UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(X) Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended MARCH 31, 2000.
Commission File No. 0-27857
EYE DYNAMICS, INC.
------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0249812
---------------------------------- ------------------------------------
( State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2301 W. 205th Street, #106, Torrance, CA 90501
----------------------------------------- -----------
(Address of principal executive offices) ( Zip Code)
Issuer's telephone number 310-328-0477
------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
The number of shares outstanding of the issuer's common stock as of March 31,
2000 was 9,139,460.
Transitional Small Business Disclosure Format (check one) ( ) Yes; (X) No.
PART 1 FINANCIAL INFORMATION
------ ---------------------
ITEM 1. FINANCIAL STATEMENTS
-------
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31,
2000 1999
----------- -----------
Current Assets
Cash $ 67,926 $ 52,842
Account Receivables 65,105 93,491
Inventories 55,013 58,368
Prepaid Expenses 2,281 0
----------- -----------
Total Current Assets 190,325 204,701
----------- -----------
Property and Equipment
Furniture and Fixtures 1,432 1,432
Equipment 13,331 12,632
----------- -----------
14,763 14,064
Less: Accumulated Depreciation (8,279) (5,647)
----------- -----------
Total Property and Equipment 6,484 8,417
----------- -----------
Other Assets
Receivable for Consigned Inventory 20,500 10,250
Consigned Inventory 41,000 1,250
Organizational Costs, net of accumulated
amortization of $4,858 0 0
Deposits 16,397 3,344
----------- -----------
Total Other Assets 77,897 64,844
----------- -----------
TOTAL ASSETS $ 274,706 $ 277,962
============ ===========
See Accompanying Notes and Accountant's Report 3
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
2000 1999
------------ ------------
Current Liabilities
Accounts Payable $ 50,914 $ 55,423
Accrued Expenses 285,607 223,914
Income Tax Payable 1,600 1,600
Consigned Inventory 61,500 61,500
Deposit from Shareholders 7,758 0
Line of Credit 0 10,702
Notes Payable, current Portion 406,999 430,191
------------ ------------
Total Current Liabilities 814,378 783,330
------------ ------------
Long-Term Liabilities 0 0
------------ ------------
Total Liabilities 814,378 783,330
------------ ------------
Stockholders' Equity (Deficit)
Common Stock, $.001 par value, 50,000,000
shares authorized; 9,139,460 shares
issued and outstanding in 2000, and
9,050,627 in 1999 9,139 9,050
Paid-in Capital 2,459,063 2,426,027
Accumulated Deficit (3,007,874) (2,940,445)
------------ ------------
Total Stockholders' Equity (Deficit) (539,672) (505,368)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 274,706 $ 277,962
============ ============
See Accompanying Notes and Accountant's Report 4
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
Three months ended March 31, 2000 and 1999
2000 1999
------------ ------------
SALES $ 202,784 $ 164,418
COST OF SALES - SCHEDULE A 102,651 72,733
------------ ------------
GROSS PROFIT 100,133 91,685
OPERATING EXPENSES - SCHEDULE B 117,064 85,221
------------ ------------
INCOME (LOSS) FROM OPERATIONS (16,931) 6,464
------------ ------------
OTHER INCOME (EXPENSES)
Cash Discounts (390) (876)
Late Charges and Penalties (14) 0
Interest Expenses (9,137) (10,298)
------------ ------------
Total Other Income (Expenses) (9,541) (11,174)
------------ ------------
NET INCOME (LOSS) BEFORE TAXES (26,472) (4,710)
PROVISION FOR INCOME TAXES 1,600 1,600
------------ ------------
NET INCOME (LOSS) (28,072) (6,310)
ACCUMULATED DEFICIT
Beginning Balance (2,979,802) (2,934,135)
------------ ------------
Ending Balance $(3,007,874) $(2,940,445)
============ ============
Earnings (Loss) per share $ (0.0031) $ (0.0007)
============ ============
Weighted Average Shares Outstanding 9,139,460 8,633,960
============ ============
See Accompanying Notes and Accountant's Report 5
EYE DYNAMICS, INC. & SUBSIDIARY
COST OF SALES
(Unaudited)
Three months ended March 31, 2000 and 1999
SCHEDULE A
2000 1999
--------- ---------
Beginning Inventory $ 50,083 $ 60,263
Purchases 78,769 59,007
Labors & Commissions 28,812 11,622
Other Overhead Costs 0 209
--------- --------
157,664 131,101
Less: Ending Inventory 55,013 58,368
--------- --------
Total Cost of Sales $ 102,651 $ 72,733
========= ========
See Accompanying Notes and Accountant's Report 6
EYE DYNAMICS, INC. & SUBSIDIARY
OPERATING EXPENSES
(Unaudited)
Three months ended March 31, 2000 and 1999
SCHEDULE B
2000 1999
-------- --------
Accounting $ 3,200 $ 2,000
Advertising 3,758 79
Automobile 1,858 1,050
Bank Charge 195 60
Commissions 10,422 13,722
Consulting 600 3,000
Depreciation 667 632
Dues and Subscriptions 66 66
Freight 5,179 2,926
Insurance 1,988 4,600
Legal and Professional 6,208 5,602
Licenses & Regulatory Fees 256 287
Meals and Entertainment 75 122
Office Supplies 2,850 649
Other Expenses 88 0
Payroll Taxes 5,094 3,781
Postage and Stationeries 2,941 620
Printing and Collateral 7,091 1,429
Rent and Lease 3,034 3,584
Sales Promotion & Public Relations 525 2,745
Salaries - Officers 27,000 27,000
Salaries and Wages 5,519 670
Shows and Exhibits 16,982 1,750
Supplies 1,542 524
Telephone 2,543 1,533
Temporary Labor 100 0
Travel 7,084 6,597
Utilities 199 193
-------- --------
Total Operating Expenses $117,064 $ 85,221
======== ========
See Accompanying Notes and Accountant's Report 7
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31, 2000 and 1999
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(28,072) $ (6,310)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation 667 632
(Increase) Decrease in:
Accounts Receivable 54,123 25,129
Inventories (4,930) 1,895
Prepaid Expenses 2,671 0
Receivable on Consigned Inventory (10,250) 0
Consigned Inventory 10,250 0
Deposits (405) 2,797
Increase (Decrease) in:
Accounts Payable 4,423 (37,105)
Accrued Expenses 10,461 (31,687)
State Tax Payable 1,600 1,600
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 40,538 (43,049)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing common stock 0 93,750
Payments to Line of Credit 0 (34,311)
Payments to Notes Payable (23,192) 0
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (23,192) 59,439
--------- ---------
NET INCREASE (DECREASE) IN CASH 17,346 16,390
BEGINNING OF PERIOD 50,580 36,452
--------- ---------
END OF PERIOD $ 67,926 $ 52,842
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 0 $ 1,161
========= =========
Income Tax $ 0 $ 0
========= =========
See Accompanying Notes and Accountant's Report 8
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Interim Information
In the Opinion of the management of Eye Dynamics, Inc. & Subsidiary (the
Company), the accompanying unaudited consolidated financial statements include
all normal adjustments considered necessary to present fairly the financial
positions as of March 31, 2000 and 1999, and the results of operations and cash
flows for the three months then ended. Interim results are not necessarily
indicative of results for a full year.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the Company's
audited consolidated financial statements and notes for the fiscal year ended
December 31, 1999.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Oculokinetics, Inc. (a California
corporation), after elimination of all material intercompany accounts and
transactions.
The subsidiary had no operations in both periods of 2000 and 1999. All revenue
is derived from the Company.
Use of estimates
The preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make certain estimates and assumptions that directly affect the results of
reported assets, liabilities, revenue, and expenses. Actual results may differ
from these estimates.
Cash Equivalents
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents. As of March 31, 2000,
there were no cash equivalents.
The Company prepares its consolidated statements of cash flows using the
indirect method as defined under Financial Accounting Standards Board Statement
No. 95.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
The Company has not established an allowance for doubtful accounts and does not
use reserve method for recognizing bad debts. Bad debts are treated as direct
write-offs in the period management determines that collection is not probable.
There was no bad debt expense for both three months ended March 31, 2000 and
1999.
Inventories
Costs incurred for materials, technology and shipping are capitalized as
inventories and charged to cost of sales when revenue is recognized.
Inventories consist of finished goods and are stated at the lower of cost or
market, using the first-in, first-out method.
Property and Equipment
Property and Equipment are valued at cost. Maintenance and repair costs are
charged to expenses as incurred. Depreciation is computed on the straight-line
method based on the estimated useful lives of the assets. Depreciation expense
was $667 and $632 for 2000 and 1999, respectively.
Income Taxes
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109 "Accounting For Income Taxes" (SFAS No. 109).
SFAS No. 109 requires a company to recognize deferred tax liabilities and assets
for the expected future income tax consequences of events that have been
recognized in the Company's financial statements. Under this method, deferred
tax assets and liabilities are determined based on temporary differences between
the financial carrying amounts and the tax bases of assets and liabilities using
the enacted tax rates in effect in the years in which the temporary differences
are expected to reverse.
Reclassification
Certain reclassifications have been made to the 1999 consolidated financial
statements to conform with the 2000 consolidated financial statement
presentation. Such reclassification had no effect on net loss as previously
reported.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 2 - LINE OF CREDIT
In 1998, the Company established a $65,000 operating line of credit with Wells
Fargo Bank at the bank's prime rate plus 2.75%. This line of credit is payable
on demand and is personally guaranteed by the Company's President. As of March
31, 2000 and 1999, the balance due was $0 and $10,702, respectively.
NOTE 3 - NOTES PAYABLE
Notes Payable consist of the following at March 31,
2000 1999
---------- ----------
a.)Notes to Officers, interest at 10%,
accrued semi-monthly; due 60 days
after dates of notes; unsecured $ 278 $ 23,470
b.)Notes to Others, interest at 12%,
due on demand, unsecured 10,000 10,000
c.)Note to TESA Corporation, interest
at 7% payable on maturity date,
December 31, 1999; maturing 11% of
gross revenues, collateralized by
accounts receivable, inventories,
patents and a licensing agreement 396,721 396,721
---------- ----------
406,999 430,191
Less current maturities 406,999 430,191
---------- ----------
Long-term debt, net $ 0 $ 0
========== ==========
NOTE 4 - SETTLEMENT AGREEMENT AND MUTUAL RELEASE
On December 29, 1993, the Company entered into a settlement agreement and mutual
release with TESA Corporation, a former distributor. The agreement provided a
payment of $400,000 with simple interest at 7% per annum, payable on or before
December 31, 1999. The note principal is payable in monthly installments of 11%
of gross revenue on the sales (See Note 3c). As of March 31, 2000 and 1999,
interest of $174,987 and $118,994 was accrued and no principal payments were
made, respectively. The Company is currently negotiating the note.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 4 - SETTLEMENT AGREEMENT AND MUTUAL RELEASE (Continued)
The agreement also provides a payment of $10,250 for each of the first nine
product units sold after the agreement as compensations for repurchased units.
As of March 31, 2000 and 1999, the balance of these consigned inventories was
$41,000 and $51,250, respectively. There was a receivable of $20,500 and $10,250
on these consigned inventories as of March 31, 2000 and 1999, respectively.
NOTE 5 - INCOME TAXES
The Company files separate federal and state income tax returns with its
subsidiary.
Provision for income taxes in the consolidated statements of operations for
three months ended March 31, 2000 and 1999 consist of $1,600 minimum state
income taxes in each year, $800 for each corporation.
The Company has net operating loss carryforwards of $539,648 to reduce future
taxable income. The subsidiary has NOL carryforwards of $1,481,264. To the
extent not utilized, both carryforwards will begin to expire through 2019.
NOTE 6 - STOCK OPTIONS
The Company granted 150,000 non-qualified stock options to employees in lieu of
salary at fifteen cents per share ($.15) through February 2003. In addition, the
Company had 2,160,000 outstanding stock options at various exercise prices and
expiration dates.
A summary of options outstanding as of March 31, 2000 is shown as follows:
Exercise No. of shares Expiration
Price Outstanding Date
-------- -------------- ----------
$0.54 60,000 9/2001
$0.25 1,000,000 11/2001
$0.375 1,000,000 11/2001
$0.15 150,000 2/2003
$0.001 100,000 11/2001
--------------
2,310,000
==============
There were no options exercised during the three months ended March 31, 2000,
and 1999.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 7 - EARNINGS (LOSS) PER SHARE
Earnings per share is based on the weighted average number of shares of common
stock and common stock outstanding during the period. Earnings per share is
computed using the treasury stock method. Had the Stock Options (See Note 6)
been issued as of March 31, 2000, the Company's loss per share would have been
$0.0024.
NOTE 8 - SEGMENT INFORMATION
SFAS No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION" requires that a publicly traded company must disclose information
about its operating segments when it presents a complete set of financial
statements. Since the subsidiary did not have any operations in 2000 or 1999,
and all income are derived from the Company; accordingly, detailed information
of the reportable segment is not presented.
NOTE 9 - LEASE COMMITMENTS
The Company leases its office facilities for $768 per month. The lease expires
April 2001. Rent expense totaled $2,304 and $2,737 for three months ended March
31, 2000 and 1999, respectively.
The Company leases various office equipments at $185 per month which commence to
expire in 2000.
As of March 31, 2000, the minimum commitments under these leases are as follows:
December 31, Amounts
------------ -------
2000 $ 6,912
2001 3,072
-------
Total $ 9,984
=======
NOTE 10 - GOING CONCERN
The accompanying consolidated financial statements are presented on the basis
that the Companies are going concerns. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. As shown in the accompanying
consolidated financial statements, the Company incurred a net operating loss of
$23,192 for three months ended March 31, 2000, and as of that date, the Company
has accumulated deficit of $3,007,874, a stockholders' deficit of $539,672 and
its current liabilities exceed current assets by $624,053.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2000 and 1999
NOTE 10 - GOING CONCERN (Continued)
Management is currently involved in active negotiations to convert a note
payable of $396,721 into equity, and actively increasing marketing efforts to
increase revenues. The Company continued existence depends on its ability to
meet its financing requirements and the success of its future operations. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
------
Continued successful marketing of the Infrared/Video ENG System along with the
manufacture and sale of a private label ENG type product has been achieved in
this quarterly period. Almost all of the Company's current revenues come from
sale of these products.
Revenues for the quarterly period were 23 percent higher than for the same
period in 1999. Sales increased to $202,784 from $164,418 in first quarter of
1999. However, a larger loss for the period was sustained in 2000 as compared
with the 1999 quarter. The loss in the first quarter of 1999 was $6,310, as
compared to a loss of $28,072 for the same period in 2000. A major factor in the
increased the loss was a change in accounting policy; in the first quarter of
2000 commissions payable were booked as sales revenues were booked, as compared
with paying and recording the commission expenses when paid in the first quarter
of 1999. The policy for payment of the commissions was not changed; payment is
made after receipt of the payment from the customer. This change accounted for
approximately $10,000 of the quarterly loss. Another factor was the expenses of
a major national exhibition that occurred in March, 2000, wherein this same
exhibition occurred in late April in 1999. This expenses of this event exceeded
$14,000 and were fully expensed in this quarterly period.
Printing and collateral expenses exceeded the prior year by $5,500 because of
the earlier date of the exhibit at the American Academy of Audiology in Chicago,
Illinois in March, 2000.
Collectively, these additional expenses in the first quarter came to almost
$30,000, which is more than the loss reported. Gross profits remain suitable and
with a more aggressive promotional activity of shows and exhibits plus workshops
and direct mail campaigns, the prospect for increased business is very good.
PART II OTHER INFORMATION
------- -----------------
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or to
which the property interests of the Company are subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the vote of security holders during this
quarterly reporting period.
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
------- --------------------------------
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Eye Dynamics, Inc.
Date: November 21, 2001 By /s/ Charles E. Phillips
------------------------------
Charles E. Phillips, President
and Chief Financial Officer