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 JUNE 30, 2000.
EYE DYNAMICS, INC.
(Name of small business issuer in its charter)
Nevada 88-0249812
( State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
2301 W. 205th Street, #106, Torrance, CA 90501
(Address of principal executive offices) (City, state and ZIP)
Issuer's telephone number 310-328-0477
The number of shares outstanding of the issuer's common stock as of June 30,
2000 was 9,616,313.
Transitional Small Business Disclosure Format (check one) ( ) Yes; (X) No.
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
To the Board of Directors and Stockholders
Eye Dynamics, Inc.
Torrance, California
I have reviewed the accompanying consolidated balance sheets of Eye Dynamics,
Inc. (a Nevada corporation) and its wholly-owned subsidiary, Oculokinetics, Inc.
(a California corporation), as of June 30, 2000, and the related consolidated
statements of operations for the three and six months ended June 30, 2000, and
cash flows for the six months ended June 30, 2000, in accordance with Statements
on Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Eye Dynamics, Inc.
A review consist principally of inquires of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on our review, I am not aware of any material modifications that should be
made to the accompanying consolidated financial statements in order for them to
be in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the Note 10
to the consolidated financial statements, the Company's significant operating
losses, working capital deficiency and deficit in stockholders' equity raise
substantial doubt about their abilities to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The accompanying financial statements for the six months ended June 30, 1999
were compiled by me in accordance with Statements of Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. A compilation is limited to presenting in the form of financial
statements information that is the representation of management. I have not
audited or reviewed the 1999 financial statements and, accordingly, I do not
express an opinion or any other form of assurance on them.
/s/ Harold Y. Spector, CPA
Pasadena, California
August 8, 2000
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2000 (Reviewed) and 1999 (Compiled)
ASSETS
June 30,
2000 1999
---------- ----------
Current Assets
Cash $ 40,000 $ 66,426
Account Receivables 46,750 87,280
Inventories 60,381 63,919
Prepaid Expenses 1,367 0
---------- ----------
Total Current Assets 148,498 217,625
Property and Equipment
Furniture and Fixtures 1,432 1,432
Equipment - Telemed 13,331 12,632
---------- ----------
14,763 14,064
Less: Accumulated Depreciation (8,946) (6,279)
---------- ----------
Total Property and Equipment 5,817 7,785
Other Assets
Organizational Costs, net of accumulated
amortization of $4,858 0 0
Receivable - Consigned Inventory 20,500 10,250
Consigned Inventory 41,000 51,250
Deposits 13,071 5,835
---------- ----------
Total Other Assets 74,571 67,335
---------- ----------
TOTAL ASSETS $ 228,886 $ 292,745
========== ==========
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2000 (Reviewed) and 1999 (Compiled)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30,
2000 1999
------------ ------------
Current Liabilities
Accounts Payable $ 35,280 $ 52,991
Accrued Expenses 274,706 235,064
Consigned Inventory 61,500 61,500
Deposit from Shareholders 7,758 55,000
Line of Credit 0 4,995
Notes Payable, current Portion 406,999 430,191
------------ ------------
Total Current Liabilities 786,243 839,741
Long-Term Liabilities
Long-term debt 0 0
------------ ------------
Total Liabilities 786,243 839,741
Stockholders' Equity (Deficit)
Common Stock, $.001 par value,
50,000,000 shares authorized;
9,616,313 shares issued and
outstanding in 2000, and 9,095,960
in 1999 9,616 9,096
Paid-in Capital 2,553,957 2,471,314
Accumulated Deficit (3,120,930) (3,027,406)
------------ ------------
Total Stockholders' Equity (Deficit) (557,357) (546,996)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 228,886 $ 292,745
============ ============
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For Three and Six months ended June 30, 2000(Reviewed) and 1999 (Compiled)
Three Months ended Six Months ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
SALES $ 147,067 $ 176,787 $ 349,850 $ 341,205
COST OF SALES 64,704 92,562 167,354 165,295
------------ ------------ ------------ ------------
GROSS PROFIT 82,363 84,225 182,496 175,910
OPERATING EXPENSES 186,132 161,606 303,196 246,827
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (103,769) (77,381) (120,700) (70,917)
OTHER INCOME (EXPENSES)
Cash Discounts (400) 0 (790) (876)
Late Charges and Penalties 0 (94) (14) (94)
Interest Expenses (8,887) (9,486) (18,024) (19,784)
------------ ------------ ------------ ------------
Total Other Income (Expenses) (9,287) (9,580) (18,828) (20,754)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAXES (113,056) (86,961) (139,528) (91,671)
PROVISION FOR INCOME TAXES 0 0 1,600 1,600
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (113,056) $ (86,961) $ (141,128) $ (93,271)
============ ============ ============ ============
Net Loss per share $ (0.012) $ (0.010) $ (0.015) $ (0.011)
============ ============ ============ ============
Weighted Average Shares Outstanding 9,616,313 9,095,960 9,377,887 8,864,960
============ ============ ============ ============
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 (Reviewed) and 1999 (Compiled)
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(141,128) $ (93,271)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,334 1,264
Issuance stock for consulting fee 95,371 45,333
(Increase) Decrease in:
Accounts Receivable 72,478 31,340
Inventories (10,298) (3,656)
Prepaid Expenses 3,585 0
Receivable on Consigned Inventory (10,250) 0
Consigned Inventory 10,250 0
Deposits 2,921 306
Increase (Decrease) in:
Accounts Payable (11,211) (39,537)
Accrued Expenses (440) (20,537)
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,612 (78,758)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment 0 (1,903)
---------- ----------
NET CASH (USED) BY INVESTING ACTIVITIES 0 (1,903)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing common stock 0 93,750
Deposits from Stockholders 0 55,000
Payments to Line of Credit 0 (40,018)
Payments to Officers' Loan (23,192) 0
---------- ----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (23,192) 108,732
---------- ----------
NET INCREASE (DECREASE) IN CASH (10,580) 29,974
BEGINNING OF PERIOD 50,580 36,452
---------- ----------
END OF PERIOD $ 40,000 $ 66,426
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 95 $ 1,464
Income Tax $ 1,600 $ 1,600
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 2000 and 1999, and the results of operations for the
three months and six months ended June 30, 2000 and 1999, and cash flows for the
six months ended June 30, 2000 and 1999. 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-QSB, 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.
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
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Accounts Receivable
Management of the Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made. There was no bad debt expense neither for 2000 nor 1999.
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
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 $1,334 and $1,264 for 2000 and 1999, respectively.
Research and Development
Research and development costs are expensed as incurred.
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.
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 secured by all assets of the Company. As of June 30, 2000 and
1999, the balance due was $0 and $4,995, respectively.
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - NOTES PAYABLE
Notes Payable consist of the following at June 30,
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 maturity 406,999 430,191
Long-term debt, net $ 0 $ 0
NOTE 4 - 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 six
months ended June 30, 2000 and 1999 consist of $1,600 minimum state income taxes
in each year, $800 for each corporation.
The Company has net operating loss carry forwards of $539,648 to reduce future
taxable income. The subsidiary has NOL carry forwards of $1,481,264. To the
extent not utilized, both carry forwards will begin to expire through 2019.
NOTE 5 - COMMON STOCK TRANSACTIONS
In April 2000, the Company issued 400,000 shares common stock to a financial
advisor at $.20 per share for his service rendered. The Company also issued
76,853 shares to a consultant for his consulting fee of $15,371. In April 1999,
the Company issued common stock to a consultant in the amount of $45,333 for his
service rendered.
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKS OPTIONS
In February 2000, the Company granted 150,000 non-qualified stock options to
officers in lieu of salary at fifteen cents ($.15) per share 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 June 30, 2000 is shown as follows:
Exercise No. of shares Expiration
Price Outstanding Date
$.54 60,000 9/2001
$.25 1,000,000 11/2001
$.375 1,000,000 11/2001
$.001 100,000 11/2001
$.15 150,000 2/2003
Total 2,310,000
NOTE 7 - NET LOSS PER SHARE
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding during the period. Basic net loss per share for six
months ended June 30, 2000 and 1999 is $0.015 and $0.011, respectively. Net loss
per share does not include options as they would be anti-dilutive in 2000 and
1999 due to the net loss in those periods.
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 Parent; accordingly, detailed information of the
reportable segment is not presented.
NOTE 9 - LEASE COMMITMENTS
The Company leases its office facilities for $787 per month. The lease expires
April 2001. Rent expense totaled $4,646 and $5,026 for 2000 and 1999,
respectively.
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - LEASE COMMITMENTS (Continued)
The Company leases various office equipment at $196 per month which commence to
expire in 2000.
As of June 30, 2000, the minimum commitments under these leases are as follows:
December 31, Amount
2000 $4,722
2001 3,148
$7,870
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 net losses of $141,128
and $93,271 for six months ended June 30, 2000 and 1999; and as of June 30,
2000, the Company had accumulated deficit of $3,120,930, a working capital
deficiency of $637,745 and a deficit in net worth of $557,357.
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
New `Windows' based software for the Infrared/Video ENG System was first shown
at a major exhibition in Chicago in March 2000. Customers, both current and
future prospects, expressed enthusiasm for this revised product. The development
project is near completion with first shipment scheduled for late August 2000.
Our private label ENG business was very slow during May, June and into July, but
as of this writing, the orders have increased and appear to be on an upward
trend. Even with the temporary downturn in sales of the private label ENG
product, year to date revenues were still 3% ahead of last at $349,850 as
opposed to $341,205 for 1999.
Second quarter sales were $29,000 less than second quarter of 1999. Gross profit
percent on sales remains steady, but an extraordinary expense for consulting was
resolved in April by issuance of shares in lieu of cash payment. This affected
the profit/loss significantly by increasing our expenses for the quarter by
approximately $96,000.
This expense for financial and marketing consulting covered work done in the
last half of 1999 through April of 2000 in one instance and July through
December of 1999 in the other instance.
Operating profit was suitable as a percent of sales but not enough revenue was
generated to offset these extraordinary expenses. A loss of $113,056 was
recorded for the second quarter as opposed to a loss of $86,961 for the same
period in 1999.
We are currently evaluating various products for marketing in order to increase
sales , but with only a modest increase in fixed expenses.
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
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
(A) The following exhibits are included herein or incorporated by reference:
3(i)* Articles of Incorporation, as amended.
3(ii)* Bylaws
10.1* Employment Agreement, dated April 1, 1989
with Charles E. Phillips
10.2* Employment Agreement, dated December 1, 1989
with Barbara J. Mauch
10.3* Exclusive Licensing Agreement, dated November 1, 1989
with Ronald A. Waldorf
15 Letter On Unaudited Interim Financial Information
27 Financial Data Schedule
* Incorporated by reference from Amendment No. 1 to the Registration Statement
on Form 10-SB, filed on December 13, 1999.
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