Table of Contents
**U.S. SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, DC20549**
**FORM 10-QSB/A**
**Amendment No. 2**
(Mark One)

T

Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of1934For the quarterly period ended March 31, 2003
  
 ̈

Transition report under Section 13 or 15(d) of the Exchange ActFor thetransition period from ______ to ____________

**Commission file number 0-27889**
 
**EYE CARE INTERNATIONAL, INC.**

*(Exact name of registrant asspecified in its charter)*
Delaware
 
59-3206480

(State or Other Jurisdiction ofIncorporation or Organization)
 
(IRS EmployerIdentification No.)

1511 North Westshore Boulevard, Suite 925Tampa, 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 Section13 or 15(d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to such reports, and (2) registrant wasrequired to file such reports, and (2) has been subject to such filingrequirements for the past 90 days.

Yes   þ   No    ̈

As of April 11, 2003, the issuer had outstanding 13,357,060 shares of commonstock, $.001 par value. 
Transitional Small Business DisclosureFormat:     Yes      ̈     No     T   
**EYE CARE INTERNATIONAL, INC.**
**FORM 10-QSB**
**INDEX**

PART  I  FINANCIAL INFORMATION   
ITEM 1

FINANCIAL STATEMENTS
  
BALANCE SHEET - March 31, 2003

3
  
STATEMENT OF OPERATIONS -For the Quarters ended March 31, 2003 and 2002

4
  
STATEMENT OF CASH FLOWS - For the Quarters ended March 31, 2003 and 2002

5
  
NOTES TO FINANCIAL STATEMENTS

6
 
ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS
 
of Financial Condition and Results of Operations

9
   
PART II  OTHER INFORMATION
 
ITEM 1.    LEGAL PROCEEDINGS

11
 
ITEM 2.     CHANGES INSECURITIES

11

 

ITEM 4.     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

11
 
ITEM 6.     (a) EXHIBITS FILED:

11

                   (b) REPORTS ON FORM 8-K
 
SIGNATURES 

11

 

2
   
Table of Contents
**PART I - FINANCIAL INFORMATION**
**Item 1.     Financial Statements**
**EYE CARE INTERNATIONAL, INC.****BALANCE SHEET**
**ASSETS**  
**March 31****2003**
  
**Unaudited**

Current assets
  
       Cash

$

4,791 
       Accounts receivable
 
207,050 
       Non-trade receivables and employeereceivables
 
10,000 

 
  
Total current assets
 
221,841 
 
  
       Loans and advances to stockholders andrelated parties (Note B)
 
91,223 
       Fixed assets (net of accumulateddepreciation)
 
1,820 

 
  
**Total assets**

$

314,884 
**LIABILITIES AND STOCKHOLDERS’ DEFICIT**
 
  
Current liabilities
  
       Accounts payable (Note C)

$

672,749 
       Short-term notes payable (Note D)
 
1,920,500 
       Accrued expenses and payroll taxes
 
207,021 
       Deferred compensation (Note B)
 
203,367 
       Deferred revenue to be recognizedwithin one year
 
67,025  

 
  
Total current liabilities
 
3,070,662 
 
  
Deferred revenue to be recognized over more than one year
 
30,676 
 
  Stockholder’s Equity and Accumulated Deficit  
Preferred stock, $.001 par value, authorized 10,000,000 shares
  
       Series A convertible preferred stock, authorized shares:  1,500               issued and outstanding 680 shares at March 31, 2003               issued and outstanding:                 aggregateliquidation value: $680,000 (Note G).
 
1 
       Series B 6% cumulative convertible preferred stock:               authorized, issued and outstanding: 685,715 shares(Note G)
 
686 
Common stock, $0.001 par value; authorized shares:  300,000,000;       issued andoutstanding:  13,487,060  at March 31, 2003,  (Note E).

 
13,487 
Additional paid-in capital
 
9,111,130 
Accumulated deficit
 
(11,911,758)
 
  
Total stockholders’ deficit
 
(2,786,454)

 
  
**Total liabilities and stockholders’ deficit**

$

314,884 

The accompanying notes are an integral part of the unaudited financial information.3
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**PART I - FINANCIAL INFORMATION**
**EYE CARE INTERNATIONAL, INC.****STATEMENTS OF OPERATIONS****(Unaudited)**
  
**FOR THE THREE****MONTHS ENDED**
 
 
**March 31,****2003****Unaudited**

 
 
**March 31,****2002Unaudited**

REVENUES
      
     Membership fees (net of returns &allowances)

$
50,624  
$
72,559 
     Endorsement fees & sales commissions
 
 253,933 
  
-0- 
      
Total Net Revenue

$
304,557  
$
72,559       
EXPENSES
     
     Selling, general and administrative expenses
 
489,846   
381,559      Gain on cancellation of officers' deferred        Compensation and forgiveness of accounts        Payable 
(689,654)    
     Depreciation
 
2,315   
2,546 
     Interest and financial costs
 
63,890 
  
  22,705 
      
Total Expenses
 
(133,603)   
406,810       
Net income (loss) from continuing operations

$
(438,160) 
$
(334,251)             
NET INCOME (LOSS)

$
438,160  
$
(334,251)      
Dividends attributable to preferred stockholders
 
4,500   
4,500       
Income (Loss) attributable to common stockholders

$
433,660  
$
(338,751)       
Basic earnings (loss) per common share (Note F):
     
     Income (loss) from continuing operations
 $
(0.03) 
 $
(0.03)      
Weighted average number of shares outstanding (Note F)
     
     For computation of basic earnings per share
 
13,393,199   
13,206,580 
The accompanying notes are an integral part of the unaudited comparativefinancial information.4  
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**PART I - FINANCIAL INFORMATION**
**EYE CARE INTERNATIONAL, INC.STATEMENTS OF CASH FLOWS(Unaudited)**
** **
 
**FOR THE THREE****MONTHS ENDED** 
**2003**
 
**2002**

Cash flow from operating activities; net income (loss)

$
438,160 
 
$
(334,251)      
Adjustments to reconcile net income and (loss) tocash     provided or (used) in operating activities
     
     Decrease by non-cash additions to income:
     
               Write-offof deferred compensation (Note B)
 
(936,639)    
     Add non-cash charges to operations:
     
               Depreciation
 
2,315   
2,546 
               Issuanceof shares for services and interest
    
18,437 
               Forgivenessof officer’s loans receivable (Note B)
 
282,984    
               Taxliability on forgiven loans receivable (Note B)
 
76,000    
               Interestaccrued but not paid
 
59,144    
     Changes in operating assets and liabilities:
     
               (Increase)decrease in accounts receivable
 
(189,329)  
( 9,690)
               (Increase)decrease in prepaid interest
     
( 7,465)
               Increase(decrease) in accounts payable (Note C)
 
(63,329)  
6,301 
               Increase(decrease) in net deferred revenue
 
(  8,066)  
( 5,161)
               Increase(decrease) in net deferred compensation
 
  111,995 
  
 95,361 
      
Net cash (used) in operations
 
(226,765)  
(233,922)      
Cash flow from investing activities:
     
               Advancesto stockholders/officers
 
(  21,541)  
( 15,537)      
Cash flow from financing activities:
     
               Proceedsfrom short-term borrowings
 
175,000   
230,000 
               Proceedsfrom sales of common stock
 
       
  
25,000 
      
Net cash provided by financing activities
 
175,000   
255,000       
Increase or (decrease) in cash

$
(  73,306) 
$
5,541       
Cash - January 01
 
 78,097 
  
  8,694 
      
Cash - March 31

$
4,791  
$
14,235       
Supplemental disclosures
     
               Interestpaid

$
-0-  
$
2,875  
The accompanying notes are an integral part of the unaudited comparativefinancial information.  5
Table of Contents
**PART I - FINANCIAL INFORMATION**
**EYE CARE INTERNATIONAL, INC.****NOTES TO FINANCIALSTATEMENTS****(Unaudited)**
**Note A:  Basis of Presentation**
The accompanying unaudited financial information has been prepared by Eye CareInternational, Inc. (the Company) in accordance with accounting principalsgenerally accepted in the United States of America for interim financialinformation, and in accordance with the instructions to Form 10-QSB, and Item310(b) of Regulation S-B, of the Securities and Exchange Commission (SEC).  Inthe opinion of management, all adjustments (consisting of normal and recurringadjustments) considered necessary for a fair representation have been included.Financial results for the interim three-month period are not necessarilyindicative of the results that may be expected for the year ending December 31,2003.  The December 2002 comparative balance sheet presented was derived fromaudited financial statements, but does not include all disclosures required withthe audited annual statements.  This financial information should therefore beread in conjunction with the financial statements and notes included with theCompany’s Annual Report on Form 10-KSB for the year ended December 31,2002.
The preparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions thataffect the amounts reported in the financial statements and accompanying notes.Actual results could differ from those estimates. 
**Note B:****Mutual Forgiveness of Debts**
During the quarter ending March 31, 2003, the Company and two of its officers,Clark Marcus (CEO) and Jim Koenig (CFO) entered into agreements whereby Messrs.Marcus and Koenig relinquished their claims to deferred compensation (earned butunpaid) in the amounts of $424,985 and $511,654, respectively.  In considerationfor their agreements, the Company forgave collection of personal loans andadvances to them, totaling $282,984.  The resultant gain on this transaction tothe Company is reduced by the tax liability associated with the forgiveness ofdebt, for which the Company has agreed to reimburse the officers.  Thistransaction resulted in the Company recording a net extraordinary gain of$577,654, in March 2003. 
**Note C:****Accounts Payable**
Accounts payable decreased by $63,329 between the close of the preceding year(December 31, 2002) and this quarter end (March 31, 2003).  The net decrease isexplained as follows:

  

Balance at December 31, 2002

$
736,078 
  
 
Add:

Invoices received & processed
 
312,494 
  
 
Less:

Amounts disbursed for payable liquidation
 
(263,823)   
Forgiveness of past due accounts payable - extraordinary gain
 
(112,000)
 
Balance at March 31, 2003

$
672,749 

**Note D:     Short-term Notes Payable**
During the three months ended March 31, 2003, the Company borrowed $175,000 fromsix accredited investors.  These loans are evidenced by short-term notes,maturing within one year of date of issuance, and bearing interest ranging from10 to 12 percent.  Associated with the issuance of these notes, warrants topurchase 160,000 shares of Class A common stock were issued at March 31.Additional warrants associated with one of the notes, are to be issued at therate of 1,000 warrants per month until the earlier of: the maturity date, or thedate upon which the note is paid.  All of these warrants are exercisable at$0.01 per common share, through March 2008.6  
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**Note E:  Common Stock and Warrants**
The 30,000,000 authorized shares of common stock consist of twoclasses:  20,000,000 authorized Class A, and 10,000,000 authorized Class B. On all matters required by law to be submitted to a vote of the holders ofcommon stock, each share of Class A common stock is entitled to one vote pershare, and each share of Class B common stock is entitled to five votes pershare.  At March 31, 2003, and December 31, 2002 the issued and outstandingshares of common stock by class were as follows:
  
March 31,    2003 
December 31,    2002
Class A common stock issued and    outstanding
12,209,360
 
12,079,360Class B common stock issued    and outstanding
1,277,700 1,277,700
Total common stock issued and    outstanding
13,487,060 13,357,060
Two investors holding a total of 65 Class A shares of Series A preferred stock exercisedtheir conversion privilege and converted the Series A preferred stock to 130,000shares of common stock during the three month period ended March 31, 2003.  Thisincreased the common stock issued and outstanding from 13,357,060 shares to13,487,060 shares.
As commented on in the preceding “Note D,” during the three monthsended March 31, 2003, the Company issued warrants to purchase 160,000 shares ofClass A common stock.  The change in the number of warrants issued, and theaverage exercise price, is computed as follows:
  
No. StockPurchaseWarrants
ExercisePrice atIssue
TotalExerciseValue
AverageExercisePrice
 
Totals at December 31, 2002

5,434,718      
(a)
$2,489,279  
$
0.458      
Issued during 3 months ended March 31, 2003

 160,000     

$ 0.01
 1,600  
    
TOTALS March 31, 2003

5,594,718         
$2,490,879  
 $
0.445     
(a)     All warrants issued before the year beginning January 01,2000 have either expired or been cancelled. The 5,594,718 issued subsequent toDecember 31, 1999 have been issued at various exercise prices ranging from ahigh of $1.00 to a low of $0.01, producing a weighted average exercise price of$0.445, per  Class A common share.
**Note F:  Earnings per Share**
The basic earnings pershare, for each period presented was computedbased on the weighted average number of common shares outstanding during theperiod.  Fully diluted net income or loss per share has not been presented as ineach loss period inclusion of potential common shares (such as the outstandingwarrants) would be antidilutive.  Likewise, warrants are dilutive only when theaverage market price of the common stock exceeds the average exercise price ofthe warrants.  This was not the condition during the periods reflected (seepreceding Note E).
 
 
7

**Note G: Subsequent Events**
Subsequent to March 31, 2003, the Company borrowed an aggregateof $360,000 from stockholders and other accredited investors, at interest ratesof 10%, per annum. In connection with these notes, the Company issued warrantsto purchase 360,000 shares of Class A common stock. Eachwarrant is exercisable at $0.01 per Class A common share, through May 2008.
On April 11, 2003 the Board of Directors approved, by writtenconsent in lieu of a special meeting of stockholders, a proposal to amend theCompany's Certificate of Incorporation to authorize a one-for-five reverse stocksplit of all the outstanding Class A and Class B common stock, and increase thenumber of authorized Class A common stock from 20,000,000 to 30,000,000 shares(See Part II, Item 6(a) exhibits, Schedule 14C).
The one-for-five reverse stock split became effective on June 19,2003.  Immediately upon becoming effective there were 2,698,262 shares ofcommon stock outstanding (Class A and Class B in aggregate).
On May 30, 2003 the Company entered into an agreement with threepreferred shareholders whereby all of the Series B, 6% cumulative preferred stockand 300 shares of the Series A, preferred stock will be retired in exchange fora note payable in the amount of $664,950.  This note, plus interest accruedat the rate of 1.53 percent, is due in full on 29 May, 2004.  Inconjunction with this transaction, the Company entered into a consultingagreement for the provision of marketing and sales assistance with these samepreferred shareholders.  This agreement requires the payment of $29,000 inequal monthly installments over a one year period.8  
Table of Contents
**Item 2.      Management’s Discussion and Analysis of Financial Condition andResults of Operations**
**Results of Operations**
**Quarter Ended March 31, 2003 Compared to Quarter Ended March 31, 2002**
**Revenue:**
During the quarter end March 31, 2003 revenues increased at the highest rate fora three month period in the Company’s history.  Compared to the same threemonth period end in 2002, revenue, net of returns and allowances, increased byapproximately $232 thousand or 320 percent.  This is primarily attributable toexpanding and diversifying the Company’s sales program, which hastraditionally focused solely on membership solicitations and renewals.Beginning in this first quarter of 2003, several significant new customercontracts were negotiated.  Several of the private label wholesale agreementsprovide that the Company’s vision plan will be automatically included withall sales offerings of their products or services.  Additionally, during thisperiod the Company entered into an agreement with a mail order fulfillmentprovider which began generating commission income for the Company.
A contract was also signed with a producer of vitamins that promote eye health.Under the terms of this particular contract, the Company recorded a $250thousand fee for the endorsement of its medical panel.  Going forward, theCompany will continue to receive commissions on all such nuetriceutical salesthrough its provider network. 
**Selling, General and Administrative Expenses (SG&A):**
Even with the notable revenue performance mentioned above, the Company still hasnot reached a breakeven level of operations.  The Company’s SG&Aexpenses, which although relatively fixed, still increased by a total ofapproximately $108 thousand or 28 percent, for the three month period endingMarch 31, 2003, over the same period in 2002.  Comparison of the more significantcomponents of SG&A expenses follows:
   
For the three months ended March 31
   
2003 
2002 
Increase(Decrease)
 
Payroll & related expense

$
273,327
$
224,315
$
49,012  
Commissions

60,815
22,948
37,867  
Business travel

47,252
38,200
9,052  
Insurance

31,388
28,325
3,063  
Professional fees

22,100
5,000
17,100  
Rent

29,695
28,254
1,441  
All other SG&A expenses

25,269
 
34,517
 
(  9,248)

 
Total

$
489,846
$
381,559
$
108,287 
Staffing additions account for the majority of the increase inpayroll and related expenses. During the first quarter of 2002, the Company hadnot yet filled the senior positions in Marketing, Provider Relations, orInformation Technology. During the entire three month period end March 31, 2003all of these positions were filled. Additionally, an accountant was added to thestaff during the quarter.
Commission expense varies directly with the Company’s sales.  As notedabove, sales in the quarter end March 31, 2003, exceeded the same period salesof 2002 by over 300 percent.  Period-to-period, comparative commission expenseincreased by approximately 165%.
The increase in business travel expenses reflects the increased time of the CEOaway from the home office negotiating the new contracts and raisingcapital.
Professional fees, which include expenses associated with legal and auditingservices, during the quarter, exceed similar expenses during the first quarterof 2002, by $17,100.  During this current reporting period the Company retained a new SEC Attorney and, as reported on Form 8-K, retained a newauditor.  These two new relationships account for approximately 73 percent ofthe increase.  Other legal costs are associated with litigation documented inthe Company’s Annual Report, Form 10–KSB, filed April 24, 2003(incorporated by reference in Part II, Item 6).
 9  
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**Interest Expense:**
For the quarter ended March 31, 2003, interest expense of $63,890 increased morethan $41,000 over the same period of 2002 as the Company issued additionalinterest bearing notes in late 2002 and this first quarter of 2003, andadditional interest expense of $22,400 associated with warrants issued withpromissory notes.  Interest rates varied betweentenand twelve percent.
**Depreciation Expense:**
Depreciation expense for the respective quarters end March 31, 2003 and 2002,remained constant as no major depreciable assets have been purchased during thelast three years. 
 
 
 10  
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**PART II: OTHER INFORMATION**

 

Item 1. Legal Proceedings:

The Company is involved in lawsuits, claims or disputes arising in the  normalcourse of business.  The settlement of such claims cannot be  determined at thistime.  Management does not believe the ultimate  outcome of these matters willbe significant to its results of operations  or cash flows.

Item 2.  Changes in Securities:

Information called for in this Item 2, of Part II is incorporatedby reference to Part I, Item I, notes to the financial statements; specificallyNote D and Note E.

Item 3.  Defaults upon Senior Securities:

None

Item 4.  Submission of Matters to a Vote of Security Holders

This item incorporates by reference the information regardingamendment of the Company’s Certificate of Incorporation, in Note G, to thefinancial statements in Part I of this Form 10–QSB.

Item 5.  Other Information:

None

Item 6.  Exhibits and Reports on Form 8-K
 
       (a)  Exhibits Filed:

31.1 Certifications of Chief Executive Officer Pursuant toSection         302 of the Sarbanes-Oxley Act of 200231.2 Certifications of Chief Financial Officer Pursuant to Section         302 of the Sarbanes-Oxley Act of 200232.1  Certification of the Chief Executive Officer Pursuant to         Section 906 of the Sarbanes-Oxley Act of 200232.2  Certification of the Chief Financial Officer Pursuant to         Section 906 of the Sarbanes-Oxley Act of 2002

       (b) Reports on Form 8-K:  

During the quarter ended March 31, 2003, Eye Care International, Inc.  filed thefollowing Current Report on Form 8-K:
Current Report on Form 8-K dated March 21, 2003 (date of earliest  eventreported) and filed on April 7, 2003, for purposes of reporting  under Item 4,Changes in Registrant’s Certifying Accountant

**Signatures**
In accordance with the requirements of the Exchange Act, the registrant hascaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.
 
EYE CARE INTERNATIONAL, INC.
  
Date: February 1, 2004
  
By: /s/  James L.Koenig                                              JamesL. Koenig, Chief Financial Officer

11

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EXHIBIT INDEX

31.1 Certifications of Chief Executive OfficerPursuant to Section  302 of the Sarbanes-Oxley Act of 2002

31.2 Certifications of Chief Financial OfficerPursuant to Section  302 of the Sarbanes-Oxley Act of 2002

32.1  Certification of the Chief ExecutiveOfficer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002

32.2  Certification of the Chief FinancialOfficer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

12