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**U.S. SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**

**FORM 10-KSB**

**  [X]  Annual report under Section 13 or 15(d) of theSecurities Exchange Act of 1934**

For the fiscal year ended December 31, 2003

**[_]  Transition report under Section 13 or 15(d) of the SecuritiesExchange Act of 1934**

For the transition period from _______________ to____________________

Commission file number 0-27889

**EYE CARE INTERNATIONAL, INC.**(Name of Small Business Issuer in its Charter)

| Delaware                                                       |   | 59-3206480                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |
|                                                           |   |                              |
| 1511 North Westshore Boulevard, Suite 925 Tampa, Florida       |   | 33607                             |
| (Address of principal executive offices)                       |   | (Zip Code)                        |

(813) 289-5552(Registrant's telephone number)

**Securities registered pursuant to Section 12(b) of theAct:**

| Title of each class to be so registered | Name of each exchange on which each class is to be registered |
|-----------------------------------------|---------------------------------------------------------------|
|                                    |                                                          |
| None                                    | None                                                          |

**Securities registered pursuant to Section 12(g) of theAct:**

Class A common stock, $.001 par value(Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90days.          Yesþ     No      ̈

Check if there is no disclosure of delinquent filers in response to Item 405 of RegulationS-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form10-KSB.       ̈

Revenues for the issuer's most recent fiscal year were $181,392.

The aggregate market value of the voting and non-voting common equity held bynon-affiliates computed by reference to the closing price of the common stock on April 15, 2004 was $52,520,390.

----

**ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGSDURING THE PAST FIVE YEARS**

Check whether the issuer has filed all documents and reports required to be filed bySection 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 REGISTRANTS

                               As of April 15, 2004, the issuer had 17,219,800 shares of common stock, $.001 par value, outstanding.

Transitional Small Business Disclosure Format:  Yes ̈   Noý

**DOCUMENTS INCORPORATED BY REFERENCE**

 

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**Table of Contents**

|  **PART I.   FINANCIAL INFORMATION**                                                                                   | 1                                                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|
|                                                                                                                                  | Items 1 and 2.    Description of Business andProperties                                         | 2 |
|                                                                                                                                  | Item 3.    Legal Proceedings                                                                    | 2 |
|                                                                                                                                  | Item 4.    Submission of Matters to aVote of Security Holders                                   | 3 |
| **PART II**                                                                                                                           |                                                                                                           |
|                                                                                                                                  | Item 5.    Market forRegistrant’s Common Equity and Related Stockholder Matters           | 3 |
|                                                                                                                                  | Item 6.    Management's Discussion andAnalysis of Financial Condition and Results of Operations | 4 |
|                                                                                                                                  | Item 7.    FinancialStatements                                                                  | F-1 |
|                                                                                                                                  | Item 8.    Changes in and DisagreementsWith Accountants on Accounting and Financial Disclosure  | 8 |
|                Item 8A.  Controls and Procedures | 8                                                                                                              |
|                                                                                                                                  | Item 9.    Directors and ExecutiveOfficers                                                      | 9 |
|                                                                                                                                  | Item 10.  Executive Compensation                                                                          | 11 |
|                                                                                                                                  | Item 11.  Security Ownership of CertainBeneficial Owners and Management                                   | 13 |
|                                                                                                                                  | Item 12.  Certain Relationships and RelatedTransactions                                                   | 13 |
|                                                                                                                                  | Item 13.  Exhibits and Reports on Form8-K.                                                                | 14 |
|                                                                                                                                  | Item 14.  Principal Accountant Fees and Services                                                          | 14 |
| **Signatures**                                                                                                                        |                                                                                                           |

 

 

 

 

 

 

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Table of Contents

**PART I**

**Items 1and 2 Description of Businessand Properties**

In this report, ”ECI”, “we”, “the Company” or“us” refers to Eye Care International, Inc., a Delaware corporation, incorporated on May 31, 1994.  ECI’sexecutive offices are located at 1511 North Westshore Boulevard, Suite 925, Tampa, Florida 33607.  Our telephone number is(813) 289-5552.  These facilities are leased and consist of approximately 4,400 square feet.  Ourlease expires on June 30, 2006.  Rent expense associated with these premises and charged to operations for the twelve monthperiod ending December 31, 2003 was $117,677. 

**Our Business**

We market memberships in a comprehensive, national, non-insurance based, quality discounteye care and eyewear plan. The memberships entitle plan participants to obtain eye care services and products from our network ofproviders at rates which range from 20% to 60% below retail.  Additionally, beginning during the first quarter of 2003, wealso promote the distribution and sale of a line of nutraceuticals (vitamins) to enhance vision and cardiovascular health.  Inconsideration for this service, we have begun to receive endorsement fees and commissions.  

We believe that we are the only national discount vision network with ophthalmologists whohave agreed to discount all of their medical services, as well as the nation's largest optometric discount vision network. Thiswould make ECI the only national discount vision network which combines ophthalmology services provided by medical doctors withoptometric products and services provided by optometrists, opticians and optical locations. Our network has providers at nearly14,000 locations, and is comprised of over 1,600 ophthalmologic practices and over 12,000 optometric, optician and opticallocations. Ophthalmologists, optometrists and opticians participating in our vision care network are located within reasonableproximity to all major metropolitan areas within the United States.

By having access to a full range of eye care/eyewearservices offered by ECI's network of providers, at discounted rates, members of our vision care plan are able to obtain acomprehensive eye care service package, including elective cosmetic surgical procedures such as lasik or vision correction surgery,CO2 laser skin resurfacing or wrinkle removal surgery, and other laser surgical procedures performed by ophthalmologists. Theseprocedures are traditionally not covered by insurance or Medicare and are generally expensive. ECI members can obtain theseelective procedures from our providers at a discount of 20% from an ophthalmologist's usual and customary rate. As illustratedunder the caption "Our Vision Plan," members not eligible for Medicare may receive greater discounts for surgical procedures, suchas cataract surgery, that are typically covered by Medicare, since the 20% discount applies to the Medicare allowable cost ofprocedures, rather than the ophthalmologist's usual and customary rate, which is generally significantly higher. Althoughindividuals eligible for Medicare may participate in our vision care program, they only receive discounts on surgical proceduresnot covered by Medicare. Surgical procedures covered by Medicare are performed for them at the Medicare allowable rates.

ECI providers offer eyewear products to our members at nationally listed wholesale prices,plus a $30 to $50 dispensing fee paid to the provider. This generally creates a savings in the range of 40% to 60% off retailprices. We also offer a mail order program through which members of our vision care networkmay orderreplacement contact lenses and designer or non-designer sunglasses at nationally listed wholesale prices.   Substantiallyall of our revenues are derived from membership fees paid to us by individual subscribers or sponsoring organizations that offerour vision care program to their employee members. Less than one percent of revenues are derived from individuals. 

We market our vision care plan to corporations for their employees, large salesorganizations (such as insurance companies and sellers of multi-discount programs who include the ECI plan as part of theirproduct), and affinity groups which are groups created because of a common relationship or interest, for example religious,fraternal, trade and professional organizations.  These organizations can either purchase our vision care plan for, or offerit to, their employees as a supplement to existing health care insurance plans or other benefit programsor as a stand-alone benefit.  Sponsors of healthcare programs, including other discount vision plans, may secure for theirmembers the right to use the providers in our vision care network. This is a particularly significant aspect of our marketing plandue to the national scope of our network and the ophthalmology services offered.

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We have experienced losses since we commenced operations in 1994, including, net losses of$1,550,584 and $1,513,947 for the fiscal periods ending December 31, 2003 and 2002, respectively.  Our ability to operateprofitably depends upon market acceptance of our vision care plan and the development of an effective marketing organization. We are presently unable to predict when and if we will generate sufficient revenues to become profitable. 

However, in November 2003 the Company entered in an investment bankingagreement with Fordham Financial Management located in New York.  The agreement provides for Fordham to provide adviceconcerning strategic corporate planning and long-term investment policies, advice regarding mergers and acquisitions, and adviceregarding the sales of securities in private transactions. Through the efforts of Fordham, the Company expects to  initiallyreceive funds of up to $500,000 through a convertible debt arrangement. Although there can be no assurances, said funding isexpected to begin before May 2004. 

In January 2004 the Company entered into an arrangement with the May DavisGroup, another investment banking firm located in New York, to assist in raising up to $5 million for the Company. The Company hasbegun receiving funds through this arrangement.  These funds are through the issuance of three-year mandatory convertible debtwith an annual interest rate of seven percent. The conversion price is the lesser of (a) 120% of the closing bid price on theclosing date or (b) 75% of the lowest closing bid price during the five trading days immediately preceding the conversiondate.  To date a total $266,333 has been received.  In addition to its financial assistance, in April 2004  throughthe efforts of the May Davis Group, the Company signed a Private Equity Credit Agreement with Zatoon Ventures Limited wherebyZatoon will invest up to $3 million to be used for general corporate purposes.  The agreement provides that upon the effectiveregistration of the Company’s stock, at the option of the Company, Zatoon will purchase the Company’s stock for theaverage of the three lowest closing bid prices prior to the date of such notice. The put date is the date that the Company submitsnotice to the investor that it desires to draw down a portion of the line.  The Company expects to file to register its stockby May 31, 2004. 

In February 2004, the Company also signed a Letter of Intent to acquire byway of merger or the acquisition of the stock of three private sister companies, all health related companies, in an equity/cashtransaction with the Company being the survivor company.  These three companies are in the fields of managed care technology/repricing; insurance wholesaler providing stop loss insurance to third party administrators; and preferred provider medical networkcontracting with managed care organizations, third party administrators and large self-insured companies.  The synergies ofthese companies and the Company will enable all to benefit form each other, i.e. the Company making major sales through theseorganizations, as well as using their infrastructure to help with the Company’s rapid growth, and in return allow the othercompanies to use the Company as an outlet for their products/services.  Gross revenues for these three companies in 2003exceeded $13 million.  Although the Company expects to consummate this transaction before May 15, 2004, there can be noassurances that the transaction will be completed.  Closing of this transaction is conditioned upon certain legal andfinancial conditions being met, including but not limited to legal documents being completed and certified financial statementsbeing made available, and the payment by the Company of cash and stock to the sellers.

During the first quarter of 2004, some of the Company’s debt holdersconverted their promissory notes along with the related accrued interest into Class A common stock of the Company at the rate of$0.50 per share.  As of April 1, 2004, approximately $1.9 million of promissory notes (over 54% of the outstanding balance atyear-end 2003) and over $200,000 of accrued interest related to the notes has been converted to equity, thus reducing theCompany’s need for cash.

Funding received through these transactions will be used for completing thedevelopment of its marketing plan, and building the necessary administrative infrastructure, including the acquisition/mergerdiscussed above; and the repayment of the note issued to the three shareholders discussed in the Liquidity and Capital Resourcessection of the Management Discussion and Analysis.

**Employees**

As of December 31, 2003, we had eight full-time employees (the CEO, CFO,Secretary, Supervisor of Customer Service, and four Customer Service Reps and one part-time Customer Service Rep).

**Item 3. ****Legal Proceedings**

Other than routinevarious lawsuits, claims ordisputes arising in the normal course of business, we are not involved in any pending  litigation, nor are we aware of any pending or contemplated  proceedings against us. We know of no legal proceedings pending orthreatened, or judgments entered against any of our directors or officers in their capacity as such the settlement of suchclaims cannot be determined at this time.  Management does not believe the ultimate outcome of these matters will besignificant to its results of operations or cash.

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

We did not submit any matter to a vote of security holders, through thesolicitation of proxies or otherwise, during the fiscal year ended December 31, 2003.

**PART II**

**Item 5. ****Market for Registrant’s Common Equity and Related Stockholder Matters.**

**Trading Price Range and Dividends**

ECI’s common stock was held by approximately 250 stockholders ofrecord at December 31, 2003.  The Class A common stock is listed and traded principally on the OTC Bulletin Board under thesymbol "EYCI."  Set forth below are the high and low closing prices for our Class A common stock on the OTC Bulletin Board foreach quarter of the years ending December 31, 2003 and 2002.  These quotations reflect inter-dealer prices, without retailmark-up, mark-down or commission, and may not represent actual transactions.

              Quarter Ended

High

 

Low

March 31, 2002

$2.55

 

$0.75

June 30, 2002

2.40

 

0.85

September 30, 2002

1.90

 

1.00

December 31, 2002

1.50

 

0.30

March 31, 2003

0.51

 

0.15

June 30, 2003

0.48

 

0.17

September 30, 2003

0.38

 

0.20

December 31, 2003

0.30

 

0.06

On  April 15, 2004 the closing bid price of one share of our Class Acommon stock on the OTC Bulletin Board was $3.05.  As of the same date, there were approximately 250 holders of record of ourClass A common stock.

**Dividends**

The payment of dividends is within the discretion of our Board of Directorsand depends in part upon our earnings, capital requirements and financial condition. We have never paid any dividends on our ClassA common stock and we do not anticipate paying such dividends in the foreseeable future. We currently intend to retain earnings, ifany, to finance our operations.

**Sales of Unregistered Securities**

During 2003, two accredited investors converted their Series A preferredstock into 130,000 shares of Class A common stock.  In addition, ten accredited investors exercised a total of 230,500warrants to purchase 230,500 shares of Class A common stock, and two accredited investors converted their promissory notes andaccrued interest into 71,500 shares of Class A common stock. The Company also issued 150,000 shares of Class A common stock inpayment for consulting services.

The Company issued 112,000 shares of Class A common stock as additionalinterest applicable to notes payable, which were converted to equity in 2004.

The Company also issued $979,500 of one-year ten percent promissory notes in2003 to thirty-two accredited investors.

All of the foregoing were pursuant to Section 4(2) of the Securities Act of1933, as amended, and did not involve a public offering.   We paid no fees in connection with these transactions. There were no underwriters involved in these transactions and there were no underwriting discounts or commissions paid.  Thepurchasers in each transaction represented their intention to acquire the securities for investment only and not with a view to orfor sale in connection with any distribution of the securities.  Appropriate legends were affixed to the certificates for thesecurities issued in such transactions. All purchasers of securities in these transactions had adequate access to information aboutus and were sophisticated investors.

**Equity Compensation Plans**

In May 1997 ECI’s Board of Directors adopted, and our stockholdersapproved, the Eye Care International, Inc. 1997 Stock Option Plan.  The stock option plan is to be administered by the Boardof Directors or a committee of the Board.  Pursuant to the plan, options to purchase 750,000 shares of class A common stockmay be granted to directors, employees (including officers) and consultants.  To date, no options have been granted under theplan.
 
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**Item 6. ****Management's Discussion and Analysis of Financial Condition and Results of Operations**

CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION

We made forward-looking  statements (within the meaning of the PrivateSecurities  Litigation Reform Act of 1995) in this  report  that are subject to risks and  uncertainties, such as  statements about our plans, objectives, projections, expectations, assumptions, strategies, or  future events.   Other  written  or  oral  statements,   which  constituteforward-looking  statements,  also may be made from time to time by or on behalf of the  Company.  Words such as  "may,"  "expects,"  "anticipates,"  "intends," "plans," "believes," "seeks," "estimates," "will,""should," "could," variations of  such  words,   and  similar   expressions  are intended  to  identify  such forward-looking  statements.  Similarly,  statements that describe theCompany's future plans, objectives,  or goals also are forward-looking  statements.  These statements are notguarantees of future  performance and are subject to a number of risks, uncertainties,  and other factors, includingthose discussed below and elsewhere in this report,  that could cause actual results to differ  materially from futureresults,  performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue relianceshould not be placed on these forward-looking statements. The Company undertakes no obligation to update publicly anyforward-looking statements, whether as a result of new information, future events or otherwise.

Factors  that  could  cause  actual  results todiffer  materially  from what is expressed or forecasted in such forward-looking  statements include, but are notlimited to: (i) the inability of the  Company's  products to attain broad market acceptance;  (ii) inability of theCompany to complete its product development ; (iii) the impact of  competitive  products and pricing;  (iv) theCompany's ability to expand its sales and  marketing  programs;  (vii)  dependence on key personnel;  (ix)the availability,  terms and deployment of capital; and (x) general economic and business conditions. Subsequent  writtenand oral  forward-looking  statements  attributable to us or persons  acting on our behalf are expressly qualified in their  entirety by the cautionary  statements  set forth above and  contained  elsewhere inthis Annual Report on Form 10-KSB.

The following discussion and analysis of our financial condition and resultsof operation should be read in conjunction with the financial statements and notes thereto appearing elsewhere in thisreport.

**RESULTS OF OPERATIONS**

**Revenue:**

For the fiscal year 2003 the Company’s gross income of $431,392,exceeded the Company’s gross income recorded in 2002 by $144,000.  This increase resulted, in part, by the Companyreceiving $250,000, recorded in Other Income, from endorsing a vitamin product. The decline in the Company’s gross operatingrevenue derived from the sales of memberships resulted from the Company shifting its emphasis from retail marketing of membershipsto the wholesale marketing of its memberships and to the development of a more diversified and expanded wholesale customer base;one which will include the Company’s program as a premium benefit under the wholesale customer’s label. 

Although several significant new wholesale customer contracts werenegotiated during the year, implementation has taken longer than anticipated by the Company.  Several of the recently signedprivate label wholesale agreements provide that the Company’s vision plan will be automatically included with all salesofferings of the customer’s products or services.  The Company anticipates that commission income derived from itsagreement with a mail order fulfillment provider will be generated once the wholesale contracts are implemented.  Revenue(commissions) received on vitamin sales, included in Other Income, associated with an agreement signed earlier in the year shouldalso begin to generate revenue once the vitamin company receives adequate funding.  Other Income/(Expenses) includes $250,000of revenue received in 2003 from this contractual arrangement with the vitamin company.

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**Selling, General and Administrative Expenses (SG&A):**

The Company’s SG&A expenses of $2,647,992 increased byapproximately $1,196,000 over the prior year.  Comparison of the more significant components of SG&A expensesfollows:
   
2003 
 
2002
 
Increase(Decrease)
        
Payroll & related Expenses
 
$
1,274,982
$

925,324
$

349,658
Commissions
  81,737 
16,609 
65,128
Business Travel
  220,541 
121,461 
99,080
Insurance
  127,938 
126,243 
1,695
Professional/consulting Fees
  489,993 
102,764 
387,229Rent  117,677 
116,107 
1,570
All other SG&A expenses
  335,124 
43,268 
291,856         
               Total 
 
$

2,647,992
$

1,451,776
$

1,196,216
Staffing additions account for the majority of the increase in payroll andrelated expenses.  During the majority of 2002, the Company had not yet filled positions in Marketing, Provider Relations, andAccounting.  All of these positions, except the Accounting position, were filled during most of the year2003. 

Commissions increased approximately $65,000 to $81,737 for 2003 primarilybecause of the commission expense associated with the revenue created from the vitamin contract.

Insurance expense for 2003 of $127,938 was nearly same as the same period in2002.

Professional/consultingfees of $489,993 were approximately $387,000 higher than for year 2002 primarilybecause the Company used consultants   instead of hiring employees forcertain functions, and increased legal/financial activities.

 Other expenses for the current period increased nearly $292,000 to $335,124mainly because of the expenses associated with the reverse stock split, the use of temporary staffing personnel instead of hiringemployees, increased printing costs and the settlement of claims.  

**Interest Expense:**

Interest expense for 2003 of $364,511 increased by approximately $129,000over the same period of 2002 as the Company issued additional interest bearing notes in late 2002 and during the year 2003. The interest rate on these notes was ten percent.  The Company also issued warrants is lieu of granting higher interestrates.  The cost associated with said warrants of $157,566 was charged to interest expense.

**Depreciation Expense**:

Although a majority of the Company’s assets have been fullydepreciated, the Company did acquire a limited amount of depreciable assets in 2003.  Therefore, depreciation expense,computed on a straight-line method over the assets’ estimated lives, declined by nearly $5,000 in 2003.

**Other Income/(Expense) – Forgiveness of Debt**

In 2003 the Company entered into an agreement with its officers, ClarkMarcus and James Koenig, for the forgiveness of indebtedness owed by the Company to its officers.  At December 31, 2002 theCompany owed the officers a total of approximately $1,028,000 in deferred compensation, and the officers owed the Companyapproximately $282,982 for amounts advanced.  The officers forgave the Company of $928,639 of the deferred compensation inreturn for the Company forgiving the amounts owed by them to the Company.  The Company also negotiated a settlement with avendor in 2003 which resulted in the vendor forgiving the Company of $112,000 in return for the Company agreeing to pay the vendorcommissions on specific vision membership sales.

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**Loans to Stockholders and Officers:**

During the year 2003, loans and advances to stockholders and officers(primarily the CEO and CFO) were settled.  In prior years the Company had advanced amounts to them because they had deferred amajor portion of their compensation.  In March 2003, the Company and its officers, Clark Marcus (CEO) and James Koenig (CFO)entered into agreements whereby Messrs Marcus and Koenig relinquished their claims to deferred compensation in the aggregate amountof $928,639.  In return, the Company forgave Messrs Marcus and Koenig of loans and advances totaling $282,984.  Anyremaining amounts were eliminated by the officers absorbing expenses they incurred on behalf of the Company.

****

**LIQUIDITY AND CAPITAL RESOURCES**

The following summary table presents comparative cash flows of the Companyfor the years 2003 and 2002:
 2003 2002
Net cash used by    operating activities
$(1,103,009)
 
$(1,054,536)
Net cash used by investing activities16,933  (35,961)
Net cash provided by financing activities1,009,405  1,159,900     
Net increase or (decrease) in cash $(76,671) $69,403 
As evidenced in the above summary table, the Company has funded itsoperations primarily through the issuance of short-term notes payable.  During the year 2003, funds raised in this mannertotaled**$**978,500. From time to time the Company experiences cash flow shortages due to current operating demands of itsmarket development and enhancement program, and lack of capital resources.  Management of the Company has been able to managethese shortfalls without interruption to the business to date. 

In June 2003 the Company entered into an agreement with three preferredshareholders settling an action brought by these shareholders against the Company, its directors and officers.  Under theterms of the agreement, the Company redeemed all of the shareholders’ preferred stock in the Company in exchange for thefollowing:

The issuance of a promissory note in the principal amount of $664,950 dueand payable on June 1, 2004, including  principal and interest accrued atthe rate of 1.53% per annum;

The issuance of warrants entitling the three individuals to purchase upto 299,406 shares of the  Company at the exercise price of $2.1875 pershare, in lieu of the Company paying off the promissory note.  Theindividuals have the option to exercise these warrants at  any time priorto  the sixth business day after the Company has delivered a written noticeof the Company’s intent to   pay in full, within thirty days, theobligations arising under the note, and

 The extension of the expiration date of the Shareholders’ existingtwo-hundred forty  thousand warrants, exercisable at $2.50 per commonshare, from May 12, 2003 to June 1, 2005.

In November 2003 the Company entered in an investment banking agreement withFordham Financial Management located in New York.  The agreement provides for Fordham to provide advice concerning strategiccorporate planning and long-term investment policies, advice regarding mergers and acquisitions, and advice regarding the sales ofsecurities in private transactions. Through the efforts of Fordham, the Company expects to initially receive funds of $500,000through a convertible debt arrangement. Although there can be no assurances, said funding is expected to begin before May2004. 

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In January 2004 the Company entered into an arrangement with the May DavisGroup, another investment banking firm located in New York, to assist in raising up to $5 million for the Company. The Company hasbegun receiving funds through this arrangement.  These funds are through the issuance of three-year mandatory convertible debtwith an annual interest rate of seven percent. The conversion price is the lesser of (a) 120% of the closing bid price on theclosing date or (b) 75% of the lowest closing bid price during the five trading days immediately preceding the conversiondate.  To date a total $266,333 has been received.  In addition to its financial assistance, in April 2004  throughthe efforts of the May Davis Group, the Company signed a Private Equity Credit Agreement with Zatoon Ventures Limited wherebyZatoon will invest up to $3 million to be used for general corporate purposes.  The agreement provides that upon the effectiveregistration of the Company’s stock, at the option of the Company, Zatoon will purchase the Company’s stock for theaverage of the three lowest closing bid prices prior to the date of such notice. The put date is the date that the Company submitsnotice to the investor that it desires to draw down a portion of the line.  The Company expects to file to register its stockby May 31, 2004.

In February 2004, the Company also signed a Letter of Intent to acquire byway of merger or the acquisition of the stock of three private sister companies, all health related companies, in an equity/cashtransaction with the Company being the survivor company.  These three companies are in the fields of managed care technology/repricing; insurance wholesaler providing stop loss insurance to third party administrators; and preferred provider medical networkcontracting with managed care organizations, third party administrators and large self-insured companies.  The synergies ofthese companies and the Company will enable all to benefit form each other, i.e. the Company making major sales through theseorganizations, as well as using their infrastructure to help with the Company’s rapid growth, and in return allow the othercompanies to use the Company as an outlet for their products/services.  Gross revenues for these three companies in 2003exceeded $13 million.  Although the Company expects to consummate this transaction before May 15, 2004, there can be noassurances that the transaction will be completed.  Closing of this transaction is conditioned upon certain legal andfinancial conditions being met, including but not limited to legal documents being completed and certified financial statementsbeing made available, and the payment by the Company of cash and stock to the sellers.

During the first quarterof 2004, some of the Company’s debt holders converted their promissory notesalong with the related accrued interest into Class A common stock of the Companyat the rate of $0.50 per share.  As of April 1, 2004, approximately $1.9million of promissory notes (over 54% of the outstanding balance at year-end2003) and over $200,000 of accrued interest related to the notes has beenconverted to equity, thus reducing the Company’s need for cash.

Funding received through these transactions will be used for completing thedevelopment of its marketing plan and building the necessary administrative infrastructure, including the acquisition/mergerdiscussed above; and the repayment of the Note issued to the three shareholders discussed above.

CONTRACTUAL OBLIGATIONS

We do not  have  any  material  contractual  obligations currently  outstanding requiring payments over the next five years.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements as of December 31, 2003 or as of thedate of this report.

 

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**Item 7.  FinancialStatements.**

EYE CARE INTERNATIONAL, INC.FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2003 AND 2002

Index to Financial Statements

** **

**Page**

 

 

Report of Independent Accountants – 2003

F - 2

 

 

Balance Sheets at December 31, 2003and 2002

F - 3

 

 

Statements of Operations                For years ended December 31, 2003and 2002

F - 4

 

 

Statements of Stockholders’  Deficit                For years ended December 31, 2003and 2002

F - 5

 

 

Statements of Cash Flows                For years ended December 31, 2003and 2002

F - 6

 

 

Notes to Financial Statements

F - 7

 

 

Report of Independent Accountants –2002

F - 15
 
 

 

 

 

F-1
**BRIMMER, BUREK & KEELAN LLPCERTIFIED PUBLIC ACCOUNTANTS**

**REPORT OF INDEPENDENT ACCOUNTANTS**

Board of Directors and StockholdersEye Care International, Inc.Tampa, Florida

We have audited the accompanying balance sheet of Eye Care International, Inc. as ofDecember 31, 2003 and the related statements of operations, stockholders’ deficit and cash flows for the year thenended.  These financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in theUnited States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the  financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.

In our opinion, the  financial statements referred to above present fairly, in allmaterial respects, the financial position of Eye Care International, Inc. as of December 31, 2003 and the results of operations,changes in shareholders’ deficit and cash flows for the year then ended in conformity with accounting principles generallyaccepted in the United States.

The financial statements as of and for the year ended December 31, 2002 were audited byanother auditor. As discussed in Note 8 to the financial statements, the Company has restated its 2002 financial statements duringthe current year to reflect a reverse stock split in conformity with accounting principles generally accepted in the United Statesof America. The other auditor reported on the 2002 financial statements before the restatement.

***/s/Brimmer, Burek & Keelan LLP***

Brimmer, Burek & Keelan LLPCertified Public AccountantsTampa, FloridaApril 20, 2004

 

F-2

**EYE CARE INTERNATIONAL, INC.BALANCE SHEETS**

**                                                                                 ASSETS**

**2003**

**2002**

 Current assets

 

 

               Cash

$                 1,426 

$            78,097 

               Accounts receivable (net of allowance for doubtful accounts)

 55,455 

22,670 

               Non-trade receivables and employee receivables

- 

 5,050 

               Prepaid Expenses

10,557 

 

 

 

 

               Total current assets

 67,438 

105,817 
  
Fixed assets (net of accumulated depreciation)

 6,587 

4,135 
   
Loans and Advances to Stockholders and Related Parties

-  

 352,665 

 

 

 

Total assets

$              74,025 

$         462,617 

 

 

 

 

 

**LIABILITIES AND STOCKHOLDERS’ DEFICIT**

 

 

 

 Current liabilities

 

 

                Accounts payable

$             767,199 

$         736,078 

                Loans and notespayable

 3,093,140 

1,745,500 

                Accrued expenses and payrolltaxes

 433,958 

141,767 

                Deferred compensation –related party

 487,809 

1,028,011 

                Deferred revenue

 32,303 

57,899 

                Total currentliabilities

 4,814,409 

3,709,255 

 

 

 

Long Term Liabilities

               Deferred Revenue

37,917 

47,866 
    
Total liabilities

4,852,326 

3,757,121 
   
Stockholders’ Deficit

 

 

Preferred Stock, $.001 par value, 10,000,000 shares authorized:                 Series A convertible preferredstock;                 1,500 shares authorized; 380 and 745shares issued and                  outstanding  (aggregateliquidation value**:** $380,000 and                   $745,000)

- 

1 

                Series B 6% cumulativeconvertible preferred stock;                 authorized, issued and outstanding: -0-and   685,715 shares                 (aggregate liquidation value: $-0- and  $385,407)

- 

686 

 Common stock  A $.001 par value; 30,000,000 shares authorized;                 3,062,722 shares and 2,415,860 sharesissued and                 outstanding at 31 December 2003 and2002, respectively

3,062 

 2,418 

Common stock   B $.001 par value; 10,000,000 shares authorized;                 shares and 255,540   shares issuedand outstanding

255 

   255 

Additional paid-in capital

 9,166,373 

9,099,544 

Accumulated deficit

 (13,947,991)

(12,397,408)

 

 

 

                Total stockholders’deficit

 (4,778,301)

( 3,294,504)

 

 

 

Total liabilities and stockholders' deficit

$              74,025 

$           462,617 

See notes to financial statements

F-3

**EYE CARE INTERNATIONAL, INC. STATEMENTS OF OPERATIONSFor the Years ended December 31, 2003 and 2002**

 

 

**2003**

        

**2002**

REVENUES

 

 

 

 

Membership fees

$

181,392 

$

287,735 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

        Selling, general and administrativeexpenses

 

2,647,992 

 

1,451,776 

        Depreciation

 

4,940 

 

9,642 

Total Operating Expenses

 

2,652,932 

 

1,461,418 

 

 

 

 

 

Loss From Operations
 
2,471,540 
 
1, 173,683
     
OTHER INCOME (EXPENSE)
 
 
 
 

      Interest Expense

 

 (364,511)

 

(235,929)
       Financing Costs 
- 
 
(86,335)
       Forgiveness of Debt – RelatedParty
 
928,639 
 
- 

       Forgiveness of Debt

 

 114,274 

 

- 

       Product Endorsement Fees
 
250,000 
 
- 

Total Other Income (Expense)
 
928,402 
 
(322,264)
        
Net Loss Before Income Taxes
 
(1,543,138)
 
(1,495,947)

Income Taxes
 
- 
 
- 
    
Net Loss
 
(1,543,138)
 
(1,495,947)
   
Preferred Stock Dividends
 
7,446 
 
18,000 
   
Net Loss Available To Common Stockholders

$

(1,550,584)

$

(1,513,947)
   
Basic loss per common share

$

(.54)

$

(.63)

 

 

 

 

 

Basic weighted average number of shares outstanding
 
2,858,330 
 
2,408,313 

See notes to financial statements

F-4

**EYE CARE INTERNATIONAL, INC.STATEMENTS OF STOCKHOLDERS' DEFICITYears ended December 31, 2003 and 2002**

 

Preferred Stock
 
Common Stock
       
  

Series A
 
Series B
 
Series A
 
Series B
      
 

Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Paid-In Capital
 
Retained Deficit
 
Total

 

 

 

 

 

 

 

 

 

 

 
 
 

 
  
 

 

 

 

 

 

Balance – December 31, 2001 

745 

 

$1 

 

685,715 

 

  $686 

 

11,924,360 
 
$11,925 

 

1,277,700 
 
$1,277

 

8,908,615 

 

(10,883,461)

 

(1,960,957)

Issuance of common stock

 

 

 

 

 

 

 

 

155,000 
 
155

 
    
180,245 

 
 
 

180,400

Preferred Dividends
                   
(18,000)
 
(18,000)
Net (Loss)                   
(1,495,947) 
(1,495,947)
Balance – December 31, 2002

745 

 

1 
 
685,715 
 
686 
 
12,079,360 
 
12,080
 
1,277,700 
 
1,.277
 
9,088,860
 
(12,397,408)
 
(3,294,504)

Reverse split
        
(9,662,640)
 
(9,662)
 
(1,022,160)
 
(1,022)
 
10,684
    
 

 

 

 

 

 

 

 

 

 
   
  

 
  
  

 

 

 

 

 

Balance – December 31, 2002 –    restated

745 

 

$1 

 

685,715 

 

$686 

 

  2,416,720 
 
 $2,418 

  

255,540
 
$255

  

$9,099,544 

 

 $(12,397,408)

 

$(3,294,504)
                     
Conversion of Preferred stock to        Common

(65)
 
(1)
     
130,000 
 
130 
     
(130)
   
(1)

Reverse Stock Split
        
(104,000)
 
(104)
     
104
   
- 

Redemption   of Preferred for Debt

(300)
 
- 
 
(685,715)
 
(686)
         
(599,314)
   
(600,000)
                      
Common Stock Issued for Cash
        
50,000 
 
50 
     
24,950 
   
25,000 

Common Stock Issued for Interest
        
112,000 
 
112 
     
45,873 
   
45,985 

Exercise of Warrants
        
230,500 
 
230 
     
6,175 
    
6,405 

Conversion of Debt   for common
        
21,500 
 
22 
     
59,749 
    
59,771 

Common Stock Issued for Accts    Payable
        
4,000 
 
4 
     
1,996 
   
2,000 

Common Stock Issued for   Services
        
200,000 
 
200 
     
128,550 
   
128,750 

Preferred Stock Dividend
                   
(7,445)
 
(7,445)

Warrants Issued with Debt
                
398,876 
   
398,876 

Net (Loss)
                  
(1,543,138)
 
(1,543,138)
                      Balance - December 31, 2003
380  
- 
- 
-- 
3,060,720  
$3,062  
255,540 
$255 
9,166,373  
(13,947,991) 
(4,778,301)
 See notes to financial statements

F-5

**EYE CARE INTERNATIONAL, INC. STATEMENTS OF CASH FLOWSYears ended December 31, 2003 and 2002**

 

 

 

2003

 

 

2002

 

 

 

 

 

 

Cash flow from operating activities

 

 

 

 

 

 

Net loss

 

$

(1,543,138)

 

$

(1,495,947)

Adjustment to reconcile net loss to net used in operating activities

 

 

 

 

  

        Write-offs of deferred offering costs and otherassets

 

 

- 

 

 

99,256 

        Issuances of shares and warrants for servicesand interest

 

 

332,039 

 

 

- 

        Depreciation

 

 

4,940 

 

 

9,642 

        Common stock issued for settlement
  
2,000 
  
- 

Changes in operating assets and liabilities

 

 
 
 

 

  

        (Increase) decrease in accountsreceivables

 

 

(27,735)

 

 

19,174 

        (Increase) decrease in prepaidexpenses

 

 

(10,557)

 

 

10,973 

        (Increase) decrease in other currentassets

 

 

328,341 

 

 

- 

        Increase (decrease) in accounts payable andaccrued expenses

 

 

164,832 

 

 

(97,952)

        Netchange in debt discount
  
222,016 
  
- 

        Increase (decrease) in deferredcompensation

 

 

(540,202)

 

 

481,050 

        (Decrease) in deferred revenue

 

 

(35,545)

 

 

(80,732)

 

 

 

 

 

 

   

Net cash used by operating activities

 

 

(1,103,009)

 

 

(1,054,536)

 

 

 
 
 

 

 

Cash flow from investing activities

 

 
 
 

 

 

        (Advances to) payments fromstockholders/officers

 

 

24,324 

  

 

(35,961)

         Purchases of property andequipment

 

 

(7,391)

 

 

- 
       
Net cash provided (used) by investing activities
  
16,933 
  
(35,961)
       
Cash flow from financing activities

 

 
 
 

 

 

        Proceeds from sales of common stock

 

 

25,000 

 

 

180,400 

        Proceeds from short term borrowings loans andnotes payable

 

 

978,000 

 

 

979,500 

        Proceeds from exercise of warrants

 

 

6,405 

 

 

- 

 

 

 
  
 

 

 

Net cash provided by financing activities

 

 

1,009,405 

 

 

1,159,900 

 

 

 
 
 

 

 

Increase (decrease) in cash

 

 

(76,671)

 

 

69,403 

 

 

 
 
 

 

 

Cash - January 01,

 

 

78,097 

 

 

8,694 

 

 

 
  
 

 

 

Cash - December 31,

 

$

1,426 

 

$

78,097 

 

 

 
  
 

 

 

Supplemental disclosures         Interest paid

 

$

203,439 

 

$

15,761 

        Common stock issued for settlement

$

2,000 
  
$

 

        Common stock and warrants issued for             interest and services
 
$

332,039 
 
$

- 

        Preferred stock redeemed for debt
 
$

654,950 
 
$

- 
       Taxes Paid  $
-0-   $
-0- 
See notes to financial statements

F-6

**  EYE CARE INTERNATIONAL, INC.NOTES TO  FINANCIAL STATEMENTS**

**NOTE 1 – NATURE OF OPERATIONS**

Eye Care International, Inc. (the Company) markets vision care benefit plans andenhancements to plans provided by others. The Company's benefit plans and plan enhancements provide members and members of its plansponsors (employers, associations and other organizations) the opportunity to obtain discounted eye care services and products fromthe Company’s national network of ophthalmic physicians, optometrists, eyewear suppliers, etc.

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Estimates**

The preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates

**Revenues and Commissions Recognition**

Revenues from memberships are recognized over the life of the memberships which generallyare one year from the month after a member signs up for the program. However, the Company also sells smaller amounts of two andthree year memberships which are amortized over their respective periods. The Company received a one time fee from product endorsement which was recognizedas income when all obligations of the company had been performed and the billingwas made to the customer. In 2003 the Company received this onetime product endorsement fee which is recognized as other income due to its expected non reoccurrence.  In 2003 the Companyalso received a minor amount of commission on sale of products. The Company receives orders by telephone and uses a fulfillmentcenter to complete the sale.  Those revenues are recognized when the product is shipped and paid for by the customer. Revenues from commissions are immaterial in amount.

**Stock Based Compensation**

During 2003, the Company issued 1,393,506 detachable warrants to purchase Common A stock,to 2003 debt holders in connection with their loans to the Company in the amount of $978,000.  The warrants have a term offive years from date of issue and are immediately exercisable by the warrant holders.  In accordance with EITF 00-27, thewarrants issued to 2003 debt holders were valued utilizing the Black-Scholes formula with a volatility factor of 255% and a taxfree interest rated of 4.85%. Based upon that valuation, a debt discount was so determined and is being amortized as interestexpense over the life of the debt.  The amount of discount determined as pertaining to the warrants is $398,876 and theinterest expense for 2003 is $157,566.  Prior to 2003, the detachable warrants issued to debt holders were valued using theintrinsic method and the resulting interest expense for 2002 was $322,264.   Since the debt is payable in one year from dateof issue, the use of the transitional method in EITF 00-27 for warrants issued in 2002 would not make a material difference, andtherefore the 2002 financial statements have not been restated to reflect that method.

**Property and Equipment**

Property and equipment are recorded at cost.  Depreciation is calculatedusing thestraight line method over the estimated useful lives of the assets, generally ranging from 5 to 7 years. Additions and majorimprovements to property and equipment are capitalized. Repair and maintenance expenditures are charged to expense as incurred. Asproperty or equipment is sold or retired, the applicable cost and accumulated depreciation are eliminated from the accounts and anygain or loss is recorded.

**Accounts Receivable**

Accounts receivable, net are stated at estimated net realizable value. Accounts receivableare mostly comprised of balances due from memberships and product endorsements, net of estimated allowances for uncollectibleaccounts. In determining collectibility, historical trends are evaluated and specific customer issues are reviewed to arrive atappropriate allowances. (See Note 4)

F-7

**Income Taxes**

The Company has adopted SFAS 109.  The Company has not made a provision for incometax purposes due to incurring losses since inception.  There is no current tax expense, and after consideration of a valuationallowance, there is no deferred tax benefit.  The cumulative net operating losses of approximately $12,500,000 million can becarried forward to offset future taxable income.  The net operating loss carry-forward begins expiring in 2011.

For the years ended December 31, 2003 and 2002, the temporary differences between bookincome and taxable income consisted of the deferred compensation.  Computation of any deferred tax asset is computed bymultiplying these temporary differences by the approximate applicable tax rate of 34 percent.  Components of the deferred taxasset for the periods end December 31, 2003 and 2002 are as follows:

Income tax expense (benefit) for the years ended December 31, 2003 and 2002 is asfollows:

 

2003

 

2002

Current income tax expense (benefit)

$

- 

 

$

- 

Deferred income tax expense (benefit)

 

- 

 

 

- 
      
Income tax expense (benefit)

$

- 
 
$

-

Income taxes for the years ended December 31, 2003 and 2002 differs from the amountscomputed by applying the effective income tax rate of 34% to income before income taxes as a result of the following:

 

2003

 

2002

Computed tax expense at the statutory rate
 
34% 

 
 
34% 

Increase (decrease) in taxes resulting from:

 

 

 

 

 

     Net operating loss
 
(34%)
  
(34%)
      
Current income tax expense (benefit)
 
-%
  
-%

Temporary differences that give rise to deferred tax assets and liabilities:

 

2003

 

2002

Deferred tax assets:
 
 

 
 
 

      Net operating loss carryforward

$ 

4,761,340 

 

$

3,230,000 

      Compensation
 
- 
  
340,000 

Less valuation allowance
 
(4,761,340)
  
(3,570,000)

Gross deferred tax asset
 
- 
  
- 

Gross deferred tax liability
 
- 
  
- 
      
Net deferred tax asset

$

- 
 
$

- 

As of December 31, 2003, realization of the Company’s net deferred tax assets ofapproximately $4,761,340 was not considered more likely than not, and accordingly, a valuation allowance of an equal amount wasprovided. The net change in the total valuation allowance during the year ended December 31, 2003 was $1,191,340.

**Loss Per Share**

The Company has adopted SFAS 128, Earnings per Share issued by the Financial AccountingStandards Board.

F-8

Net loss per share was computed based on the weighted average number of shares outstandingduring the periods presented.  All weighted average shares outstanding have been restated to reflect the 1 for 5 reverse stocksplit occurring in June 2003.

Diluted loss per share is considered to be the same as basic loss per share since theeffect of common stock options and warrants and preferred stock are anti-dilutive.

**NOTE 3 – DUE FROM STOCKHOLDERS/OFFICERS**

As of December 31, 2003, due from stockholders/officers included the following:

 

2003

 

2002

Loans receivable

$

-

 

$

325,074 

Travel advances
 
-
  
27,591
       
$

-
 
$

352,665

**NOTE 4 – ACCOUNTS RECEIVABLE, NET**Accounts receivable, net consist of the following:

 

2003

 

2002

Accounts receivable

$

68,955 

 

$

22,670

      Less allowance for uncollectible accounts

 

(13,500)

 

 

-

Total

$

55,455 

 

 $

22,670

For the years ended December 31, 2003 and 2002, amounts expensed to bad debt was $71,947and $30,751, respectively.  Bad debt expense for the year ended December 31, 2003 includes approximately $43,857 of allowancefor uncollectible advances to a consultant and shareholder of the Company.

During the years ended December 31, 2003 and 2002, the Company factored, without recourse,approximately $69,800 and $-0- of individual accounts in accounts receivable.  The aggregate amount of loss on the sale ofthese receivables was $14,590 for the year ended December 31, 2003.

**NOTE 5 - PROPERTY AND EQUIPMENT, NET**

Property and equipment, net consist of the following:

 

2003

 

2002

Machinery and equipment

$

72,585 

 

$

72,585 

Office furniture
 
51,845 
  
51,845 

Computers and equipment
 
7,391 
  
- 
  
131,821 
  
124,430 

Less accumulated depreciation
 
(125,234)
  
(120,294)
      
Total

$

6,587 
 
$

4,135 

Depreciation expense for the years ended December 31, 2003 and 2002 was $4,940 and $9,642,respectively.

F-9

 

**NOTE 6 – NOTES AND LOANS PAYABLE**

Notes and loans payable consist of the following as of December 31, 2003 and2002:

 

2003

 

2002

Notes payable to investors and shareholders; bearing interest ranging    from 5.75% through 12% per annum; due through December 2002;    currently in default.

$

979,000 

 

$

979,000 

Notes payable to investors and shareholders; bearing interest at 8%    per annum; payable on demand.
 
474,500 
  
474,500

Loans payable to investors and shareholders; payable without specific    interest or repayment terms; currently bearing interest ranging    from 5.75% through 12% per annum.
 
242,000 
  
242,000

Notes payable to officers; bearing interest at 8% per annum; with    no specific repayment terms.
 
50,000 
  
50,000

Notes payable to investors and shareholders; bearing interest at 10%    per annum; due through December 2003.
 
924,000 
  
-

Promissory note payable to shareholder investor; bearing 1.53% interest    per annum; due June 2004.
 
664,950 
  
-
      
Total notes and loans payable
 
3,334,450 
  
1,745,500

Less discount on debt (See Note 2, Stock Based Compensation)
 
(241,310)
  
-
      
Total

$

3,093,140
 
$

1,745,500

As of December 31, 2003, all notes and loans payable were classified as currentmaturities.

As of March 31, 2004, approximately $1,900,000 of debt had been converted in Common A stock (See footnote 16).

**NOTE 7 – PREFERRED STOCK**

Series A Convertible preferred stock is nonvoting and bears no dividends.  Each shareis redeemable by the Company on the third anniversary of issuance at $1,000, per share, and convertible into 2,000 shares of ClassA common stock, subject to adjustment.  Upon a public offering of $5,000,000 or greater, the shares are automaticallyconvertible.

Series B Convertible preferred stock votes on an as if converted basis and bearscumulative dividends at 6%, per annum.  Each share is convertible at $2.19, per share, into Class A common stock.

In June 2003, the Company settled a lawsuit with an investor whereby the investor’sinvestment in 300 shares of the Company’s Preferred A stock and 685,715 shares of the Company’s Preferred B stock wasredeemed in exchange for a note payable together with accrued dividends and legal fees. The total amount of the note is $664,950.In addition, the investor was awarded 299,406 warrants exercisable for $2.19 per share of Common A stock.  The full amount ofthe note is recorded as a current liability since its expiration date is June 1, 2004 and bears interest at the annual rate of1.53%.  In addition, the Company agreed to pay a consulting fee to the investor in the amount of $2,440 per month for twelvemonths beginning with June 2003.  Based upon a valuation of the warrants utilizing the Black-Scholes pricing model, thewarrants have a zero value and therefore have not resulted in a computation of discount on the resulting debt.  The Companyalso agreed to extend the term for another two years for 240,000 warrants previously issued to the investor.  These warrantsare exercisable at a price of $2.50 per share.  Since the extension of the term of the warrants is considered a change in thewarrant, a new measurement date occurred on the date of that change.  Utilizing the Black-Scholes pricing model, the value ofthe warrants at the new measurement date did not result in any additional expense to be recorded by the Company.

F-10

**NOTE 8 – COMMON STOCK**

In June 2003 the Company’s board approved a reverse 1 for 5 stock split for itsCommon A shares.  All references to the Common A stock in the accompanying financial statements have been adjusted to reflectthe post split shares of Common A.

During 2003, the Company issued detachable warrants to all convertible debt holders inaddition to their convertible notes.  This practice is consistent with the Company’s activity in prior years. However,EITF 00-27 requires the calculation of the fair value of the warrants so issued for periods ending after December 31, 2002. The resulting valuation of the warrants is then reflected as a discount of the underlying debt and a corresponding addition toadditional paid in capital.  The amount of this discount so valued in 2003 is $398,876 and is being amortized over the life ofthe debts as interest expense.  The amount of interest expense recorded for 2003 was $157,566.  Warrants issued in prioryears were recorded as an interest expense utilizing the intrinsic method of valuation pursuant to EITF 98-5.

In 2003, the company settled a lawsuit with a former employee for prior unpaid wageswhereby they agreed to a payment of 4,000 shares of Common A stock and a note in the amount of $55,000 payable over one year on amonthly basis.  The value of the shares issued for the settlement was $2,000.

The Company issued 150,000 shares of Common A stock for consulting services to threeconsultants.  The value of the shares issued was $102,500.

**NOTE 9 – WARRANTS**

During the years ended December 31, 2003 and 2002, the Company issued warrants to purchase1,369,506 and 184,400 shares of Class A common stock, respectively.  At December 31, 2003 there were 2,325,949 warrants topurchase Class A common stock outstanding, exercisable at varying prices (weighted average price of $2.30) through 2006.  Thefollowing table summarizes this warrant activity:

 

2003

 

2002

 

 

Warrants

 

 Weighted Average Exercise Price

 

 Warrants

 

Weighted Average Exercise Price

        Warrants outstanding, beginning ofyear

 
1,186,943 

 

2.60

 

897,543 

 

$  2.60 

        Warrants issued as additional interest on notespayable
 
1,369,506 

 

2.19

 

184,400 

 

$  1.05 

        Warrants issued on sales of Class A commonstock
 
 

 

 

15,000 

 

$  0.25 

        Warrants cancelled
  
 
 
 

(10,000)

 

$  5.00 

        Warrants exercised
 
(230,500)
 
.05
    
 
 
 

 

 

 

 

 

 

        Warrants outstanding, ending of year
 
2,325,949 

 

 2.30

 

1,186,943 

 

$  2.60 

The following table summarizes the status of warrants outstanding at December 31, 2003;all warrants are immediately exercisable:

 Exercisable and Outstanding Warrants
 
Post SplitExercise Price

Number

Weighted averageremainingcontractual life inyears

$0.01

978,600

4.41

0.05

104,400

3.71

1.25

  6,000

3.01

2.19

299,406

0.42

2.50

876,541

1.87

5.00

  61,000

2.91

F-11

**NOTE 10 – STOCK OPTION PLAN**

The 1997 Stock Option Plan (Plan) is administered by the Board of Directors or a committee thereofand provides for options to purchase 750,000 shares of Class A common stock to be granted under the Plan to employees (includingofficers), directors, independent contractors and consultants to the Company.  The Plan authorizes the issuance of incentivestock options (ISOs), as defined in the Internal Revenue Code of 1986, as amended, non-qualified stock options (NQSOs) and stockappreciation rights (SARs).  Consultants and directors who are not also employees of the Company are eligible for grants ofonly NQSOs and SARs. The exercise price of each ISO may not be less than 100% of the fair market value of the common stock at thetime of grant, except that in the case of a grant to an employee who owns 10% or more of the outstanding stock of the Company or asubsidiary of the Company, the exercise price may not be less than 110% of the fair market value on the date of grant. The exerciseprice of each NQSO or SAR may not be less than 85% of the fair market value of the common stock at the time of grant. Generally,options shall be exercisable at 20%, per year, and shall be outstanding for ten years.

As of December 31, 2003 and   2002, no options have been granted under the Plan.

**NOTE 11 – FAIR VALUES OF FINANCIAL INSTRUMENTS**

The carrying amount of cash, accounts receivable, accounts payable and other currentliabilities approximates fair value because of their short maturity.  The carrying amount of notes payable approximates fairvalue based on stated interest rates, shares and warrants being approximate to current market interest rates.

**NOTE 12 – COMMITMENTS AND CONTINGENCY**

**Lease**

The Company is committed under a lease for office space through May 31, 2006.  Forthe years ended December 31, 2003 and 2002, rent expense was approximately $117,677 and $116,107, respectively. 

The following is a schedule of future minimum lease payments (net of sales tax) requiredunder this lease.

                               Year Ending December 31,

                                               2004                                       $105,426                                               2005                                       $109, 475                                               2006                                       $  46,360

**NOTE 13 – LITIGATION AND CONTINGENCIES**

At December 31, 2003, the Company was involved in various lawsuits, claims or disputesarising in the normal course of business.  The settlement of such claims cannot be determined at this time.  Managementdoes not believe the ultimate outcome of these matters will be significant to its results of operations or cash flows.

**NOTE 14 – GOING CONCERN**

The accompanying financial statements have been prepared in conformity withaccounting principles generally accepted in the United States of America, whichcontemplates continuation of the Company as a going concern.  However, theCompany has sustained operating losses in recent years.  Further for theyear ended December 31, 2003, the Company had negative working capital ofapproximately $4,746,971, a net loss of approximately $1,543,138 and hasincurred substantial losses in previous years resulting in an accumulateddeficit of approximately $13,947,991.  Although these factors raisesubstantial doubt about the ability of the Company to continue as a goingconcern the Company has taken several actions to ensure that the Company willcontinue as a going concern through December 31, 2004.

F-12

The Company signed a financing agreement in November 2003 with an investment banking firmto obtain convertible debt financing to the Company in the approximate amount of $500,000 which is expected in the second quarterof 2004.  In January 2004, the Company signed another investment agreement with an investment banking firm to provide funds ofapproximately $400,000. In addition, as of April 22, 2004, the Company has signed an agreement with an additional investmentbanking firm that has committed to investing a minimum of $500,000 and a maximum of $3,000,000 in debt convertible into commonstock of the company predicated on the filing of a registration statement Form SB-2 .  Such funds would be available on thesuccessful filing of Form SB-2 and the investment of those funds would extend over the following forty eight months. The Company isalso in final stages of an agreement to merge with a company that will add positive cash flow and significant marketingopportunities to the Company’s services.  The Company has converted approximately 75% of its convertible debt as ofMarch 31, 2004 and therefore feels it will be able to obtain equity capital and additional operating revenues to continue as agoing concern.  However, these expected plans are subject to change that could affect the Company’s ability to raise theequity capital and increase revenues for the subsequent year.

**NOTE 15 – RELATED PARTY TRANSACTIONS**

During the years ended December 31, 2003 and 2002, the Company had an employment agreementwith its President and Chief Executive Officer, Clark Marcus.  The agreement, which originally had an expiration date ofSeptember 20, 1999, was extended by resolution of the Board of Directors, on February 15, 1996, for a period of five years,originating upon the date the executive commences to receive his full compensation, as provided under the terms of the employmentagreement.  Therefore the original agreement is still in effect.

As of December 31, 2003, a total of $ 358,424 deferred compensation was due to thisexecutive.  $227,750 of deferred compensation was due for services performed during the year ended December 31, 2003 and$130,674 for services performed in prior years.  Deferred salary from prior years is net of a forgiveness of accrued salariesin the amount of approximately $424,000.

During the years ended December 31, 2003 and 2002, the Company had an employment agreementwith James Koenig, Chief Financial Officer.  The agreement originally had an expiration date of February 1, 2001.  TheBoard of Directors extended this agreement on the same terms as described for its President and Chief Executive Officer.

As of December 31, 2003, the Company had accrued deferred compensation of approximately$129,400 for services performed during the year 2003 by Mr. Koenig.  In addition, Mr. Koenig forgave approximately $511,000 ofdeferred compensation payable to him from prior years.

The terms of the employment agreements include annual salary increases and bonuses, to bedetermined by the Board of Directors.  In addition, to fringe benefits afforded to other senior executives, the Company isobligated to pay premiums for life, travel and accident insurance, with a double indemnity provision, in the amount of five timesthe President and Chief Executive Officer’s base compensation, with the beneficiary to be designated by theexecutive.

**NOTE 16 – SUBSEQUENT EVENTS**

In January 2004, the Company offered substantially all debt holders an improved conversionfor their debt at the rate of one share of Common A stock for every $.50 of debt.  Through March 31, 2004, approximately$1,900 000 of the $2,670,000 debt has converted into Common A stock. 

In January 2004 the Company entered into an agreement with the May Davis Group (May), aninvestment banking group, to assist in raising up to $400,000 of equity financing for the Company.  The Company has begunreceiving funds under this agreement and are in the form of three–year mandatory convertible debt with an annual interestrate of seven percent. Through April 2004, the Company has received approximately $266,333 pursuant to this financing. May hasprovided assistance in the financing with Zatoon Ventures Limited.

In March 2004, the Company entered into an agreement with Zatoon Ventures Limited (Zatoon)whereby Zatoon will provide financing to the Company of up to $3,000,000 through purchase of the Company’s common Astock.  The purchases are to be in increments of at least $25,000 and no more than $500,000 at a time at the request of theCompany.  The agreement is to be for a term of the later of 36 months from the commencement period or 48 months from the dateof the agreement.  This agreement is predicated upon the Company filing a registration statement Form SB-2 with the Securitiesand Exchange Commission within 60 days of the agreement and maintaining its listing on a principal market.

F-13

The Company had entered into a financing agreement in November 2003 with Forham Financial(Fordam) to provide equity financing and other consulting services.  The Company expects to begin receiving funds by May 2004of up to $500,000 through convertible debt through the efforts of Fordam.

In March 2004, the Company settled a fee dispute with a law firm that had provided legalservices to the Company.  That settlement resulted in a reduction in the amount owed which has been reflected as of December31, 2003.

In April 2004, the Company entered into an agreement with United Networks of America(United) whereby United will add the Company’s line of services to its offerings through its network of providers and membersnationwide.

Subsequent to year end, the Company entered into significant discussions with a healthcarecompany and its affiliates to acquire all of the capital stock and equity interests of that company in exchange for common A stockof the Company. As a result of the proposed merger, Eye Care International, Inc. would own 100% of the common stock of the acquired companyand shareholders of that company would own approximately 50% of the Company. As of April 20, 2004, the companies had not finalized anagreement.

 

 

F-14

**DRESLIN FINANCIAL SERVICESCERTIFIED PUBLIC ACCOUNTANTS**

**REPORT OF INDEPENDENT ACCOUNTANTS**

 

Board of Directors and StockholdersEye Care International, Inc.Tampa, Florida

We have audited the accompanying  balance sheet of Eye CareInternational, Inc. as of December 31, 2002 and the related  statements of operations,stockholders’ deficit and cash flows for the year then ended.  These  financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on these  financial statementsbased on our audit.

We conducted our audit in accordance with auditing standards generallyaccepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the  financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the  financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the  financial statements referred to abovepresent fairly, in all material respects, the financial position of Eye Care International, Inc. as of December 31,2002 and the results of operations, changes in shareholders’ deficit and cash flows for the year thenended in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that theCompany will continue as a going concern. As discussed in Note M to the  financial statements, the Company has incurredrecurring losses from operations which raise substantial doubt about the Company’s ability to continue as a going concern.Management's plans in regard to this matter are also described in Note M. These  financial statements do not includeany adjustments that might result from the outcome of this uncertainty.

The  financial statements as of and for the year ended December31, 2001 were audited by other auditors.

***/s/ Dreslin Financial Services***

Dreslin Financial ServicesCertified Public AccountantsSeminole, FloridaApril 15, 2003

F-15

Table of Contents

**Item 8. ****Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.**

During the Company’s two most recent fiscal years, the principal independentaccountant for the Company neither resigned (or declined to stand for re-election) or was dismissed,

However, on March 10, 2004, the Board of Directors approved the decision to dismiss theregistrant’s Certifying Accountant, Dreslin Financial Services, Certified Public Accountants and engage the services ofBrimmer, Burek & Keelan LLP.  Reports in connection with audits of the two most recent fiscal years ending December 31,2002 and 2001 were provided by Dreslin Financial Services and Most & Company (the predecessor to Dreslin Financial),respectively.  Dreslin Financial did issue a report on the financial statements as of December 31, 2002.  The reports inconnection with audits of the two most recent fiscals years did not contain an adverse opinion or a disclaimer of opinion and werenot qualified or modified as to uncertainty, audit scope or accounting principles, except for going concern opinions.  Duringthe period since the Dreslin Financial’s engagement (March 21,2003 to March 10, 2004), there were no disagreements with thesaid accountants, whether resolved or not resolved, on any matter of accounting principles or practices, financial statementdisclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the Dreslin Financial,would have caused it to make reference to the subject matter of the disagreements in connection with its report. 

**ITEM 8A.                CONTROLS AND PROCEDURES.**

**Disclosure Controls and Procedures.**    The issuer's principal executive officer and principal financial officers, are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controlover financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and has:
-  designed suchdisclosure controls and procedures, or caused such disclosure controls andprocedures to be designed under their supervision,  to ensure that materialinformation relating to the issuer, including its consolidated subsidiaries, ismade known to them by others within those entities, particularly during the period in which the periodic reports are being prepared; 
-  designed suchinternal control over financial reporting, or caused such internal control overfinancial reporting to be designed under their supervision, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; 
-  evaluated theeffectiveness of the issuer's disclosure controls and procedures as of the endof the fiscal year (the "Evaluation Date"). 

Based on their evaluation as of theEvaluation Date, his conclusion about the effectiveness of the disclosurecontrols and procedures were that nothing indicated:
-  any significantdeficiencies in the design or operation of internal controls which couldadversely affect the issuer's ability to record, process, summarize and reportfinancial data; 
-  any fraud,whether or not material, that involves management or other employees who have asignificant role in the issuer's internal controls; or 
-  any materialweaknesses in internal controls that have been or should be identified for the issuer's auditors and disclosed to the issuer's auditors and the auditcommittee of the board of directors (or persons fulfilling the equivalent function). 

In addition, the issuer’s disclosure controls and procedures are effective inrecording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in thereports that it files or submits under the Exchange Act.

**Internal Control Over FinancialReporting.**    There have not been any changes in the Company’s internal control over financial reporting (assuch term is defined in Rules 13a-15(f) under the Exchange Act) during the Company’s fourth fiscal quarter that havematerially affected, or are reasonably likely to materially affect, the Company’s internal control over financialreporting.

8
Table of Contents

**PART III**

**Item 9. ****Directors and Executive Officers.**

The following is a list of our directors and executive officers:

Name

Age

Position

Clark A. Marcus

62

Chairman, President, Chief Executive Officer and Director

                                                                          

            

                                                                                  

James L. Koenig

57

Senior Vice President, Chief Financial Officer, Secretary and Director

 

 

 

Arnold Finestone

73

Director

 

 

 

William H. Koch, M.D.

65

Director

 

 

 

Robert Veligdan, M.D.

53

Director

 

 

 

Sharon Kay Ray

46

Director

 

 

 

John A. Schild

64

Director

 

 

 

Arthur Yeap

48

Director

Clark A. Marcus, one of our founders, has served as Chairman of the Board and ChiefExecutive Officer since September 1993. He also has served as President since February 1996. Mr. Marcus has been a practicingattorney since 1968 and was senior partner in the New York law firms of Victor & Marcus and Marcus & Marcus.

James L. Koenig has been Sr. Vice President, Chief Financial Officer and a member of ourBoard of Directors since February 1996. He initially joined us as an independent sales agent in December 1994. Prior to joining us,he worked in various accounting/management capacities primarily in the utilities industry. From 1984 to November 1994, Mr. Koenigwas employed by Tampa Electric Company in various executive capacities ranging from Assistant Controller to Director of AuditServices and Director of Regulatory Affairs.

Richard Abrahamson, M.D., one of our founders, was a member of our Board of Directors fromAugust 1995 until May 2003. Dr. Abrahamson also serves as a member of our Medical Screening Committee. Since July 1992, Dr.Abrahamson has operated a private ophthalmology practice specializing in diseases and surgery of the eye. Dr. Abrahamson advises uson credentials of ophthalmologists, expansion of our network and sometimes interacts with network providers.

Arnold Finestone has been a member of our Board of Directors since April 2001.  Mr.Finestone is a business management consultant.  From 1970 to 1988, he was an executive with Dart & Kraft, Inc., serving asPresident of its Dartco subsidiary, which was engaged in marketing and manufacturing high performance engineering plastics forconsumer and industrial uses and Executive Vice President of the Chemical-Plastics Group from 1970 to 1982.  From 1957 to1970, he was Vice President, Director of Planning, Development and Marketing of Foster-Grant, Inc.

William H. Koch, M.D. has been a member of our Board of Directors since February 1996. Hehas been a psychiatrist and child development specialist since 1974. He is the Founder and Director of Parent and Child Services,Inc., New York City; The Parent and Child Consultation Services, New York City; and the "School for Parents." He is a former memberof the faculty of the College of Physicians and Surgeons, New York City, and Special Consultant to Child Protective Services, NewYork City. Dr. Koch also is an author, lecturer and consultant.

9
Table of Contents

Robert Veligdan, D.M.D. has been a member of our Board of Directors since May 1994. He hasbeen a Professor and Instructor at Columbia University since 1977 and lectures on numerous topics relative to dentistry. He is alsoa staff member at Columbia University Hospital. He has operated a private dentistry practice since 1975. Dr. Veligdan is a memberof numerous professional associations including the American Dental Association, the staff of Columbia University S.D.O.S., Academyof Oral Rehabilitation, Academy of General Dentistry and the International Congress of Oral Implantologists.

Sharon Kay Ray, one of our founders, has been a member of our Board of Directors sinceinception. Since March 1989, she has served as regional marketing representative for Novo Nordis Pharmaceuticals, a multi-nationalpharmaceutical company, and as a special marketing consultant for a number of public and non-public corporations.

John A. Schild has been a member of our Board of Directors since June 2000. He has beenthe Director for the Work Related Benefits Program/Family Independence Administration/City of New York since 1998, and from1991-1998 was the Site Manager.

Arthur Yeap has been a member of our Board of Directors since April 2001.  Since 1983Mr. Yeap has been Chief Executive officer of Novo Group, consultants and manufacturers of customer audio and video products forprofessional use.  He also has been a principal investigator on the staff of the University of California at Berkley, engagedin research for advanced military and consumer uses for the Internet.  From 1996 to 1999, he was Director of Marketing,Consumer Products for ITV Corp.  From 1995 to 1996 Mr. Yeap was Chief Engineer for WYSIWYG networks.

**Meetings and Committees of the Board of Directors**

Our Board of Directors conducts its business through meetings of the Board****andthrough activities of its committees. 

The Board of Directors has established an Audit Committee. Arnold Finestone and Arthur Yeap, are the current members of the Audit Committee. Mr. Finestone is the audit committeefinancial expert.  The Audit Committee recommends engagement of the company’s independent auditors, is primarilyresponsible for approving the services perform by the independent auditors and for reviewing and evaluating our accountingprinciples and its system of internal accounting controls and has general responsibility in connection with relatedmatters.

The Board does not have an option committee, a nominating committee, the functions ofwhich are performed by the Board.

All our directors hold office until the next annual meeting of stockholders or until theirsuccessors are duly elected and qualified, and all executive officers hold office at the discretion of the Board ofDirectors. 

**Section 16(a) Beneficial Ownership Reporting Compliance**

Section 16(a) of the Securities Exchange Act requires our officers, directors and personswho own more than ten percent of our class A common stock to file certain reports of ownership and changes in ownership with theSEC within specified time periods. Officers, directors and ten-percent stockholders are required by regulation to furnish us withcopies of all Section 16(a) forms they file. We are not aware of any failures to file reports or report transactions in a timelymanner during the fiscal year ended December 31, 2003

10
 Tableof Contents

**Item 10. ****ExecutiveCompensation**

The following table sets forth the compensation paid to, earned by oraccrued for our Chief Executive Officer and each of our other executive officers for whom more than $100,000 was paid or accrued ascompensation for the years ended December 31, 2003, 2002, and 2001 (collectively, the "Named Executive Officers"):

Annual Compensation (5)

Name and Principal Position

Year

 

CashCompensation

 

OtherCompensation

 

 

 

 

 

 

 

 

Clark Marcus                 Chief Executive Officer andPresident

2003 2002 2001

  

$  207,434 $    30,625 $  196,015

(3) (3) (3)

 

**$  **280,984 $      6,000 $      6,000

(1) (1) (1)

 

 

 

 

 

 

 

 

James L. Koenig                 Senior Vice President, ChiefFinancial                Officer and Secretary

2003 2002 2001

**$  **109,663 $    16,584 $  123,242

(4) (4) (4)

 

**$  **14,000 $     6,000 $     6,000

(2) (2) (2)

 

(1)

Includes auto allowance (2003 - $6,000; 2002 - $6,000; 2001 - $6,000) andforgiveness of debt of $274,984 in 2003.

(2)

Includes auto allowance (2003 - $4,000; 2002 - $6,000; 2001 - $6,000) andforgiveness of debt of $8,000 in 2003.

(3)

Excludes deferred compensation of  $268,850 for 2003 and $276,143 for2002 and $175,654 for 2001.

(4)

Excludes deferred compensation of $170,686 for 2003, $204,907 for 2002 and$135,228 for 2001.
(5)There was no Long-Term Compensation forthe officers.
 

 

 

11
Table of Contents

Employment Agreements

Clark Marcus serves as our Chief Executive Officer pursuant to an employmentagreement which expires in September 2008. The agreement provides for a salary of $150,000 per annum, increased by an amount equalto the greater of fifteen percent (15%) of the prior year's salary or the increase in the consumer price index for the Tampa,Florida area, plus a bonus beginning at three percent (3%) of ECI's pre-tax profits in any year that our revenues exceed $1 millionand increasing up to seven percent (7%) of our pre-tax profits in any year that revenues exceed $4 million. The actual amount paidto Mr. Marcus, excluding an auto allowance of $6,000, forgiveness of debt of $274,984, and deferred salary of $268,850, for theyear ending December 31, 2003 was $207,434. We may terminate his employment for gross misconduct in the performance of his duties.If Mr. Marcus' employment is terminated within 12 months following a change in control, Mr. Marcus will receive his salary, bonusand additional compensation for a period equal to the greater of the remainder of the term of the employment agreement or 3years.

James L. Koenig serves as our Senior Vice President and Chief FinancialOfficer pursuant to an employment agreement which expires in February 2008. The agreement provides for a salary of $125,000 perannum, increased by an amount equal to the greater of ten percent (10%) of the prior year's salary or the increase in the consumerprice index for the Tampa, Florida area, plus a bonus of three percent (3%) of our pre-tax profits in any year that our revenuesexceed $1 million. The amount Mr. Koenig was paid, excluding an auto allowance of $4,000, the forgiveness of debt of $8,000, andnet of deferred salary of $170,686, for the year ending December 31, 2003, was $109,663.  We may terminate his employment forgross misconduct in the performance of his duties. If Mr. Koenig's employment is terminated within 12 months following a change incontrol, Mr. Koenig will receive his salary, bonus and additional compensation for a period equal to the greater of the remainderof the term of the employment agreement or 3 years.

The Company has amended both agreements for extensions for periods that theofficers have not received full annual salaries, currently resulting in extensions through the year 2008.

Each of Messrs. Marcus and Koenig have entered into agreements with us whichprovide that, for a period of three years following the termination of his employment, he will not
-  engage, directly or indirectly, in a business within the United States that markets products or services the same as,similar to, or competitive with, our products or services, whether fully developed or in the development stage. 
-  solicit or accept business from any entity within the United States which is or was a customer of ours during his tenurewith us, if such business involves one of our products. 
- solicit the employment of, hire or cause any other entity to hire, any of our employees.

**OPTION/SAR GRANTS IN LAST FISCAL YEAR**

No stock options or stock appreciation rights were granted by the Company to the namedexecutive officers in 2003.

**AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS/SARTABLE**

At December 31, 2003, the Company had no stock options or stock appreciation rightsoutstanding.

 

 

12
Table of Contents

**Item 11. ****Security Ownershipof Certain Beneficial Owners and Management.**

The following table sets forth certain information concerning the beneficialownership of our common stock as of April 1, 2004 by (i) each stockholder known by us to be a beneficial owner of more than fivepercent of the outstanding common stock; (ii) each executive officer and director; and (iii) all directors and officers as agroup.

The percentages below are calculated based on  17,219,800 shares ofcommon stock issued and outstanding.

 

Amount and Nature Of Beneficial Ownership (1)

 

Percentage  of Common Stock Beneficially Owned (2)

Name

Class A Common Stock

 

Class B Common Stock

 

As a % of All Common Stock

 

As a % of All Class A

 

As a % of All Class B

 

 

 

 

 

 

 

 

 

Clark Marcus (3)

11,800

** **

959,280

** **

5.7%

** **

*****

** **

56.8%

Sharon Kay Ray (3)

54,600

** **

39,640

** **

*****

** **

*****

** **

2.3%

James L. Koenig (3)

30,960

** **

648,882

** **

4.0%

** **

*****

** **

38.4%

Robert G. Veligdan, DDS (3)

93,099

** **

**--**

** **

*****

** **

*****

** **

**--**

William Koch (3)

67,548

** **

5,000

** **

*****

** **

**--**

** **

 *

John A. Schild (3)

67,800

** **

**--**

** **

**--**

** **

**--**

** **

**--**

Arnold Finestone (3)

46,390

** **

**--**

** **

*****

** **

*****

** **

**--**

Arthur Yeap (3)

56,581

** **

**--**

** **

*****

** **

*****

** **

**--**

 

 

** **

** **

** **

** **

** **

** **

** **

** **

All officers and directors as a group (8 persons)

428,778

** **

1,652,802

** **

12.1%

** **

2.8%

** **

97.8%

 _______________________________*                      Less than 1%

(1)      Unless otherwise indicated, each personhas sole investment and voting power with respect to the shares indicated, subject to community property laws, where applicable.For purposes of this table, a person or group of persons is deemed to beneficially own any shares that such person has the right toacquire within 60 days after April 1, 2004.

(2)      Calculated as a percentage of the totalnumber of shares of common stock issued and outstanding without respect to voting power. Each share of class B common stock isentitled to five votes per share, as compared to one vote per share of class A common stock. For purposes of computing thepercentage of outstanding shares held by each person or group of persons named above on April 1, 2004, any shares, which suchperson or group of persons has the right to acquire within 60 days after such date is deemed to be outstanding for the purpose ofcomputing the percentage ownership of such person. As of April 1, 2004, we had 15,530,640 shares of class A common stockoutstanding and 1,689,160 shares of class B common stock outstanding, or a total of 17,219,800 shares of common stockoutstanding.

(3)      Address is c/o Eye Care International,Inc., 1511 North Westshore Boulevard, Suite 925, Tampa, Florida 33607.

**Item 12.****     Certain Relationships and Related Transactions.**

Transactions with related parties consisting solely of loans and advancesprimarily to ECI's Chief Executive Officer, Mr. Clark Marcus, were settled in 2003.  In accordance with employment agreementswith Mr. Marcus and with Mr. James Koenig, CFO, the Company accrued wages earned but unpaid during the year 2003.  Inaddition, the officers forgave the Company of $928,639 of deferred compensation previously accrued.  As of December 31, 2003,the amount owed by the Company to its officers amounted to $487,809, as compared to $1,028,011 at December 31, 2002.

13
Table of Contents

Other than as described above, none ofthe following parties has, since our date of incorporation, had any materialinterest, direct or indirect, in any transaction with us or in any presentlyproposed transaction that has or will materially affect us:  
- Any of our directors or officers;
- Any person proposed as a nominee for election as a director;
- Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rightsattached to our outstanding shares of common stock;
- Any of our promoters;
- Any relative or spouse of any of the foregoing persons who has the same house as suchperson

**Item 13.****     Exhibits and Reports on Form 8-K.**

**(a) **Exhibits to this Reportare all documents previously filed which are incorporated herein as exhibits to this Report by reference to all other reportspreviously filed by the Company pursuant  to the Securities Act of 1933 and the Securities Exchange Act of 1934.

We are filing the exhibits listed below with this Report:
ExhibitNo.Description31.1Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2Certification of    Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certification of Chief Executive Officer Pursuant to Section 906 of theSarbanes-Oxley Act of 200232.2Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:  The Company  has not filed any Reports on Form 8-K during the last quarter of the fiscal year of December 31, 2003.

**Item 14.  Principal Accountant Fees and Services.**

 

 

**Fiscal year ending December 31, 2003**

 

**Fiscal year ending December 31, 2002**

Audit Fees

 

$

14,000

 

$

11,890

Audit Related Fees

 

0
 
0

Tax Fees

 

$

 0

 

0

All Other Fees

 

$

 0

 

$

0

 

 

 

14
 

**SIGNATURES**

                In accordance with Section 13 or15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

Dated**:   ** April 27**,**2004

**EYE CARE INTERNATIONAL INC.**

 

 

 

 

 

By:  /s/  Clark A.Marcus                                             President and Chief Executive officer          (Principal Executive Officer)

By:     /s/ James L.Koenig                                      Senior Vice President and         Chief Financial Officer         (Principal Financial and Accounting         Officer)

In accordance with the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant on April 27, 2004  in the capacities indicated.

Signature

Title

 

 

/s/  Clark A.Marcus                            Clark A. Marcus

Chief Executive Officer, President and a Director (Principal Executive Officer)

 

 

/s/ James L.Koenig                             James L. Koenig

Senior Vice President and Chief Financial Officer and a Director (Principal Financial and Accounting   Officer)

 

 

/s/  William Koch,M.D                          William Koch, M.D.

Director

 

 

/s/  Robert Veligdan,M.D.                        Robert Veligdan, M.D.

Director

 

 

/s/  Sharon KayRay                                   Sharon Kay Ray

Director

 

 

/s/  John A.Schild                                       John A. Schild

Director

 

 

ArnoldFinestone                                          Arnold Finestone

Director

 

 

  /s/ ArthurYeap                                          Arthur Yeap

Director