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, 2001.
Commission File Number: 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) (City, state and ZIP)
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 of 1934 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,
2001 was 11,691,313.
Transitional Small Business Disclosure Format (check one) ( ) Yes (X) No.
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
Harold Y. Spector, CPA
80 South Lake Avenue, Suite 723
Pasadena, CA 91101
To the Board of Directors and Stockholders
Eye Dynamics, Inc.
Torrance, California
I have reviewed the accompanying consolidated balance sheet of Eye Dynamics,
Inc. (a Nevada corporation) and its wholly-owned subsidiary, Oculokinetics, Inc.
(a California corporation), as of March 31, 2001, and the related consolidated
statements of operations and cash flows for the three months ended March 31,
2001 and 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 Note 8 to the
consolidated financial statements, the Company's significant operating losses,
working capital deficiency and deficit in stockholders' equity raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 8. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Harold Y. Spector, CPA
Pasadena, California
May 7, 2001
3
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2001
ASSETS
Current Assets
Cash $ 35,620
Account Receivables 76,020
Employee Advance 49,489
Inventories 97,151
Unamortized Expense 4,000
----------
Total Current Assets 262,280
----------
Property and Equipment
Furniture and Fixtures 1,432
Equipment - Telemed 13,331
----------
14,763
Less: Accumulated Depreciation (10,931)
----------
Total Property and Equipment 3,832
----------
Other Assets
Deposits 13,239
----------
Total Other Assets 13,239
----------
TOTAL ASSETS $ 279,351
==========
The accompanying notes are an integral part of the financial statements
4
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2001
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable $ 48,170
Accrued Interest 279,630
Other Accrued Expenses 6,879
Income Taxes Payable 1,600
Line of Credit 9,931
Notes Payable, current Portion 417,249
------------
Total Current Liabilities 763,459
------------
Long-Term Liabilities 0
------------
Total Liabilities 763,459
------------
Stockholders' Deficit
Common Stock, $.001 par value,
50,000,000 shares authorized;
11,691,313 shares issued and
outstanding 11,691
Paid-in Capital 2,986,269
Accumulated Deficit (3,482,068)
------------
Total Stockholders' Deficit (484,108)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 279,351
============
The accompanying notes are an integral part of the financial statements
5
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For Three Months ended March 31, 2001 and 2000
2001 2000
------------- -------------
SALES $ 112,168 $ 205,562
COST OF SALES 44,569 102,651
------------- -------------
GROSS PROFIT 67,599 102,911
OPERATING EXPENSES 256,353 120,246
------------- -------------
LOSS FROM OPERATIONS (188,754) (17,335)
------------- -------------
OTHER INCOME (EXPENSES)
Interest Income 329 -
Interest Expense (9,711) (9,137)
------------- -------------
TOTAL OTHER INCOME (EXPENSES) (9,382) (9,137)
------------- -------------
LOSS BEFORE TAXES (198,136) (26,472)
PROVISION FOR INCOME TAXES 1,600 1,600
------------- -------------
NET LOSS $ (199,736) $ (28,072)
============= =============
Net Loss per share - Basic and Diluted $ (0.02) $ (0.00)
============= =============
Weighted Average Shares Outstanding 11,691,313 9,139,460
============= =============
The accompanying notes are an integral part of the financial statements
6
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months ended March 31, 2001 and 2000
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(199,736) $ (28,072)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 652 667
Issuance stock for investor relation 8,000 0
(Increase) Decrease in:
Accounts Receivable 82,454 54,123
Employee Advance (46,965) 0
Inventories (37,419) (4,930)
Prepaid Expenses and Others 66,469 2,671
Deposits (1,275) (405)
Increase (Decrease) in:
Accounts Payable 20,899 4,423
Accrued Expenses (4,678) 10,461
Income Tax Payable 1,600 1,600
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (109,999) 40,538
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing common stock 50,000 0
Net Proceeds from Line of Credit 9,931 0
Net Payments to Notes Payable 0 (23,192)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 59,931 (23,192)
---------- ----------
NET INCREASE (DECREASE) IN CASH (50,068) 17,346
BEGINNING OF PERIOD 85,688 50,580
---------- ----------
END OF PERIOD $ 35,620 $ 67,926
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 810 $ 0
========== ==========
Income Tax $ 0 $ 0
========== ==========
Noncash investing and financing activities:
Issuance of common stock for investor relation expense $ 8,000
==========
The accompanying notes are an integral part of the financial statements
7
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
position as of March 31, 2001, and the results of operations and cash flows for
the three months ended March 31, 2001 and 2000. 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, 2000.
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.
Reclassification
Certain reclassifications have been made to the 2000 consolidated financial
statements to conform with the 2001 consolidated financial statement
presentation. Such reclassification had no effect on net loss as previously
reported.
NOTE 2 - EMPLOYEE ADVANCE
The Company has made advances to and on behalf of an employee and the employee
has made repayments to the Company. The net receivable from the employee for
these advances was $49,489 on March 31, 2001. The Company converted these
advances into a note receivable as of April 2, 2001. The note bears interest at
12% per annum and is collateralized by 2,660,000 shares of capital stock of
Ingen Technologies, Inc., a privately held California corporation. The note is
due on demand.
8
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LINE OF CREDIT
The Company maintained a $65,000 operating line of credit with a 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 March 31, 2001, the balance due was
$9,931.
NOTE 4 - COMMON STOCK TRANSACTIONS
In January 2001, the Company completed a self-underwritten offering of 1,000,000
units, consisting of one share of common stock and two stock warrants at
exercise prices of $0.35 and $0.75 per share. The Company received an aggregate
of $200,000 in proceeds, of which $50,000 was received in year of 2001.
The Company issued 25,000 shares of common stock to a consultant as an incentive
for development and execution of an investor relations program for the period
from January 2001 through June 2001. The fair value of the stock at the time of
issue was $0.32 per share. The total cost of $8,000 was capitalized and
amortized over a six-month period. For three months ended March 31, 2001, $4,000
was charged to operations.
The Company also granted warrants to the consultant to purchase up to 200,000
shares of the Company's common stock. Exercised prices determined for the
warrants are 66,666 shares at $0.32 per share; 66,666 shares at $0.82 per share;
and 66,668 shares at $1.32 per share. The warrants will expire on January 3,
2004
NOTE 5 - 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 three
months ended March 31, 2001 and 2000 was $0.02 and $0.00, respectively. Net loss
per share does not include options and warrants as they would be anti-dilutive
in 2001 and 2000 due to the net loss in those periods.
NOTE 6 - 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 2001 or 2000,
and the Company has only one segment; accordingly, detailed information of the
reportable segment is not presented.
9
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTION
The Company had notes payable to the officers in the amount of $278 as of March
31, 2001. As of that date, balance of accrued interest related to the notes was
$65,143. Interest expense charged on these notes totaled $1,601 for three months
ended March 31, 2001.
NOTE 8 - 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 $199,736
and $28,072 for three months ended March 31, 2001 and 2000, and as of March 31,
2001, the Company had accumulated deficit of $3,482,068, a working capital
deficiency of $501,179 and a deficit in net worth of $484,108.
A plan commenced in late 2000 to publicize the Company's SafetyScope product.
Funds for this program were secured through equity financing as discussed in
Note 4. Additional financing will be required to implement a business plan that
address the final engineering, tooling and marketing costs to fully
commercialize the SafetyScope product. Management is currently seeking such
financing and is in discussion with several potential funding sources.
Management is also 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.
10
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The first quarter of 2001 saw an increase in publicity and awareness of the
SafetyScope product. Print, broadcast and internet exposure have brought
inquiries from interested parties from many parts of the world. This increased
exposure to the market is the first step in commercializing the product.
However, substantial financial resources will be required and a business
strategy and plan has been generated with the goal of raising three to five
million dollars in capital to fully implement the commercialization plan.
Initial contacts with financing sources have been made and discussions are
ongoing.
Revenue from medical product sales in the first quarter was $112,000, as opposed
to $206,000 for the same period in 2000. Two factors caused the reduced
revenues. The collapse of our private label ENG customer during the fourth
quarter of 2000 continued through the first quarter of 2001, with no purchases
at all. One of the principals of the private label customer formed a new company
and asked Eye Dynamics to supply product to him. An agreement was reached, and
the first purchase order for the revised product has been placed and will be
shipped in mid May, 2001. It is anticipated that this sales pattern will
increase to the level of the prior year, which averaged three systems monthly
and would, if sustained, be the annual equivalent of $300,000 in revenue.
The second factor was the overall economy and uncertainty in the first quarter
causing customers to defer purchases until comfort regarding economic stability
returned. Because our customers rely heavily on Medicare reimbursements for
revenue, the political change with a new President caused great concern
regarding the prospect of reduced Medicare reimbursements. This has been
clarified with a new Medicare reimbursement schedule for 2001, which includes a
modest increase. In the second quarter, it appears that certain purchase/sales
opportunities are now unfolding.
Competitors also report similar revenue reductions in the first quarter, so it
is reassuring that our marketing efforts and product configurations were not the
cause of the decreased revenues for the period.
Gross profit on sales for the quarter was 60%, which is improved from 50% for
the same period one year ago. But, sales being reduced by 45% from one year ago
did not allow adequate generation of gross profit, so an operating loss of
$39,207 was incurred. Also, an additional loss of $160,529 was recorded related
to the pre-commercialization publicity and marketing program for the SafetyScope
product. Total loss for the quarter was $199,736 compared to a $28,072 loss for
the same period in 2000.
We continue to search out and evaluate other products to bring into the company
to augment our revenues. However, none are currently in the offing that we have
found suitable. This search for new products is an ongoing project.
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
The Company is the obligor on an outstanding $400,000 promissory note payable to
a former distributor, and has certain obligations to the former distributor in
connection with the resale of certain inventory returned by the distributor. The
note bears interest at 7% per annum, and came due on December 31, 1999. As of
March 31, 2001, the total amount due, including the principal of the note,
accrued interest, and the obligations with respect to the returned inventory,
was $693,000. The Company is engaged in negotiations with the former distributor
concerning possible restructuring of the obligation, but the holder has not
declared a default or demanded payment. Settlement discussions include a
possible conversion of the obligations into common stock and a possible new
payment schedule based on revenues from the SafetyScope commercialization
project. When financing for the SafetyScope project is achieved, a final
definition of the settlement method will be decided between the company and the
former distributor.
11
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 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following exhibits are included herein or incorporated by reference:
15 Letter on Unaudited Interim Financial Information
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