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**U.S. SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, DC20549**
**FORM 10-QSB**
(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 SHEETS - March 31, 2003 andDecember 31, 2002

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

8
   
PART II  OTHER INFORMATION
 
ITEM 1.    LEGAL PROCEEDINGS

10
 
ITEM 2.     CHANGES INSECURITIES

10

 

ITEM 4.     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

10
 
ITEM 6.     (a) EXHIBITS FILED:

10

                   (b) REPORTS ON FORM 8-K
 
SIGNATURES 

10

 

2
   
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**PART I - FINANCIAL INFORMATION**
**Item 1.     Financial Statements**
**EYE CARE INTERNATIONAL, INC.****COMPARATIVE BALANCESHEETS**
**ASSETS**  
**March 31****2003**
  
**Dec. 31****2002**
  
**Unaudited**
   
Current assets
     
       Cash

$

4,791  
$
78,097 
       Accounts receivable
 
207,050   
22,670 
       Non-trade receivables and employeereceivables
 
10,000 
  
5,050 

 
     
Total current assets
 
221,841   
105,817 
 
     
       Loans and advances to stockholders andrelated parties (Note B)
 
91,223   
352,665 
       Fixed assets (net of accumulateddepreciation)
 
1,820 
  
4,135 

 
     
**Total assets**

$

314,884  $ 
462,617 
**LIABILITIES AND STOCKHOLDERS’ DEFICIT**
 
     
Current liabilities
     
       Accounts payable (Note C)

$

672,749  
$
736,078 
       Short-term notes payable (Note D)
 
1,920,500   
1,745,500 
       Accrued expenses and payroll taxes
 
207,021   
94,277 
       Deferred compensation (Note B)
 
203,367   
1,028,011 
       Deferred revenue to be recognizedwithin one year
 
67,025  
  
57,878 

 
     
Total current liabilities
 
3,070,662   
3,661,744 
 
     
Deferred revenue to be recognized over more than one year
 
30,676   
47,887 
 
     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 andoutstanding:  745 shares at December 31, 2002                aggregateliquidation value: $680,000 and $745,000, respectively.
 
1   
1 
       Series B 6% cumulative convertible preferred stock:               authorized, issued and outstanding: 685,715 share
 
686   
686 
Common stock, $0.001 par value; authorized shares:  300,000,000;       issued andoutstanding:  13,487,060 and 13,357,060, at March 31,        2003, and December 31,2002, respectively (Note E).
 
13,487   
13,357 
Additional paid-in capital
 
8,958,330   
8,958,460 
Accumulated deficit
 
(11,758,958)  
(12,219,518)
 
     
Total stockholders’ deficit
 
(2,786,454)
  
(3,247,014)

 
     
**Total liabilities and stockholders’ deficit**

$

314,884 
 
$

462,617 

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

 
 
**31 March****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
 
489,620   
381,559 
     Depreciation
 
2,315   
2,546 
     Interest and financial costs
 
41,490 
  
  22,705 
      
Total Expenses
 
533,425   
406,810       
Net income (loss) from continuing operations

$
(228,868) 
$
(334,251)       
EXTRAORDINARY ITEMS
     
     Net gain on cancellation of officer’sdeferred     compensation (Note B)
 
577,654   
-0- 
     Net gain on write off of accounts payable
 
 111,774 
  
-0- 
      
Total Extraordinary Gain
 
689,428   
-0-       
NET INCOME (LOSS)

$
460,560  
$
(334,251)            
Dividends attributable to preferred stockholders
 
4,500   
4,500       
Income (Loss) attributable to common stockholders

$
456,060  
$
(338,751)       
Basic earnings (loss) per common share (Note F)
     
     Income (loss) from continuing operations
 $
(0.02) 
 $
(0.03)
     Extraordinary gain
 $
0.05   
n/a         
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)**
** **
 
**Quarter end March 31** 
**2003**
 
**2002**

Cash flow from operating activities; net income (loss)

$
460,560 
 
$
(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)    
               Write-offof accounts payable
 
(112,000)   
     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
 
36,744    
     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)
 
48,671   
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
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**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)   
Account written-off - 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 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, 20033

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  common share.
**Note F:  Earnings per Share**
The basic net loss from continuing operations per share, and the earnings pershare applicable to extraordinary items, 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).
**Note G:  Subsequent Events**
Subsequent to March 31, 2003, the Company borrowed an aggregate of $250,000 fromstockholders and other accredited investors, at interest rates of 10%, perannum. In connection with these notes, the Company issued warrants to purchase10,000 shares of Class A common stock as additional interest.  Each warrant isexercisable at $0.01 per  common share, for five years.
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, 6(a) exhibits, Schedule 14C)7  
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**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

25,043
 
34,517
 
(  9,474)

 
Total

$
489,620
$
381,559
$
108,061 
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.8  
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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).
**Interest Expense:**
For the quarter ended March 31, 2003, interest expense of $41,490 increased morethan $18,000 over the same period of 2002 as the Company issued additionalinterest bearing notes in late 2002 and this first quarter of 2003.  Interest rates varied betweenten and 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. 
 
 
 9  
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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:

99.1 Certifications of CEO and CFO99.2 Information Statement, Schedule 14C – incorporated by            reference, filed May 02, 2003.99.3 Annual Report, Form 10–KSB – incorporated by reference,            filed April 24, 2003.

       (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:  May 5, 2003 
  
By: /s/  James L.Koenig                                              JamesL. Koenig, Chief Financial Officer

10

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CERTIFICATIONS

 

I, Clark A. Marcus, Chief ExecutiveOfficer certify that:

1.          I have reviewed thisquarterly report on Form 10-QSB ofEye Care International, Inc.;

2.          Based on my knowledge, thisquarterly report does not contain any untrue statement of a material factor omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this quarterly report;

3.          Based on my knowledge, the financial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report; 

4.          The registrant’s other certifying officer and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant andhave:

a)          Designed such disclosure controls and procedures to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this quarterly report is being prepared;

b)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)          Presented in thisquarterly report our conclusions about the effectiveness of the disclosure controlsand procedures based on our evaluation as of the Evaluation Date;

5.          The registrant’s other certifying officer and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

a)          All significant deficiencies in the design or operation of internal controls which could adverselyaffect the registrant’s ability to record, process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

b)          Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

6.          The registrant’s other certifying officers and I have indicated in thisquarterly report whetherthere were significant changes in internal controls or in other factors that could significantly affect internal controlssubsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

Date:  May 5, 2003

/s/ *Clark A.  Marcus*                  Clark A. MarcusChief Executive Officer

 
   
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CERTIFICATIONS

 

I, James L. Koenig, Chief FinancialOfficer, certify that:

1.         I have reviewed this quarterly report on Form 10-QSB of Eye Care International, Inc.;

2.         Based on my knowledge, this quarterly report does not contain any untrue statement of a material factor omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this quarterly report;

3.         Based on my knowledge, the financial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report; 

4.         The registrant’s other certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant andhave:

a)         Designed such disclosure controls and procedures to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this quarterly report is being prepared;

b)         Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)         Presented in this quarterly report our conclusions about the effectiveness of the disclosure controlsand procedures based on our evaluation as of the Evaluation Date;

5.         The registrant’s other certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

a)         All significant deficiencies in the design or operation of internal controls which could adverselyaffect the registrant’s ability to record, process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

b)         Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

6.         The registrant’s other certifying officers and I have indicated in thisquarterly report whetherthere were significant changes in internal controls or in other factors that could significantly affect internal controlssubsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

Date:  May 5, 2003

/s/ *James L.    Koenig    *                      James L. Koenig      Chief Financial Officer