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 September 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 November 15,
1996: 3,435,190
Eye Technology, Inc.
Condensed Consolidated Balance Sheets
For the Period Ending, September, 1996
September 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- -----------
ASSETS
------
Current Assets:
Cash $ 11,578 $ 5,649
Accounts receivable, net 284,078 472,695
Inventory 1,056,102 1,085,867
Prepaid expenses and deposits 77,149 39,781
----------- -----------
Total Current Assets 1,428,907 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 (857,786) (859,108)
----------- -----------
Property and Equipment, net 84,483 93,968
Other Assets:
Purchased technology 582,267 635,508
Other assets 16,006 25,009
----------- -----------
Total Other Assets 598,273 660,517
----------- -----------
Total Assets $ 2,111,663 $ 2,358,477
=========== ===========
See accompanying notes to the condensed consolidated balance sheets
Eye Technology, Inc.
Condensed Consolidated Balance Sheets
For the Period Ending, September 30, 1996
September 30 December 31
1996 1995
(Unaudited) (Audited)
----------- -----------
LIABILITIES
-----------
Current Liabilities:
Notes payable $ 187,522 $ 0
Current portion of long-term debt 588,145 897,480
Notes payable-related party 160,000 152,000
Accounts payable-trade 550,890 598,306
Accrued liabilities:
Professional fees 509,507 466,664
Compensation 170,436 151,647
Commissions 331,415 202,596
Other 132,077 230,049
Deferred revenue 80,000 0
----------- -----------
Total Current Liabilities 2,709,992 2,698,742
Long-term debt net of current 50,998 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) (9,718,219) (9,483,077)
----------- -----------
Total Stockholders' Deficit (906,327) (671,185)
----------- -----------
Total Liability and Stockholders' Equity $ 2,111,663 $ 2,358,477
=========== ===========
See accompanying notes to the condensed consolidated balance sheets
Eye Technology, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
Three Month Period Ended
September 30,
1996 1995
---------------------------
Net sales $ 606,889 $ 951,848
Cost of goods sold 95,045 289,745
----------- -----------
Gross Profit 511,844 662,103
Operating Expenses:
Sales and marketing 218,955 321,206
General and administrative 223,214 388,025
Research and development 3,446 50,794
Total Operating Expenses 445,715 680,025
----------- -----------
Operating Income (Loss) 66,129 (17,922)
----------- -----------
Other (Income) Expense:
Equity loss of joint venture 0 9,000
Interest expense, net 33,131 49,695
Other (income) expenses 19,026 5,163
----------- -----------
Total Other (Income) Expenses $ 52,157 $ 63,858
----------- -----------
Net Income (Loss) $ 13,972 $ (81,780)
=========== ===========
Net income (loss) per common share $ 0.004 $ (0.02)
=========== ===========
Weighted average common shares outstanding 3,435,190 3,432,542
=========== ===========
See accompanying notes to the condensed consolidated balance sheets
Eye Technology, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
Nine Month Period Ended
September 30,
1996 1995
----------------------------
Net sales $ 1,899,500 $ 3,206,978
Cost of goods sold 571,292 1,076,316
----------- -----------
Gross Profit 1,328,208 2,130,662
Operating Expenses:
Sales and marketing 714,010 1,240,412
General and administrative 769,326 993,238
Research and development 21,933 138,788
----------- -----------
Total Operating Expenses 1,505,269 2,372,448
----------- -----------
Operating Loss (177,061) (241,335)
Other (Income) Expense:
Equity loss of joint venture 0 26,189
Interest expense, net 106,799 134,392
Other (income) expenses 23,013 (21,335)
----------- -----------
Total Other (Income) Expenses $ 129,812 $ 139,246
----------- -----------
Net Loss $ (306,873) $ (381,032)
=========== ===========
Net loss per common share $ (0.09) $ (0.11)
=========== ===========
Weighted average common shares outstanding 3,435,190 3,409,067
=========== ===========
See accompanying notes to the condensed consolidated balance sheets.
<TABLE>
<CAPTION>
Eye Technology, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Nine Month Period Ended
September 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss (306,873) $(381,032)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 89,609 164,600
Equity in loss of joint venture 0 26,189
Change in current assets and liabilities:
Accounts receivable 188,617 219,073
Inventories 29,765 135,816
Prepaid expenses and other (28,365) (8,210)
Accounts payable and accrued liabilities 14,369 75,498
--------- ---------
Net cash provided by operating activities (12,878) 231,934
Cash flows from investing activities:
Purchase of property and equipment, net 0 (10,075)
Proceeds from disposal of property & equipment 10,807 0
Investments in and advances to joint ventures 0 (2,500)
--------- ---------
Net cash used by investing activities 10,807 (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 (397,614)
--------- ---------
Net cash (used in) provided by financing activities 8,000 (345,614)
--------- ---------
Net increase (decrease) in cash 5,929 (126,255)
Cash, beginning of period 5,649 142,626
--------- ---------
Cash, end of period $ 11,578 $ 16,371
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 56,874 $ 114,032
========= =========
Supplemental disclosure of non-cash activity:
Issuance of debt in satisfaction of accounts payable
and accrued liabilities $ 0 $ 190,075
========= =========
Issuance of common stock in satisfaction of accrued liabilities $ 0 $ 10,313
========= =========
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 nine month period ended September 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 September 30, 1996 and 1995
Net sales for the three month period ended September 30, 1996, were $606,889; a
decrease of $344,959 (36%) below sales of $951,848 for the three month period
ended September 30, 1995. In the quarter ended September 30, 1996, 71% of the
Company's sales were in the domestic market and 29% were in the international
market. This compares to a market mix of 82% domestic sales and 18%
international sales for the quarter ended September 30, 1995.
Sales of intraocular lenses comprised 84% of net sales during the third quarter
of 1996. Sales of intraocular lenses to domestic customers decreased 48%
compared with the third quarter of 1995, due to a 13% decrease in the average
sales price and a 40% 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 third quarter
of 1996, decreased 5% compared with the third 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 16% and 9% of net sales during the third 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 - Nine months ended Setember 30, 1996 and 1995
Net sales for the nine month period ended September 30, 1996, were $1,899,500; a
decrease of $1,307,478 (41%) below sales of $3,206,978 for the nine month period
ended September 30, 1995.
Sales of intraocular lenses comprised 74% of net sales during the first nine
months of 1996. Sales of intraocular lenses to domestic customers decreased 39%
compared with the first nine months of 1995, due to a 12% decrease in the
average sales price and a 31% 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 nine
months of 1996, decreased 49% compared with the first nine 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 13% and 11% of net sales during the first nine 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, increased to 70% compared
with 66% for the first nine months of 1995. The increase in the percentage of
gross profit to sales compared to the previous year relates to the reduction of
production costs.
Selling and marketing expenses as a percentage of net sales decreased to 38%
during the first nine months of 1996 compared with 39% 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 41% during the
first nine months of 1996 compared with 31% in 1995 due primarily to lower
sales. Actual dollars expensed were reduced by $223,912 in 1996 compared to the
previous year.
Product development expenses, as a percentage of net sales decreased to 1%
during the third quarter of 1996 compared with 4% in 1995 due to reducing
expenditures in this area.
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 November 20, 1996 /s/ Robert J. Fitzsimmons
--------------------------------
Robert J. Fitzsimmons
Chairman of the Board, President
and Chief Executive Officer
Date November 20, 1996 /s/ Randy H. Gestson
--------------------------------
Randy H. Gestson
Chief Financial Officer
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<NAME> EYE TECHNOLOGY INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,578
<SECURITIES> 0
<RECEIVABLES> 284,078
<ALLOWANCES> 0
<INVENTORY> 1,133,251
<CURRENT-ASSETS> 1,540,542
<PP&E> 942,269
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<CURRENT-LIABILITIES> 2,709,992
<BONDS> 50,998
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257,000
<COMMON> 34,387
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<SALES> 1,899,500
<TOTAL-REVENUES> 1,899,500
<CGS> 571,292
<TOTAL-COSTS> 571,292
<OTHER-EXPENSES> 1,528,282
<LOSS-PROVISION> (306,873)
<INTEREST-EXPENSE> 106,799
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<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (306,873)
<EPS-PRIMARY> (.09)
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