U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-27561
EYECITY.COM, INC.
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 11-3327465
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
79 Express Street, Plainview, New York 11803
(Address of Principal Executive Offices)
(516) 822-5000
(Issuer's Telephone Number, Including Area Code)
Indicate by checkmark 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 (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 |_|
As of May 9, 2000, there were outstanding 10,910,681 shares of the
issuer's common stock, $.001 par value per share.
<PAGE>
EYECITY.COM, INC. AND SUBSIDIARIES
FORM 10-QSB
THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements:
Consolidated Balance Sheet .......................................... 2
Consolidated Statements of Operations ............................... 3
Consolidated Statements of Cash Flows ............................... 4
Notes to Consolidated Financial Statements .......................... 5
Item 2. Management's Discussion and Analysis
or Plan Of Operation .............................................. 6
Part II - OTHER INFORMATION
Item 1. Legal proceedings .................................................. 12
Item 2 Sales of Unregistered Securities.................................... 12
SIGNATURES ................................................................. 13
1
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EYECITY.COM, INC. AND SUBISDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
MARCH 31, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 236,316
Accounts receivable, net of allowance of $9,150 25,650
Inventories 428,521
Prepaid expenses and other current assets 194,032
-----------
Total current assets 884,519
Property and equipment, net of accumulated
depreciation of $69,626 353,517
Intangibles, net of accumulated
amortization of $1,457,139 3,635,665
Website development costs 124,750
Security deposits 12,523
-----------
Total assets $ 5,010,974
===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 736,309
Accrued payroll and related taxes 59,576
Deferred salaries to officers 263,804
Current portion of capital lease obligations 25,367
Current portion of notes payable 1,123,637
Current portion of subordinated convertible promissory notes 33,333
-----------
Total current liabilities 2,242,026
Capital lease obligations, less current portion 65,397
Subordinated convertible promissory notes, less current portion 166,667
-----------
Total liabilities 2,474,090
-----------
Stockholders' equity:
Preferred stock - $.001 par value: authorized, 1,000,000
shares: no shares issued and outstanding --
Common stock - $.001 par value: 20,000,000 shares authorized,
10,829,181 shares issued and outstanding 10,829
Additional paid-in capital 9,863,731
Accumulated deficit (7,307,279)
Unamortized compensation component of stock options (30,397)
-----------
Total stockholders' equity 2,536,884
-----------
Total liabilities and stockholders' equity $ 5,010,974
===========
See accompanying notes.
2
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EYECITY.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------
2000 1999
---------- --------
Net revenues $ 615,431 $ 71,138
Cost of revenues 422,207 24,128
---------- --------
Gross profit 193,224 47,010
---------- --------
Operating expenses:
Marketing and sales 85,624 50,633
General and administrative 743,856 374,454
Depreciation and amortization 445,616 16,065
Technology and development 82,349 --
---------- --------
Total operating expenses 1,357,445 441,152
---------- --------
Operating loss (1,164,221) (394,142)
---------- --------
Other income (expense):
Interest and investment income 2,515 --
Interest expense (71,772) (9,442)
---------- --------
Net other expense (69,257) (9,442)
---------- --------
Net loss $ (1,233,478) $ (403,584)
============ ===========
Basic and diluted net loss
per common share $ (.12) $ (.09)
============ ===========
Shares used in the calculation of basic
and diluted net loss per common share 10,060,349 4,606,444
============ ===========
See accompanying notes.
3
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EYECITY.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
2000 1999
----------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,233,478) $(403,584)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 445,616 16,065
Provision for doubtful accounts -- (250)
Amortization of discount 61,876 --
Amortization of compensation component of stock options 37,099 101,859
Issuance of stock for consulting services 30,000 20,000
Changes in operating assets and liabilities:
Accounts receivable (868) (1,527)
Inventories 59,719 17,125
Prepaid expenses and other current assets (102,381) (9,097)
Accounts payable and accrued expenses (505,167) (10,286)
Accrued payroll and related taxes (12,993) 2,545
Deferred salary to officers (62,734) 50,000
----------- ---------
Net cash used in operating activities (1,283,311) (217,150)
----------- ---------
Cash flows from investing activities
Capitalized website development costs (108,750) --
Purchases of property and equipment (15,845) (18,295)
Security deposits (4,264) --
----------- ---------
Net cash used in investing activities (128,859) (18,295)
----------- ---------
Cash flows from financing activities
Repayment of convertible subordinated notes -- (25,000)
Repayment of notes payable (3,000) --
Repayment of financed insurance (18,972) --
Proceeds from issuance of common stock, net of expenses 1,502,950 250,000
Repayment of capital lease obligations (7,647) --
----------- ---------
Net cash provided by financing activities 1,473,331 225,000
----------- ---------
Net increase in cash and cash equivalents 61,161 (10,445)
Cash and cash equivalents at beginning of year 175,155 224,748
----------- ---------
Cash and cash equivalents at end of period $ 236,316 214,303
----------- ---------
Supplemental disclosures
Cash paid for interest $ 12,148 $ 9,442
=========== =========
</TABLE>
See accompanying notes.
4
<PAGE>
EYECITY.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 2000
1. Basis of Presentation
The interim financial statements furnished reflect all adjustments which are, in
the opinion of management, necessary to present a fair statement of the
financial position and results of operations for the three month periods ended
March 31, 2000 and 1999. The financial statements should be read in conjunction
with the summary of significant accounting policies and notes to financial
statements included in the Company's Form 10-KSB for the fiscal year ended
December 31, 1999. The results of operations for the three months ended March
31, 2000 are not necessarily indicative of the results to be expected for the
full year.
2. Stockholders' Equity
During the three months ended March 31, 2000, EyeCity sold 1,610,500 shares of
its common stock to several investors at a price of $1.00 per share resulting in
proceeds of $1,610,500.
During the three months ended March 31, 2000, EyeCity issued 125,750 shares of
its common stock with a value of $125,750 in exchange for legal and consulting
services.
During the three months ended March 31, 2000, holders converted $125,000 of
subordinated convertible promissory notes into 100,000 shares of EyeCity common
stock.
3. Subsequent Events
Subsequent to March 31, 2000, EyeCity extended the maturity date of a promissory
note issued by EyeCity in connection with the acquisition of Peeper's Sunglasses
and Accessories, Inc. ("Peeper's") to June 8, 2000. As consideration for the
extension, EyeCity paid $25,000 in principal and $3,438 in interest on May 9,
2000 and agreed to pay equal amounts of principal and interest on May 24, 2000.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
This report contains certain forward looking statements, which may involve known
and unknown material risks, uncertainties and other factors not under EyeCity's
control including without limitation its ability to operate as a going concern,
the need for additional financing, the impact of competition, the management of
growth, compliance with applicable regulatory requirements, EyeCity's ability to
implement its long term business plan for acquiring complementary businesses and
EyeCity's ability to enter into agreements with marketing or distribution
partners, which may cause actual results, performance and achievements of
EyeCity to be materially different from EyeCity's expectations.
The following is intended to update the information contained in EyeCity's
Annual Report on Form 10-KSB for the year ended December 31, 1999 and presumes
that readers have access to, and will have read, "Management's Discussion and
Analysis or Plan of Operation" contained in such Form 10-KSB.
General
EyeCity is engaged in the online marketing, distribution and retail sale
over the Internet of a broad range of eyewear products and optical accessories,
including brand name sunglasses, contact lenses, binoculars, prescription
eyewear, telescopes, sports and lifestyle eyewear, and hunting glasses. The
United States optical product market is estimated at $15.8 billion for 1998.
EyeCity has effected an acquisition strategy within the highly fragmented
Internet optical industry, and in 1999 closed on the acquisition of three
companies retailing optical products over the Internet. Through this strategy,
as well as internal expansion, EyeCity intends to become the leading retailer of
eyewear and optical accessories on the Internet, providing one-stop shopping for
domestic and international customers in an easy-to-shop environment, 24 hours a
day, seven days a week. EyeCity intends to acquire additional complementary
businesses as opportunities arise from time to time.
In addition, EyeCity recently announced that it intends to offer later
this year turnkey business-to-business-to-consumer ("B2B2C") e-commerce store
design and fulfillment services to professional eye care providers including
ophthalmologists, optometrists, and opticians who want to create their own
customized online stores, providing full e-commerce capabilities for their
patients and customers. Subject to obtaining appropriate financing, EyeCity
plans to provide the tools and systems necessary for eye care providers to
function in the e-commerce markets, including, merchandise selection and
sourcing, storefront creation, hosting, advertising, customer service, credit
card processing and fulfillment services.
EyeCity's B2B2C e-commerce model is intended to help such eye care
providers retain customer relationships and increase sales. Unlike traditional
affiliate programs that refer customers to other web sites to shop, EyeCity's
B2B2C program is intended to enable eye care providers to drive traffic to their
own stores, thereby building loyalty and repeat sales. With EyeCity's e-commerce
service, such eye care providers will be able to customize their online store to
the unique interests of their audience. Products offered for sale would be
available through EyeCity's extensive database, with transaction processing that
creates a single unified shopping experience that is seamless to the customer.
6
<PAGE>
Overview
From EyeCity's inception through December 1998, its business strategy
primarily focused on becoming a leading producer, distributor and marketer of
ergonomic computer eyewear products designed to alleviate health related
problems associated with Computer Vision Syndrome and, to a lesser extent, on
becoming a leading producer, distributor and marketer of Foggles(R) branded
optical products designed for the aviation, hunting and shooting industries.
In January 1999, EyeCity refocused its business strategy to capitalize on
the Internet retailing opportunities associated with the optical product
industry. In this regard, EyeCity acquired EyeGlassPlace.com, Inc., Peeper's
Sunglasses and Accessories, Inc. and SunSource Technology, Inc. in March 1999,
May 1999 and June 1999, respectively. In connection with these acquisitions,
EyeCity recorded goodwill of approximately $4.2 million which will be amortized
over three years from the dates of such acquisitions. In addition, in September
1999 EyeCity acquired certain assets of Impact Eyewear, LLC, including a
non-exclusive license from Yahoo! Inc. to use the "Yahoo!" name and logo for the
distribution and marketing of eyewear and eyewear accessories throughout the
United States, and recorded an intangible asset in the amount of $646,000 which
will be amortized over three years from the closing. In August 1999, EyeCity
caused its EyeGlassPlace.com and SunSource subsidiaries to be merged into its
Peeper's subsidiary (references herein to the performance of EyeCity's Peeper's
subsidiary give effect to this merger).
EyeCity has incurred substantial losses and has had significant negative
cash flow since its inception. The independent auditor's report included in
EyeCity's Form 10-KSB for the year ended December 31, 1999 included an
explanatory paragraph regarding substantial doubt about EyeCity's ability to
continue as a going concern without additional financing due to recurring losses
from operations and a working capital deficiency. Although EyeCity has obtained
financing in the past, EyeCity will require additional funding to cover current
operations, repay indebtedness and enable it to fund its business plan. EyeCity
is currently seeking additional financing, but there is no assurance that such
financing will be sufficient or available, or if available, will be available on
acceptable terms.
Although EyeCity was formed in May 1996, it only initiated its current
business plan for online retail distribution of optical products in the first
quarter of 1999. Further, EyeCity only closed on the acquisitions forming the
core components of this current business during the second quarter of 1999.
EyeCity's SuperSite, www.eyecity.com was launched in April 2000. As a result,
there is only limited current relevant financial and operating information
available to evaluate an investment in EyeCity's common stock. In addition,
EyeCity's limited operating history and recent growth in net sales since
implementing its acquisition strategy make it difficult to forecast future
operating results and reduce the relevance of historical annual and
quarter-to-quarter comparisons.
EyeCity cannot predict whether the recent rate of growth in annual net
sales will decrease in future periods, which could have an adverse effect on
EyeCity's performance to the extent significant anticipated increased expenses
do not generate commensurate increases in sales.
In this regard, EyeCity expects to continue to incur significant losses as
a result of, among other things, substantially higher general and administrative
expenses attributable to growth in overhead as EyeCity expands its business, and
increased depreciation and amortization expense attributable to its
acquisitions. In addition, in order to promote EyeCity's brand, it will need to
increase its marketing expenditures and otherwise increase its financial
commitment to creating and maintaining brand loyalty among users, which will
further adversely affect profitability. There can be no assurance that
7
<PAGE>
EyeCity will be able to obtain requisite financing or achieve profitability.
EyeCity's gross profits on sunglasses are significantly higher than its
gross profit on its other products. As EyeCity implements its business plan to
increase the scope of its product offerings, to the extent sales of such other
products become a greater portion of total sales, EyeCity's gross profits could
be adversely affected.
Results of Operations
Net revenues for the three months ended March 31, 2000 were approximately
$615,000 as compared to net revenues in the same 1999 period of approximately
$71,000. The increase in revenues of approximately $544,000 is principally
attributable to the acquisitions of Peeper's in May 1999, and SunSource
Technology, Inc. ("SunSource") in June 1999. Peeper's and SunSource are online
optical product retailers whose aggregate revenues in the quarter ended March
31, 2000 were approximately $565,000.
Cost of revenues for the three months ended March 31, 2000 were
approximately $422,000 as compared to approximately $24,000 in the same 1999
period. The increase of approximately $398,000 is due primarily to costs
associated with increased sales volume and costs associated with product sales
by Peeper's.
Gross profit amounted to approximately $193,000 in the three months ended
March 31, 2000 (31.4% of net revenues) as compared to approximately $47,000 in
the same 1999 period (66.2% of net revenues). The dollar increase was primarily
due to increased sales levels. The percentage decrease was attributable to the
higher margins on the ergonomic computer eyewear products (constituting
substantially all of sales for the quarter ended March 31, 1999) as compared to
the lower margin on the sunglasses and other eyewear products (constituting
substantially all sales for the quarter ended March 31, 2000).
General and administrative expenses were approximately $744,000 in the
three months ended March 31, 2000 as compared to approximately $374,000 in the
same 1999 period. The overall increase is principally attributable to increases
in salaries and related expenses of $273,000. These salary increases are
primarily due to an increase in headcount.
Depreciation and amortization expenses were approximately $446,000 in the
three months ended March 31, 2000 as compared to approximately $16,000 in the
same 1999 period. The increase is principally attributable to amortization of
goodwill and other intangible assets resulting from various acquisitions
including Peeper's and SunSource.
Technology and development expenses were approximately $82,000 in the
three months ended March 31, 2000. There were no expenses related to technology
and development in the same 1999 period. This expense is associated with the
development of the eyecity.com SuperSite.
Interest expense was approximately $72,000 in the three months ended March
31, 2000 as compared to approximately $9,000 in the same 1999 period. This
increase is primarily related to the accretion recorded on the discount of the
non-interest bearing promissory notes issued in conjunction with the
acquisitions of Peeper's and SunSource. See "Liquidity and Capital Resources".
8
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Liquidity and Capital Resources
EyeCity believes that its currently available funds will be sufficient to
meet its anticipated working capital needs through at least May 2000.
Thereafter, EyeCity will need to raise substantial additional funds to implement
anticipated capital expenditures and business expansion and repay indebtedness
due in the second quarter of fiscal 2000.
Historically, EyeCity has financed its cash requirements primarily through
private placements of its securities. As of March 31, 2000, EyeCity has raised
gross proceeds of $1.0 million in a 1997-1998 offering of shares of its common
stock and gross proceeds of $4,397,500 in private placements of its common stock
in 1999-2000. The proceeds of the private placements are being or have been used
to complete the acquisitions of Peepers.com, Binoculars.com, EyeGlassPlace.com,
SunglassSite.com, OpticalSite.com, Abeam.com and certain assets of Impact
Eyewear, to build the eyecity.com SuperSite, for initial marketing and
advertising of the SuperSite, as well as general corporate purposes.
During 1998, EyeCity issued $362,500 of subordinated convertible
promissory notes. The notes bear interest at a rate of 10% per annum, payable
quarterly, commencing January 1, 1999. The notes are convertible into EyeCity's
common stock at a price of $1.25 per share at the option of the holder at any
time after October 1, 1999 (the "Conversion Date"). EyeCity has the right to
call, redeem and prepay the notes if the market price of EyeCity's common stock
equals or exceeds $2.50 per share for ten consecutive trading days at any time
after the Conversion Date. The notes are repayable in twelve quarterly principal
payments commencing on October 1, 2000. In March 1999, $25,000 of the notes was
repaid prior to maturity. In October 1999, $12,500 of the notes were converted
into 10,000 shares of common stock and on March 30, 2000, $125,000 of the notes
were converted into 100,000 shares of common stock.
A portion of the consideration paid by EyeCity in connection with its
acquisitions of Peeper's and SunSource was in the form of promissory notes in
the amounts of $875,000 and $212,500, respectively. The $875,000 note accrues no
interest, is secured by certain assets formerly owned by Peeper's and is
immediately due and payable on the earlier of May 7, 2000 or the consummation by
EyeCity of a public financing transaction which results in gross proceeds in
excess of $10,000,000. The $212,500 note accrues no interest, is unsecured and
is immediately due and payable on the earlier of June 30, 2000 or the
consummation by EyeCity of a public financing transaction which results in gross
proceeds in excess of $10,000,000. Subsequent to March 31, 2000, EyeCity
extended to June 8, 2000 the maturity date of a promissory note issued by
EyeCity in connection with the acquisition of Peeper's. As consideration for the
extension, EyeCity paid $25,000 in principal and $3,438 in interest on May 9,
2000 and agreed to pay equal amounts of principal and interest on May 24, 2000.
There can be no assurance that EyeCity will have available funds to satisfy
these notes at maturity, in which event the holder of the note could claim that
EyeCity is in breach of its obligations. Such holder could commence proceedings
against EyeCity, including seeking to foreclose on the note collateral
(including the domain names, toll-free phone numbers, contract rights, website
content and certain intellectual properties formerly owned by Peeper's and
acquired by the Company in the Peeper's acquisition), which would have a
material adverse affect on EyeCity's operations.
9
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For the three months ended March 31, 2000, EyeCity used approximately
$1,283,000 in connection with its operating activities, principally to fund its
net loss before non-cash charges of approximately $659,000, as well as increases
in operating assets such as prepaid expenses and decreases in operating
liabilities such as accounts payable and accrued expenses.
For the three months ended March 31, 2000, net cash used in investing
activities approximated $129,000. This is primarily attributable to cash paid
for the development of the website and the purchase of property and equipment.
For the three months ended March 31, 2000, net cash provided by financing
activities approximated $1,473,000, primarily from the sale of common stock
As of March 31, 2000, EyeCity had approximately $236,000 of cash and cash
equivalents. As of March 31, 2000, EyeCity's principal commitments consisted of:
o non-interest bearing promissory notes issued to sellers in
connection with prior acquisitions by EyeCity in the aggregate
amount of $1.1 million which mature at the earlier of dates ranging
from May 7, 2000 (which maturity date was, subsequent to March 31,
2000, amended to June 8, 2000) to June 30, 2000 or consummation by
EyeCity of a public financing transaction or transactions for gross
proceeds in excess of $10,000,000;
o $200,000 of 10% subordinated convertible promissory notes, due
October 1, 2003;
o $264,000 of deferred salary for officers. Included in this amount is
deferred salaries owed to Mark Levin of $120,500, Mark Suroff of
$120,500 and Daniel Thralow of $23,000;
o $8,000 outstanding on a non-interest bearing note issued in
connection with the acquisition of certain patent display technology
payable in equal monthly installments commencing June 15, 1999;
o obligations outstanding under operating leases; and
o obligations outstanding under capital leases.
As of March 31, 2000, EyeCity had a working capital deficiency of
approximately $1,357,000. EyeCity expects that it will need to raise in the near
term approximately $1,500,000 to satisfy its current obligations, an additional
amount of approximately $500,000 for it to continue its current operations
through June 2000, and approximately $1,500,000 to further fund its business
plan. There is no assurance that such funds will be available, or if available,
will be available on terms satisfactory to EyeCity. If EyeCity raises additional
funds through the issuance of equity or convertible debt securities, the
percentage ownership of its current stockholders will be reduced, its
stockholders may experience additional dilution and such securities may have
rights, preferences and privileges senior to those of its common stock. There
can be no assurance that additional financing will be available on terms
favorable to EyeCity or at all. If adequate funds are not available or are not
available on acceptable terms, EyeCity may not be able to meet its financial
obligations or to continue to implement its business plan. This inability could
have a material adverse effect on EyeCity's business, results of operations and
financial condition.
Seasonality
EyeCity believes that its results of operations are somewhat seasonal in
nature, with the highest volume of purchases by consumers occurring in the
second and fourth quarters. EyeCity's limited operating history makes it
difficult to fully assess the impact of seasonality or whether or not EyeCity's
business is susceptible to cyclical fluctuations in the U.S. economy. In
addition, EyeCity believes that
10
<PAGE>
its rapid growth may have overshadowed whatever seasonal or cyclical factors
might have influenced its business to date. EyeCity intends to expense all
advertising costs, including all direct-mail advertising costs, when the
advertising first takes place. As a result, quarter-to-quarter comparisons will
be impacted by the timing of advertisements and related expenses within and
between quarters. There can be no assurance that seasonal or cyclical variations
in EyeCity's operations will not become more pronounced over time or that they
will not materially adversely affect its results of operations in the future.
Impact of Year 2000
EyeCity is not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the products and
services of third parties. EyeCity will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.
11
<PAGE>
Part II - OTHER INFORMATION
Item 1. - Legal proceedings
EyeCity is not aware of any material adverse claims regarding any of its
trademarks or domain names with the exception of its "Peeper's" mark and
peepers.com domain name. Rights in this mark and domain name have been
challenged in an action now pending entitled American Eyewear, Inc. v. Peeper's
Sunglasses and Accessories, Inc. and EyeCity.com, Inc. which was commenced in
July 1999 in the United States District Court for the Northern District of
Texas. Peeper's and EyeCity have moved to dismiss the action. The motion is now
pending. EyeCity has substantial defenses and may counter-claim to limit
American Eyewear's claimed rights in the trademark Peeper's. The parties are
also discussing settlement. It is premature to assess the likely outcome of the
proceeding.
A wholly owned subsidiary of EyeCity, Peeper's was named as a defendant in
an action entitled Oakley, Inc. v. Peeper's Sunglasses & Accessories Inc. and
Son Dad Boards Ltd. d/b/a Freestyle of Duluth and Larry Leege, which was
commenced in October 1999 in the Superior Court of California, Orange County.
This action, which is principally a contract claim against the third parties,
Son Dad Boards Ltd. and Larry Leege, also alleges that Peeper's interfered with
the plaintiff's contractual relationship with these third parties when it
purchased sunglasses from them and then re-sold the merchandise. Peeper's
believes the claim against it has no merit and has moved to dismiss the action
against it. However, it is premature to assess the likely outcome of the
proceeding.
Item 2 - Sales of Unregistered Securities
During the three months ended March 31, 2000 EyeCity privately sold
1,610,500 shares of its common stock to 50 investors in unrelated transactions.
These shares were sold for $1 per share, for a total offering price of
$1,610,500. In connection with the sale of $1,075,500 of these shares, EyeCity
paid to James J. Armenakis a commission equal to $107,550 and will issue options
to purchase 107,550 shares of EyeCity common stock at an exercise price of $1.00
per share under EyeCity's 1999 Stock Option Plan. EyeCity relied on exemptions
from registration under Section 4(2) of the Securities Act of 1933. Each of
these investors represented that he or she was an accredited investor as defined
under securities laws.
12
<PAGE>
Signatures
Pursuant to the requirements 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.
EYECITY.COM, INC.
May 15, 2000 By: /s/ Mark H. Levin
------------------------------------
Mark H. Levin, President,
Chief Executive Officer
(principal executive officer)
and Director
13
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 236,316
<SECURITIES> 0
<RECEIVABLES> 34,800
<ALLOWANCES> (9,150)
<INVENTORY> 428,521
<CURRENT-ASSETS> 884,519
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