U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from .............to............
Commission file number 0-15324
EYE TECHNOLOGY, INC.
Name of Small Business Issuer in its Charter
Delaware 52-1402131
(State or Other Jurisdiction) (I.R.S. Employer I.D. No.)
1983 Sloan Place, St. Paul, Minnesota 55117
(Address of Principal Executive Offices)
(612) 774-9060
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to File such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ____ No __x__
Number of shares of Common Stock, $.01 par value, outstanding as of September
18, 1996: 3,438,656
Eye Technology, Inc.
Condensed Consolidated Balance Sheets
For the Period Ending, June 30, 1996
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ------------
ASSETS
Current Assets:
Cash $ 23,598 $ 5,649
Accounts receivable, net 348,513 472,695
Inventory 979,538 1,085,867
Prepaid expenses and deposits 36,367 39,781
----------- -----------
Total Current Assets 1,388,016 1,603,992
Property and Equipment:
Machinery and equipment 487,296 641,080
Office equipment and furniture 415,135 272,158
Leasehold improvements 39,838 39,838
----------- -----------
942,269 953,076
Less: Accumulated Depreciation (852,482) (859,108)
-----------
Property and Equipment, net 89,787 93,968
Other Assets:
Purchased technology 600,014 635,508
Other assets 9,874 25,009
----------- -----------
Total Other Assets 609,888 660,517
----------- -----------
Total Assets $ 2,087,691 $ 2,358,477
=========== ===========
See accompanying notes to the condensed consolidated balance sheets.
<TABLE>
<CAPTION>
Eye Technology, Inc.
Condensed Consolidated Balance Sheets
For the Period Ending, June 30, 1996
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ---------
LIABILITIES
<S> <C> <C>
Current Liabilities:
Notes payable $ 178,874 $ 0
Current portion of long-term debt 597,688 897,480
Notes payable-related party 160,000 152,000
Accounts payable-trade 572,510 598,306
Accrued liabilities:
Professional fees 510,934 466,664
Compensation 176,449 151,647
Commissions 254,372 202,596
Other 137,915 230,049
Deferred revenue 80,000 0
----------- -----------
Total Current Liabilities 2,668,742 2,698,742
Long-term debt net of current 82,248 73,920
Convertible preferred stock 257,000 257,000
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock 34,387 34,387
Additional paid-in capital 8,777,505 8,777,505
Retained earnings (deficit) (9,732,191) (9,483,077)
----------- -----------
Total Stockholders' Deficit (920,299) (671,185)
----------- -----------
Total Liability and Stockholders' Equity $ 2,087,691 $ 2,358,477
=========== ===========
See accompanying notes to the condensed consolidated balance sheets.
</TABLE>
Eye Technology, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
Three Month Period Ended June 30,
1996 1995
---------------------------------
Net sales $ 574,174 $ 1,127,832
Cost of goods sold 220,436 400,321
----------- -----------
Gross Profit 353,738 727,511
Operating Expenses:
Sales and marketing 210,147 478,900
General and administrative 276,054 333,311
Research and Development 3,085 42,383
----------- -----------
Total Operating Expenses 489,286 854,594
----------- -----------
Operating Loss (135,548) (127,083)
Other (Income) Expense:
Equity loss of joint venture 0 17,189
Interest expense, net 34,786 48,258
Other (income) expenses (7,195) (25,776)
----------- -----------
Total Other (Income) Expenses $ 27,591 $ 39,671
----------- -----------
Net Loss $ (163,139) $ (166,754)
=========== ===========
Net loss per common share $ (0.05) $ (0.05)
=========== ===========
Weighted average common shares outstanding 3,438,656 3,401,156
=========== ===========
See accompanying notes to the condensed consolidated balance sheets.
Eye Technology, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
Six Month Period Ended June 30,
1996 1995
-------------------------------
Net sales $ 1,292,611 $ 2,255,130
Cost of goods sold 476,247 786,571
----------- -----------
Gross Profit 816,364 1,468,559
Operating Expenses:
Sales and marketing 495,055 919,206
General and administrative 546,012 685,213
Research and Development 18,487 88,004
----------- -----------
Total Operating Expenses 1,059,554 1,692,423
----------- -----------
Operating Loss (243,190) (223,864)
Other (Income) Expense:
Equity loss of joint venture 0 17,189
Interest expense, net 73,668 84,697
Other (income) expenses 3,987 (26,498)
----------- -----------
Total Other (Income) Expenses $ 77,655 $ 75,388
----------- -----------
Net Loss $ (320,845) $ (299,252)
=========== ===========
Net loss per common share $ (0.09) $ (0.09)
=========== ===========
Weighted average common shares outstanding 3,438,656 3,401,156
=========== ===========
See accompanying notes to the condensed consolidated balance sheets.
<TABLE>
<CAPTION>
Eye Technology, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Six Month Period Ended June 30,
1996 1995
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(320,845) $(299,252)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 79,328 108,504
Write-off of investment in joint venture 0 0
Equity in loss of joint venture 0 17,189
Gain on disposal of property and equipment 0 0
Change in current assets and liabilities:
Accounts receivable 124,182 213,407
Inventories 106,329 150,978
Prepaid expenses and other 18,551 (16,599)
Accounts payable and accrued liabilities (3,415) 42,769
--------- ---------
Net cash provided by operating activities 4,130 216,996
Cash flows from investing activities:
Purchase of property and equipment, net 0 (10,075)
Proceeds from disposal of property & equipment 5,819 0
Investments in and advances to joint ventures 0 (2,500)
--------- ---------
Net cash used by investing activities 5,819 (12,575)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,000 52,000
Repayment of long-term debt and notes payable 0 (378,615)
--------- ---------
Net cash (used in) provided by financing activities 8,000 (326,615)
--------- ---------
Net increase (decrease) in cash 17,949 (122,194)
Cash, beginning of period 5,649 142,626
--------- ---------
Cash, end of period $ 23,598 $ 20,432
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 44,150 $ 71,651
========= =========
Supplemental disclosure of non-cash activity:
Issuance of debt in satisfaction of accounts payable
and accrued liabilities $ 0 $ 190,075
========= =========
Present value of debt payments to purchase equipment $ 0 $ 28,939
========= =========
See accompanying notes to the condensed consolidated balance sheets.
</TABLE>
EYE TECHNOLOGY, INC
Notes To Unaudited Condensed Consolidated Financial Statements
Note 1
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary for the fair presentation of results for the interim
period. These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations, although the Company believes
that the disclosures made are adequate to make the information presented not
misleading. The Company's annual report on Form 10-KSB should be read in
conjunction with these financial statements.
The results of operations for the six month period ended June 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
Note 2 Accounting Policies and Procedures
Earnings (loss) per common share is computed based upon the weighted average
number of common shares outstanding during the period. Common equivalents have
been excluded from the computation as their effect would be antidilutive. Income
(loss) per share computed on a fully diluted basis would not have been
significantly different than the amounts presented in the accompanying
condensed consolidated financial statements.
Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources
As reflected in the accompanying financial statements, the Company has incurred
losses from operations and has a net capital deficiency. In addition, the
limited availability of additional working capital under the Company's line of
credit facility indicates uncertainty as to whether current financing
arrangements will be sufficient to fund current operations and financial
commitments. The Company has significant current debt obligations and is in
default on payments to various entities. Also, the Company is in technical
default on its obligations in conjunction with the purchase of technology.
Management continues to pursue various financing alternatives, but there can be
no assurance that the Company will be successful in these initiatives. These
matters raise substantial doubt about the Company's ability to fund operations
and financial commitments and to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amounts and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
Results of Operations - Three months ended June 30, 1996 and 1995
Net sales for the three month period ended June 30, 1996, were $574,174; a
decrease of $553,658 (49%) below sales of $1,127,832 for the three month period
ended June 30, 1995. In the quarter ended June 30, 1996, 84% of the Company's
sales were in the domestic market and 16% were in the international market. This
compares to a market mix of 72% domestic sales and 28% international sales for
the quarter ended June 30, 1995.
Sales of intraocular lenses comprised 95% of net sales during the second quarter
of 1996. Sales of intraocular lenses to domestic customers decreased 39%
compared with the second quarter of 1995, due to a 16% decrease in the average
sales price and a 54% decrease in unit sales. The Company continued to
experience a reduced average sales price as a result of competitive price
pressures from the larger companies in the industry who are offering substantial
price reductions in order to capture larger market share.
Sales of intraocular lenses to international customers during the second quarter
of 1996, decreased 69% compared with the second quarter of 1995. The decrease in
foreign sales is a result of a lower average sales price and lower unit sales.
The Company also distributes surgical instruments and related equipment for
kerato-refractive surgery. Sales generated by these products accounted for
approximately 5% and 12% of net sales during the second quarter of 1996 and
1995, respectively. In 1996, such sales were primarily derived from the
microkeratome unit which the Company began selling in May 1994.
Results of Operations - Six months ended June 30, 1996 and 1995
Net sales for the six month period ended June 30, 1996, were $1,292,611; a
decrease of $962,519 (43%) below sales of $2,255,130 for the six month period
ended June 30, 1995.
Sales of intraocular lenses comprised 89% of net sales during the first six
months of 1996. Sales of intraocular lenses to domestic customers decreased 40%
compared with the first six months of 1995, due to a 18% decrease in the average
sales price and a 26% decrease in unit sales. The Company continued to
experience a reduced average sales price as a result of competitive price
pressures from the larger companies in the industry who are offering substantial
price reductions in order to capture larger market share.
Sales of intraocular lenses to international customers during the first six
months of 1996, decreased 65% compared with the first six months of 1995. The
decrease in foreign sales is a result of a lower average sales price and lower
unit sales.
The Company also distributes surgical instruments and related equipment for
kerato-refractive surgery. Sales generated by these products accounted for
approximately 11% and 15% of net sales during the first six months of 1996 and
1995, respectively. In 1996, such sales were primarily derived from the
microkeratome unit which the Company began selling in May 1994.
Gross profit in 1996, as a percentage of net sales, decreased to 63% compared
with 65% for the first six months of 1995. The decrease in gross profit relates
to the pricing factors, discussed above, and the fact that the Company's new
products do not offer the same margins as that of intraocular lenses.
Selling and marketing expenses as a percentage of net sales decreased to 38%
during the first six months of 1996 compared with 41% in 1995. This decrease was
due to cutting actual dollar expenditures in the sales and marketing area. In
addition, sales and marketing expenses were further reduced, due to declining
sales, since sales representatives are paid on a percentage of sales basis.
Additional dollar reductions were made in general and administrative expenses,
however, as a percentage of net sales these expenses increased to 40% during the
first six months of 1996 compared with 30% in 1995 due primarily to lower sales.
Actual dollars expensed were reduced by $139,201 in 1996 compared to the
previous year.
Product development expenses, as a percentage of net sales increased to 6%
during the first quarter of 1996 compared with 4% in 1995 due to lower sales.
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 Technology, Inc.
(Registrant)
Date September 18, 1996 /s/ Robert J. Fitzsimmons
------------------ ----------------------------------
Robert J. Fitzsimmons
Chairman of the Board, President
and Chief Executive Officer
Date September 18, 1996 /s/ Randy H. Gestson
------------------ ----------------------------------
Randy H. Gestson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 23,598
<SECURITIES> 0
<RECEIVABLES> 348,513
<ALLOWANCES> 0
<INVENTORY> 979,538
<CURRENT-ASSETS> 1,388,016
<PP&E> 1,552,157
<DEPRECIATION> 852,482
<TOTAL-ASSETS> 2,087,691
<CURRENT-LIABILITIES> 2,668,742
<BONDS> 82,248
0
257,000
<COMMON> 34,387
<OTHER-SE> (920,299)
<TOTAL-LIABILITY-AND-EQUITY> 2,087,691
<SALES> 1,292,611
<TOTAL-REVENUES> 1,292,611
<CGS> 476,247
<TOTAL-COSTS> 476,247
<OTHER-EXPENSES> 1,063,541
<LOSS-PROVISION> 320,845
<INTEREST-EXPENSE> 73,668
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320,845)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
