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 SEPTEMBER 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
Check whether the issuer (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 (or 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 September
30, 2000 was 11,416,313.
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 September 30, 2000, and the related
consolidated statements of operations for the three and nine months ended
September 30, 2000, and cash flows for the nine months ended September 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 consists principally of inquiries 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 10 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. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The accompanying financial statements for the nine months ended September 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
--------------------------
Harold Y. Spector, CPA
Pasadena, California
October 30, 2000
2
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (Reviewed) and 1999 (Compiled)
ASSETS
2000 1999
-------------- --------------
Current Assets
Cash $ 53,310 $ 51,949
Certificate of Deposit 100,000 0
Account Receivables 95,153 88,540
Inventories 44,723 54,451
Prepaid Expenses and Others 1,815 0
-------------- --------------
Total Current Assets 295,001 194,940
-------------- --------------
Property and Equipment
Furniture and Fixtures 1,432 1,432
Equipment - Telemed 13,331 12,632
-------------- --------------
14,763 14,064
Less: Accumulated Depreciation (9,613) (6,910)
-------------- --------------
Total Property and Equipment 5,150 7,154
-------------- --------------
Other Assets
Receivable - Consigned Inventory 10,250 10,250
Consigned Inventory 41,000 51,250
Deposits 22,406 11,072
-------------- --------------
Total Other Assets 73,656 72,572
-------------- --------------
TOTAL ASSETS $ 373,807 $ 274,666
============== ==============
The accompanying notes are an integral part of the financial statements
3
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (Reviewed) and 1999 (Compiled)
LIABILITIES AND STOCKHOLDERS' DEFICIT
2000 1999
-------------- --------------
Current Liabilities
Accounts Payable $ 28,484 $ 64,145
Accrued Expenses 10,008 24,871
Accrued Interest 261,860 225,817
Consigned Inventory 61,500 61,500
Deposit from Shareholders 7,758 7,758
Line of Credit 0 12
Notes Payable, current Portion 406,999 430,191
-------------- --------------
Total Current Liabilities 776,609 814,294
-------------- --------------
Long-Term Liabilities
Long-term debt 0 0
-------------- --------------
Total Liabilities 776,609 814,294
-------------- --------------
Stockholders' Deficit
Common Stock, $.001 par value,
50,000,000 shares authorized;
11,416,313 shares issued and
outstanding in 2000, and 9,139,460
in 1999 11,416 9,139
Paid-in Capital 2,716,286 2,459,063
Accumulated Deficit (3,130,504) (3,007,830)
-------------- --------------
Total Stockholders' Deficit (402,802) (539,628)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 373,807 $ 274,666
============== ==============
The accompanying notes are an integral part of the financial statements
4
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For Three and Nine months ended September 30, 2000(Reviewed)
and 1999 (Compiled)
Three Months ended Nine Months ended
September 30, September 30,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
SALES $ 163,369 $ 260,723 $ 513,219 $ 601,928
COST OF SALES 65,460 114,196 232,814 279,491
-------------- -------------- -------------- --------------
GROSS PROFIT 97,909 146,527 280,405 322,437
OPERATING EXPENSES 98,652 117,624 322,652 365,421
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS (743) 28,903 (42,247) (42,984)
-------------- -------------- -------------- --------------
NONOPERATING EXPENSES
Interest Expenses (8,831) (9,327) (26,855) (29,111)
Consulting Expenses 0 0 (80,000) 0
-------------- -------------- -------------- --------------
Total Nonoperating Expenses (8,831) (9,327) (106,855) (29,111)
-------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE TAXES (9,574) 19,576 (149,102) (72,095)
PROVISION FOR INCOME TAXES 0 0 1,600 1,600
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (9,574) $ 19,576 $ (150,702) $ (73,695)
============== ============== ============== ==============
Net Loss per share - Basic $ (0.00) $ 0.00 $ (0.02) $ (0.01)
============== ============== ============== ==============
Weighted Average Shares
Outstanding - Basic 10,216,313 9,139,460 9,657,362 8,956,460
============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements
5
EYE DYNAMICS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH
FLOWS Nine months ended September 30, 2000 (Reviewed) and 1999 (Compiled)
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (150,702) $ (73,695)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 2,001 1,895
Issuance stock for consulting fee 90,000 33,125
(Increase) Decrease in:
Accounts Receivable 24,075 30,080
Inventories 5,360 5,812
Prepaid Expenses and Others 3,137 0
Consigned Inventory 10,250 0
Deposits (6,414) (4,931)
Increase (Decrease) in:
Accounts Payable (18,007) (28,383)
Accrued Expenses 16,222 (4,913)
-------------- --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (24,078) (41,010)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Certificate of Deposit (100,000) 0
-------------- --------------
NET CASH (USED) BY INVESTING ACTIVITIES (100,000) 0
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing common stock 150,000 93,750
Deposits from Stockholders 0 7,758
Payments to Line of Credit 0 (45,001)
Payments to Officers' Loan (23,192) 0
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 126,808 56,507
-------------- --------------
NET INCREASE (DECREASE) IN CASH 2,730 15,497
BEGINNING OF PERIOD 50,580 36,452
-------------- --------------
END OF PERIOD $ 53,310 $ 51,949
============== ==============
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 95 $ 1,560
============== ==============
Income Tax $ 1,600 $ 1,600
============== ==============
Noncash investing and financing activities:
Issuance of common stock for reduction in consulting
fee payable $ 19,500
==============
Issuance of common stock for stock offering commission:
Common Stock $ 1,000
Paid-in Capital (1,000)
--------------
$ 0
==============
The accompanying notes are an integral part of the financial statements
6
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 September 30, 2000 and 1999, and the results of operations for
the three months and nine months ended September 30, 2000 and 1999, and cash
flows for the nine months ended September 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 for 2000 or 1999.
Inventories
Inventories consist of finished goods and are stated at the lower of cost or
market, using the first-in, first-out method.
7
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 $2,001 and $1,895 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.
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 September 30, 2000
and 1999, the balance due was $0 and $12, respectively.
NOTE 3 - NOTES PAYABLE
Notes Payable consist of the following at September 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
8
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - NOTES PAYABLE (Continued)
2000 1999
-------------- --------------
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 - INCOME TAXES
Provision for income taxes in the consolidated statements of operations for nine
months ended September 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 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. The
Company's ability to utilize its net operating loss carryforwards is uncertain
and thus a valuation reserve has been provided against the Company's net
deferred tax assets.
NOTE 5 - PRIVATE PLACEMENT OFFERING
In August 2000, the Company conducted a self-underwritten offering of 1,000,000
units, consisting of one share of common stock and two stock warrants at $0.20
per unit. One warrant to be for purchase of one share of common stock at $.35
per share and the second warrant to be for purchase of one share of common stock
at $.75 per share. The warrants expire in one year after purchase of the above
described unit. As of September 30, 2000, the Company sold 750,000 units and
received $150,000 in proceeds.
NOTE 6 - COMMON STOCK TRANSACTIONS
In September 2000, the Company issued 1,000,000 shares of common stock to a
private placement agent as a stock offering commission (See Note 5). The cost
was deducted from the proceeds of the offering and charged to paid-in capital.
The Company also issued 50,000 shares of common stock at $.20 per share to a
consultant as an incentive for development and execution of a public relations
program. The total cost of $10,000 was charged to operations.
In April 2000, the Company issued 400,000 shares of common stock to a financial
advisor in the amount of $80,000 for his service rendered.
9
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
The Company also issued 76,853 shares to reduce a consulting fee payable of
$19,500.
In April 1999, the Company issued 88,833 shares of common stock to a consultant
in the amount of $45,333 for his service rendered.
NOTE 7 - STOCKS OPTIONS AND WARRANTS
As discussed in Note 5, the Company sold warrants in a private placement
offering to purchase up to 1,500,000 shares of common stock at exercise prices
of $.35 or $.75 per share. These warrants will expire in August 2001.
In February 2000, the Company granted 150,000 non-qualified stock options to
officers in lieu of salary at fifteen cents ($.15) per share through February
2003.
In 1999, the Company granted 30,000 non-qualified stock options to employees at
fifty-four cents ($.54) per share through September 2001.
There were 750,000 shares of options exercised at $.125 per share in 1999. None
were in 2000.
A summary of options and warrants outstanding as of September 30, 2000 is shown
as follows:
Exercise No. of shares Expiration
Price Outstanding Date
-------- ------------- ----------
$.75 750,000 8/2001
$.35 750,000 8/2001
$.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
-------------
3,810,000
=============
NOTE 8 - 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 nine
months ended September 30, 2000 and 1999 is $0.02 and $0.01, 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.
10
EYE DYNAMICS, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - 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,
all revenue was derived from the Company; accordingly, detailed information of
the reportable segment is not presented.
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 $150,702
and $73,695 for the nine months ended September 30, 2000 and 1999, and as of
September 30, 2000, the Company had an accumulated deficit of $3,130,504, a
working capital deficiency of $481,608, and a deficit in net worth of $402,802.
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's 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.
11
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The new 'Windows' based software for the Infrared/Video ENG System was first
shipped in late August. The delay in completing development and shipping
affected our sales in July and August as customers were waiting to take delivery
and/or place orders until the new software was released for shipment. Sales in
July and August were further affected by the seasonal slowness of the medical
capital equipment market during the summer months. After shipment of the new
software product commenced, September sales bounced back to almost $100,000 for
the month. Sales of this product remained strong in October, with shipments
exceeding $140,000 for that month. Nevertheless, sales for the three months
ended September 30, 2000 were only $163,000, compared to $260,000 in 1999 for
the same quarter.
Operating profit for the two comparative quarters was almost breakeven, with
only a $743 loss for the current period. Total income for the quarter was a loss
of $9,574 after taking into account non-operating expenses. Because of the lower
sales in the quarter, the year to date sales are $88,000 behind the same period
in 1999, or 15% lower than in 1999.
Management believes that strong October sales are indicative of good fourth
quarter.
With funds from the private placement, we have begun a wide-ranging program to
market and publicize our Impairment Detection device, formerly known as the
EPS-100. It has been renamed the "SafetyScope", a brand which better
communicates its function and potential.
Our private label ENG business was also slow during the third quarter, but has
improved with shipments of three systems in each of September and October. In
addition, our customer is forecasting 5 to 7 systems each month for November and
December.
We continue to evaluate various opportunities to augment our current product
line. We have looked at many items, but have not found anything yet that is
suitable. This search will continue throughout the year.
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
During the period the Company conducted a private placement of 750,000 units,
each unit consisting of one share of common stock and two stock purchase
12
warrants. The units were issued at $0.20 per unit. The first warrant entitles
the holder to purchase one share of common stock at $.35 per share, and the
second warrant entitles the holder to purchase one share of common stock at $.75
per share. The warrants expire one year after issuance. The gross proceeds of
the issuance of the units were $150,000. The Company also issued 1,000,000
shares of common stock to a private placement agent as a fee for conducting the
private placement.
The Company also issued 50,000 shares of common stock to a consultant as an
incentive for development and execution of a public relations program.
The Company believes each of the foregoing issuances was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended
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 5. OTHER INFORMATION
Not applicable
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
(B) No reports on Form 8-K were filed during the period
SIGNATURES
In accordance with the requirements 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