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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1997
------------------------------------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0-15324
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Eye Technology, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 52-1402131
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
16 South Market Street, Petersburg, Virginia 23803
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(Address of Principal Executive Offices)
(804) 861-0681
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(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports 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 X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 53,310,591 shares of Common
Stock, $.01 par value, outstanding as of April 6, 1998
Transitional Small Business Disclosure Format (check one):
Yes No
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
An index to the financial statements of the Company filed as a part of this
report appears at Page F-1. The financial statements of the Company appear at
Pages F-2 through F-7 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Financial Condition. The Company maintained a position of severe working capital
shortages throughout the third quarter of 1997, a situation that did not improve
until a "reverse acquisition" transaction in February 1998 with Star Tobacco and
Pharmaceuticals, Inc. The Company was dependent upon the forbearance of certain
creditors in order to maintain operations.
Results of Operations. Sales for the nine-month period ended September 30, 1997,
declined to $1,059,337 from $1,899,500 for the same period of 1996. Sales for
the third quarter of 1997 were $324,000, compared to sales of $370,086 and
$364,567 for the first and second quarters, respectively, of 1997. 1997 sales
were substantially less than 1996 sales for all quarterly periods because of the
Company's inability, due to a lack of working capital, to expend funds for
marketing and promotional purposes and to engage additional sales
representatives that would give the Company greater geographical representation.
In addition, some customers switched from using "hard" intraocular lenses, which
comprises the Company's product line of such lenses, to "foldable" or "soft"
lenses, which the Company does not produce or sell. Furthermore, Company sales
of MKM equipment used in refractive surgery declined in 1997 due to the
Company's inability to finance design changes needed to make the Company's
product competitive in the marketplace.
Gross profit margin for the nine months ended September 30, 1997, was
42% compared to 70% for the same period of 1996. The primary reason for the
significant decline was that fixed manufacturing costs and costs not directly
related to volume did not decline, thus becoming a larger percentage of sales.
In addition, manufacturing efficiencies declined as volume fell off.
Sales and marketing expenses were 11% of sales in the 1997 period
compared to 38% in 1996. The Company's poor liquidity position prevented it from
making marketing, promotional and adverting expenditures, as it had in 1996. In
addition, a larger portion of the Company's sales were to customers on which no
commissions were payable.
General and administrative expenses, as a percentage of sales, remained
relatively stable during the two nine-month periods shown in this Report, as the
Company was able to reduce this category of expense in the face of declining
sales revenue.
Interest expense increased in the 1997 period to $127,662 from $106,799
in the 1996 period. The increase reflects one-time fees and penalties incurred
in January 1997 to the Company's then line of credit lender, which amounts are
classified as "interest."
Net income of $119,657 was achieved in the first nine months of 1997
due to a non-recurring license fee of $325,000 received from an unrelated party
for the right to make intraocular lenses pursuant to the Company's FDA
approvals. Otherwise, the 1997 period would have shown a net loss proportionate
to the Company's net loss for the 1996 nine-month period of $306,873.
2
<PAGE> 3
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
No exhibits are filed with this report.
(b) No Report on Form 8-K was filed during the fiscal quarter for
which this report is filed.
3
<PAGE> 4
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 TECHNOLOGY, INC.
Date: April 29, 1998 /s/ Samuel P. Sears, Jr.
-------------------------------------------------
Samuel P. Sears, Jr., Chief Executive Officer and
Chief Financial Officer
4
<PAGE> 5
Index to Unaudited Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
1. Condensed Consolidated Balance Sheets F-2
dated September 30, 1997 and December 31, 1996
2. Condensed Consolidated Statements of Operations F-4
for the Three Month Periods Ended September 30, 1997 and 1996
3. Condensed Consolidated Statements of Operations F-5
for the Nine Month Periods Ended September 30, 1997 and 1996
4. Condensed Consolidated Statements of Cash Flows F-6
for the Nine Month Periods Ended September 30, 1997 and 1996
5. Notes to Unaudited Condensed Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 6
Eye Technology, Inc
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
------------- -------------
ASSETS
------
<S> <C> <C>
Current Assets:
Cash $ 1,842 $ 64,266
Accounts receivable, net 59,634 102,623
Inventories 816,583 1,049,257
Prepaid expenses and other deposits 4,414 4,414
------------- -------------
Total Current Assets 882,473 1,220,560
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Property and Equipment:
Machinery and equipment 529,517 498,516
Office equipment and furniture 272,040 272,040
Leasehold improvements 39,837 39,837
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841,394 810,393
Less: Accumulated depreciation (756,216) (733,389)
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Property and Equipment, net 85,178 77,004
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Other Assets:
Purchased technology 361,453 414,434
Other 23,225 23,225
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Total Other Assets 384,678 437,659
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Total Assets $ 1,352,329 $ 1,735,223
============= =============
</TABLE>
See accompanying notes to the condensed consolidated balance sheets
F-2
<PAGE> 7
Eye Technology, Inc
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- ------------
LIABILITIES
-----------
<S> <C> <C>
Current Liabilities:
Notes payable $ 54,594 $ 450,354
Current portion of long-term debt 277,951 346,166
Notes payable-related party 124,700 172,500
Accounts payable-trade 345,025 405,398
Accrued liabilities:
Professional fees 504,777 491,477
Compensation 194,233 124,517
Commissions 112,616 153,575
Other 166,813 139,273
Deferred Revenue 80,000 80,000
----------- -----------
Total current liabilities 1,860,709 2,363,260
----------- -----------
Long term debt net of current 0 0
----------- -----------
Convertible preferred stock 257,000 257,000
----------- -----------
STOCKHOLDERS' DEFICIT
---------------------
Common stock 34,352 34,352
Additional paid-in capital 8,777,504 8,777,504
Accumulated Deficit (9,577,236) (9,696,893)
----------- -----------
Total stockholders' deficit (765,380) (885,037)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 1,352,329 $ 1,735,223
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated balance sheets
F-3
<PAGE> 8
Eye Technology, Inc
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Ended
September 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 324,694 $ 606,889
Cost of goods sold 163,514 95,045
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Gross Profit 161,180 511,844
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Operating Expenses:
Sales and Marketing 34,500 218,955
General and Administrative 109,554 223,214
Research and development 0 3,446
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Total Operating Expenses 144,054 445,715
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Operating Income 17,126 66,129
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Other Income (Expense):
Interest expense, net (29,196) (33,131)
OTher Income (Expenses) 2,605 (19,026)
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Total Other Income (Expenses) (26,591) (52,157)
----------- -----------
Net Income (Loss) $ (9,465) $ 13,972
=========== ===========
Basic and Diluted Net income (loss) per common share $ (0.003) $ 0.004
=========== ===========
Weighted average common shares outstanding 3,435,190 3,435,190
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated balance sheets
F-4
<PAGE> 9
Eye Technology, Inc
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period Ended
September 30,
1997 1996
----------- -----------
<S> <C> <C>
Net Sales $ 1,059,337 $ 1,899,500
Cost of goods sold 614,220 571,292
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Gross Profit 445,117 1,328,208
----------- -----------
Operating Expenses:
Sales and Marketing 118,722 714,010
General and Administrative 410,216 769,326
Research and development 0 21,933
----------- -----------
Total Operating Expenses 528,938 1,505,269
----------- -----------
Operating Loss (83,821) (177,061)
----------- -----------
Other Income (Expense):
License sale 325,000 0
Interest expense, net (127,662) (106,799)
Other Income (Expenses) 6,140 (23,013)
----------- -----------
Total Other Income (Expenses) 203,478 (129,812)
----------- -----------
=========== ===========
Net Income (Loss) $ 119,657 $ (306,873)
=========== ===========
Net income (loss) per common share $ 0.03 $ (0.09)
=========== ===========
Weighted average common shares outstanding 3,435,190 3,435,190
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated balance sheets
F-5
<PAGE> 10
Eye Technology, Inc
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period Ended
September 30,
1997 1996
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 119,657 $(306,873)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 75,808 89,609
Change in current assets and liabilities:
Accounts receivable 42,989 188,617
Inventories 232,674 29,765
Prepaid expenses and other 0 (28,365)
Accounts payable and accrued liabilities 9,224 14,369
--------- ---------
Net cash provided by (used in) operating activities 480,352 (12,878)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment, net (31,001) 0
Proceeds from disposal of property& equipment 0 10,807
--------- ---------
Net cash provided by (used in) investing activities (31,001) 10,807
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 8,000
Repayment of long-term debt and notes payable (511,775) 0
--------- ---------
Net cash provided by (used in) financing activities (511,775) 8,000
--------- ---------
Net increase (decrease) in cash (62,424) 5,929
Cash, beginning of period 64,266 5,649
========= =========
Cash, end of period $ 1,842 $ 11,578
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 93,224 $ 56,874
</TABLE>
See accompanying notes to the condensed consolidated balance sheets
F-6
<PAGE> 11
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, 1997 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.
F-7
<PAGE> 12
Index to Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,842
<SECURITIES> 0
<RECEIVABLES> 59,634
<ALLOWANCES> 0
<INVENTORY> 816,583
<CURRENT-ASSETS> 882,473
<PP&E> 841,394
<DEPRECIATION> 756,216
<TOTAL-ASSETS> 1,352,329
<CURRENT-LIABILITIES> 1,860,709
<BONDS> 0
0
257,000
<COMMON> 34,352
<OTHER-SE> (799,732)
<TOTAL-LIABILITY-AND-EQUITY> 1,352,329
<SALES> 324,694
<TOTAL-REVENUES> 324,694
<CGS> 163,514
<TOTAL-COSTS> 163,514
<OTHER-EXPENSES> 144,054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,196
<INCOME-PRETAX> (9,465)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,465)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
