executive Officer or the President. Any two or more offices may be held by the same person except the offices of President and Secretary.
SECTION 2. Term of Office and Remuneration . The term of office of all officers shall be until the next annual meeting of the Board of Directors and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the vote of a majority of the entire Board of Directors. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide.
SECTION 3. Resignation; Removal . Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation.
SECTION 4. Chairman of the Board . The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.
SECTION 5. Chief Executive Officer . The Chief Executive Officer of the Corporation shall have such duties as customarily pertain to that office. The Chief Executive Officer shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees, other than officers referred to in Section 1 of this Article IV; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments.
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SECTION 6. President . The President of the Corporation may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority and duties as from time to time may be assigned by the Board of Directors or the Chief Executive Officer.
SECTION 7. Vice President . A Vice President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority and duties as from time to time may be assigned by the Board of Directors, the Chief Executive Officer or the President.
SECTION 8. Treasurer . The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors, the Chief Executive Officer or the President.
SECTION 9. Secretary . The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors, the Chief Executive Officer or the President.
SECTION 10. Assistant Officers . Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer, the Chief Executive Officer, the President or the Board of Directors shall from time to time prescribe.
SECTION 11. Other Officers . The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these Bylaws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of the duties of such person.
SECTION 12. Indemnification of Directors, Officers and Employees . A director of the Corporation shall not be personally liable either to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except ( for any breach of the director's duty of loyalty to the Corporation or its stockholders, or ( for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, or for any matter in respect of which such director shall be liable under N.R.S. Section 78.300 or any amendment thereto or successor provision thereto, or for any transaction from which the director shall have derived an improper personal benefit. Neither amendment nor repeal of this paragraph (a) nor the adoption of any provision of the Articles of Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in respect of any matter occurring, or any cause of action, suit or claim that, but for this paragraph (a) of this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
(a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law, and the Corporation may adopt Bylaws or enter into agreements with any such person for the purpose of providing for such indemnification.
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(b) To the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (b) of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.
(c) Expenses incurred by an officer, director, employee or agent in defending or testifying in a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation against such expenses as authorized by this Article, and the Corporation may adopt bylaws or enter into agreements with such persons for the purpose of providing for such advances.
(d) The indemnification permitted by this Article shall not be deemed exclusive of any other rights to which any person may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding an office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
(e) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or otherwise.
(f) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law, and the Corporation may adopt Bylaws or enter into agreements with any such person for the purpose of providing for such indemnification.
ARTICLE V
Books and Records
SECTION 1. Location . The books and records of the Corporation may be kept at such place or places within or outside the State of Nevada as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the Bylaws and by such officer or agent as shall be designated by the Board of Directors.
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SECTION 2. Addresses of Stockholders . Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
SECTION 1. Certificates; Signatures . The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock . Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon.
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SECTION 3. Fractional Shares . The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided.
The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates . The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Articles of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE VIII
Ratification
Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
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ARTICLE IX
Corporate Seal
The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the twelve month period ending on the Sunday nearest to December 31st of each year.
ARTICLE XI
Waiver of Notice
Whenever notice is required to be given by these Bylaws or by the Articles of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts . In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer.
SECTION 2. Contracts . Except as otherwise restricted by the Articles of Incorporation, the Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
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SECTION 3. Proxies; Powers of Attorney; Other Instruments . The Chairman, the Chief Executive Officer, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the Chief Executive Officer, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person.
SECTION 4. Financial Reports . The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law.
ARTICLE XIII
Amendments
Except as provided in the Articles of Incorporation, the Board of Directors shall have power to adopt, amend or repeal bylaws. Bylaws adopted by the Board of Directors may be repealed or changed, and new bylaws made, by the stockholders.
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Exhibit 10.62
GUARANTY
THIS GUARANTY (this “Guaranty”), dated as of January 19, 2015, is made by Invisa, Inc., a Nevada corporation (the “Guarantor”), in favor of Lloyds Bank Commercial Finance Limited (the “Lender”).
Wardle Storeys (Earby) Limited, a company incorporated under the laws of England and Wales with company number 04710820 (the “Obligor”), and the Lender are parties to (i) a Receivables Finance Agreement dated October 6, 2009 (as amended, modified, renewed or extended from time to time, the “Finance Agreement”), (ii) a Loan Agreement dated March 4, 2013 (as amended, modified, renewed or extended from time to time, the “Initial Loan Agreement”), and (iii) a Loan Agreement dated February 13, 2014 (as amended, modified, renewed or extended from time to time, the “Additional Loan Agreement”). The Guarantor has agreed to guarantee the indebtedness and other obligations of the Obligor to the Lender under or in connection with the Finance Agreement, the Initial Loan Agreement and the Additional Loan Agreement (the “Facilities Agreements”) as set forth herein. The Guarantor, as indirect parent company of the Obligor, will derive substantial direct and indirect benefits from the extension of credit to the Obligor pursuant to the Facilities Agreements (which benefits are hereby acknowledged by the Guarantor).
Accordingly, to induce the Lender to extend credit to the Obligor, and in consideration thereof, the Guarantor hereby agrees as follows:
SECTION 1 Definitions; Interpretation .
(a) Certain Defined Terms . As used in this Guaranty, the following terms shall have the following meanings:
“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy.”
“ Collateral ” means any property and interests and proceeds thereof now or hereafter acquired by the Obligor or any other Person in which a Lien shall exist in favor of the Lender to secure the Guaranteed Obligations.
“ Collateral Documents ” means any agreement pursuant to which the Obligor or any other Person provides a Lien on any Collateral and all filings, documents and agreements made or delivered pursuant thereto.
“ Commitment ” means any obligation of the Lender to extend credit to the Obligor under or in connection with the Facilities Agreements.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“ Credit Parties ” means the Obligor, the Guarantor and any other Subsidiary of the Guarantor party to any Finance Document.
“ Debtor Relief Laws ” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States of America or other applicable jurisdictions from time to time in effect.
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“ Event of Default ” means an event of default under the Facilities Agreements.
“ Finance Documents ” means the Facilities Agreements, this Guaranty and all other documents, agreements and instruments delivered by the Obligor, the Guarantor or other Credit Party to the Lender under or in connection with Facilities Agreements, this Guaranty and all such other documents, agreements and instruments.
“ Governmental Authority ” means any federal, state, local or other governmental department, commission, board, bureau, agency, court, tribunal or other instrumentality or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“ Guaranteed Obligations ” has the meaning set forth in Section 2.
“ Guarantor Documents ” means this Guaranty and all other certificates, documents, agreements and instruments delivered by the Guarantor to the Lender under or in connection with this Guaranty.
“ Insolvency Proceeding ” means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other governmental agency or authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in either case undertaken under Debtor Relief Laws.
“ Lien ” means any mortgage, deed of trust, pledge, security interest, assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential arrangement.
“ Material Adverse Effect ” means any event, matter, condition or circumstance which has or would reasonably be expected to have a material adverse effect on the business, properties, results of operations or condition (financial or otherwise) of any the Guarantor and its Subsidiaries taken as a whole.
“ Organization Documents ” means, relative to any Person, its articles or certificate of incorporation, or certificate of limited partnership or formation, its bylaws, partnership or operating agreement or other organizational documents.
“ Person ” means an individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature.
“ Related Party ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“ Solvent ” means, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of §101(32) of the Bankruptcy Code and, in the alternative, for purposes of applicable state law; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital.
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“ Subsidiary ” means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interest is owned directly or indirectly by any Person or one or more of the other Subsidiaries of such Person or a combination thereof.
(b) Interpretation . In this Guaranty, except to the extent the context otherwise requires: (i) any reference to an Article, a Section, a Schedule or an Exhibit is a reference to an article or section thereof, or a schedule or an exhibit thereto, respectively, and to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (ii) the words “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Guaranty as a whole and not merely to the specific Article, Section, subsection, paragraph or clause in which the respective word appears; (iii) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (iv) the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation;” (v) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto; (vi) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending, supplementing, interpreting or replacing the statute or regulation referred to; and (vii) any table of contents, captions and headings are for convenience of reference only and shall not affect the construction of this Guaranty.
SECTION 2 Guaranty .
(a) Guaranty . The Guarantor hereby unconditionally and irrevocably guarantees to the Lender, and its successors, endorsees, transferees and assigns, the full and prompt payment when due (whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) and performance of the indebtedness, liabilities and other obligations of the Obligor to the Lender, whether created under, arising out of or in connection with the Facilities Agreements or otherwise, including all unpaid principal under the Facilities Agreements, all interest accrued thereon, all fees due under the Facilities Agreements and all other amounts payable by the Obligor to the Lender thereunder or in connection therewith. The terms “indebtedness,” “liabilities” and “obligations” are used herein in their most comprehensive sense and include any and all advances, debts, obligations and liabilities, now existing or hereafter arising, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness, liabilities and obligations may be or hereafter become unenforceable or shall be an allowed or disallowed claim in any Insolvency Proceeding, and including interest that accrues after the commencement by or against any Credit Party of any Insolvency Proceeding naming such Person as the debtor in such Insolvency Proceeding. The foregoing indebtedness, liabilities and other obligations of the Obligor, and all other indebtedness, liabilities and obligations to be paid or performed by the Guarantor in connection with this Guaranty (including any and all amounts due under Section 14), shall hereinafter be collectively referred to as the “Guaranteed Obligations.”
(b) Limitation of Guaranty . To the extent that any court of competent jurisdiction shall impose by final judgment under applicable law (including applicable state law and §§544 and 548 of the Bankruptcy Code) any limitations on the amount of the Guarantor’s liability with respect to the Guaranteed Obligations which the Lender can enforce under this Guaranty, the Lender accepts such limitation on the amount of the Guarantor’s liability hereunder to the extent needed to make this Guaranty and the Guarantor Documents fully enforceable and nonavoidable.
SECTION 3 Liability of Guarantor . The liability of the Guarantor under this Guaranty shall be irrevocable, absolute, independent and unconditional, and shall not be affected by any circumstance which might constitute a discharge of a surety or guarantor other than the indefeasible payment and performance in full of all Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, the Guarantor agrees as follows:
(i) the Guarantor’s liability hereunder shall be the immediate, direct, and primary obligation of the Guarantor and shall not be contingent upon the Lender’s exercise or enforcement of any remedy it may have against the Obligor, any other Credit Party or any other Person, or against any Collateral;
(ii) this Guaranty is a guaranty of payment when due and not merely of collectibility;
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(iii) the Lender may enforce this Guaranty upon the occurrence and during the continuance of an Event of Default notwithstanding the existence of any dispute between the Lender and the Obligor with respect to the existence of such Event of Default;
(iv) the Guarantor’s payment of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge the Guarantor’s liability for any portion of the Guaranteed Obligations remaining unsatisfied; and
(v) the Guarantor’s liability with respect to the Guaranteed Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, nor shall the Guarantor be exonerated or discharged by, any of the following events: (A) any Insolvency Proceeding with respect to the Obligor, the Guarantor, any other Credit Party or any other Person; (B) any limitation, discharge, or cessation of the liability of the Obligor, the Guarantor, any other Credit Party or any other Person for any Guaranteed Obligations due to any statute, regulation or rule of law, or any invalidity or unenforceability in whole or in part of any of the Guaranteed Obligations or the Finance Documents; (C) any merger, acquisition, consolidation or change in structure of the Obligor, the Guarantor or any other Credit Party or Person, or any sale, lease, transfer or other disposition of any or all of the assets or shares of the Obligor, the Guarantor, any other Credit Party or other Person; (D) any assignment or other transfer, in whole or in part, of the Lender’s interests in and rights under this Guaranty or the other Finance Documents, including the Lender’s right to receive payment of the Guaranteed Obligations, or any assignment or other transfer, in whole or in part, of the Lender’s interests in and to any of the Collateral; (E) any claim, defense, counterclaim or setoff, other than that of prior performance, that the Obligor, the Guarantor, any other Credit Party or other Person may have or assert, including any defense of incapacity or lack of corporate or other authority to execute any of the Finance Documents; (F) the Lender’s amendment, modification, renewal, extension, cancellation or surrender of any Finance Document, any Guaranteed Obligations, any Collateral, or the Lender’s exchange, release, or waiver of any Collateral; (G) the Lender’s exercise or nonexercise of any power, right or remedy with respect to any of the Collateral, including the Lender’s compromise, release, settlement or waiver with or of the Obligor, the Guarantor, any other Credit Party or any other Person; (H) the Lender’s vote, claim, distribution, election, acceptance, action or inaction in any Insolvency Proceeding related to the Guaranteed Obligations; (I) any impairment or invalidity of any of the Collateral or any failure to perfect any of the Lender’s Liens thereon or therein; and (J) any other guaranty, whether by the Guarantor or any other Person, of all or any part of the Guaranteed Obligations or any other indebtedness, obligations or liabilities of the Obligor to the Lender.
SECTION 4 Consents of Guarantor . The Guarantor hereby unconditionally consents and agrees that, without notice to or further assent from the Guarantor:
(i) the principal amount of the Guaranteed Obligations may be increased or decreased and additional indebtedness or obligations of any Credit Party under the Finance Documents may be incurred, by one or more amendments, modifications, renewals or extensions of any Finance Document or otherwise;
(ii) the time, manner, place or terms of any payment under any Finance Document may be extended or changed, including by an increase or decrease in the interest rate on any Guaranteed Obligation or any fee or other amount payable under such Finance Document, by an amendment, modification or renewal of any Finance Document or otherwise;
(iii) the time for the Obligor’s (or any other Person’s) performance of or compliance with any term, covenant or agreement on its part to be performed or observed under any Finance Document may be extended, or such performance or compliance waived, or failure in or departure from such performance or compliance consented to, all in such manner and upon such terms as the Lender may deem proper;
(iv) the Lender may discharge or release, in whole or in part, any other Credit Party or any other Person liable for the payment and performance of all or any part of the Guaranteed Obligations, and may permit or consent to any such action or any result of such action, and shall not be obligated to demand or enforce payment upon any of the Collateral, nor shall the Lender be liable to the Guarantor for any failure to collect or enforce payment or performance of the Guaranteed Obligations from any Person or to realize upon the Collateral;
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(v) in addition to the Collateral, the Lender may take and hold other security (legal or equitable) of any kind, at any time, as collateral for the Guaranteed Obligations, and may, from time to time, in whole or in part, exchange, sell, surrender, release, subordinate, modify, waive, rescind, compromise or extend such security and may permit or consent to any such action or the result of any such action, and may apply such security and direct the order or manner of sale thereof;
(vi) the Lender may request and accept other guaranties of the Guaranteed Obligations and any other indebtedness, obligations or liabilities of the Obligor to the Lender and may, from time to time, in whole or in part, surrender, release, subordinate, modify, waive, rescind, compromise or extend any such guaranty and may permit or consent to any such action or the result of any such action; and
(vii) the Lender may exercise, or waive or otherwise refrain from exercising, any other right, remedy, power or privilege (including the right to accelerate the maturity of any indebtedness and any power of sale) granted by any Finance Document or other security document or agreement, or otherwise available to the Lender, with respect to the Guaranteed Obligations or any of the Collateral, even if the exercise of such right, remedy, power or privilege affects or eliminates any right of subrogation or any other right of the Guarantor against the Obligor;
all as the Lender may deem advisable, and all without impairing, abridging, releasing or affecting this Guaranty.
SECTION 5 Guarantor’s Waivers .
(a) Certain Waivers . The Guarantor waives and agrees not to assert: (i) any right to require the Lender to marshal assets in favor of the Obligor, the Guarantor, any other Credit Party or any other Person, to proceed against the Obligor, any other Credit Party or any other Person, to proceed against or exhaust any of the Collateral, to give notice of the terms, time and place of any public or private sale of personal property security constituting the Collateral or to pursue any other right, remedy, power or privilege of the Lender whatsoever; (ii) the defense of the statute of limitations in any action hereunder or for the collection or performance of the Guaranteed Obligations; (iii) any defense arising by reason of any lack of corporate or other authority or any other defense of the Obligor, the Guarantor or any other Person; (iv) any defense based upon the Lender’s errors or omissions in the administration of the Guaranteed Obligations; (v) any rights to set-offs and counterclaims; (vi) any defense based upon an election of remedies (including, if available, an election to proceed by nonjudicial foreclosure) which destroys or impairs the subrogation rights of the Guarantor or the right of the Guarantor to proceed against the Obligor or any other obligor of the Guaranteed Obligations for reimbursement; and (vii) without limiting the generality of the foregoing, to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties, or which may conflict with the terms of this Guaranty.
(b) Additional Waivers . The Guarantor waives any and all notice of the acceptance of this Guaranty, and any and all notice of the creation, renewal, modification, extension or accrual of the Guaranteed Obligations, or the reliance by the Lender upon this Guaranty, or the exercise of any right, power or privilege hereunder. The Guaranteed Obligations shall conclusively be deemed to have been created, contracted, incurred and permitted to exist in reliance upon this Guaranty. The Guarantor waives promptness, diligence, presentment, protest, demand for payment, notice of default, dishonor or nonpayment and all other notices to or upon the Obligor, the Guarantor or any other Person with respect to the Guaranteed Obligations.
(c) Independent Obligations . The obligations of the Guarantor hereunder are independent of and separate from the obligations of the Obligor and any other Credit Party and upon the occurrence and during the continuance of any Event of Default, a separate action or actions may be brought against the Guarantor, whether or not the Obligor or any other Credit Party is joined therein or a separate action or actions are brought against the Obligor or any other Credit Party.
(d) Financial Condition of Obligor . The Guarantor shall not have any right to require the Lender to obtain or disclose any information with respect to: (i) the financial condition or character of any Credit Party or the ability of any Credit Party to pay and perform the Guaranteed Obligations; (ii) the Guaranteed Obligations; (iii) the Collateral; (iv) the existence or nonexistence of any other guarantees of all or any part of the Guaranteed Obligations; (v) any action or inaction on the part of the Lender or any other Person; or (vi) any other matter, fact or occurrence whatsoever.
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SECTION 6 Subrogation . Until the Guaranteed Obligations shall be satisfied in full and any Commitments shall be terminated, the Guarantor shall not have, and shall not directly or indirectly exercise, (i) any rights that it may acquire by way of subrogation under this Guaranty, by any payment hereunder or otherwise, (ii) any rights of contribution, indemnification, reimbursement or similar suretyship claims arising out of this Guaranty, or (iii) any other right which it might otherwise have or acquire (in any way whatsoever) which could entitle it at any time to share or participate in any right, remedy or security of the Lender as against the Obligor or other Credit Parties, whether in connection with this Guaranty, any of the other Finance Documents or otherwise. If any amount shall be paid to the Guarantor on account of the foregoing rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Lender and shall forthwith be paid to the Lender to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Finance Documents.
SECTION 7 Continuing Guaranty; Reinstatement .
(a) Continuing Guaranty . This Guaranty is a continuing guaranty and agreement of subordination relating to any Guaranteed Obligations, including Guaranteed Obligations which may exist continuously or which may arise from time to time under successive transactions, and the Guarantor expressly acknowledges that this Guaranty shall remain in full force and effect notwithstanding that there may be periods in which no Guaranteed Obligations exist. This Guaranty shall continue in effect and be binding upon the Guarantor until termination of any Commitments and payment and performance in full of the Guaranteed Obligations.
(b) Reinstatement . This Guaranty shall continue to be effective or shall be reinstated and revived, as the case may be, if, for any reason, any payment of the Guaranteed Obligations by or on behalf of any Credit Party (or receipt of any proceeds of Collateral) shall be rescinded, invalidated, declared to be fraudulent or preferential, set aside, voided or otherwise required to be repaid to any Credit Party, its estate, trustee, receiver or any other Person (including under the Bankruptcy Code or other state or federal law), or must otherwise be restored by the Lender, whether as a result of Insolvency Proceedings or otherwise. To the extent any payment is so rescinded, set aside, voided or otherwise repaid or restored, the Guaranteed Obligations shall be revived in full force and effect without reduction or discharge for such payment. All losses, damages, costs and expenses that the Lender may suffer or incur as a result of any voided or otherwise set aside payments shall be specifically covered by the indemnity in favor of the Lender contained in Section 14.
SECTION 8 Payments . The Guarantor hereby agrees, in furtherance of the foregoing provisions of this Guaranty and not in limitation of any other right which the Lender or any other Person may have against the Guarantor by virtue hereof, upon the failure of the Obligor to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under §362(a) of the Bankruptcy Code), the Guarantor shall forthwith pay, or cause to be paid, in cash, to the Lender an amount equal to the amount of the Guaranteed Obligations then due as aforesaid (including interest which, but for the filing of a petition in any Insolvency Proceeding with respect to the Obligor, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against the Obligor for such interest in any such Insolvency Proceeding). The Guarantor shall make each payment hereunder, unconditionally in full, free and clear of any and all taxes, without set-off, counterclaim or other defense, on the day when due in U.S. dollars or other applicable currency in which the Guaranteed Obligations are denominated, and in same day or immediately available funds, to the Lender at such office of the Lender and to such account as the Lender shall notify to the Obligor in writing. All such payments shall be promptly applied from time to time by the Lender to the payment of the Guaranteed Obligations in such order of application as the Lender in its sole discretion may choose.
SECTION 9 Representations and Warranties . The Guarantor represents and warrants to the Lender that:
(a) Organization and Powers . The Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is qualified to do business and is in good standing in each jurisdiction in which the failure so to qualify or be in good standing would have a Material Adverse Effect and has all requisite power and authority to own its assets and carry on its business and to execute, deliver and perform its obligations under the Guarantor Documents.
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(b) Authorization; No Conflict . The execution, delivery and performance by the Guarantor of this Guaranty and any other Guarantor Documents have been duly authorized by all necessary action of the Guarantor, and do not and will not: (i) contravene the terms of the Organization Documents of the Guarantor or result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Guarantor is a party or by which it or its properties may be bound or affected; or (ii) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree or the like binding on or affecting the Guarantor.
(c) Binding Obligation . This Guaranty constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms.
(d) Governmental Consents . No authorization, consent, approval, license, exemption of, or filing or registration with, any Governmental Authority, or approval or consent of any other Person, is required for the due execution, delivery or performance by the Guarantor of the Guarantor Documents.
(e) Solvency . Immediately prior to and after and giving effect to the incurrence of the Guarantor’s obligations under this Guaranty the Guarantor is and will be Solvent.
(f) Consideration . The Guarantor has received at least “reasonably equivalent value” (as such phrase is used in §548 of the Bankruptcy Code and in comparable provisions of other applicable law) and more than sufficient consideration to support its obligations hereunder in respect of the Guaranteed Obligations and under any of the Collateral Documents to which it is a party.
(g) Independent Investigation . The Guarantor hereby acknowledges that it has undertaken its own independent investigation of the financial condition of the Obligor and all other matters pertaining to this Guaranty and further acknowledges that it is not relying in any manner upon any representation or statement of the Lender with respect thereto. The Guarantor represents and warrants that it has received and reviewed copies of the Finance Documents and that it is in a position to obtain, and it hereby assumes full responsibility for obtaining, any additional information concerning the financial condition of the Obligor and any other matters pertinent hereto that the Guarantor may desire. The Guarantor is not relying upon or expecting the Lender to furnish to the Guarantor any information now or hereafter in the Lender’s possession concerning the financial condition of the Obligor or any other matter.
SECTION 10 Reporting Covenants . So long as any Guaranteed Obligations (other than contingent indemnification obligations) shall remain unsatisfied or the Lender shall have any Commitment, the Guarantor agrees that:
(a) Financial Statements and Other Reports . The Guarantor shall furnish to the Lender:
(a) Financial Statements . The Guarantor shall furnish to Lender from time to time such information respecting Guarantor’s financial condition as Lender may from time to time reasonably request. Without limiting the foregoing, the Guarantor shall furnish to the Lender promptly upon the issuance thereof, copies of all reports, if any, to or other documents filed by it with the Securities and Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(b) Additional Information . The Guarantor shall furnish to the Lender: (i) prompt written notice of any condition or event which has resulted, or that could reasonably be expected to result, in a Material Adverse Effect; and (ii) such other information respecting the operations, properties, business or condition (financial or otherwise) of the Guarantor or its Subsidiaries as the Lender may from time to time reasonably request.
SECTION 11 Additional Covenants . So long as any Guaranteed Obligations (other than contingent indemnification obligations) shall remain unsatisfied or the Lender shall have any Commitment, the Guarantor agrees that:
(a) Preservation of Existence, Etc . The Guarantor shall, and shall cause each of its Subsidiaries to, maintain and preserve its legal existence, its rights to transact business and all other rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of its properties.
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(b) Governmental Consents . The Guarantor shall maintain all authorizations, consents, approvals, licenses, exemptions of, or filings or registrations with, any Governmental Authority, or approvals or consents of any other Person, required in connection with this Guaranty or any other Guarantor Documents.
(c) Ownership of the Obligor . The Guarantor shall maintain at all times, directly or indirectly, ownership of all of the issued and outstanding capital stock of the Obligor and possess, directly or indirectly, capital stock or other equity interests representing voting control of the Obligor.
(d) Restrictions on Fundamental Changes . The Guarantor shall not merge with or consolidate into any Person, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets.
(e) Further Assurances and Additional Acts . The Guarantor shall execute, acknowledge, deliver, file, notarize and register at its own expense all such further agreements, instruments, certificates, documents and assurances and perform such acts as the Lender shall deem necessary or appropriate to effectuate the purposes of this Guaranty and the other Guarantor Documents, and promptly provide the Lender with evidence of the foregoing satisfactory in form and substance to it.
SECTION 12 Notices . All notices and other communications provided for hereunder and under the other Guarantor Documents shall, unless otherwise stated herein, be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or by email (i) if to the Lender, at or to its address, email address or facsimile number set forth in the Facilities Agreements, and (ii) if to the Guarantor, at or to its address, email address or facsimile number set forth below its name on the signature page hereof, or at or to such other address, email address or facsimile number as such party shall have designated in a written notice to the other party. Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices and other communications (A) sent by facsimile or by email shall be deemed to have been given when sent, and (B) posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its email address as described herein, of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (A) and (B) above, if a notice or other communication is not given during normal business hours for the recipient, it shall be deemed to have been given at the opening of business on the next business day for the recipient.
SECTION 13 No Waiver; Cumulative Remedies . No failure on the part of the Lender to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder or under any other Guarantor Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under this Guaranty and the other Guarantor Documents are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to the Lender.
SECTION 14 Costs and Expenses; Indemnification .
(a) Costs and Expenses . The Guarantor agrees to pay all out-of-pocket expenses incurred by the Lender (including the fees, charges and disbursements of any counsel for the Lender) in connection with the enforcement or protection of its rights (i) in connection with this Guaranty and the other Guarantor Documents, including its rights under this Section, and (ii) in connection with the Guaranteed Obligations, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Guaranteed Obligations, and including in or in connection with any Insolvency Proceeding.
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(b) Indemnification . The Guarantor shall indemnify the Lender (and any agent thereof) and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Guarantor, the Obligor or any other Credit Party), other than such Indemnitee and its Related Parties, arising out of, in connection with, or as a result of (i) the execution or delivery of this Guaranty, any other Guarantor Document or other Finance Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) the Guaranteed Obligations or the use or proposed use of the proceeds therefrom, or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Guarantor, the Obligor or any other Credit Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Guarantor, the Obligor or any other Credit Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Finance Document, if the Obligor, the Guarantor or such Credit Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Guarantor shall not assert, and hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Guaranty, any other Guarantor Document or Finance Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, the Guaranteed Obligations or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Guaranty or the other Guarantor Documents or Finance Documents or the transactions contemplated hereby or thereby.
(d) Payment . All amounts due under this Section 14 shall be payable upon demand.
SECTION 15 Right of Set-Off . Upon the occurrence and during the continuance of any Event of Default each of the Lender and its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or any such Affiliate to or for the credit or the account of the Guarantor or any other Credit Party against any and all of the obligations of the Guarantor or such other Credit Party now or hereafter existing under this Guaranty or any other Guarantor Document to the Lender or its Affiliates, irrespective of whether or not the Lender or its Affiliate shall have made any demand under this Guaranty or any other Guarantor Document and although such obligations of the Guarantor or such other Credit Party may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or obligations or are owed to a branch, office or Affiliate of the Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness. The rights of the Lender and its Affiliates under this Section 15 are in addition to other rights and remedies (including other rights of set-off) which the Lender or its Affiliates may have. By its acceptance hereof, the Lender shall promptly notify the Guarantor after any such set-off and application; provided , however , that the failure to give such notice shall not affect the validity of such setoff and application.
SECTION 16 Survival . All covenants, agreements, representations and warranties made in this Guaranty and in any other Guarantor Document shall survive the execution and delivery of this Guaranty, and shall continue in full force and effect so long as the Lender has any Commitment or any Guaranteed Obligations remain unsatisfied. Without limiting the generality of the foregoing, the obligations of the Guarantor under Section 14 shall survive the satisfaction of the Guaranteed Obligations and the termination of any Commitments.
SECTION 17 Benefits of Guaranty . This Guaranty is entered into for the sole protection and benefit of the Lender and its successors and assigns, and no other Person (other than any Related Party specified herein) shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, this Guaranty. The Lender, by its acceptance of this Guaranty, shall not have any obligations under this Guaranty to any Person other than the Guarantor, and such obligations shall be limited to those expressly stated herein.
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SECTION 18 Binding Effect; Assignment .
(a) Binding Effect . This Guaranty shall be binding upon the Guarantor and its successors and assigns, and inure to the benefit of and be enforceable by the Lender and its successors, endorsees, transferees and assigns. Delivery by the Guarantor of an executed counterpart of a signature page of this Guaranty by facsimile or in electronic ( i.e ., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Guaranty.
(b) Assignment . The Guarantor shall not have the right to assign or transfer its rights and obligations hereunder or under any other Guarantor Documents without the prior written consent of the Lender. The Lender may, without notice to or consent by the Guarantor, sell, assign, transfer or grant participations in all or any portion of the Lender’s rights and obligations hereunder and under the other Guarantor Documents in connection with any sale, assignment, transfer or grant of a participation by the Lender under the Facilities Agreements of its rights and obligations thereunder and under the other Finance Documents. The Guarantor agrees that in connection with any such sale, assignment, transfer or grant by the Lender, the Lender may deliver to the prospective participant or assignee financial statements and other relevant information relating to the Guarantor and its Subsidiaries. In the event of any grant of a participation, the participant (i) shall be deemed to have a right of setoff under Section 15 in respect of its participation to the same extent as if it were the “Lender,” provided that such participant shall have agreed to share any amount so realized with the Lender on terms and conditions satisfactory to the Lender; and (ii) shall also be entitled to the benefits of Section 14.
SECTION 19 Governing Law . This Guaranty and the other Guarantor Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Guaranty or any other Guarantor Document (except, as to any other Guarantor Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.
SECTION 20 Submission to Jurisdiction .
(a) Submission to Jurisdiction . The Guarantor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Lender or any Related Party of the Lender in any way relating to this Guaranty or any other Guarantor Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the Guarantor and the Lender (by its acceptance hereof) irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the Guarantor and the Lender (by its acceptance hereof) agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty or in any other Guarantor Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Guaranty or any other Finance Document against the Guarantor or any other Credit Party or its properties in the courts of any jurisdiction.
(b) Waiver of Venue . The Guarantor irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Guaranty or any other Guarantor Document in any court referred to in subsection (a) of this Section. Each of the Guarantor and the Lender (by its acceptance hereof) hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Service of Process . Each of the Guarantor and the Lender (by its acceptance hereof) irrevocably consents to service of process in the manner provided for notices in Section 12. Nothing in this Guaranty will affect the right of any party hereto to serve process in any other manner permitted by applicable law.
SECTION 21 Waiver of Jury Trial . THE GUARANTOR AND THE LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED ON OR ARISING FROM ANY GUARANTOR DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THE GUARANTOR DOCUMENTS .
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SECTION 22 Entire Agreement; Amendments and Waivers .
(a) Entire Agreement . This Guaranty and the other Guarantor Documents constitute the entire agreement of the Guarantor with respect to the matters set forth herein and supersede any prior agreements, commitments, drafts, communications, discussions and understandings, oral or written, with respect thereto. There are no conditions to the full effectiveness of this Guaranty.
(b) Amendments and Waivers . This Guaranty and the other Guarantor Documents may not be amended except by a writing signed by the Guarantor and the Lender. No waiver of any rights of the Lender under any provision of this Guaranty or consent to any departure by the Guarantor therefrom shall be effective unless in writing and signed by the Lender. Any such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
SECTION 23 Lender Not a Fiduciary to Guarantor . The relationship between the Guarantor and its Affiliates, on the one hand, and the Lender and its Affiliates, on the other hand, is solely that of debtor and creditor, and neither the Lender not any Affiliate thereof shall have any fiduciary or other special relationship with the Guarantor or any of its Affiliates, and no term or provision of any Finance Document, no course of dealing, no written or oral communication, or other action, shall be construed so as to deem such relationship to be other than that of debtor and creditor.
SECTION 24 Judgment Currency . If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Lender could purchase the first currency with such other currency on the business day preceding that on which final judgment is given. The obligation of the Guarantor in respect of any such sum due from it to the Lender shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of the Finance Documents (the “Agreement Currency”), be discharged only to the extent that on the business day following receipt by the Lender of any sum adjudged to be so due in the Judgment Currency, the Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Lender from such Guarantor in the Agreement Currency, the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Lender in such currency, the Lender (by its acceptance hereof) agrees to return the amount of any excess to the Guarantor (or to any other Person who may be entitled thereto under applicable law). The agreements in this Section 24 shall survive the termination of any Commitments and the repayment of all Guaranteed Obligations.
SECTION 25 Severability . Whenever possible, each provision of this Guaranty and the other Guarantor Documents shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Guaranty or any other Guarantor Document shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Guaranty or such Guarantor Document, as the case may be, or the validity or effectiveness of such provision in any other jurisdiction
SECTION 26 USA PATRIOT Act Notice . The Guarantor acknowledges notice from the Lender that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), the Lender is required to obtain, verify and record information that identifies the Guarantor, which information includes the name and address of the Guarantor and other information that will allow the Lender to identify the Guarantor in accordance with the Act. The Guarantor shall, promptly following a request by the Lender, provide all documentation and other information that the Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.
[Remainder of page intentionally left blank; signature page(s) follow]
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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty, as of the date first above written.
| INVISA, INC. | ||
| By: | /s/ Edmund King | |
| Title: Chief Executive Officer | ||
| Address: | ||
| 1800 2 nd Street, Suite 965 | ||
| Sarasota, Florida 34236, U.S.A. | ||
| Attn.: Oliver J. Janney | ||
| Fax No. 941-906-8582 | ||
| Email: ojanney@nauga.com | ||
Consented to and Agreed:
| WARDLE STOREYS (EARBY) LIMITED | ||
| By: | /s/ Howard R. Curd | |
| Title: Director | ||
| As of January 19, 2015 | ||
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Exhibit 10.63
AGREEMENT
THIS AGREEMENT is made this 31 st day of December 2014, by and between Centurian Investors, Inc., a Delaware corporation (“Lender”), and Invisa, Inc., a Nevada corporation (“Invisa”).
WHEREAS, Lender has made series of loans to Invisa; and
WHEREAS, the loans that are in effect as of the date hereof are evidenced by senior secured promissory notes, which are listed on Exhibit A hereto (“the Outstanding Notes”); and
WHEREAS, the total outstanding balance of the Outstanding Notes as of the date hereof is $1,470,057.27; and
WHEREAS, the Lender and Invisa (the “Parties”) desire to consolidate all of the Outstanding Notes into one senior secured promissory note;
NOW THEREFORE, in consideration of the premises, the provisions of this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. Upon execution of this Agreement, Invisa shall execute the senior secured promissory note set forth as Exhibit A hereto (the “Consolidated Note”).
2. Lender hereby waives any known and unknown defaults that may have occurred under the Outstanding Notes or any of them prior to the date hereof.
3. Upon execution and delivery of the Consolidated Note, the Outstanding Notes will be cancelled and of no further effect and Lender will return the cancelled Outstanding Notes to Invisa.
4. The shares of common stock heretofore issued and held in escrow as part of the Collateral securing the Outstanding Notes are hereby released and shall become treasury shares.
5. This Agreement constitutes the full agreement of the Parties concerning its subject matter and may not be amended or otherwise modified except by a written document signed by both Parties. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and any disputes hereunder shall be submitted for determination to the courts of the State of Florida sitting in Sarasota, Florida or the federal court sitting in Tampa, Florida.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their officers duly authorized as of the day and year first set forth above.
| CENTURIAN INVESTORS, INC. | INVISA, INC. | |||
| By: | /s/ Howard R. Curd | By: | /s/ Edmund C. King | |
| Howard R. Curd | Edmund C. King | |||
| Chief Executive Officer | Chief Executive Officer | |||
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EXHIBIT A
OUTSTANDING NOTES
| Number of Note | Date of Note | Principal Amount |
| 4 | March 28, 2008 | up to $100,000.00 |
| 5 | July 1, 2008 | up to $100,000.00 |
| 6 | March 24, 2010 | up to $128,319.10 |
| 7 | March 24, 2010 | up to $200,000.00 |
| 8 | December 31, 2011 | up to $250,000.00 |
| 10 | December 31, 2012 | up to $225,000.00 |
| 11 | December 31, 2013 | up to $232,109.00 |
| 12 | December 31,2014 | $245,997.20 |
EXHIBIT B
SENIOR SECURED PROMISSORY NOTE
| $ 1,470,057.27 | December 31, 2014 | |
| Sarasota, Florida |
FOR VALUE RECEIVED, the undersigned, INVISA, INC. , a Nevada corporation (“ Borrower ”) having an address at 1800 Second Street, Suite 965 Sarasota, Florida, 34236, promises to pay to the order of Centurian Investors, Inc., a Delaware corporation (“ Lender ”), having an office at 1800 Second Street, Suite 970 Sarasota, Florida, 34236, or such other place as the Lender may designate in writing, the principal amount up to and not to exceed One Million Four Hundred Seventy Thousand Fifty-Seven and 27/100 United States Dollars (U.S. $1,470,057.27), with interest on the unpaid principal balance from the date of this Senior Secured Promissory Note (this “ Promissory Note ”), until paid, at the Interest Rate (as hereinafter defined) provided herein.
1. Rate of Interest . The outstanding principal balance of this Promissory Note shall bear interest at ten percent (10%) per annum (the “ Interest Rate ”).
2. Date and Time of Payment . Invisa shall pay even payments of principal and interest in the amount of $36,247.99 on or before April 1, 2015 and in accordance with the payment schedule set forth on Schedule 1 hereto on or before the first day of each calendar quarter thereafter. The final payment on or before January 1, 2020 will include all outstanding amounts. All amounts outstanding hereunder shall constitute Borrower’s obligations hereunder, and such obligations include without limitation all principal, interest (including all interest which accrues after the commencement of any case or proceeding by or against Borrower in bankruptcy whether or not allowed in such case or proceeding), expenses, attorneys’ fees and any other sum chargeable to Borrower hereunder and owing to Lender under this Promissory Note (all such obligations and all other obligations of Borrower under this Promissory Note (the “ Obligations ”). No principal amount of this Note paid or prepaid may be reborrowed.
3. Default Rate . Notwithstanding Section 1 , after the occurrence of any Event of Default and for so long as such Event of Default continues, and in any event from and after the Maturity Date, all principal, interest and other amounts payable under this Promissory Note shall bear interest until paid in full at a rate of interest equal to four percent (4%) above the per annum rate otherwise applicable hereunder (the “ Default Rate ”).
4. Computation of Interest . Interest on the principal amount hereof and all other Obligations shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period.
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5. Manner of Payment . All payments by Borrower in respect of any Obligations shall be made without deduction, defense, set off or counterclaim, free and clear of all taxes delivered to Lender at its address first set forth above or at such other address as Lender may specify by notice pursuant to Section 17, below.
6. Maturity . To the extent not sooner due and payable in accordance with this Promissory Note, the Obligations shall be due and payable on January 1, 2020 (the “ Maturity Date ”).
7. Application of Payments . All payments shall be applied to amounts then due and payable in the following order: (a) to Lender’s costs and expenses reimbursable in connection herewith; (b) to interest accrued on the outstanding principal balance of this Promissory Note; (c) to the principal amount hereof; and (d) to all other Obligations, or in such other manner as Lender shall determine in its sole and exclusive discretion.
8. Security . This Promissory Note shall be secured by a continuing first priority security interest in all of Borrower’s right, title, and interest in and to, all property of Borrower (collectively, the “ Collateral ”), as more specifically set forth in the Security Agreement executed by Borrower in favor of Lender dated as of February 28, 2007, as amended by the Amendment to General Security Agreement dated the date hereof (as amended, the “ Security Agreement ”).
9. Priority . This Promissory Note shall be a senior obligation of Borrower, and for so long as this Promissory Note shall be outstanding, (i) Borrower shall be prohibited from incurring any and all future indebtedness without the prior written consent of Lender and (ii) any and all future indebtedness approved by Lender in writing shall be deemed subordinate and inferior to, all respective right, title and interest of Lender, in, to and under this Promissory Note, this Security Agreement and any and all documents and instruments evidencing, securing or otherwise relating to this Promissory Note.
10. Representations and Warranties . Borrower makes the following representations and warranties to Lender, which representations and warranties shall be true, correct, and complete as of the date hereof and shall survive the execution and delivery of this Promissory Note:
(a) Due Organization and Qualification . Borrower is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any jurisdiction where it is required to be so qualified, and has all requisite power and authority to (i) own its assets and carry on its business, and (ii) execute, deliver and perform its Obligations.
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(b) Due Authorization; No Conflict . The execution, delivery, and performance by Borrower of this Promissory Note has been duly authorized by all necessary action on the part of Borrower. This Promissory Note has been duly executed and delivered by Borrower. The execution, delivery, and performance by Borrower of this Promissory Note and the consummation of the transactions contemplated hereby, do not and will not (i) violate in any material respect any provision of federal, state, provincial or local law or regulation applicable to Borrower, its organizational documents, or any order, judgment, or decree of any court or other governmental authority, (ii) conflict with, result in a breach or termination of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of Borrower, (iii) result in or require the creation or imposition of any lien of any nature whatsoever upon any properties or assets of Borrower, other than liens or security interests in favor of Lender, or (iv) require any approval of any of Borrower’s stockholders or any approval or consent of any other person or entity, other than consents or approvals that have been obtained and that are still in force and effect. The execution, delivery, and performance by Borrower of this Promissory Note do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any governmental authority, other than consents or approvals that have been obtained and that are still in force and effect. This Promissory Note when executed and delivered by Borrower will be the legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.
(c) No Litigation . No litigation, investigation or proceeding of or before any arbitrator or government authority is (i) pending or, to the knowledge of Borrower, threatened with respect to this Promissory Note or the Collateral or any of the transactions contemplated hereby or (ii) pending or, to the knowledge of Borrower, threatened by or against Borrower, its properties or revenues which, if adversely determined, would have a material adverse effect on its business, operations, property or financial condition, when taken as a whole.
(d) No Default . Borrower is not in default under or with respect to any contractual obligation and no event of default has occurred or is continuing with respect to Borrower.
(e) Taxes . Borrower has filed or caused to be filed all tax returns required to be filed by it and has paid all taxes due and payable on said returns or on any assessments made against Borrower or any of its property. All other taxes, fees or other charges on Borrower or any of its property by any governmental authority have been paid and no tax liens have been filed.
11. Covenants of Borrower . As of the date hereof and so long as the Obligations hereunder shall be outstanding:
(a) Borrower will preserve and keep in force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business;
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(b) Borrower will promptly pay and discharge all lawful taxes, assessments, charges or levies imposed upon Borrower, or upon or in respect of all or any part of the property or business of Borrower, all trade accounts payable in accordance with usual and customary business terms and all claims for work, labor or materials, which if unpaid might become a lien or charge upon any property of Borrower; provided , Borrower shall not be required to pay such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate action or proceeding which will prevent the forfeiture or sale of any property of Borrower, and (ii) Borrower shall set aside on its books, reserves deemed by it to be adequate with respect thereto;
(c) Borrower will promptly comply with all laws, ordinances or governmental rules and regulations to which it is subject, the violations of which would materially or adversely affect its properties, business, prospects, profits or condition or would result in any material lien or charge upon any property of Borrower;
(d) Borrower will maintain, preserve and keep its properties which are used or useful in the conduct of its business in good repair and working order;
(e) Without prior written approval from Lender, Borrower will not create, assume or incur or in any manner become liable with respect of any indebtedness except this Promissory Note and any indebtedness of Borrower incurred prior to the date hereof; and
(f) Borrower will not create or incur any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (a “Lien”) other than the Lien under the Security Agreement on it or its property or assets, whether now owned or hereinafter acquired, or upon any income or profits there from except (i) Liens for property taxes and assessments or levies and liens that are not yet due and payable; (ii) Liens of or resulting from any judgment or award, the time for appeal or petition for rehearing of which shall not have expired or in respect of which the Company shall in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; or (iii) Liens or priority claims (A) incidental to the conduct of business, (B) created by any material agreement of Borrower entered into prior to and currently in effect as of the date hereof or (C) the ownership or lease of properties and assets and not in connection with the borrowing of money, provided , in each case, the obligation secured is not overdue, or if overdue, is being contested in good faith by appropriate actions or proceedings and provided , further that Borrower shall have received the prior written consent of Lender to any Lien described in (A) or (C) above.
12. Events of Default; Remedies; Acceleration . (a) The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “ Event of Default ” hereunder:
(i) Borrower fails to make any payment of outstanding principal balance of this Promissory Note, or interest thereon, or any of the other Obligations when due and payable;
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(ii) Any representation or warranty of Borrower made in this Promissory Note, the Security Agreement, or any other document made by or on behalf of Borrower in connection herewith and the transactions contemplated hereby proves to have been false or incorrect in any material respect or Borrower shall fail to comply in all respects with any covenant herein or therein;
(iii) Borrower shall violate any provision of this Promissory Note, the Security Agreement or any other document made by or on behalf of Borrower in connection herewith and the transactions contemplated hereby, including, without limitation, failure to comply with the terms and provisions of Section 11 of this Promissory Note;
(iv) A case or proceeding is commenced against Borrower seeking a decree or order (i) under Title 11 of the United States Bankruptcy Code (11 U.S.C. §§101 et seq. , as amended, and any successor statute, the “ Bankruptcy Code ”), or any other applicable federal, state or foreign bankruptcy or other similar law, rule or regulation, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any substantial part of Borrower’s assets, or (iii) ordering the winding-up or liquidation of the affairs of Borrower, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or a decree or order granting the relief sought in such case or proceeding shall be entered by a court of competent jurisdiction;
(v) Borrower, without the prior written consent of Lender (A) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, rule or regulation, (B) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any substantial part of Borrower’s assets, (C) makes an assignment for the benefit of creditors, (D) takes any action in furtherance of any of the foregoing; or (E) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due;
(vi) If this Promissory Note, the Security Agreement, or any financing statement, document or other instrument executed, delivered or filed in connection herewith or with the security interest granted to Lender hereunder, shall, for any reason, fail or cease to create a valid and perfected lien on or security interest in any or all of the Collateral or the Collateral shall be compromised or encumbered;
(vii) If Borrower shall default on any material obligations of Borrower or an event of default shall occur with respect to any material agreement of Borrower, whether such agreement shall be in effect or effective subsequent to this Promissory Note.
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(b) Immediately upon the occurrence of any Event of Default, all of the Obligations of Borrower hereunder shall become immediately due and payable to Lender and the Obligations shall thereafter accrue interest at the Default Rate from the date of any Event of Default until such Obligations are paid in full (an “ Acceleration ”). Promptly upon the occurrence of an Acceleration, Lender shall send Borrower written notice of the date upon which the Acceleration is effective and the names of two (2) representatives of Lender (“ Lender Nominees ”) to be immediately appointed to the Board of Directors of Borrower (the “ Default Notice ”). The Lender Nominees shall be appointed to the Board of Directors of Borrower not less than five days following the date of the Default Notice. Except with respect to an Event of Default under Section 12(a)(iv) and (v), Borrower shall have forty-five (45) days (the forty-fifth day hereinafter being the “ Final Payment Date ”) from the date of the Default Notice to pay Lender the total amount of the Obligations due and owing under this Promissory Note. In the event that Borrower shall fail to satisfy in full all of the outstanding Obligations under this Promissory Note on or before the Final Payment Date, then Lender may (i) proceed to protect and enforce Lender’s rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Promissory Note, the Security Agreement, or in any instrument or document delivered to Lender pursuant to this Promissory Note, or in aid of the exercise of any power granted in this Promissory Note or any such instrument or document, and (ii) proceed to enforce payment of the Obligations in such manner as Lender may elect, including the foreclosure of the Collateral in accordance with the terms of the Security Agreement, and to realize upon any and all rights of Lender hereunder and thereunder. Upon the occurrence of any Event of Default under Section 12(a)(iv) and (v), Lender shall have a right to immediately enforce its rights hereunder and proceed against or foreclose upon the Collateral without regard to the 45-day period set forth in this Section 12(b) To the extent not prohibited by applicable law which cannot be waived, all of Lender’s rights hereunder shall be cumulative. Lender shall have all other rights and remedies not inconsistent herewith as provided under applicable law or in equity, and no exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default shall be deemed a continuing waiver. No delay by Lender shall constitute a waiver, election or acquiescence by it.
(c) In the event that the Obligations hereunder shall be paid in full by or on behalf of Borrower after the Acceleration of this Promissory Note but prior to the Final Payment Date, then this Promissory Note shall be deemed paid in full, Lender shall promptly release any lien of Lender on the Collateral, and each Lender Nominee shall immediately resign from the Board of Directors of Borrower.
13. Certain Rights and Waivers . To the extent not prohibited by the provisions of applicable law, Borrower hereby expressly waives: (a) all presentments, demands for performance, notices of nonperformance (except to the extent required by this Note), protests, notices of protest and notices of dishonor; (b) any requirement of diligence or promptness on the part of Lender in the enforcement of its rights under this Note; (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law; and (d) any defense (other than indefeasible payment in full) which it may now or hereafter have with respect to its liability under this Note.
14. Assignments . Borrower may not assign or transfer any of its rights or obligations hereunder without the express, written consent of Lender. Any such purported assignment or transfer by Borrower without the express, written consent of Lender shall be null and void ab initio .
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15. Costs and Expenses . Borrower agrees to pay all costs and expenses of Lender, including without limitation all all fees and disbursements of attorneys, advisors, consultants, examiners and appraisers for Lender, in connection with (a) the issuance of this Promissory Note and advancement of principal amount hereunder, (b) any enforcement (whether through negotiations, legal process or otherwise) of this Promissory Note, (c) any workout or restructuring of this Promissory Note during the pendency of one or more Events of Default, (d) any bankruptcy case or proceeding of Borrower or any appeal thereof, and (e) upon the occurrence and during the continuance of an Event of Default, any efforts to verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral.
16. Choice of Law . The validity of this note, the construction, interpretation, and enforcement hereof, and the rights of the borrower and lender with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the state of Florida, without reference to conflicts of law principles.
17. Notices . All communications hereunder shall be in writing and shall be deemed to be duly given and received (a) upon delivery if delivered personally or upon confirmed transmittal if by facsimile, (b) on the next Business Day if sent by overnight courier, or (c) four (4) Business Days after mailing if mailed by prepaid certified mail, return receipt requested, in each case to the appropriate address first set forth above or such other address as a party shall have specified to the other party by notice hereunder.
18. Independent Arm’s Length Transaction . It is understood and agreed that this Promissory Note, the Security Agreement and the transactions contemplated hereby and thereby were negotiated in an arm’s length transaction separate and distinct from any other transaction or contractual obligations and are independent of any transaction or transactions between Borrower, on the one hand, and Lender and any of its affiliates or related entitles on the other hand. Borrower further agrees that the contractual obligations of Borrower hereunder are in no way dependent or conditioned upon any other agreements, contracts or transactions whatsoever unless expressly stated herein.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above.
| INVISA, INC. | ||||
| By: | Edmund C. King | |||
| Name: Edmund C. King | ||||
| Title: Chief Executive Officer | ||||
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SCHEDULE 1
| Date | Interest | Principal | Total Payment | Balance | |||||||||||||
|
1-Apr-15 |
$ | 36,247.99 | $ | — | $ | 36,247.99 | $ | 1,470,057.27 | |||||||||
| 1-Jul-15 | 36,650.74 | — | 36,650.74 | 1,470,057.27 | |||||||||||||
| 1-Oct-15 | 37,053.50 | — | 37,053.50 | 1,470,057.27 | |||||||||||||
| 1-Jan-16 | 37,053.50 | — | 37,053.50 | 1,470,057.27 | |||||||||||||
| 1-Apr-16 | 36,247.99 | 91,878.58 | 128,126.57 | 1,378,178.69 | |||||||||||||
| 1-Jul-16 | 34,360.07 | 91,878.58 | 126,238.65 | 1,286,300.11 | |||||||||||||
| 1-Oct-16 | 32,421.81 | 91,878.58 | 124,300.39 | 1,194,421.53 | |||||||||||||
| 1-Jan-17 | 30,105.97 | 91,878.58 | 121,984.55 | 1,102,542.95 | |||||||||||||
| 1-Apr-17 | 27,185.99 | 91,878.58 | 119,064.57 | 1,010,664.37 | |||||||||||||
| 1-Jul-17 | 25,197.39 | 91,878.58 | 117,075.97 | 918,785.79 | |||||||||||||
| 1-Oct-17 | 23,158.44 | 91,878.58 | 115,037.02 | 826,907.21 | |||||||||||||
| 1-Jan-18 | 20,842.59 | 91,878.58 | 112,721.17 | 735,028.63 | |||||||||||||
| 1-Apr-18 | 18,123.99 | 91,878.58 | 110,002.57 | 643,150.05 | |||||||||||||
| 1-Jul-18 | 15,858.49 | 91,878.58 | 107,737.07 | 551,271.47 | |||||||||||||
| 1-Oct-18 | 13,593.00 | 91,878.58 | 105,471.58 | 459,392.89 | |||||||||||||
| 1-Jan-19 | 11,327.50 | 91,878.58 | 103,206.08 | 367,514.31 | |||||||||||||
| 1-Apr-19 | 9,062.00 | 91,878.58 | 100,940.58 | 275,635.73 | |||||||||||||
| 1-Jul-19 | 6,796.50 | 91,878.58 | 98,675.08 | 183,757.15 | |||||||||||||
| 1-Oct-19 | 4,531.00 | 91,878.58 | 96,409.58 | 91,878.57 | |||||||||||||
| 1-Jan-20 | 2,265.50 | 91,878.57 | 94,144.07 | — |
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Exhibit 10.64
SENIOR SECURED PROMISSORY NOTE
| $ 1,470,057.27 | December 31, 2014 | |
| Sarasota, Florida |
FOR VALUE RECEIVED, the undersigned, INVISA, INC. , a Nevada corporation (“ Borrower ”) having an address at 1800 Second Street, Suite 965 Sarasota, Florida, 34236, promises to pay to the order of Centurian Investors, Inc., a Delaware corporation (“ Lender ”), having an office at 1800 Second Street, Suite 970 Sarasota, Florida, 34236, or such other place as the Lender may designate in writing, the principal amount up to and not to exceed One Million Four Hundred Seventy Thousand Fifty-Seven and 27/100 United States Dollars (U.S. $1,470,057.27), with interest on the unpaid principal balance from the date of this Senior Secured Promissory Note (this “ Promissory Note ”), until paid, at the Interest Rate (as hereinafter defined) provided herein.
1. Rate of Interest . The outstanding principal balance of this Promissory Note shall bear interest at ten percent (10%) per annum (the “ Interest Rate ”).
2. Date and Time of Payment . Invisa shall pay even payments of principal and interest in the amount of $36,247.99 on or before April 1, 2015 and in accordance with the payment schedule set forth on Schedule 1 hereto on or before the first day of each calendar quarter thereafter. The final payment on or before January 1, 2020 will include all outstanding amounts. All amounts outstanding hereunder shall constitute Borrower’s obligations hereunder, and such obligations include without limitation all principal, interest (including all interest which accrues after the commencement of any case or proceeding by or against Borrower in bankruptcy whether or not allowed in such case or proceeding), expenses, attorneys’ fees and any other sum chargeable to Borrower hereunder and owing to Lender under this Promissory Note (all such obligations and all other obligations of Borrower under this Promissory Note (the “ Obligations ”). No principal amount of this Note paid or prepaid may be reborrowed.
3. Default Rate . Notwithstanding Section 1 , after the occurrence of any Event of Default and for so long as such Event of Default continues, and in any event from and after the Maturity Date, all principal, interest and other amounts payable under this Promissory Note shall bear interest until paid in full at a rate of interest equal to four percent (4%) above the per annum rate otherwise applicable hereunder (the “ Default Rate ”).
4. Computation of Interest . Interest on the principal amount hereof and all other Obligations shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period.
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5. Manner of Payment . All payments by Borrower in respect of any Obligations shall be made without deduction, defense, set off or counterclaim, free and clear of all taxes delivered to Lender at its address first set forth above or at such other address as Lender may specify by notice pursuant to Section 17, below.
6. Maturity . To the extent not sooner due and payable in accordance with this Promissory Note, the Obligations shall be due and payable on January 1, 2020 (the “ Maturity Date ”).
7. Application of Payments . All payments shall be applied to amounts then due and payable in the following order: (a) to Lender’s costs and expenses reimbursable in connection herewith; (b) to interest accrued on the outstanding principal balance of this Promissory Note; (c) to the principal amount hereof; and (d) to all other Obligations, or in such other manner as Lender shall determine in its sole and exclusive discretion.
8. Security . This Promissory Note shall be secured by a continuing first priority security interest in all of Borrower’s right, title, and interest in and to, all property of Borrower (collectively, the “ Collateral ”), as more specifically set forth in the Security Agreement executed by Borrower in favor of Lender dated as of February 28, 2007, as amended by the Amendment to General Security Agreement dated the date hereof (as amended, the “ Security Agreement ”).
9. Priority . This Promissory Note shall be a senior obligation of Borrower, and for so long as this Promissory Note shall be outstanding, (i) Borrower shall be prohibited from incurring any and all future indebtedness without the prior written consent of Lender and (ii) any and all future indebtedness approved by Lender in writing shall be deemed subordinate and inferior to, all respective right, title and interest of Lender, in, to and under this Promissory Note, this Security Agreement and any and all documents and instruments evidencing, securing or otherwise relating to this Promissory Note.
10. Representations and Warranties . Borrower makes the following representations and warranties to Lender, which representations and warranties shall be true, correct, and complete as of the date hereof and shall survive the execution and delivery of this Promissory Note:
(a) Due Organization and Qualification . Borrower is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any jurisdiction where it is required to be so qualified, and has all requisite power and authority to (i) own its assets and carry on its business, and (ii) execute, deliver and perform its Obligations.
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(b) Due Authorization; No Conflict . The execution, delivery, and performance by Borrower of this Promissory Note has been duly authorized by all necessary action on the part of Borrower. This Promissory Note has been duly executed and delivered by Borrower. The execution, delivery, and performance by Borrower of this Promissory Note and the consummation of the transactions contemplated hereby, do not and will not (i) violate in any material respect any provision of federal, state, provincial or local law or regulation applicable to Borrower, its organizational documents, or any order, judgment, or decree of any court or other governmental authority, (ii) conflict with, result in a breach or termination of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of Borrower, (iii) result in or require the creation or imposition of any lien of any nature whatsoever upon any properties or assets of Borrower, other than liens or security interests in favor of Lender, or (iv) require any approval of any of Borrower’s stockholders or any approval or consent of any other person or entity, other than consents or approvals that have been obtained and that are still in force and effect. The execution, delivery, and performance by Borrower of this Promissory Note do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any governmental authority, other than consents or approvals that have been obtained and that are still in force and effect. This Promissory Note when executed and delivered by Borrower will be the legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.
(c) No Litigation . No litigation, investigation or proceeding of or before any arbitrator or government authority is (i) pending or, to the knowledge of Borrower, threatened with respect to this Promissory Note or the Collateral or any of the transactions contemplated hereby or (ii) pending or, to the knowledge of Borrower, threatened by or against Borrower, its properties or revenues which, if adversely determined, would have a material adverse effect on its business, operations, property or financial condition, when taken as a whole.
(d) No Default . Borrower is not in default under or with respect to any contractual obligation and no event of default has occurred or is continuing with respect to Borrower.
(e) Taxes . Borrower has filed or caused to be filed all tax returns required to be filed by it and has paid all taxes due and payable on said returns or on any assessments made against Borrower or any of its property. All other taxes, fees or other charges on Borrower or any of its property by any governmental authority have been paid and no tax liens have been filed.
11. Covenants of Borrower . As of the date hereof and so long as the Obligations hereunder shall be outstanding:
(a) Borrower will preserve and keep in force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business;
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(b) Borrower will promptly pay and discharge all lawful taxes, assessments, charges or levies imposed upon Borrower, or upon or in respect of all or any part of the property or business of Borrower, all trade accounts payable in accordance with usual and customary business terms and all claims for work, labor or materials, which if unpaid might become a lien or charge upon any property of Borrower; provided , Borrower shall not be required to pay such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate action or proceeding which will prevent the forfeiture or sale of any property of Borrower, and (ii) Borrower shall set aside on its books, reserves deemed by it to be adequate with respect thereto;
(c) Borrower will promptly comply with all laws, ordinances or governmental rules and regulations to which it is subject, the violations of which would materially or adversely affect its properties, business, prospects, profits or condition or would result in any material lien or charge upon any property of Borrower;
(d) Borrower will maintain, preserve and keep its properties which are used or useful in the conduct of its business in good repair and working order;
(e) Without prior written approval from Lender, Borrower will not create, assume or incur or in any manner become liable with respect of any indebtedness except this Promissory Note and any indebtedness of Borrower incurred prior to the date hereof; and
(f) Borrower will not create or incur any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (a “Lien”) other than the Lien under the Security Agreement on it or its property or assets, whether now owned or hereinafter acquired, or upon any income or profits there from except (i) Liens for property taxes and assessments or levies and liens that are not yet due and payable; (ii) Liens of or resulting from any judgment or award, the time for appeal or petition for rehearing of which shall not have expired or in respect of which the Company shall in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; or (iii) Liens or priority claims (A) incidental to the conduct of business, (B) created by any material agreement of Borrower entered into prior to and currently in effect as of the date hereof or (C) the ownership or lease of properties and assets and not in connection with the borrowing of money, provided , in each case, the obligation secured is not overdue, or if overdue, is being contested in good faith by appropriate actions or proceedings and provided , further that Borrower shall have received the prior written consent of Lender to any Lien described in (A) or (C) above.
12. Events of Default; Remedies; Acceleration . (a) The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “ Event of Default ” hereunder:
(i) Borrower fails to make any payment of outstanding principal balance of this Promissory Note, or interest thereon, or any of the other Obligations when due and payable;
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(ii) Any representation or warranty of Borrower made in this Promissory Note, the Security Agreement, or any other document made by or on behalf of Borrower in connection herewith and the transactions contemplated hereby proves to have been false or incorrect in any material respect or Borrower shall fail to comply in all respects with any covenant herein or therein;
(iii) Borrower shall violate any provision of this Promissory Note, the Security Agreement or any other document made by or on behalf of Borrower in connection herewith and the transactions contemplated hereby, including, without limitation, failure to comply with the terms and provisions of Section 11 of this Promissory Note;
(iv) A case or proceeding is commenced against Borrower seeking a decree or order (i) under Title 11 of the United States Bankruptcy Code (11 U.S.C. §§101 et seq. , as amended, and any successor statute, the “ Bankruptcy Code ”), or any other applicable federal, state or foreign bankruptcy or other similar law, rule or regulation, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any substantial part of Borrower’s assets, or (iii) ordering the winding-up or liquidation of the affairs of Borrower, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or a decree or order granting the relief sought in such case or proceeding shall be entered by a court of competent jurisdiction;
(v) Borrower, without the prior written consent of Lender (A) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, rule or regulation, (B) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any substantial part of Borrower’s assets, (C) makes an assignment for the benefit of creditors, (D) takes any action in furtherance of any of the foregoing; or (E) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due;
(vi) If this Promissory Note, the Security Agreement, or any financing statement, document or other instrument executed, delivered or filed in connection herewith or with the security interest granted to Lender hereunder, shall, for any reason, fail or cease to create a valid and perfected lien on or security interest in any or all of the Collateral or the Collateral shall be compromised or encumbered;
(vii) If Borrower shall default on any material obligations of Borrower or an event of default shall occur with respect to any material agreement of Borrower, whether such agreement shall be in effect or effective subsequent to this Promissory Note.
| 5 |
(b) Immediately upon the occurrence of any Event of Default, all of the Obligations of Borrower hereunder shall become immediately due and payable to Lender and the Obligations shall thereafter accrue interest at the Default Rate from the date of any Event of Default until such Obligations are paid in full (an “ Acceleration ”). Promptly upon the occurrence of an Acceleration, Lender shall send Borrower written notice of the date upon which the Acceleration is effective and the names of two (2) representatives of Lender (“ Lender Nominees ”) to be immediately appointed to the Board of Directors of Borrower (the “ Default Notice ”). The Lender Nominees shall be appointed to the Board of Directors of Borrower not less than five days following the date of the Default Notice. Except with respect to an Event of Default under Section 12(a)(iv) and (v), Borrower shall have forty-five (45) days (the forty-fifth day hereinafter being the “ Final Payment Date ”) from the date of the Default Notice to pay Lender the total amount of the Obligations due and owing under this Promissory Note. In the event that Borrower shall fail to satisfy in full all of the outstanding Obligations under this Promissory Note on or before the Final Payment Date, then Lender may (i) proceed to protect and enforce Lender’s rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Promissory Note, the Security Agreement, or in any instrument or document delivered to Lender pursuant to this Promissory Note, or in aid of the exercise of any power granted in this Promissory Note or any such instrument or document, and (ii) proceed to enforce payment of the Obligations in such manner as Lender may elect, including the foreclosure of the Collateral in accordance with the terms of the Security Agreement, and to realize upon any and all rights of Lender hereunder and thereunder. Upon the occurrence of any Event of Default under Section 12(a)(iv) and (v), Lender shall have a right to immediately enforce its rights hereunder and proceed against or foreclose upon the Collateral without regard to the 45-day period set forth in this Section 12(b) To the extent not prohibited by applicable law which cannot be waived, all of Lender’s rights hereunder shall be cumulative. Lender shall have all other rights and remedies not inconsistent herewith as provided under applicable law or in equity, and no exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default shall be deemed a continuing waiver. No delay by Lender shall constitute a waiver, election or acquiescence by it.
(c) In the event that the Obligations hereunder shall be paid in full by or on behalf of Borrower after the Acceleration of this Promissory Note but prior to the Final Payment Date, then this Promissory Note shall be deemed paid in full, Lender shall promptly release any lien of Lender on the Collateral, and each Lender Nominee shall immediately resign from the Board of Directors of Borrower.
13. Certain Rights and Waivers . To the extent not prohibited by the provisions of applicable law, Borrower hereby expressly waives: (a) all presentments, demands for performance, notices of nonperformance (except to the extent required by this Note), protests, notices of protest and notices of dishonor; (b) any requirement of diligence or promptness on the part of Lender in the enforcement of its rights under this Note; (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law; and (d) any defense (other than indefeasible payment in full) which it may now or hereafter have with respect to its liability under this Note.
14. Assignments . Borrower may not assign or transfer any of its rights or obligations hereunder without the express, written consent of Lender. Any such purported assignment or transfer by Borrower without the express, written consent of Lender shall be null and void ab initio .
| 6 |
15. Costs and Expenses . Borrower agrees to pay all costs and expenses of Lender, including without limitation all all fees and disbursements of attorneys, advisors, consultants, examiners and appraisers for Lender, in connection with (a) the issuance of this Promissory Note and advancement of principal amount hereunder, (b) any enforcement (whether through negotiations, legal process or otherwise) of this Promissory Note, (c) any workout or restructuring of this Promissory Note during the pendency of one or more Events of Default, (d) any bankruptcy case or proceeding of Borrower or any appeal thereof, and (e) upon the occurrence and during the continuance of an Event of Default, any efforts to verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral.
16. Choice of Law . The validity of this note, the construction, interpretation, and enforcement hereof, and the rights of the borrower and lender with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the state of Florida, without reference to conflicts of law principles.
17. Notices . All communications hereunder shall be in writing and shall be deemed to be duly given and received (a) upon delivery if delivered personally or upon confirmed transmittal if by facsimile, (b) on the next Business Day if sent by overnight courier, or (c) four (4) Business Days after mailing if mailed by prepaid certified mail, return receipt requested, in each case to the appropriate address first set forth above or such other address as a party shall have specified to the other party by notice hereunder.
18. Independent Arm’s Length Transaction . It is understood and agreed that this Promissory Note, the Security Agreement and the transactions contemplated hereby and thereby were negotiated in an arm’s length transaction separate and distinct from any other transaction or contractual obligations and are independent of any transaction or transactions between Borrower, on the one hand, and Lender and any of its affiliates or related entitles on the other hand. Borrower further agrees that the contractual obligations of Borrower hereunder are in no way dependent or conditioned upon any other agreements, contracts or transactions whatsoever unless expressly stated herein.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above.
| INVISA, INC. | ||||
| By: | Edmund C. King | |||
| Name: Edmund C. King | ||||
| Title: Chief Executive Officer | ||||
| 7 |
SCHEDULE 1
| Date | Interest | Principal | Total Payment | Balance | |||||||||||||
|
1-Apr-15 |
$ | 36,247.99 | $ | — | $ | 36,247.99 | $ | 1,470,057.27 | |||||||||
| 1-Jul-15 | 36,650.74 | — | 36,650.74 | 1,470,057.27 | |||||||||||||
| 1-Oct-15 | 37,053.50 | — | 37,053.50 | 1,470,057.27 | |||||||||||||
| 1-Jan-16 | 37,053.50 | — | 37,053.50 | 1,470,057.27 | |||||||||||||
| 1-Apr-16 | 36,247.99 | 91,878.58 | 128,126.57 | 1,378,178.69 | |||||||||||||
| 1-Jul-16 | 34,360.07 | 91,878.58 | 126,238.65 | 1,286,300.11 | |||||||||||||
| 1-Oct-16 | 32,421.81 | 91,878.58 | 124,300.39 | 1,194,421.53 | |||||||||||||
| 1-Jan-17 | 30,105.97 | 91,878.58 | 121,984.55 | 1,102,542.95 | |||||||||||||
| 1-Apr-17 | 27,185.99 | 91,878.58 | 119,064.57 | 1,010,664.37 | |||||||||||||
| 1-Jul-17 | 25,197.39 | 91,878.58 | 117,075.97 | 918,785.79 | |||||||||||||
| 1-Oct-17 | 23,158.44 | 91,878.58 | 115,037.02 | 826,907.21 | |||||||||||||
| 1-Jan-18 | 20,842.59 | 91,878.58 | 112,721.17 | 735,028.63 | |||||||||||||
| 1-Apr-18 | 18,123.99 | 91,878.58 | 110,002.57 | 643,150.05 | |||||||||||||
| 1-Jul-18 | 15,858.49 | 91,878.58 | 107,737.07 | 551,271.47 | |||||||||||||
| 1-Oct-18 | 13,593.00 | 91,878.58 | 105,471.58 | 459,392.89 | |||||||||||||
| 1-Jan-19 | 11,327.50 | 91,878.58 | 103,206.08 | 367,514.31 | |||||||||||||
| 1-Apr-19 | 9,062.00 | 91,878.58 | 100,940.58 | 275,635.73 | |||||||||||||
| 1-Jul-19 | 6,796.50 | 91,878.58 | 98,675.08 | 183,757.15 | |||||||||||||
| 1-Oct-19 | 4,531.00 | 91,878.58 | 96,409.58 | 91,878.57 | |||||||||||||
| 1-Jan-20 | 2,265.50 | 91,878.57 | 94,144.07 | — |
| 8 |
Exhibit 10.65
AMENDMENT TO GENERAL SECURITY AGREEMENT
THIS AGREEMENT is made this 31st day of December, 2014, by and between Centurian Investors, Inc., a Delaware corporation having an office at 1800 2 nd Street, Suite 970, Sarasota, Florida 34236 (“Secured Party”), and Invisa, Inc., a Nevada corporation having a place of business at 1800 2 nd Street, Suite 965, Sarasota, Florida 34236 (“Debtor”).
WHEREAS, Secured Party has lent funds to Debtor in exchange for a series of senior secured promissory notes (the “Prior Notes”) given by Debtor; and
WHEREAS, the parties entered into a General Security Agreement dated as of February 28, 2007 (the “Agreement”), pursuant to which Debtor has granted a security interest in assets of Debtor; and
WHEREAS, the parties are as of the date hereof replacing the Prior Notes with a consolidated senior secured promissory note (the “Replacement Note”); and
WHEREAS, the parties desire to amend the Agreement to reflect the terms of the Replacement Note;
NOW THEREFORE, in consideration of the premises, the terms of this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
| 1. | The Agreement is hereby amended as follows: |
| a. | The term “Note” is the Replacement Note dated the date hereof. |
| b. | The term “Escrowed Shares” is hereby deleted from Sections 1 and 10 of the Agreement, effective as of the date hereof. |
| c. | The address of Debtor is the address first set forth above in this Agreement. |
| d. | Section 3, Subsection (h) of Section 4, Subsections (m), (n) and (o) of Section 5 and Subsection (e) of Section 13 of the Agreement are hereby deleted from the Agreement. |
| 2. | Except as hereby amended, all provisions of the Agreement shall continue in full force and effect. |
| 1 |
IN WITNESS WHEREOF, the parties have executed this Amendment to General Security Agreement as of the date first set forth above.
| INVISA, INC. | CENTURIAN INVESTORS, INC. | |||
| By: | /s/ Edmund C. King | By: | /s/ Howard R. Curd | |
| Edmund C. King | Howard R. Curd | |||
| Chief Financial Officer | Chief Executive Officer | |||
| 2 |
Exhibit 21.1
Invisa, Inc.
Subsidiaries of the Registrant as of December 31, 2014
The following list of subsidiaries of Invisa, Inc. indicates the jurisdiction of organization.
| Name | Jurisdiction of Organization | Status at December 31, 2014 |
| UEP Holdings, LLC | Delaware | Active |
| Uniroyal Engineered Products, LLC (1) | Delaware | Active |
| Engineered Products Acquisition Limited | England and Wales | Active |
| Wardle Storeys (Group) Limited (2) | England and Wales | Active |
| Wardle Storeys (Earby) Limited (3) | England and Wales | Active |
| Wardle Storeys (Services) Limited (3) | England and Wales | Active |
_____________
(1) 100% owned by UEP Holdings, LLC.
(2) 100% owned by Engineered Products Acquisition Limited
(3) 100% owned by Wardle Storeys (Group) Limited
EXHIBIT 31.1
CERTIFICATION
I, Edmund C. King, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Invisa, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of and for the periods presented in this report; |
| 4. | The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting. |
| 5. | The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
| Date: March 30, 2015 | /s/ Edmund C. King | |
| Edmund C. King | ||
| Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Edmund C. King, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Invisa, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of and for the periods presented in this report; |
| 4. | The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting. |
| 5. | The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
| Date: March 30, 2015 | /s/ Edmund C. King | |
| Edmund C. King | ||
| Chief Financial Officer |
Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Invisa, Inc. (the “Company” or “Invisa”) on Form 10-K for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edmund C. King, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 30, 2015 | /s/ Edmund C. King | |
| Edmund C. King | ||
| Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Invisa, Inc. and will be retained by Invisa, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification has not been, and shall not be deemed to be, filed with the Securities and Exchange Commission.
Exhibit 32.2
Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Invisa, Inc. (the “Company” or “Invisa”) on Form 10-K for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edmund C. King, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 30, 2015 | /s/ Edmund C. King | |
| Edmund C. King | ||
| Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Invisa, Inc. and will be retained by Invisa, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification has not been, and shall not be deemed to be, filed with the Securities and Exchange Commission.