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

FORM 10-K/A



| |  | [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 1999.                     
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from ____________ to _____________.

Commission File Number 0-12728

INTEGRAL VISION, INC.
(Exact name of registrant as specified in its charter)

|                                                                                              |  |                                                   
|--------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Michigan
(State or other jurisdiction of
incorporation or organization)                       |  | 38-2191935
(I.R.S. Employer Identification Number)
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|38700 Grand River Avenue,
Farmington Hills, Michigan
(Address of principal executive offices) |  | 48335
(Zip Code)                                  

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

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, No Par Value, Stated Value $.20 Per Share
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days. YES XNO___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of the registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 29, 2000:

Common Stock, No Par Value, Stated Value $.20 Per Share  $30,447,505

The number of shares outstanding on each of the issuers classes of common
stock, as of February 29, 2000:

Common Stock, No Par Value, Stated Value $.20 Per Share  9,024,901

Documents Incorporated By Reference:Portions of the proxy statement for the
annual shareholders meeting to be held May 24, 2000 are incorporated by
reference into Part III.

1



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The Company has filed this amendment to its 10-K, filed on March 29, 2000, to
include an audit opinion issued by its former auditors, Ernst & Young LLP,
covering the years ended December 31, 1998 and 1997. In addition, due to the
inclusion of the second audit opinion, our current auditors reissued their
opinion letter, which is also included in this amendment. The list of
financial statements, Item 14(a)(1), was adjusted to reflect the inclusion of
the additional opinion. Because there were no changes to any of the exhibits,
the exhibits were not included with this filing. Due to the fact that they are
included in the listing of exhibits, Item 14(a)(3), there was an annotation
added to note that these exhibits were included in our originally filed 10-K.
Other than the previously discussed changes, there were no other changes to the
original filing.

2



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PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) and (2) The response to this portion of ITEM 14 is submitted as a
separate section of this report.

(3) Listing of exhibits.

|        |  |                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description of Document                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                  
|3.1     |  | Articles of Incorporation, as amended (filed as Exhibit 3.1 to the
registrants Form 10-K for the year ended December 31, 1995, SEC file
0-12728, and incorporated herein by reference).                                                                         
|       
|       
|       
|       
|3.2     |  | Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to the
registrants Form 10-K for the year ended December 31, 1994, SEC file
0-12728, and incorporated herein by reference).                                                                          
|       
|       
|       
|       
|4.1     |  | Note and Warrant Purchase Agreement (filed as Exhibit 4.1 to the
registrants Form 8-K dated July 15, 1997, SEC file 0-12728, and
incorporated herein by reference).                                                                                              
|       
|       
|       
|       
|4.3     |  | Form of Integral Vision, Inc. Common Stock Purchase Warrant Certificate
(filed as Exhibit 4.3 to registrants Form 8-K dated July 15, 1997, SEC
file 0-12728, and incorporated herein by reference).                                                              
|       
|       
|       
|       
|10.1    |  | Amendment to Integral Vision, Inc. Incentive Stock Option Plan dated May
10, 1993 (filed as Exhibit 10.3 to the registrants Form 10-K for the year
ended December 31, 1993, SEC File 0-12728, and incorporated herein by
reference).                            
|       
|       
|       
|       
|10.2    |  | Non-qualified Stock Option Plan (filed as Exhibit 10.3 to the
registrants Form 10-K for the year ended December 31, 1992, SEC File
0-12728, and incorporated herein by reference).                                                                              
|       
|       
|       
|       
|10.3    |  | Integral Vision, Inc. Employee Stock Option Plan (filed as Exhibit 10.5
to the registrants Form 10-Q for the quarter ended September 30, 1995,
SEC file 0-12728, and incorporated herein by reference).                                                         
|       
|       
|       
|       
|10.4    |  | Form of Confidentiality and Non-Compete Agreement Between the Registrant
and its Employees (filed as Exhibit 10.4 to the registrants Form 10-K for
the year ended December 31, 1992, SEC File 0-12728, and incorporated
herein by reference).                   
|       
|       
|       
|       
|10.5    |  | Integral Vision, Inc. 1999 Employee Stock Option Plan (filed as exhibit
10.5 to the registrants Form 10-Q for the quarter ended June 30, 1999 and
incorporated herein by reference).                                                                            
|       
|       
|       
|       
|10.16*  |  | Patent License Agreement dated October 4, 1995 by and between Integral
Vision, Inc. and Square D Company (filed as Exhibit 10.24 to the
registrants Form 10-Q for the quarter ended September 30, 1995, SEC File
0-12728, and incorporated herein by reference).
|       
|       
|       
|       
|10.32   |  | Asset Purchase Agreement between the Registrant and Weltronic (filed as
exhibit to the registrants Preliminary Schedule 14A  Rule 14A-101 dated
May 6, 1999 and incorporated herein by reference).                                                             
|       
|       
|       
|       
|10.33** |  | Post Closing Adjustment and Settlement Agreement between Integral
Vision, Inc. and Weltronic/Technitron, Inc. dated December 29, 1999.                                                                                                                           
|       
|       
|       
|       
|21**    |  | Subsidiary of the registrant.                                                                                                                                                                                                                                    
|       
|       
|       
|       
|23.1**  |  | Consent of Ernst & Young, LLP, independent auditors.                                                                                                                                                                                                             
|       
|       
|       
|       
|23.2**  |  | Consent of Moore Stephens Doeren Mayhew, independent auditors.                                                                                                                                                                                                   
|       
|       
|       
|       
|(b)     |  | The Company filed a report with the commission on December 20, 1999 on
Form 8-K reporting a change in our certifying accountant under ITEM 9.                                                                                                                    
|       
|       
|       
|       
|(c)**   |  | Exhibits  The response to this portion of ITEM 14 is submitted as a
separate section of this report.                                                                                                                                                            
|       
|       
|       
|       
|(d)     |  | Financial statement schedules  The response to this portion of ITEM 14
is submitted as a separate section of this report.                                                                                                                                       



|* |  | The Company has been granted confidential treatment with respect to certain
portions of this exhibit      pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

** The Company filed these exhibits previously on Form 10-K which
was filed with the commission on March 29, 2000.

3



---



SIGNATURES

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

Date: April 17, 2000
                          
       INTEGRAL VISION, INC.



| | By: /S/ CHARLES J. DRAKE_________________________________
Charles J. Drake, Chairman of the Board
(Principal Executive Officer)
| | -------------------------------------------------------------------------------------------------------------------------------



| | By: /S/ VINCENT SHUNSKY_________________________________
Vincent Shunsky, Treasurer and Director
(Acting Chief Financial Officer)
| | ---------------------------------------------------------------------------------------------------------------------------------

Pursuant to the requirements of 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.

|                                                                            |  |                                                                 
|--------------------------------------------------------------------------- |  | ----------------------------------------------------------------
|/S/ CHARLES J. DRAKE
_________________________________
Charles J. Drake     |  | Chairman of the Board (Principal
Executive Officer) and Director
|                                                                           
|/S/ MAX A. COON
_________________________________
Max A. Coon               |  | Vice Chairman, Secretary and Director                           
|                                                                           
|/S/ VINCENT SHUNSKY
_________________________________
Vincent Shunsky       |  | Treasurer and Director
(Acting Chief Financial Officer)         
|                                                                           
|/S/ WILLIAM B. WALLACE
_________________________________
William B. Wallace |  | Director                                                        
|                                                                           
|/S/ STEPHAN SHARF
_________________________________
Stephan Sharf           |  | Director                                                        

4



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Annual Report on Form 10K

ITEM 14(a)(1) and (2), (c) and (d)

List of Financial Statements and Financial Statement Schedules

Certain Exhibits

Financial Statement Schedules

Year Ended December 31, 1999

INTEGRAL VISION, INC.

Farmington Hills, MI

5



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Form 10-K  ITEM 14(a)(1) and (2)
Integral Vision, Inc. and Subsidiary

List of Financial Statements and Financial Statement Schedules



| |  | (a)(1) | The following consolidated financial statements of Integral
Vision, Inc. and subsidiary are included in ITEM 8:
| |  | ------ | ---------------------------------------------------------------------------------------------------------------



| |  |  | Report of Moore Stephens Doeren Mayhew,
Independent Auditors
| |  |  | ------------------------------------------------------------

| |  |  | Report of Ernst & Young LLP, Independent
Auditors
| |  |  | -------------------------------------------------

| |  |  | Consolidated Balance Sheets-December 31, 1999 and 1998
| |  |  | ------------------------------------------------------

| |  |  | Consolidated Statements of Operations-Years ended December 31,
1999, 1998 and 1997
| |  |  | ----------------------------------------------------------------------------------

| |  |  | Consolidated Statements of Stockholders Equity-Years ended
December 31, 1999, 1998, and 1997
| |  |  | ---------------------------------------------------------------------------------------------

| |  |  | Consolidated Statements of Cash Flows-Years ended December 31,
1999, 1998 and 1997
| |  |  | ----------------------------------------------------------------------------------

| |  |  | Notes to Consolidated Financial Statements-December 31, 1999
| |  |  | ------------------------------------------------------------



| |  | (2) | The following Consolidated Financial Statement schedule
of Integral Vision, Inc. and subsidiary is submitted herewith:
| |  | --- | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Schedule II    Valuation and qualifying accounts
| |  |  | ------------------------------------------------



| |  | All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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Report of Independent Auditors

To the Board of Directors and Stockholders
Integral Vision, Inc.
Farmington Hills, MI

We have audited the accompanying consolidated balance sheet of
Integral Vision,
Inc. and subsidiary as of December 31, 1999, and the related consolidated
statements of operations, stockholders equity and cash flows for the year then
ended. In connection with our audit of the consolidated financial
statements, we also have audited the financial statement schedule for
1999 as
listed in the accompanying index at ITEM 14(a). These consolidated
financial statements and the financial statement schedule are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements and the financial
statement schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatements. 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 1999 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Integral Vision, Inc. and subsidiary as of December 31, 1999 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule for
1999, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ Moore Stephens Doeren Mayhew

Troy, Michigan
February 23, 2000

7



---



Report of Independent Auditors

Board of Directors and Stockholders
Integral Vision, Inc. (Formerly Medar, Inc.)

We have audited the consolidated balance sheets of
Integral Vision,
Inc. (formerly Medar, Inc.) and subsidiaries as of December 31,
1998, and the related consolidated
statements of operations, stockholders equity, and cash flows
for each of the two years in the period ended December 31, 1998. Our
audits included the amounts in the financial statement schedule
listed in the index at ITEM 14(a) for each of the two years in the
period ended December 31, 1998.  These financial statements and
schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Integral Vision, Inc. (formerly Medar, Inc.) and subsidiaries at
December 31, 1998 and the
consolidated results of their operations and their cash flows for
each of the two years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the amounts in the related financial statement schedule for
each of the two years in the period ended December 31, 1998, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects the information contained therein.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully
described in Note D to the 1998 financial statements, as a result of
recurring operating losses the Company has violated the provisions of
certain of its loan agreements with regard to levels of tangible net
worth.  Consequently the revolver and term notes with the Bank, all
mature in June 1999. The Company is currently exploring alternatives
for financing its operations should the Bank elect not to extend the
agreement.  These conditions raise substantial doubt about the
Companys ability to continue as a going concern.
Managements plans in regard to these matters are more fully
described in Note D.  The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of
this uncertainty.

/s/ Ernst & Young LLP

Detroit, Michigan
February 23, 1999, except for Note D
as to which the date is March 31, 1999

8



---



Consolidated Balance Sheets
Integral Vision, Inc. and Subsidiary

|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |         |   |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------ | - | ---------------------------------------- | ------- | -------------- | ----- | ---------- | ------- | - |  |  |  |  |  | 
|                                                 |                                                                                                                                      |   |                                          |         | December 31   
|                                                 |                                                                                                                                      |   |                                          |         |               
|                                                 |                                                                                                                                      |   |                                          |         | 1999           |       | 1998      
|                                                 |                                                                                                                                      |   |                                          |         |                |       | (restated)
|                                                 |                                                                                                                                      |   |                                          |         |                |       |           
|                                                 |                                                                                                                                      |   |                                          |         | (in thousands)
|Assets                                          
|                                                
|                                                
|                                                
|                                                
|Current Assets                                  
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash                                                                                                                                 |   | $                                        | 391     |                |       | $          | 566     |   |  |  |  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Accounts receivable, less allowance of $820,000 ($400,000 in 1998)                                                                   |   |                                          | 3,883   |                |       |            | 2,838   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Inventories  Note A                                                                                                                 |   |                                          | 1,995   |                |       |            | 4,176   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Costs and estimated earnings in excess of billings on incomplete contracts
- Note D                                                  |   |                                          | 284     |                |       |            | 199     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Current maturities of notes from sale of Welding division  Note C                                                                   |   |                                          | 1,716   |               
|                                                
|                                                
|                                                
|                                                
|                                                 | Other current assets                                                                                                                 |   |                                          | 309     |                |       |            | 533     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Current assets of discontinued operations  Note C                                                                                   |   |                                          |         |                |       |            | 10,843  |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|Total current assets                             |                                                                                                                                      |   | 8,578                                    |         |                |       | 19,155     |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                
|                                                
|                                                
|                                                
|Property and equipment                          
|                                                
|                                                
|                                                
|                                                
|                                                 | Land and improvements                                                                                                                |   |                                          | 363     |                |       |            | 363     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Building and building improvements                                                                                                   |   |                                          | 3,740   |                |       |            | 3,732   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Production and engineering equipment                                                                                                 |   |                                          | 2,669   |                |       |            | 2,605   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Furniture and fixtures                                                                                                               |   |                                          | 872     |                |       |            | 847     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Vehicles                                                                                                                             |   |                                          | 145     |                |       |            | 254     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Computer equipment                                                                                                                   |   |                                          | 2,762   |                |       |            | 2,845   |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                 |                                                                                                                                      |   | 10,551                                   |         |                |       | 10,646     |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Less accumulated depreciation                                                                                                        |   |                                          | 6,289   |                |       |            | 6,086   |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                 |                                                                                                                                      |   | 4,262                                    |         |                |       | 4,560      |        
|                                                
|                                                
|                                                
|                                                
|Other assets                                    
|                                                
|                                                
|                                                
|                                                
|                                                 | Capitalized computer software development costs,
less accumulated amortization  Note A                                              |   |                                          | 4,327   |                |       |            | 4,353   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Patents, less accumulated amortization                                                                                               |   |                                          | 259     |                |       |            | 351     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Note from sale of Welding division, less unamortized                                                                                 |   |                                          |         |               
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                      |   | discount and current maturities  Note C |         |                | 1,563 |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                                                                |   |                                          | 69      |                |       |            | 467     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Noncurrent assets of discontinued operations  Note C                                                                                |   |                                          |         |                |       |            | 5,434   |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                 |                                                                                                                                      |   | 6,218                                    |         |                |       | 10,605     |        
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                 |                                                                                                                                      | $ | 19,058                                   |         |                | $     | 34,320     |         |   |  |  | 
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|Liabilities and Stockholders Equity            
|                                                
|                                                
|                                                
|                                                
|Current liabilities                             
|                                                
|                                                
|                                                
|                                                
|                                                 | Accounts payable                                                                                                                     |   | $                                        | 1,546   |                |       | $          | 1,801   |   |  |  |  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Employee compensation                                                                                                                |   |                                          | 300     |                |       |            | 489     |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Accrued and other liabilities                                                                                                        |   |                                          | 887     |                |       |            | 1,046   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Current maturities of long-term debt                                                                                                 |   |                                          | 35      |                |       |            | 13,178  |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|Total current liabilities                        |                                                                                                                                      |   | 2,768                                    |         |                |       | 16,514     |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                
|                                                
|                                                
|                                                
|Long-term debt, less current maturities  Note E |                                                                                                                                      |   | 1,965                                    |         |                |       | 6,945      |        
|                                                
|                                                
|                                                
|                                                
|Stockholders equity Notes G and I             
|                                                
|                                                
|                                                
|                                                
|                                                 | Common stock, without par value, stated value $.20 per share;
15,000,000, shares authorized; 9,024,901 shares
issued and outstanding |   |                                          | 1,805   |                |       |            | 1,805   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Additional paid-in capital                                                                                                           |   |                                          | 31,187  |                |       |            | 31,187  |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Retained-earnings deficit                                                                                                            |   |                                          | (18,103 | )              |       |            | (21,628 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Notes receivable from officers                                                                                                       |   |                                          | (602    | )              |       |            | (580    | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Accumulated translation adjustment  Note A                                                                                          |   |                                          | 38      |                |       |            | 77      |  
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|Total stockholders equity                       |                                                                                                                                      |   | 14,325                                   |         |                |       | 10,861     |        
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        
|                                                 |                                                                                                                                      | $ | 19,058                                   |         |                | $     | 34,320     |         |   |  |  | 
|                                                 |                                                                                                                                      |   |                                          |         |                |       |            |        

See accompanying notes

9



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Consolidated Statements of OperationsIntegral Vision, Inc. and Subsidiary

|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |       |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ----------------------- | ------------------------------------------------------------------- | ----- | ------------------------------------- | ------ | ---------- | ----- | ---------- | ------ | ------ | ----- | - | ------ | -
|                                                                                                                                                                                               |                                 |                         |                                                                     |       | Year ended December 31               
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                      
|                                                                                                                                                                                               |                                 |                         |                                                                     |       | 1999                                  |        | 1998       |       | 1997      
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        | (restated) |       | (restated)
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |           
|                                                                                                                                                                                               |                                 |                         |                                                                     |       | (in thousands, except per share data)
|Net revenues                                                                                                                                                                                   |                                 | $                       | 10,743                                                              |       |                                       | $      | 9,434      |       |            | $      | 15,955 |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Direct costs of sales                                                                                                                                                                          |                                 |                         | 10,848                                                              |       |                                       |        | 8,169      |       |            |        | 11,642 |      
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Gross margin  Note A                                                                                                                                                                          |                                 |                         | (105                                                                | )     |                                       |        | 1,265      |       |            |        | 4,313  |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Other costs and expenses:                                                                                                                                                                     
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Marketing                       |                         |                                                                     | 2,464 |                                       |        |            | 2,419 |            |        |        | 2,788 |  
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | General and administrative      |                         |                                                                     | 1,306 |                                       |        |            | 1,410 |            |        |        | 1,319 |  
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Engineering and development:   
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               |                                 |                         | Expenditures                                                        |       |                                       | 4,190  |            |       |            | 4,868  |        |       |   | 8,325  |  
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               |                                 |                         | Allocated to capitalized software and
direct cost of sales  Note A |       |                                       | (1,109 | )          |       |            | (1,375 | )      |       |   | (7,041 | )
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|                                                                                                                                                                                               |                                 |                         | Net Expense                                                         |       |                                       | 3,081  |            |       |            | 3,493  |        |       |   | 1,284  |  
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Product restructuring and       |                         |                                                                     |       |                                       |        |            |       |           
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               |                                 | other charges   Note B |                                                                     |       |                                       |        |            |       | 4,231      |       
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|                                                                                                                                                                                               |                                 |                         | 6,851                                                               |       |                                       |        | 11,553     |       |            |        | 5,391  |      
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Loss from operations                                                                                                                                                                           |                                 |                         | (6,956                                                              | )     |                                       |        | (10,288    | )     |            |        | (1,078 | )    
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Other income  Note C                                                                                                                                                                          |                                 |                         | 1,450                                                               |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Interest income  Note C                                                                                                                                                                       |                                 |                         | 374                                                                 |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Interest expense  Note E                                                                                                                                                                      |                                 |                         | (539                                                                | )     |                                       |        | (915       | )     |            |        | (1,054 | )    
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Loss from continuing operations before income
taxes                                                                                                                                            |                                 |                         | (5,671                                                              | )     |                                       |        | (11,203    | )     |            |        | (2,132 | )    
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Provision (credit) for income taxes  Note F                                                                                                                                                   |                                 |                         |                                                                     |       |                                       |        |            |       |            |        | (469   | )    
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Loss from continuing operations                                                                                                                                                                |                                 |                         | (5,671                                                              | )     |                                       |        | (11,203    | )     |            |        | (1,663 | )    
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Income from discontinued welding operations, less
applicable income    taxes of $-0- and $-0-, and
$507 for the years ended December 31,     1999, 1998 and 1997
respectively   Notes C and F |                                 |                         | 1,030                                                               |       |                                       |        | 19         |       |            |        | 1,519  |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Gain on disposal of Welding division, less
applicable income taxes of     $300 - Note C                                                                                                        |                                 |                         | 8,749                                                               |      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|Extraordinary charge for early retirement of debt
less applicable income     tax credit of $200   Note E                                                                                      |                                 |                         | (583                                                                | )    
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Net income (loss)                                                                                                                                                                              |                                 | $                       | 3,525                                                               |       |                                       | $      | (11,184    | )     |            | $      | (144   | )    
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Basic and diluted earnings per share:                                                                                                                                                         
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Continuing operations           |                         | $                                                                   | (.63  | )                                     |        | $          | (1.24 | )          |        | $      | (.19  | )
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Discontinued Welding operations |                         |                                                                     | .11   |                                       |        |            |       |            |        |        | .17   |  
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Disposal of Welding division    |                         |                                                                     | .97   |                                      
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                              
|                                                                                                                                                                                               | Extraordinary charge            |                         |                                                                     | (.06  | )                                    
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|                                                                                                                                                                                               | Net income (loss)               |                         | $                                                                   | .39   |                                       |        | $          | (1.24 | )          |        | $      | (.02  | )
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      
|Weighted average number of shares of common
stock and common stock equivalents outstanding                                                                                                     |                                 |                         | 9,025                                                               |       |                                       |        | 9,025      |       |            |        | 8,897  |      
|                                                                                                                                                                                               |                                 |                         |                                                                     |       |                                       |        |            |       |            |        |        |      

See accompanying notes

10



---



Consolidated Statements of Stockholders EquityIntegral Vision, Inc. and Subsidiary

|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |         |       |         |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|----------------------------- | -------------------------- | -------------------- | ---------------------- | -- | -------------- | - | ------- | --- | ---------- | - | -------- | ------- | ----------- | ----------- | ----- | --- | - | - | -- | --- | - | - | ------ | ------- | ----- | ------- | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                              |                            |                      |                        |    |                |   |         |     | Additional |   | Retained |         |             | Accumulated
|                              |                            |                      |                        |    | Common         |   | Paid-In |     | Earnings   |   | Officer  |         | Translation |             |      
|                              |                            |                      |                        |    | Stock          |   | Capital |     | (Deficit)  |   | Notes    |         | Adjustment  |             | Total
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |      
|                              |                            |                      |                        |    | (in thousands)
|Balances at January 1, 1997   |                            | $                    | 1,771                  |    |                | $ | 29,767  |     |            | $ | (10,300  | )       |             | $           | (483  | )   |   | $ | 64 |     |   | $ | 20,819 |         |       |         |   |  |  |  |  | 
|                             
|                             
|                             
|                             
|                              | Net loss for the year      |                      |                        |    |                |   |         |     |            |   |          | (144    | )           |             |       |     |   |   |    |     |   |   |        | (144    | )    
|                             
|                             
|                             
|                             
|                              | Translation adjustments    |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    | (57 | ) |   |        | (57     | )    
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              |                            |                      | Comprehensive loss     |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |         |       | (201    | )
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              | Issuance of 150,000 shares |                      |                        | 30 |                |   |         | 720 |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        | 750     |      
|                             
|                             
|                             
|                             
|                              | Exercise of options to     |                      |                        | 4  |                |   |         | 98  |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        | 102     |      
|                             
|                             
|                             
|                             
|                              |                            |                      | purchase 22,500 shares
|                             
|                             
|                             
|                             
|                              | Issuance of stock warrants |                      |                        |    |                |   |         | 602 |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        | 602     |      
|                             
|                             
|                             
|                             
|                              | Loans to Officers          |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       | (69 | ) |   |    |     |   |   |        | (69     | )    
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|Balances at December 31, 1997 |                            |                      | 1,805                  |    |                |   | 31,187  |     |            |   | (10,444  | )       |             |             | (552  | )   |   |   | 7  |     |   |   | 22,003 |        
|                             
|                             
|                             
|                             
|                              | Net loss for the year      |                      |                        |    |                |   |         |     |            |   |          | (11,184 | )           |             |       |     |   |   |    |     |   |   |        | (11,184 | )    
|                             
|                             
|                             
|                             
|                              | Translation adjustments    |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    | 70  |   |   |        | 70      |      
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              |                            |                      | Comprehensive loss     |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |         |       | (11,114 | )
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              | Loans to Officers          |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       | (28 | ) |   |    |     |   |   |        | (28     | )    
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|Balances at December 31, 1998 |                            |                      | 1,805                  |    |                |   | 31,187  |     |            |   | (21,628  | )       |             |             | (580  | )   |   |   | 77 |     |   |   | 10,861 |        
|                             
|                             
|                             
|                             
|                              | Net income for the year    |                      |                        |    |                |   |         |     |            |   |          | 3,525   |             |             |       |     |   |   |    |     |   |   |        | 3,525   |      
|                             
|                             
|                             
|                             
|                              | Translation adjustments    |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    | (39 | ) |   |        | (39     | )    
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              |                            | Comprehensive income |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |         | 3,486 |        
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|                              | Loans to Officers          |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       | (22 | ) |   |    |     |   |   |        | (22     | )    
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        
|Balance at December 31, 1999  |                            | $                    | 1,805                  |    |                | $ | 31,187  |     |            | $ | (18,103  | )       |             | $           | (602  | )   |   | $ | 38 |     |   | $ | 14,325 |         |       |         |   |  |  |  |  |  |  |  |  |  |  |  |  | 
|                              |                            |                      |                        |    |                |   |         |     |            |   |          |         |             |             |       |     |   |   |    |     |   |   |        |        

See accompanying notes.

11



---



Consolidated Statements of Cash FlowsIntegral Vision, Inc. and Subsidiary

|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |       |      |   |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------- | ---------------------------------------------- | ------- | ---------------------- | ------ | ---------- | ------- | ---------- | ----- | - | ------- | ----- | ---- | - |  |  |  |  |  |  |  | 
|                                                                                                       |                                                                       |                                                |         | Year Ended December 31
|                                                                                                       |                                                                       |                                                |         |                       
|                                                                                                       |                                                                       |                                                |         | 1999                   |        | 1998       |         | 1997      
|                                                                                                       |                                                                       |                                                |         |                        |        | (restated) |         | (restated)
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |           
|                                                                                                       |                                                                       |                                                |         | (in thousands)        
|Operating Activities
Net income (loss)                                                                 |                                                                       | $                                              | 3,525   |                        |        | $          | (11,184 | )          |       | $ | (144    | )     |      |   |  |  |  |  |  | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Income from discontinued operations                                                                    |                                                                       |                                                | (1,030  | )                      |        |            | (19     | )          |       |   | (1,519  | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Gain on sale of welding division                                                                       |                                                                       |                                                | (8,749  | )                     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Extraordinary charge for early retirement of debt                                                      |                                                                       |                                                | 583     |                       
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Loss from continuing operations                                                                        |                                                                       |                                                | (5,671  | )                      |        |            | (11,203 | )          |       |   | (1,663  | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Adjustments to reconcile net loss from continuing operations
to net cash used in operating activities:
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Depreciation and amortization                                         |                                                |         | 2,374                  |        |            |         | 2,374      |       |   |         | 3,276 |     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Restructuring charges                                                 |                                                |         |                        |        |            |         | 4,231      |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Changes in operating assets and liabilities of continuing
operations:
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       | Accounts receivable                            |         |                        | (1,045 | )          |         |            | 1,444 |   |         |       | (508 | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       | Inventories                                    |         |                        | 2,181  |            |         |            | 2,104 |   |         |       | 779  |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       | Prepaid and other                              |         |                        | 117    |            |         |            | 313   |   |         |       | (929 | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       | Accounts payable and other current liabilities |         |                        | (603   | )          |         |            | (590  | ) |         |       | (234 | )
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Net cash provided by (used in) operating activities                                                    |                                                                       |                                                | (2,647  | )                      |        |            | (1,327  | )          |       |   | 721     |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       |                                                |         |                       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Investing Activities

Proceeds from sale of Welding division                                           |                                                                       |                                                | 22,394  |                       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Increase in property and equipment                                                                     |                                                                       |                                                | (290    | )                      |        |            | (251    | )          |       |   | (128    | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Investment in capitalized software                                                                     |                                                                       |                                                | (1,410  | )                      |        |            | (1,283  | )          |       |   | (4,644  | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Other                                                                                                  |                                                                       |                                                | 265     |                        |        |            | 124     |            |       |   | (45     | )    
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Net cash provided by (used in) investing activities                                                    |                                                                       |                                                | 20,959  |                        |        |            | (1,410  | )          |       |   | (4,817  | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |                                                                       |                                                |         |                       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Financing Activities
Repayments of revolving line of credit and other
obligations                      |                                                                       |                                                | (20,448 | )                      |        |            | (19,664 | )          |       |   | (34,085 | )    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from draws on revolving line of credit                                                        |                                                                       |                                                |         |                        |        |            | 22,066  |            |       |   | 37,400  |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from mortgage note payable                                                                    |                                                                       |                                                | 2,000   |                       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from exercise of stock options                                                                |                                                                       |                                                |         |                        |        |            |         |            |       |   | 102     |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from sale of common stock                                                                     |                                                                       |                                                |         |                        |        |            |         |            |       |   | 750     |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from issuance of stock warrants                                                               |                                                                       |                                                |         |                        |        |            |         |            |       |   | 602     |      
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Net cash provided by (used in) financing activities                                                    |                                                                       |                                                | (18,448 | )                      |        |            | 2,402   |            |       |   | 4,769   |      
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Effect of exchange rate changes                                                                        |                                                                       |                                                | (39     | )                      |        |            | 70      |            |       |   | (57     | )    
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Increase (decrease) in cash                                                                            |                                                                       |                                                | (175    | )                      |        |            | (265    | )          |       |   | 616     |      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Cash at beginning of year                                                                              |                                                                       |                                                | 566     |                        |        |            | 831     |            |       |   | 215     |      
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      
|Cash at end of year                                                                                    |                                                                       | $                                              | 391     |                        |        | $          | 566     |            |       | $ | 831     |       |      |   |  |  |  |  |  | 
|                                                                                                       |                                                                       |                                                |         |                        |        |            |         |            |       |   |         |      

See accompanying notes.

12



---



Notes to Consolidated Financial Statements
Integral Vision, Inc. and Subsidiary

Note A  Significant Accounting Policies

Principles of Consolidation

|                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The consolidated financial statements include the accounts of the
Company and its 100% owned subsidiary: Integral Vision LTD, United
Kingdom. Upon consolidation, all significant intercompany accounts and
transactions are eliminated.

Use of Estimates

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The preparation of financial statements in conformity with generally
accepted accounting principles 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. Estimates also affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Translation of Foreign Currencies

|                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The financial statements of Integral Vision LTD are translated into
United States dollar equivalents at exchange rates as follows: balance
sheet accounts at year-end rates; income statement accounts at average
exchange rates for the year. Transaction gains and losses are reflected
in net earnings and are not significant.

Accounts Receivable

|                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------
|Trade accounts receivable primarily represent amounts due from
equipment manufacturers and end-users in North America, Asia and
Europe.

Inventories

|                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Inventories are stated at the lower of first-in, first-out cost or
market, and at December 31 consisted of the following (net of
obsolescence reserve of $2,100,000 in 1999 and $300,000 in 1998):

|                |  |                |       |      |  |   |       |  |  |  |  | 
|--------------- |  | -------------- | ----- | ---- |  | - | ----- |  |  |  |  | 
|                |  | 1999           |       | 1998
|                |  |                |       |     
|                |  | (in thousands)
|Raw materials   |  | $              | 1,502 |      |  | $ | 3,587 |  |  |  |  | 
|               
|               
|               
|               
|Work in process |  |                | 218   |      |  |   | 260   | 
|               
|               
|               
|               
|Finished goods  |  |                | 275   |      |  |   | 329   | 
|                |  |                |       |      |  |   |       | 
|                |  | $              | 1,995 |      |  | $ | 4,176 |  |  |  |  | 
|                |  |                |       |      |  |   |       | 

13



---



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|In 1999, $1.5 million was charged to direct costs of sales to set up an
additional obsolescence reserve as a result of the review of the marketability of
remaining inventory related to a previously discontinued product line.
In 1998, management decided to no longer sell inspection systems for
the audio CD market, as a result $1.4 million was charged to direct
costs of sales to write-off the inventory related to the discontinued
product line. A reconciliation of gross margin as reported to gross
margin from operations is presented in the table below.

|                                                       |  |                |        |      |  |      |       |  |  |   |        | 
|------------------------------------------------------ |  | -------------- | ------ | ---- |  | ---- | ----- |  |  | - | ------ | 
|                                                       |  | 1999           |        | 1998 |  | 1997
|                                                       |  |                |        |      |  |     
|                                                       |  | (in thousands)
|Net revenues                                           |  | $              | 10,734 |      |  | $    | 9,434 |  |  | $ | 15,955 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Gross margin as reported                               |  |                | (105   | )    |  |      | 1,265 |  |  |   | 4,313  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Adjustments to reconcile gross
margin from operations:
|                                                      
|                                                      
|                                                      
|                                                      
|Specific inventory adjustments                         |  |                | 1,525  |      |  |      | 1,402 | 
|                                                       |  |                |        |      |  |      |       |  |  |   |        | 
|Gross margin from operations                           |  | $              | 1,420  |      |  | $    | 2,667 |  |  | $ | 4,313  | 
|                                                       |  |                |        |      |  |      |       |  |  |   |        | 

Property and Equipment

|                                                                                                                                                                                                                                                                          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Property and equipment is stated on the basis of cost. Equipment
capitalized under lease agreements and the related accumulated
amortization is included in property and equipment. Expenditures for
normal repairs and maintenance are charged to operations as incurred.

|                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Depreciation, including amortization of assets recorded under capital
lease obligations, is computed by the straight-line method based on the
estimated useful lives of the assets (buildings-40 years, other
property and equipment-3 to 10 years).

Capitalized Computer Software Development Costs

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Computer software development costs are capitalized after the
establishment of technological feasibility of the related technology.
These costs are amortized following general release of products based
on current and estimated future revenue for each product with an annual
minimum equal to the straight-line amortization over the remaining
estimated economic life of the product (not to exceed 5 years).
Management continually reviews the net realizable value of capitalized
software costs. At the time that a determination is made that
capitalized software amounts exceed the estimated net realizable value
of amounts capitalized, any amounts in excess of the estimated
realizable amounts are written off. (See Note B.)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Amortization of the capitalized costs amounted to $1,182,000,
$1,420,000, and $2,678,000 in 1999, 1998 and 1997, respectively. Total
accumulated amortization at December 31, 1999 and 1998, was $3,886,000
and $2,704,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Patents

|                                                                                                                                                                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Patents are stated at cost less accumulated amortization of $515,000
and $369,000 at December 31, 1999 and 1998, respectively. Amortization
of the patents amounted to $146,000, $120,000 and $100,000 in 1999,
1998, and 1997, respectively. These costs are amortized on a
straight-line basis over the estimated useful lives of the assets.

14



---



Revenue Recognition

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Revenues are recorded at the time services are performed or when
products are shipped, except for long-term contracts. Revenues on
long-term contracts are recognized using the percentage of completion
method. The effects of changes to estimated total contract costs are
recognized in the year determined and losses, if any, are fully
recognized when identified. Costs and estimated earnings recognized in
excess of amounts billed are classified under current assets as costs
and estimated earnings in excess of billings on incomplete contracts.
Long-term contracts include a relatively high percentage of engineering
costs and are generally less than one year in duration.

Income Taxes

|                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Deferred income taxes are provided when necessary to recognize the
effect of temporary differences between financial and income tax
accounting related principally to contract revenues, depreciation and
capitalized computer software development costs.

Fair Value Disclosure

|                                                                                                                                                                                                                                                                                                                                                                             
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The carrying amounts of certain financial instruments such as cash,
accounts receivable, notes receivable, accounts payable and long-term
debt approximate their fair values. The fair value of the long-term
financial instruments is estimated using discounted cash flow analysis
and the Companys current incremental borrowing rates for similar types
of arrangements.

Reclassifications

|                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------
|Certain amounts have been reclassified in prior periods presentations
to conform to the current years presentation.

Note B  Restructuring of Operations

|                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Early in the second quarter of 1998, Management completed an evaluation
of competitive conditions and product offerings in vision. A charge of
$5,633,000 was recorded as of March 31, 1998 to give effect to the
impairment of assets identified in this review. The charge consisted of
$4,231,000 related to capitalized software development costs and
$1,402,000 related to inventory (included in direct costs of sales).

Note C  Discontinued Operations

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|On June 30, 1999, the Company completed an agreement to sell
substantially all the assets of its Welding Controls division for $25.7
million, net of costs of the sale, for cash, the assumption of certain
liabilities, and a subordinated note. The interest bearing portion of
the note, approximately $1.9 million, carries an interest rate
approximating prime plus 1% and requires quarterly payments beginning
on February 15, 2000, with a February 15, 2001 maturity date. The
non-interest bearing portion of the note, $1.5 million, was discounted
using an imputed interest rate of 9% and matures on February 15, 2001.
Additionally, in connection with the sale, Integral Vision entered into
an agreement to provide certain services to the purchaser for a fee
totaling $1.5 million, all of which was paid in cash. These services
included use of the Companys personnel, facilities and software.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|During the quarter ended December 31, 1999, the Company resolved
certain post closing adjustments with the purchaser of the former
Welding Controls division which produced the additional gain of $2.1
million recognized in the quarter. Part of the resolution with the
purchaser included an agreement to pay amounts that previously had been
contingent on shipments to a certain customer. This accounted for
approximately $1.5 million of this additional gain recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                        

15



---



|                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                             
|                                                                                                                                                                                             
|                                                                                                                                                                                             
|                                                                                                                                                                                             
|The results of operations for this segment have been reported
separately as discontinued operations in the Consolidated Statements of
Operations for the current and prior periods presented.

|                             |  |                |        |      |  |      |        |  |  |   |        |  |  |  |  | 
|---------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  |  |  | 
|                             |  | 1999           |        | 1998 |  | 1997
|                             |  |                |        |      |  |     
|                             |  | (in thousands)
|Net revenues                 |  | $              | 12,403 |      |  | $    | 25,379 |  |  | $ | 24,569 |  |  |  |  | 
|                            
|                            
|                            
|                            
|Costs and expenses           |  |                | 11,373 |      |  |      | 25,360 |  |  |   | 22,543 | 
|                             |  |                |        |      |  |      |        |  |  |   |        | 
|Income before
income taxes   |  |                | 1,030  |      |  |      | 19     |  |  |   | 2,026  | 
|                            
|                            
|                            
|                            
|Income tax expense           |  |                |       |      |  |      |       |  |  |   | 507    | 
|                             |  |                |        |      |  |      |        |  |  |   |        | 
|Net income                   |  |                |        |      |  |      |        |  |  |   |        |  |  |  |  | 
|                            
|                            
|                            
|                            
|from discontinued
operations |  | $              | 1,030  |      |  | $    | 19     |  |  | $ | 1,519  | 
|                             |  |                |        |      |  |      |        |  |  |   |        | 

|                                                                               
|-------------------------------------------------------------------------------
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Net assets of the discontinued operations at December 31, 1998 were as
follows:

|                                                  |                    |   |                |        | 
|------------------------------------------------- | ------------------ | - | -------------- | ------ | 
|                                                  |                    |   | 1998          
|                                                  |                    |   |               
|                                                  |                    |   | (in thousands)
|Current assets                                    |                    | $ | 15,082         |       
|                                                 
|                                                 
|                                                 
|                                                 
|Current liabilities                               |                    |   | (4,239         | )     
|                                                  |                    |   |                |       
|                                                  | Net current assets |   |                | 10,843 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|Property and equipment                            |                    |   | 3,928          |       
|                                                 
|                                                 
|                                                 
|                                                 
|Intangibles and other                             |                    |   | 2,760          |       
|                                                 
|                                                 
|                                                 
|                                                 
|Non-current liabilities                           |                    |   | (1,254         | )     
|                                                  |                    |   |                |       
|Net non-current assets of discontinued operations |                    |   | 5,434          |       
|                                                  |                    |   |                |       
|Total net assets of discontinued operations       |                    | $ | 16,277         |       
|                                                  |                    |   |                |       

Note D  Costs and Estimated Earnings in Excess of Billings on Incomplete Contracts

|                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------
|Costs and estimated earnings in excess of billings on incomplete
contracts at December 31 are summarized as follows:

|                                                                           |  |                |       |      |  |   |     | 
|-------------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | - | --- | 
|                                                                           |  | 1999           |       | 1998
|                                                                           |  |                |       |     
|                                                                           |  | (in thousands)
|Contract costs to date                                                     |  | $              | 500   |      |  | $ | 263 | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Estimated contract earnings                                                |  |                | 863   |      |  |   | 491 | 
|                                                                           |  |                |       |      |  |   |     | 
|                                                                           |  |                | 1,363 |      |  |   | 754 | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Less billings to date                                                      |  |                | 1,079 |      |  |   | 555 | 
|                                                                           |  |                |       |      |  |   |     | 
|Costs and estimated earnings in excess
of billings on incomplete contracts |  | $              | 284   |      |  | $ | 199 | 
|                                                                           |  |                |       |      |  |   |     | 

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company anticipates that substantially all of the costs incurred on
long-term contracts at December 31, 1999, will be billed and collected
in 2000.

16



---



Note E  Long-Term Debt and Other Financing Arrangements

|                                                        
|--------------------------------------------------------
|Long-term debt at December 31 consists of the following:

|                                |                                                                                    |   |                |  |      |   |        |       | 
|------------------------------- | ---------------------------------------------------------------------------------- | - | -------------- |  | ---- | - | ------ | ----- | 
|                                |                                                                                    |   | 1999           |  | 1998
|                                |                                                                                    |   |                |  |     
|                                |                                                                                    |   | (in thousands)
|Mortgage note payable, 8.9%     |                                                                                    | $ | 2,000          |  |      | $ |       |      
|                               
|                               
|                               
|                               
|Revolving note payable to bank  |                                                                                    |   |                |  |      |   | 10,000 |      
|                               
|                               
|                               
|                               
|Term notes payable to bank      |                                                                                    |   |                |  |      |   | 3,214  |      
|                               
|                               
|                               
|                               
|Subordinated debentures, 12.95%
|                               
|                               
|                               
|                               
|                                | (Net of $417,000 ($510,000 in 1997) unaccreted value
assigned to related warrants) |   |                |  |      |   |        | 6,583 | 
|                               
|                               
|                               
|                               
|Other                           |                                                                                    |   |                |  |      |   | 326    |      
|                                |                                                                                    |   |                |  |      |   |        |      
|                                |                                                                                    |   | 2,000          |  |      |   | 20,123 |      
|                               
|                               
|                               
|                               
|Less current maturities         |                                                                                    |   | 35             |  |      |   | 13,178 |      
|                                |                                                                                    |   |                |  |      |   |        |      
|                                |                                                                                    | $ | 1,965          |  |      | $ | 6,945  |      
|                                |                                                                                    |   |                |  |      |   |        |      

|                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company used cash received as a result of the sale of the Welding
Controls division to retire substantially all outstanding debt at June
30, 1999 (see Note C). An extraordinary charge of $583,000, net of tax
credit, resulted from this early retirement of debt. These charges
included unaccreted value assigned to warrants and unamortized
discounts.
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|Maturities of long-term debt are $41,000 in 2001; $45,000 in 2002;
$49,000 in 2003; $54,000 in 2004; $1,776,000 thereafter.                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                
|Interest paid approximates interest expensed for the years presented.                                                                                                                                                                                                                                                                                           

Note F  Income Taxes

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company establishes valuation allowances in accordance with the
provisions of FASB Statement No. 109, Accounting for Income Taxes.
The Company continually reviews realizability of deferred tax assets
and recognizes these benefits only as reassessment indicates that it is
more likely than not that the benefits will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|As of December 31, 1999, the Company has cumulative net operating loss
carryforwards approximating $23,100,000 (expiring: $7,457,000 in 2010,
$3,889,000 in 2011, $6,404,000 in 2012, and $5,350,000 in 2018) for tax
purposes available to reduce taxable income of future periods and
unused investment, alternative minimum tax, and research and
development tax credits approximating $1,197,000 which expire through
2013. For financial reporting purposes, the net operating losses and
credits have been offset against net deferred tax liabilities based
upon their expected amortization during the loss carryforward period.
The remaining valuation allowance is necessary due to the uncertainty
of future income estimates. The valuation allowance decreased
$1,143,000 in 1999 and increased $3,883,000 in 1998 and decreased
$55,000 in 1997.

17



---



|                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Companys deferred tax
liabilities and assets as of December 31 are as follows:

|                                            |                                                            |   |                |       |      |   |        |       | 
|------------------------------------------- | ---------------------------------------------------------- | - | -------------- | ----- | ---- | - | ------ | ----- | 
|                                            |                                                            |   | 1999           |       | 1998
|                                            |                                                            |   |                |       |     
|                                            |                                                            |   | (in thousands)
|Deferred tax liabilities:                  
|                                           
|                                           
|                                           
|                                           
|                                            | Deductible software development costs, net of
amortization |   | $              | 1,471 |      |   | $      | 1,808 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Tax over book depreciation                                 |   |                | 664   |      |   |        | 498   | 
|                                           
|                                           
|                                           
|                                           
|                                            | Percentage of completion                                   |   |                | 293   |      |   |        | 508   | 
|                                            |                                                            |   |                |       |      |   |        |      
|Total deferred tax liabilities              |                                                            |   | 2,428          |       |      |   | 2,814  |      
|                                           
|                                           
|                                           
|                                           
|Deferred tax assets:                       
|                                           
|                                           
|                                           
|                                           
|                                            | Net operating loss carryforwards                           |   |                | 7,854 |      |   |        | 9,489 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Credit carry forwards                                      |   |                | 1,197 |      |   |        | 1,097 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Reserve for warranty                                       |   |                | 27    |      |   |        | 61    | 
|                                           
|                                           
|                                           
|                                           
|                                            | Bad debt reserve                                           |   |                | 279   |      |   |        | 136   | 
|                                           
|                                           
|                                           
|                                           
|                                            | Other                                                      |   |                | 100   |      |   |        | 203   | 
|                                            |                                                            |   |                |       |      |   |        |      
|Total deferred tax assets                   |                                                            |   | 9,457          |       |      |   | 10,986 |      
|                                           
|                                           
|                                           
|                                           
|Valuation allowance for deferred tax assets |                                                            |   | 7,029          |       |      |   | 8,172  |      
|                                            |                                                            |   |                |       |      |   |        |      
|Net deferred tax assets                     |                                                            |   | 2,428          |       |      |   | 2,814  |      
|                                            |                                                            |   |                |       |      |   |        |      
|Net deferred tax                            |                                                            | $ | 0              |       |      | $ | 0      |      
|                                            |                                                            |   |                |       |      |   |        |      

|                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------
|The reconciliation of income taxes computed at the U.S. federal statutory tax rates to income
tax expense (credit) is as follows:

|                                                                      |  |                |        |      |  |      |        |   |  |   |      |  
|--------------------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | - |  | - | ---- | -
|                                                                      |  | 1999           |        | 1998 |  | 1997
|                                                                      |  |                |        |      |  |     
|                                                                      |  | (in thousands)
|Tax provision (credit) at U.S. statutory rates                        |  | $              | 1,199  |      |  | $    | (3,802 | ) |  | $ | (56  | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Tax provision included in income from
discontinued welding operations |  |                |        |      |  |      |        |   |  |   | (507 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Change in valuation allowance                                         |  |                | (1,143 | )    |  |      | 3,883  |   |  |   | (55  | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Nondeductible expenses                                                |  |                | 30     |      |  |      | 38     |   |  |   | 43   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other                                                                 |  |                | (86    | )    |  |      | (119   | ) |  |   | 86   |  
|                                                                      |  |                |        |      |  |      |        |   |  |   |      |  
|                                                                      |  | $              | 0      |      |  | $    | 0      |   |  | $ | (469 | )
|                                                                      |  |                |        |      |  |      |        |   |  |   |      |  

|                                                        
|--------------------------------------------------------
|There were no income tax payments in 1999, 1998 or 1997.

18



---



Note G  Earnings per Share

|                                                                                       
|---------------------------------------------------------------------------------------
|The following table sets forth the computation of basic and diluted
earnings per share:

|                                                       |                                             |  |                                       |        |      |  |       |         |   |  |       |        |  
|------------------------------------------------------ | ------------------------------------------- |  | ------------------------------------- | ------ | ---- |  | ----- | ------- | - |  | ----- | ------ | -
|                                                       |                                             |  | 1999                                  |        | 1998 |  | 1997 
|                                                       |                                             |  |                                       |        |      |  |      
|                                                       |                                             |  | (in thousands, except per share data)
|Numerator for basic and diluted earnings per share -  
|                                                      
|                                                      
|                                                      
|                                                      
|Income(loss) available to common stockholders         
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Loss from continuing operations             |  | $                                     | (5,671 | )    |  | $     | (11,203 | ) |  | $     | (1,663 | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Income from discontinued Welding operations |  |                                       | 1,030  |      |  |       | 19      |   |  |       | 1,519  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Gain on disposal of Welding division        |  |                                       | 8,749  |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Extraordinary charge                        |  |                                       | (583   | )   
|                                                       |                                             |  |                                       |        |      |  |       |         |   |  |       |       
|                                                       | Net Income (loss)                           |  | $                                     | 3,525  |      |  | $     | (11,184 | ) |  | $     | (144   | )
|                                                      
|                                                      
|                                                      
|                                                      
|*there was no effect of dilutive securities see below 
|                                                      
|                                                      
|                                                      
|                                                      
|Denominator for basic and diluted earnings per share -
|                                                      
|                                                      
|                                                      
|                                                      
|weighted average shares                                |                                             |  | 9,025                                 |        |      |  | 9,025 |         |   |  | 8,897 |       
|                                                       |                                             |  |                                       |        |      |  |       |         |   |  |       |       
|*there was no effect of dilutive securities see below 
|                                                      
|                                                      
|                                                      
|                                                      
|Basic and diluted earnings per share:                 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Continuing operations                       |  | $                                     | (0.63  | )    |  | $     | (1.24   | ) |  | $     | (0.19  | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Discontinued Welding operations             |  |                                       | 0.11   |      |  |       |         |   |  |       | 0.17   |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Disposal of Welding division                |  |                                       | 0.97   |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Extraordinary charge                        |  |                                       | (0.06  | )   
|                                                       |                                             |  |                                       |        |      |  |       |         |   |  |       |       
|                                                       | Net income (loss)                           |  | $                                     | 0.39   |      |  | $     | (1.24   | ) |  | $     | (0.02  | )
|                                                       |                                             |  |                                       |        |      |  |       |         |   |  |       |       

|                                                                                                                                                                                                                                                         
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Warrants and options outstanding were not included in the computation
of diluted earnings per share because the inclusion of these options
would have an antidilutive effect. For additional disclosures regarding
stock options and warrants see Note I.

19



---



Note H  Employee Savings Plan

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company has an Employee Savings Plan covering substantially all
United States employees. The Company contributes $.20 to the Plan for
every dollar contributed by the employees up to 6% of their
compensation. The Plan also provides for discretionary contributions by
the Company as determined annually by the Board of Directors. Company
contributions charged to operations under the Plan were $30,000,
$30,000, and $37,000 for the years ended December 31, 1999, 1998 and
1997, respectively.

Note I  Stock Options and Warrants

|                                                                               
|-------------------------------------------------------------------------------
|A summary of the status of the Option Plans at December 31, 1999 is as
follows:

|                        |           |  |                |   |              |  |               |   |           |  |     |     |  |  |     |     | 
|----------------------- | --------- |  | -------------- | - | ------------ |  | ------------- | - | --------- |  | --- | --- |  |  | --- | --- | 
|                        |           |  |                |   |              |  | Non-Qualified
|                        |           |  | Qualified ISO  |   | Stock Option
|                        |           |  | Plan           |   | Plan         |  | 1999 Plan     |   | 1995 Plan
|                        |           |  |                |   |              |  |               |   |          
|                        |           |  | (in thousands)
|Options outstanding     |           |  | 171            |   |              |  | 14            |   |           |  | 400 |     |  |  | 492 |    
|                       
|                       
|                       
|                       
|Options exercisable     |           |  | 171            |   |              |  | 14            |   |           |  | 0   |     |  |  | 286 |    
|                       
|                       
|                       
|                       
|Options granted during:
|                       
|                       
|                       
|                       
|                        | 1999      |  |                | 0 |              |  |               | 0 |           |  |     | 400 |  |  |     | 206 | 
|                       
|                       
|                       
|                       
|                        | 1998      |  |                | 0 |              |  |               | 0 |           |  |     | 0   |  |  |     | 0   | 
|                       
|                       
|                       
|                       
|                        | 1997      |  |                | 0 |              |  |               | 0 |           |  |     | 0   |  |  |     | 267 | 
|                       
|                       
|                       
|                       
|                        | 1996      |  |                | 0 |              |  |               | 0 |           |  |     | 0   |  |  |     | 132 | 
|                       
|                       
|                       
|                       
|                        | 1995      |  |                |   |              |  |               |   |           |  |     | 0   |  |  |     | 211 | 
|                       
|                       
|                       
|                       
|Options available       |           |  |                |   |              |  |               |   |           |  | 0   |    
|                       
|                       
|                       
|                       
|                        | For Grant |  |                | 0 |              |  |               | 0 |           |  |     | 100 |  |  |     | 8   | 
|                        |           |  |                |   |              |  |               |   |           |  |     |     |  |  |     |    

|                                                                                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Option grants are approved by the Compensation Committee of the Board
of Directors. The option price is the market price on the date of the
grant, and vesting generally occurs after one year and the expiration
occurs ten years from the date of the grant.

|                                                     
|-----------------------------------------------------
|A summary of option activity under all plans follows:

|                                       |                            |  |                                 |   |                |  |        |  |                |          |        |  |                |  |     |   |          |   |      |  |  |  |          |   |  |   |      |  | 
|-------------------------------------- | -------------------------- |  | ------------------------------- | - | -------------- |  | ------ |  | -------------- | -------- | ------ |  | -------------- |  | --- | - | -------- | - | ---- |  |  |  | -------- | - |  | - | ---- |  | 
|                                       |                            |  | 1999                            |   | 1998           |  | 1997  
|                                       |                            |  |                                 |   |                |  |       
|                                       |                            |  |                                 |   |                |  |        |  |                | Weighted |        |  |                |  |     |   | Weighted |   |      |  |  |  | Weighted
|                                       |                            |  |                                 |   |                |  |        |  |                | Average  |        |  |                |  |     |   | Average  |   |      |  |  |  | Average 
|                                       |                            |  | Shares                          |   | Exercise Price |  | Shares |  | Exercise Price |          | Shares |  | Exercise Price
|                                       |                            |  |                                 |   |                |  |        |  |                |          |        |  |               
|                                       |                            |  | (number of shares in thousands)
|Outstanding at beginning of year       |                            |  | 597                             |   |                |  |        |  |                | $        | 5.48   |  |                |  | 662 |   |          | $ | 5.64 |  |  |  | 589      |   |  | $ | 5.87 | 
|                                      
|                                      
|                                      
|                                      
|Granted                                |                            |  | 606                             |   |                |  |        |  |                |          | 1.07   |  |                |  | 0   |   |          |   | 0    |  |  |  | 267      |   |  |   | 5.20 | 
|                                      
|                                      
|                                      
|                                      
|Exercised                              |                            |  | 0                               |   |                |  |        |  |                |          | 0      |  |                |  | 0   |   |          |   | 0    |  |  |  | (23      | ) |  |   | 4.57 | 
|                                      
|                                      
|                                      
|                                      
|Canceled                               |                            |  | (126                            | ) |                |  |        |  |                |          | 6.10   |  |                |  | (65 | ) |          |   | 5.74 |  |  |  | (171     | ) |  |   | 5.88 | 
|                                       |                            |  |                                 |   |                |  |        |  |                |          |        |  |                |  |     |   |          |   |      |  |  |  |          |   |  |   |      | 
|Outstanding at end of year             |                            |  | 1,077                           |   |                |  |        |  |                |          | 3.02   |  |                |  | 597 |   |          |   | 5.48 |  |  |  | 662      |   |  |   | 5.64 | 
|                                      
|                                      
|                                      
|                                      
|                                       | ($1.07 to $9.25 per share)
|                                       |                            |  |                                 |   |                |  |        |  |                |          |        |  |                |  |     |   |          |   |      |  |  |  |          |   |  |   |      | 
|Exercisable ($1.07 to $9.25 per share) |                            |  | 471                             |   |                |  |        |  |                | $        | 5.54   |  |                |  | 597 |   |          | $ | 5.48 |  |  |  | 396      |   |  | $ | 5.93 | 
|                                       |                            |  |                                 |   |                |  |        |  |                |          |        |  |                |  |     |   |          |   |      |  |  |  |          |   |  |   |      | 

20



---



|                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------
|Additional information regarding the range of exercise prices and
weighted average remaining life of options outstanding at December 31,
1999 follows:

| |                 |  |             |                                 |                |  |             |          |  |  |  |     |  | 
| | --------------- |  | ----------- | ------------------------------- | -------------- |  | ----------- | -------- |  |  |  | --- |  | 
| |                 |  |             |                                 |                |  |             | Weighted
| | Range of        |  | Number      |                                 | Average        |  | Number     
| | Exercise Prices |  | Outstanding |                                 | Remaining Life |  | Exercisable
| |                 |  |             |                                 |                |  |             |          |  |  |  |    
| |                 |  |             |                                 |                |  |            
| |                 |  |             | (number of shares in thousands)
| | $1.07 to 1.75   |  |             | 611                             |                |  |             | 9.7      |  |  |  | 5   | 
|
|
|
|
| | 4.00 to 4.88    |  |             | 190                             |                |  |             | 4.3      |  |  |  | 190 | 
|
|
|
|
| | 5.00 to 5.63    |  |             | 110                             |                |  |             | 7.6      |  |  |  | 110 | 
|
|
|
|
| | 6.00 to 6.25    |  |             | 118                             |                |  |             | 4.6      |  |  |  | 118 | 
|
|
|
|
| | 8.25 to 9.25    |  |             | 48                              |                |  |             | 5.3      |  |  |  | 48  | 
|
| | $1.07 to 9.25   |  |             | 1,077                           |                |  |             | 7.8      |  |  |  | 471 | 
|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company has elected to follow APB No. 25 Accounting for Stock
Issued to Employees and related interpretations in accounting for its
employee stock options because, in managements opinion, the models
required to be used by FASB Statement No. 123, Accounting for
Stock-Based Compensation, were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Companys employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|For purposes of proforma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. After
adjusting for the proforma effect of stock compensation, the net
income in 1999
is estimated to be $2,998,000 ($.33 per share), and the net loss in 1998 and 1997 was estimated to be $11,532,000
($1.28 per share), and $470,000 ($.05 per share),
respectively. In 1999 the assumptions used in determining the proforma
disclosure was a risk free interest rate of 6.00%, no dividend yields,
 .85 market price volatility, and 7.8-year weighted average life of
options. These proforma results reflect only stock options granted in
1995 through 1999 (no options were issued during 1998) and may not be
comparable with the results of applying the fair market value
methodology to all stock options granted prior to the initial adoption
of this statement.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|In connection with the private placement of $7.0 million of debentures
in 1997, which were retired in 1999, the company issued warrants for the
purchase of 1,400,000 Integral Vision common shares at $6.86 per share
all of which were outstanding at December 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Note J  Lease Commitments and Contingencies

|                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company and its subsidiary use equipment and office space under
long-term operating lease agreements requiring rental payments
approximating $78,000 in 2000, $83,000 in 2001 and $80,000 in 2002 and
$74,000 in 2003. Rent expense charged to operations approximated
$65,000, $60,000, and $57,000 in 1999, 1998 and 1997, respectively.

Note K  Operations by Geographic Area

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company adopted Statement of Financial Accounting Standards
(SAFS) No. 131, Disclosures about Segments of an Enterprise and
Related Information, for the year ended December 31, 1998. SFAS No. 131
established standards for reporting information about operating
segments in annual financial statements and requires selected
information about operating segments in interim financial reports
issued to stockholders. It also established standards for related
disclosures about products and services, and geographic areas.
Operating segments are defined as components of the enterprise about
which separate

21



---



|                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|financial information is available that is evaluated regularly by
management in deciding how to allocate resources and in assessing
performance.
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|The Company is engaged in one line of business, vision-based inspection
products. The following presents information by geographic area.        

|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |        |        | 
|--------------------------------------------------------------- | ------------------------------------- | -------------- | ------ | ---------------------- | ----- | ---- | ------- | ------ | ----- | - | ------ | ------ | ------ | 
|                                                                |                                       |                |        | Year Ended December 31
|                                                                |                                       |                |        |                       
|                                                                |                                       |                |        | 1999                   |       | 1998 |         | 1997  
|                                                                |                                       |                |        |                        |       |      |         |       
|                                                                |                                       |                |        | (in thousands)        
|Net revenues from unaffiliated customers:                      
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                       | United States  |        | $                      | 7,589 |      |         | $      | 6,773 |   |        | $      | 14,995 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                       | United Kingdom |        |                        | 3,154 |      |         |        | 2,661 |   |        |        | 960    | 
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | 10,743 |                        |       | $    | 9,434   |        |       | $ | 15,955 |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|Earnings (loss) from continuing operations
before income taxes:
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United States                         |                | $      | (4,686                 | )     |      | $       | (5,740 | )     |   | $      | 100    |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United Kingdom                        |                |        | (985                   | )     |      |         | (1,232 | )     |   |        | (2,232 | )     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Restructuring charges                 |                |        |                        |       |      |         | (4,231 | )    
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | (5,671 | )                      |       | $    | (11,203 | )      |       | $ | (2,132 | )     
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|Identifiable assets:                                           
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United States                         |                | $      | 21,556                 |       |      | $       | 20,270 |       |   | $      | 27,722 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United Kingdom                        |                |        | 1,337                  |       |      |         | 1,608  |       |   |        | 4,471  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Eliminations                          |                |        | (3,835                 | )     |      |         | (3,835 | )     |   |        | (3,835 | )     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net assets of discontinued
operations |                |        |                        |       |      |         | 16,277 |       |   |        | 20,163 |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | 19,058 |                        |       | $    | 34,320  |        |       | $ | 48,521 |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|Capital expenditures:                                          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United States                         |                | $      | 245                    |       |      | $       | 212    |       |   | $      | 104    |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United Kingdom                        |                |        | 45                     |       |      |         | 39     |       |   |        | 24     |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | 290    |                        |       | $    | 251     |        |       | $ | 128    |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|Depreciation and amortization expense:                         
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United States                         |                | $      | 1,997                  |       |      | $       | 2,004  |       |   | $      | 2,794  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | United Kingdom                        |                |        | 377                    |       |      |         | 370    |       |   |        | 482    |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | 2,374  |                        |       | $    | 2,374   |        |       | $ | 3,276  |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|Net revenues by geographic area:                               
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | North America*                        |                | $      | 4,912                  |       |      | $       | 2,815  |       |   | $      | 11,300 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Europe                                |                |        | 3,154                  |       |      |         | 3,361  |       |   |        | 4,030  |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Asia                                  |                |        | 2,677                  |       |      |         | 3,258  |       |   |        | 625    |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       
|                                                                |                                       | $              | 10,743 |                        |       | $    | 9,434   |        |       | $ | 15,955 |       
|                                                                |                                       |                |        |                        |       |      |         |        |       |   |        |       

|                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* Countries that are considered individually material (more than 10% of
net revenues) all others are included in North America and in total are
considered immaterial

22



---



Schedule II  Valuation And Qualifying Accounts

Integral Vision, Inc. And Subsidiary

(in thousands)

|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |       |  |  |  |  |  |  |  |  | 
|----------------------------- | -------------------------------- | ------------ | ----- | ---------- |  | ---------- | --------- | ---------- |  | ---------- | - |  |  | - | ----- | ----- | --- | - | ----- | ----- |  |  |  |  |  |  |  |  | 
|Column A                      |                                  | Column B     |       | Column C   |  | Column D   |           | Column E  
|                              |                                  |              |       |            |  |            |           |           
|                              |                                  |              |       |            |  |            | Additions
|                              |                                  |              |       |            |  |            |          
|                              |                                  |              |       | Charged To |  | Charged To |           |            |  |           
|                              |                                  | Balance At   |       | Costs      |  | Other      |           |            |  | Balance At
|                              |                                  | Beginning Of |       | And        |  | Accounts-  |           | Deductions |  | End       
|Description                   |                                  | Period       |       | Expenses   |  | Describe   |           | Describe   |  | Of Period 
|                              |                                  |              |       |            |  |            |           |            |  |           
|Year ended December 31, 1999:
|                             
|                             
|                             
|                             
|                              | Accounts receivable allowance    |              | $     | 400        |  |            | $         | 516        |  |            | $ |  |  |   | $     | 96    | (3) |   | $     | 820   | 
|                             
|                             
|                             
|                             
|                              | Inventory obsolescence reserve   |              |       | 300        |  |            |           | 1,800      |  |            |   |  |  |   |       |       |     |   |       | 2,100 | 
|                             
|                             
|                             
|                             
|                              | Deferred tax valuation allowance |              |       | 8,172      |  |            |           |            |  |            |   |  |  |   |       | 1,143 | (2) |   |       | 7,029 | 
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      
|                              |                                  | $            | 8,872 |            |  | $          | 2,316     |            |  | $          |   |  |  | $ | 1,239 |       |     | $ | 9,949 |      
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      
|Year ended December 31, 1998:
|                             
|                             
|                             
|                             
|                              | Accounts receivable allowance    |              | $     | 400        |  |            | $         | 162        |  |            |   |  |  |   | $     | 162   | (3) |   | $     | 400   |  |  |  |  |  |  |  |  | 
|                             
|                             
|                             
|                             
|                              | Inventory obsolescence reserve   |              |       | 210        |  |            |           | 1,530      |  |            |   |  |  |   |       | 1,440 | (1) |   |       | 300   | 
|                             
|                             
|                             
|                             
|                              | Deferred tax valuation allowance |              |       | 4,289      |  |            |           | 3,883      |  |            |   |  |  |   |       |       |     |   |       | 8,172 | 
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      
|                              |                                  | $            | 4,899 |            |  | $          | 5,575     |            |  |            |   |  |  | $ | 1,602 |       |     | $ | 8,872 |       |  |  |  |  |  |  |  | 
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      
|Year ended December 31, 1997:
|                             
|                             
|                             
|                             
|                              | Accounts receivable allowance    |              | $     | 400        |  |            | $         | 120        |  |            |   |  |  |   | $     | 120   | (3) |   | $     | 400   |  |  |  |  |  |  |  |  | 
|                             
|                             
|                             
|                             
|                              | Inventory obsolescence reserve   |              |       | 156        |  |            |           | 622        |  |            |   |  |  |   |       | 568   | (1) |   |       | 210   | 
|                             
|                             
|                             
|                             
|                              | Deferred tax valuation allowance |              |       | 4,344      |  |            |           |            |  |            |   |  |  |   |       | 55    | (2) |   |       | 4,289 | 
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      
|                              |                                  | $            | 4,900 |            |  | $          | 742       |            |  |            |   |  |  | $ | 743   |       |     | $ | 4,899 |       |  |  |  |  |  |  |  | 
|                              |                                  |              |       |            |  |            |           |            |  |            |   |  |  |   |       |       |     |   |       |      

|                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------
|1) Write-off obsolete inventory
2) Net change in deferred tax valuation allowance
3) Net accounts receivable write-offs

23