<PAGE>
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 March 31, 2000
/_/ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________ to __________
Commission file number 0-27889
EYE CARE INTERNATIONAL, INC.
----------------------------
Delaware 59-3206480
-------- ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1511 North Westshore Boulevard, Suite 925
Tampa , Florida 33607
(Address of principal executive offices) (Zip Code)
(813) 289-5552
(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 X No
----- -----
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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 10, 2000, the issuer had 8,012,604 shares of class A common stock,
$.001 par value, outstanding.
<PAGE>
EYE CARE INTERNATIONAL, INC.
Index
Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet -- March 31, 2000
Consolidated Statements of Income and Retained Earnings --
Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows -- Three Months Ended --
March 31, 2000 and 1999
Consolidated Statement of Changes in Common Equity
Notes to Consolidated Financial Statements -- March 31, 2000
Item 2. Management's Discussion and Analysis or Plan of Operation
Part II. Other Information
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounted principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in Eye Care International, Inc.'s annual report on
Form 10KSB for the year ended December 31, 1999.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31,
2000
----
(Unaudited)
ASSETS
Current assets
Cash $189,670
Accounts receivable $863,730
Miscellaneous receivables
and advances $218,009
----------
$1,271,409
Fixed assets - net of
accumulated depreciation $52,955
----------
Total assets $1,324,364
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses and
taxes payable $551,994
Notes payable $50,000
----------
$601,994
----------
Stockholders' equity
Capital stock
- 30,000,000 shares of $.001 par value
common stock authorized: 9,390,304
issued at 3/31/00 $9,390
- - 10,000,000 shares of $.001 par value
preferred stock authorized: 1,045 issued
at 3/31/00 $1
Paid-in capital $7,443,945
Accumulated deficit ($6,730,966)
----------
$712,980
----------
Total liabilities and stockholders'
equity $1,324,364
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31,
2000 1999
---- ----
(Unaudited)
Revenues
Memberships $893,561 $104,904
Interest $170 $1,601
----------- -----------
$893,731 $106,505
General and administrative expenses $651,820 $614,407
Interest $1,000 $1,667
Depreciation $7,361 $8,077
----------- -----------
$660,181 $624,151
Income/(loss) before cumulative effect of
accounting change $233,550 ($517,646)
Cumulative effect of accounting change
to adopt SOP 98-5 $0 $749,433
----------- -----------
Net income/(loss) $233,550 ($1,267,079)
Accumulated deficit -- January 1 ($6,964,516) ($4,185,930)
----------- -----------
Accumulated deficit -- March 31 ($6,730,966) ($5,453,009)
=========== ===========
Earnings Per Share $0.02 ($0.15)
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
2000 1999
---- ----
(Unaudited)
Cash flow from operating activities
Net income/(loss) $233,550 ($1,267,079)
Adjustment to reconcile net income
to net cash provided by operating
activities
Depreciation & Amortization $7,361 $8,077
Accounting Change $0 $749,433
Changes in operting assets and liabilities
Decrease in accounts receivables ($788,812) $48,160
Increase in miscellaneous receivables ($40,926) ($54,104)
Increase/(Decrease) in accrued
expenses and taxes payable $99,016 $13,329
--------- ----------
Net cash provided by operating
activities ($489,812) ($502,184)
Cash flow from investing activities
Purchases of fixed assets $0 ($2,472)
Cash flows from financing activities
Decrease in notes payable $0 $0
Proceeds from sale of common and
preferred stock $550,000 $266,000
--------- ----------
Net cash provided by financing activities $550,000 $266,000
Increase/(Decrease) in cash $60,188 ($238,656)
Cash - January 1, $129,482 $658,743
--------- ----------
Cash - March 31, $189,670 $420,087
========= ==========
Supplemental disclosures
Interest paid $1,000 $1,667
========= ==========
Income taxes paid $0 $0
========= ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN COMMON EQUITY
Common Paid-in Retained
Equity Capital Earnings
------ ------- --------
Balance December 31, 1998 $8,504 $5,917,332 ($4,185,930)
Net Income/(Loss) ($2,778,586)
Issuance of Capital Stock $506 $976,989
Balance December 31, 1999 $9,010 $6,894,325 ($6,964,516)
Net Income/(Loss) $233,550
Issuance of Capital Stock $380 $ 549,620
Balance March 31, 2000 $9,390 $ 7,443,945 ($6,730,966)
The accompanying notes are an integral part of these financial statements.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Note A - NATURE OF THE ORGANIZATION
--------------------------
Eye Care International, Inc. and Subsidiary (the Company) markets
vision care benefit plans and enhancements to plans provided by
others. The Company's benefit plans and plan enhancements afford its
member/subscribers, and those of its plan sponsors (employers,
associations, etc.) and other licensed organizations, the opportunity
to obtain discounted services from its national network of ophthalmic
physicians. Through contractual arrangements with others, the
Company's plans also provide its member/subscribers with access to
providers of eye wear and other benefits on a discounted basis.
The Company's principal operating revenues consist of annual fees
charged to participating physicians and user fees charged either
directly to its member/subscribers, or indirectly through plan
sponsors or through licensing arrangements with providers of other
benefit plans in exchange for access by their member/subscribers to
the Company's network of ophthalmologists on a similarly discounted
basis.
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
1. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, National Vision Services,
Inc. All significant intercompany transactions and balances have
been eliminated in consolidation.
2. Revenue Recognition
-------------------
The Company sells one, two and three year memberships in its vision
plan. At the time of enrollment, it issues a membership kit that
includes a membership card, network providers and other materials
which completes the Company's obligation during the term of
membership. After thirty days, the membership cannot be cancelled,
therefore membership fees are recognized in full at the time of
enrollment. Membership fees however, can neither be determined nor
estimated until reported to the Company by the selling organization
and are subject to possible subsequent audit by the Company at its
option under the terms of the related agreement. Accordingly,
depending on the timeliness and accuracy of membership reports
received (which are presently beyond the Company's control),
membership income is not recognized in the Company's financial
statements until reported
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
2. Revenue Recognition (continued)
-------------------
by licensees, which may be in periods later than those in which they
were earned and subject to adjustment in subsequent periods.
3. Fixed Assets and Depreciation
-----------------------------
Fixed assets are recorded at cost. Depreciation of fixed assets is
recorded using accelerated and straight line methods over the
estimated useful lives of the related assets.
4. Income Taxes
------------
Income taxes are to be provided for the tax effects of transactions
reported in the financial statements. Provisions will be made for
deferred income taxes, which result from timing differences between
expenses and income as reported for financial statement purposes and
their deductibility or exclusion for income tax purposes, when
appropriate.
5. Warrants
---------
The Company has issued 482,500 warrants for the purchase of common
stock. Of these warrants, 82,500 have an exercise price of $1.00 per
share and expire at various dates from January 2001 to April 2003.
The warrants were issued to individuals who made loans to the
Company in 1995 through 1997 at the rate of one warrant per dollar
loaned. Upon maturity, $32,500 of the notes were paid in full
without the holder exercising the warrants. The remaining 50,000
warrants relate to the notes payable detailed in Note C.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------------------
5. Warrants (continued)
--------
The remaining 400,000 warrants were issued in 1998 to an individual
as an incentive to sign a "spokesperson" contract for future
service. These warrants have an exercise price of $1.50 per share
and expire in June 2003. Conversion of these warrants would have a
negligible affect on earnings per share computation.
6. Preferred Stock
---------------
In late 1999, the Company issued 495 shares of convertible preferred
stock at a price of $1,000 per share. Each share of preferred stock
is convertible into 2,000 shares of common stock and has a
liquidation preference of $1,000 per share. We have the right to
redeem shares of series A convertible preferred stock on the third
anniversary of the date shares of series A convertible preferred
stock were first issued at a redemption price of $1,200 per share.
7. Change in Accounting Principle
------------------------------
Effective January 1, 1999, the Company adopted Statement of Position
98-5, Reporting on the Costs of Start-up Activities. This statement
requires that certain costs of start-up activities and organization
costs be expensed as incurred rather than capitalized and amortized
under previous accounting principles. The cumulative effect of the
change on net income was $749,433.
Note C - NOTES PAYABLE
-------------
The Company is indebted to two stockholders in the amount of $25,000.00
each. The monies bear interest at the rate of 8% and are payable upon
demand.
Note D - INCOME TAXES
------------
Substantially all of the Company's retained earnings deficit will be
available as an operating loss carryforward to reduce future income tax
obligations as may be incurred through the year 2015. However, because
of the Company's relatively short operating history, the potential tax
benefit of this loss has been valued at zero in the financial
statements and will remain so until realized or until the criterion in
Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes, for recognition of a deferred tax asset has been met.
<PAGE>
EYE CARE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
Note E - COMMITMENTS AND CONTINGENCIES
----------------------------
The Company leases its present offices under an operating lease
expiring on July 31, 2003 with an option to renew for one year. Rent
expense for the years amounted to $87,576 and $54,416 respectively.
Future minimum rental commitments at December 31, 1999 are as follows:
2000 $ 92,048
2001 96,523
2002 100,992
2003 42,855
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$419,994
========
Note F - GOING CONCERN
-------------
As shown in the accompanying financial statements, the Company has
incurred substantial losses from operations. Management believes that
the Company will generate significant new business in the future and
also be able to sell shares of its capital stock to outsiders beginning
in January, 2000. Absent an increase in revenue or the sale of shares
of stock, there may be uncertainty about the Company's ability to
continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
<PAGE>
EYE CARE INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OR PLAN OF OPERATION
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our financial condition and
results of operation should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this report.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999.
Sales. Sales for the three months ended March 31, 2000, of $863,730 were nearly
$789,000 higher than the $104,904 recorded during the same period in 1999. This
increase was primarily due to sales of approximately $761,000 being billed to a
private label marketer of ECI's vision plan which were previously not reported
by the marketer. This bill is being disputed by the marketer, who claims no
additional liability exists other than those previously reported by the
marketer.
Selling, General and Administrative Expenses. The major components of Selling,
General & Administrative expenses (G&A) are Payroll, Commissions, Business
Travel Postage & Printing, and Profession/Consulting Fees. G&A expenses of
$651,820 were approximately $37,000, or about 6%, higher than the $614,408 for
the quarter ended March 31, 1999. While all other expenses remained relatively
level for the comparative periods, professional/consulting fees increased
approximately $43,000.
Consulting/Professional expenses increased to $100,429 from $56,842 in the same
quarter of 1999 primarily because of increased legal and accounting activities
and the use of consultants to perform certain functions in lieu of hiring
full-time employees.
Interest Income. Interest income for the first quarter of 2000 of $170 was about
$1,500 lower than the interest earned during the same period in 1999. The
company maintained a cash balance significantly higher in the first quarter of
1999 than in the current year's quarter and was thus able to invest more
principal in interest bearing securities.
Interest Expense. Interest expense of $1000 was nearly the same as in the
quarter ended March 31, 1999.
Depreciation and Amortization Expense. Since no major depreciable assets were
added during 1999 or the first quarter of 2000, depreciation expense of $7,361
was nearly the same as in the first quarter of 1999.
<PAGE>
Change in Accounting Principle. Effective January 1, 1999, the Company adopted
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities",.
This statement requires that certain costs of start-up activities and
organization costs be expensed as incurred rather than capitalized and amortized
under previous accounting principles. The cumulative effect of the change on net
income was $749,433, net of taxes in the amount of $0, since the Company has
loss carryforwards.
Liquidity and Capital Resources
Since inception, the company's expenses has consistently exceeded its revenues.
Operations have primarily been funded from the issuance of debt and equity
securities aggregating approximately $7.5 million, which includes $50,000 in
notes payable.
The Company used cash in its operating activities totaling $.5 million and $.5
million during the first quarter of 2000 and 1999. respectively, primarily for
payroll, business travel and professional/consulting fees. The Company did not
acquire any fixed assets during the first quarter of 2000 but did invest $2,472
during the first quarter of 1999 to acquire computers and office furniture.
During the first quarter of 2000 the Company raised $550,000 as compared to
$266,000 during the first quarter of 1999 through financing activities;
primarily the sale of convertible preferred stock in 2000 and the sale of common
stock in 1999. Each share of convertible preferred stock may be converted into
2,000 shares of common stock.
Going Concern.
Note F to the audited financials expresses the uncertainty of the Company's
ability to continue as a going concern. Management believes that significant
revenues will be generated in the near future as a result of marketing
arrangements entered into and /or under negotiations.
Forward-looking Statements
This report includes forward-looking statements that are not based upon
historical facts. These statements, which discuss future expectations, estimate
the happening of future events, or our results of operations or financial
condition for future periods, can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "believe", 'intend", "anticipate",
"estimate", "continue", or similar words. These forward-looking statements are
subject to certain uncertainities, and there are important factors that may
cause actual results to differ materially from those expressed or implied by
these forward-looking statements. The forward-looking statements made in this
report undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.
<PAGE>
PART II
Item 2. Changes in Securities
During the quarter ended March 31, 2000 the Company sold an aggregate 550
shares of Series A Convertible Preferred Stock to six accredited investors for a
total purchase price of $550,000 ($1,000 per share). Each share of convertible
preferred stock is convertible into 2,000 shares of class A common stock.
These transactions were exempt from the registration requirements of the
Securities Act under Section 4 (2) of the Securities Act and Rule 506 of
Registration D. There were no underwriters involved in these transactions and
there were no underwriting discounts paid in connection with these transactions.
The purchasers in each transaction represented their intention to acquire the
securities for investment only and not with a view to or offer for sale in
connection with any distribution of the securities and appropriate legends were
affixed to the certificates for the securities issued in such transactions. All
purchasers of securities in these transactions had adequate access to
information about the Company and were sophisticated investors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EYE CARE INTERNATIONAL, INC.
Date: May 12, 2000 By: /s/ James L. Koenig
----------------------------------------
James L. Koenig, Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 189,670 0
<SECURITIES> 0 0
<RECEIVABLES> 863,730 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,271,409 0
<PP&E> 52,956 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,324,364 0
<CURRENT-LIABILITIES> 601,994 0
<BONDS> 0 0
0 0
0 0
<COMMON> 722,370 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,324,364 0
<SALES> 893,561 104,904
<TOTAL-REVENUES> 893,731 106,505
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 651,820 614,407
<LOSS-PROVISION> 7,361 8,077
<INTEREST-EXPENSE> 1,000 1,667
<INCOME-PRETAX> 233,550 (517,646)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 233,550 (517,646)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 749,433
<NET-INCOME> 233,550 (1,267,079)
<EPS-BASIC> 0.02 (0.15)
<EPS-DILUTED> 0.02 0.14)
</TABLE>
