SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Date of Report (date of earliest event reported): August 7, 1996
NYER MEDICAL GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 000-20175 01-0469607
(State or other (Commission (IRS Employer
jurisdiction of file Number) Identification No.)
incorporation)
1292 Hammond Street, Bangor, Maine 04401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (207) 942-5273
N/A
(Former name or former address, if changed since last report)
This Amendment No. 3 relates to a Current Report on Form 8-K filed on
August 7, 1996 concerning an acquisition by the Registrant of a chain of 9
pharmacies operating in the metropolitan Boston under the trade name of Eaton
Pharmacies.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
Pursuant to Item 7(a)(4) of Form 8-K, the Registrant is filing the
following financial statements for the acquired business.
Financial Statements of D.A.W. Inc. for the Nine Months Ended March 31,
1996 and the Year Ended June 30, 1995.
(b) Pro Forma Financial Information.
Pursuant to Item 7(a)(4) of Form 8-K, the Registrant is filing the
following pro forma financial information relating to the acquired
business.
The following statements are located at Pages F-1 through F-19 of this report:
Balance Sheets of D.A.W., Inc. as of March 31, 1996
and June 30, 1995.
Statements of Income of D.A.W., Inc. for the Nine Months Ended
March 31, 1996 and the Year Ended June 30, 1995.
Statements of Changes in Shareholders Equity of D.A.W., Inc. for
the Nine Months Ended March 31, 1996 and the Year Ended
June 30, 1995.
Statements of Cash Flows of D.A.W., Inc. for the Nine Months Ended
March 31, 1996 and the Year Ended June 30, 1995.
Notes Accompanying Financial Statements of D.A.W., Inc.
Pro Forma Condensed Balance Sheet as of June 30, 1996
Notes to Pro Forma Balance Sheet
Pro Forma Condensed Statement of Earnings for the year ended
December 31, 1995
Notes to Pro Forma Statement of Earnings for the year ended
December 31, 1995
Pro Forma Condensed Statement of Earnings for the six months ended
June 30, 1996
Notes to Pro Forma Statement of Earnings for the six months ended
June 30, 1996
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Nyer Medical Group, Inc.
Date: October 22, 1996 By: /s/ Karen L. Wright
Karen L. Wright
Treasurer
Financial Statement Index
Description
Balance Sheets of D.A.W., Inc. as of March 31, 1996
and June 30, 1995. F 1-2
Statements of Income of D.A.W., Inc. for the Nine Months Ended
March 31, 1996 and the Year Ended June 30, 1995. F-3
Statements of Changes in Shareholders Equity of D.A.W., Inc. for
the Nine Months Ended March 31, 1996 and the Year Ended
June 30, 1995. F-4
Statements of Cash Flows of D.A.W., Inc. for the Nine Months Ended
March 31, 1996 and the Year Ended June 30, 1995. F-5
Notes Accompanying Financial Statements of D.A.W., Inc.
F6-F-14
<PAGE>
D.A.W. INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
1996 1995
Current assets:
Cash $ 56,648 $ 174,163
Accounts receivable, less allowance for
doubtful accounts of $32,267 at March
31, 1996 and $35,723 at December 31,
1995. 899,840 762,132
Inventories, net 1,082,379 1,079,168
Prepaid expenses 61,378 44,594
Deferred tax assets (note 1g) 3,949 9,677
Total current assets 2,104,194 2,069,734
Property, plant and equipment, net 413,143 464,749
Other assets:
Other assets, net of accumulated
amortization of $7,646 at March 31,
1996, and $3,915 at December 31, 1995 95,262 87,407
(see note 3)
Deferred assets, note 1g 15,706 20,257
Total assets $2,628,305 $2,642,147
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
SEE ACCOUNTANTS' AUDIT REPORT
F-1
<PAGE>
D.A.W. INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
March 31, June 30,
1996 1995
Current liabilities:
Notes payable-Current portion $ 315,308 $ 325,571
Accounts payable 686,227 548,796
Accrued payroll and related taxes 8,495 5,519
Accrued expenses and other liabilities 87,812 72,372
Total current liabilities 1,097,842 952,258
Long-term debt, net of current portion 995,449 1,195,221
Long-term accounts payable 31,762 30,204
Total long-term liabilities
Minority interest 35,814 31,372
Shareholders' equity:
Common stock; no par value, 7,500 shares
authorized; 2,500 shares issued and
outstanding: 2000 shares 27,169 27,169
Additional paid-in capital 38,652 38,652
Retained earnings 437,431 398,637
Total shareholders' equity 503,252 464,458
Total Liabilities and Equity $2,628,305 $2,642,141
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
SEE ACCOUNTANTS' AUDIT REPORT
F-2
<PAGE>
D.A.W., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the nine months ended March 31, 1996 and
for the year ended June 30, 1995
March 31, June 30,
1996 1995
Net sales and other revenues $10,338,333 $11,614,918
Expenses:
Cost of goods sold 7,966,164 8,731,391
Selling, general and administrative 2,251,207 2,690,278
Interest 61,948 62,765
Total expense 10,279,319 11,484,434
Income before provision for income taxes 59,014 130,484
Provision for income taxes 20,220 37,190
Net income $ 38,794 $ 37,190
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
SEE ACCOUNTANTS' AUDIT REPORT
F-3
<PAGE>
D.A.W. INC.
Statement of Changes in Shareholders Equity for the nine months ended
March 31, 1996 and for the year ended June 30, 1995
Additional
Paid in Retained Total
Common Stock Capital Earnings Equity
Shares Amount
Balance at June 30, 1994: 5,520 27,169 38,652 378,806 444,627
Less: Prior Period Adjustment; Write Down
of Assets Due to
Reorganization (80,518) (80,518)
Less: Prior Period Adjustment; Correction of
Depreciation Expense of Leasehold Improvements (55,281) (55,281)
Add: Prior Period Adjustment; Correction of
Deferred Tax Assets & Expense 62,336 62,336
5,520 27,169 38,652 305,343 371,164
Add: Net Income for the year ending 93,294 93,294
Balance at June 30, 1995: 5,520 27,169 38,652 398,637 464,458
Cancellation and Exchange of Common Stock
for Common Stock (5,520) (27,169)
2,500 27,169
Add: Net Income for the nine months
ended March 31, 1996 38,794 38,794
Balance at March 31, 1996:2,500 27,169 38,652 437,431 503,252
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
SEE ACCOUNTANTS' AUDIT REPORT
F-4
<PAGE>
D.A.W., INC.
Statements of Cash Flows for the nine months ended March 31, 1996
and for the year ended June 30, 1995
March 31, June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 38,794 $ 93,294
Non Cash Items Included in Net Income:
Amortization and Depreciation 126,730 171,443
Adjustment of Assets Due to Reorganization 0 (80,518)
Net Change in Accounts Receivable (137,708) 59,530
Net Change in Inventory (3,211) 6,840
Net Change in Prepaid Expenses (16,784) 1,287
Net Change in Deferred Tax Assets 10,273 32,408
Net Change in Accounts Payable 138,989 284,746
Net Change in Accrued Expenses & Taxes 18,416 (38,036)
Net Cash as Provided by Operations 175,499 530,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets at Cost (42,288) (85,350)
Sale of Fixed Assets 0 34,919
Acquisition of Other Assets (1,486) (2,333)
Net Cash as Used for Investing Activities (43,774) (52,764)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note Borrowings 0 125,000
Principal Payments - Installment Notes (249,240) (598,360)
Net Cash as Used for Financing Activities (249,240) (473,360)
NET CHANGE IN CASH BALANCE: (117,515) 4,870
BEGINNING CASH BALANCE: 174,163 169,293
ENDING CASH BALANCE: $ 56,648 $ 174,163
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid $ 49,139 $ 57,359
Income Taxes Paid $ 4,782 $ 49,095
SUMMARY OF NON-CASH FINANCIAL TRANSACTIONS:
Conversion of Payroll Tax Liabilities
to Long Term Debt $ 0 $ 271,710
Non-Cash Related Party Sale of
Intangible Asset at book value $ 31,889 $ 0
Acquisition of Fixed Assets through
Borrowings $ 29,105 $ 29,000
Acquisition of Inventory through
Borrowings $ 0 $ 100,411
Acquisition of Other Assets through
Borrowings $ 10,100 $ 50,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
SEE ACCOUNTANTS' AUDIT REPORT
F-5
<PAGE>
D.A.W., INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES:
A) D.A.W. Inc, (formerly known as Dumouchel Apothecary of Waltham,
Inc. legally changed the corporate name on March 29, 1996) is a
Massachusetts corporation engaged principally in operations of retail
pharmacies in northeastern Massachusetts. The company was originally
formed in 1967. As of 1992 the company along with three affiliated
entities operated twelve locations. In May of 1992 due to several
operating and economic reasons the companies were forced to
reorganize under Chapter 11 of the U.S. Bankruptcy Laws. The
companies emerged from Chapter 11 in May of 1994 as the one present
company Dumouchel Apothecary of Waltham, Inc. After emerging the
company sold off its non-profitable locations; and acquired two new
locations. The company now has a total of 8 locations. The main
focus of these retail locations is to provide customers with the
personal services not found in the larger chain store pharmacies.
B) Use of Estimates: The preparation of financial statements
in conformity with the generally accepted accounting principals
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ form those
estimates.
C) Cash and Cash Equivalents: The corporation considers all
highly liquid investments with a maturity of three months or
less at the date of acquisition to be cash or cash equivalents.
D) Merchandise Inventory: Merchandise inventory consists
mainly of pharmaceuticals, drugs and supplies. Inventory is
valued at the lower of cost or market, using the last in first
out (LIFO) cost assumption. Had actual cost or market been
used inventories would have been valued at $1,565,465 at
March 31, 1996. Net income before corporate taxes for the
nine months ended March 31, 1996 would have been $114,309.
Had actual cost or market been used inventories would have
been valued at $1,506,959 at June 30, 1995. Net income before
corporate taxes would have been $164,733. Substantially all
of the merchandise inventory is pledged as collateral on various
notes payable.
E) Property, Plant and Equipment: Property, Plant and
Equipment are recorded at cost. Leasehold improvements are
capitalized, while repairs and maintenance costs are charged
to operations as incurred. When assets are retired or disposed
of, the costs of accumulated depreciated thereon are removed
from the accounts, and any gains or losses are included in
operations. Leasehold improvements are amortized using the
straight-line method over the lease term.
F-6
<PAGE>
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
For financial reporting purposes, depreciation is computed
principally using the straight-line method over estimated
service lives of the related assets as follows:
Store Furniture and Fixtures 5 - 12 years
Leasehold Improvements 10 years
Motor Vehicles 5 years
Signs 12 years
Computers and Software 5 years
Office Furniture and Fixtures 7 - 12 years
Substantially all of the fixed assets are pledged as collateral on
various notes payables.
F) Other Assets: Other Assets as of March 31, 1996 and
June 30, 1995 are as follows:
March 31, June 30,
1996 1995
Security and Utility Deposits 12,410 10,923
Purchased Goodwill (net of amortization) 41,250 41,389
Organizational Costs (net of amortization) 35 95
Covenant not to compete 9,678 0
Franchise Set Up Fee 0 35,000
Loan Receivable- Affiliate 31,889 0
Total $95,262 $87,407
Purchased Goodwill, which represents the excess of costs of
companies acquired over the fair market value of their net
assets at dates of acquisition is being amortized on the
straight-line method over fifteen years. The covenant not to
compete is being amortized over its life of fifteen years,
using the straight-line method. The company evaluates on an
on-going basis, the carrying value of assets and makes a
specific provision when impairment is identified. Impairment
would include for an on-going business the inability to
generate operating income sufficient to cover the amortization
of those assets, and in management's judgement the business
will not recover from this position. Impairment would also be
identified in the event of an expected loss on the sale of a
business. Impairment would not be indicated where other objective
evidence exists that confirms the recoverability of such assets.
Presently there are no such impairments.
Amortization expense charged to operations for all deferred
charges was $3,731 and $2,941 for the periods ending
March 31, 1996 and June 30, 1995.
F-7
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
The Loan Receivable - Affiliate represents a long-term interest
bearing loan, to a corporation affiliated with D.A.W., Inc. through
common ownership and management. (see also note 3)
G) Income Taxes and Deferred Taxes: The corporation uses the
asset and liability method of accounting for income taxes.
Under this method deferred tax assets and liabilities are recognized
for the future tax consequences attributed to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable
income in the years in which those temporary differences are expected
to be recovered or settled. The provision for income taxes
represents the total of income taxes payable for the current year,
plus the change in deferred taxes during the year.
As of June 30, 1995 the corporation has a net operating loss
(NOL) of $9,012 to offset future taxable income. The corporation
also has available a general business tax credit of $10,181. The
corporation expects to utilize the majority of the credit for the
June 30, 1996 tax year.
The provision for income taxes for the nine months ended March
31, 1996 and for the year ended June 30, 1995 are as follows:
March 31, June 30,
1996 1995
Current:
Federal $ 2,931 $ 636
State 7,016 4,146
9,947 4,782
Deferred:
Federal 8,062 21,704
State 2,211 10,704
10,273 32,408
Total Provision for Income Taxes $20,220 $ 37,190
The actual income tax expense differs from the expected tax
computed by applying the statutory Federal and State tax rates
to income before provision for income taxes as follows:
March 31, June 30,
1996 1995
Computed Federal expected income tax: 18.6% 17.1%
Computed State expected corporate tax
(net of federal benefit) 15.4% 11.4%
34.0% 28.5%
F-8
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
The tax effect of temporary differences that give rise to
significant portions of the deferred tax assets at March
31, 1996 and June 30, 1995 consists of the following:
March 31, June 30,
1996 1995
Depreciation 10,639 13,436
Allowance for Bad Debts 1,414 3,925
Contribution Carryover 0 128
Net Operating Loss 0 2,264
General Business Credit 7,602 10,181
$19,655 $29,934
Deferred Tax Assets- Current 3,949 9,677
Deferred Tax Assets- Non Current 15,706 20,257
$19,655 $29,934
NOTE 2: NOTES PAYABLE:
March 31, June 30,
1996 1995
A) Internal Revenue Service: A note for
pre-petition federal tax liabilities.
The note is dated November 30, 1994 in the
original amount of $138,980. Principal
payments along with interest (at an annual
rate of 7%), are paid on a quarterly
basis. At the balance sheet date 8 payments
remain. The note will mature on April
2, 1998. The note is guaranteed by the
shareholders of the corporation. $87,598 $112,991
B) Commonwealth of Massachusetts: For
pre-petition taxes, the note is dated August
31,1994 in the original amount of $132,730
and is payable monthly with interest at 7%.
At the balance sheet date 29 payments
remain. The note will mature on August
15, 1998. The note is guaranteed by the
shareholders of the corporation. $82,377 $105,243
C) 3 S Corp: To finance the purchase of
inventory, fixtures, and intangibles of a
retail location in Westwood. The note is
dated September 1, 1995 in the original
amount of $39,205 and is payable monthly
at 9%. At the balance sheet date 5 payments
remain. The note will mature on September
1, 1996 and is secured by all assets
relating to the Westwood, MA location. $16,764 $ 0
F-9
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
D) Merchants Drug Co.: To finance the
purchase of inventory, fixtures and
intangible assets of a new retail location
in Danvers, MA. in the original amount of
$70,000. The note is payable in monthly
installments of $1,167 without interest.
At the balance sheet date 32 payments remain.
The note will mature on December 1, 1998 and
is secured by all assets relating to the
Danvers, MA location. $37,333 $54,833
E) Woodmans Drug Co. Inc.: To finance the
purchase of inventory, fixtures and
intangibles of a retail location in Danvers, MA
in the original amount of $74,411. The note
is payable in 24 monthly payments of $2,934
(no interest) & a final balloon payment of
$4,000. At the balance sheet date, including
the balloon payment 11 payments remain. The
note will mature in January 1997, and is secured
by all assets relating to the Danvers, MA
location. $33,338 $59,742
F) McKesson Drug Co.: A pre-petition secured
debt in the original amount of $233,461.
After a $70,000 reduction, the note is payable
in monthly installments of $2,724 principal
and interest on the unpaid balance (interest
at prime). At the balance sheet date 39 payments
remain. The note will mature in June 1999 and
is secured by all assets of the Newton, MA
location, and then a subordinated position on
other assets, following Donald Blodgett et al,
and the Daly note. $106,250 $130,768
G) Eileen Dumouchel: A pre-petition secured
debt in the original amount of $100,000. After
a $20,000 reduction, the note is payable in
monthly payments of $1,333 and interest on the
unpaid balance at prime. At the balance sheet
date 41 payments remain. The note will mature
in August, 2000 and is secured by assets in the
North Shore, MA locations with the same rights
as Donald Blodgett et al. $ 54,667 $66,667
F-10
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
H) Donald Blodgett: A pre-petition secured
debt in the original amount of $330,00. After
a $30,000 reduction, the note is payable in
monthly payments of $4,500 and interest on the
unpaid balance at prime. The final balloon
payment is for $30,000. At the balance sheet
date including the balloon payment, 42 payments
remain. The note will mature in August, 2000
and is secured by assets in the North Shore, MA
locations with the same rights as that of
Eileen Dumouchel. $214,500 $255,000
I) James W. Daly Inc.: A pre-petition debt
in the original amount of $800,000. After
$50,000 reduction and a subsequent $90,000
reduction, the note is payable in monthly
installments of $5,423 with a final balloon
payment of $200,000. After July 1, 1995
interest shall be paid monthly at prime. At
the balance sheet date, including the final
balloon payment, 64 payments remain. The
note will mature in July, 2001 and is secured
by all corporate assets subordinated by all
other notes with the exception of the IRS and
Common Wealth of Mass notes. $552,930 $595,852
J) McKesson Drug Co.: A note dated June 30,
1995 in the original amount of $125,000. The
note is payable in monthly installments of
$2.083 and interest is on the original balance
at prime +2%. At the balance sheet date 60
payments remain. Payments are to commence in
May 1996 and the note will mature in May, 2001,
and is secured by assets held in Newton, Mass
location subordinated by the other McKesson
note, and D. Blodgett et al. $125,000 $125,000
K)Others: $ 0 $ 14,695
$1,310,757 $1,520,792
Amount classified as current notes payable: $ 315,308 $ 325,571
Amount classified as long term notes payable $ 995,449 $1,195,221
F-11
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
The maturities of long term debt at March 31, 1996 are as follows:
March 31, 1997 $315,308
March 31, 1998 $278,816
March 31, 1999 $227,352
March 31, 2000 $164,041
March 31, 2001 $102,839
Thereafter $222,401
$1,310,757
NOTE 3: RELATED PARTY TRANSACTIONS:
The corporation shareholders and officers have entered into the following
agreements with a corporation (F.M.T. Franchise Company, Inc.) related
through common ownership and management.
A) Asset Purchase Agreement: D.A.W., Inc. agrees to sell to
F.M.T. for the sum of $31,889 the trade name "Eaton" and
"Eaton Apothecary"; trade style and logo of "Eaton" and "Eaton
Apothecary"; all trade designs of seller; all of sellers trade
secrets; all of seller business systems to operate retail
pharmacies. The $31,889 is presently a long term loan receivable
due to D.A.W. Inc. Management expect full repayment by F.M.T.,
Inc. when F.M.T. begins operations.
B) License Agreement: F.M.T. grants D.A.W. a revocable license
for the use of the items mentioned in (A), for the sum of $1.00.
The agreement calls for D.A.W. to pay F.M.T. a royalty fee of 3%
of gross sales on a weekly basis. All royalty fees not paid by
the due date shall bear interest at a rate of 1.5% per month.
The corporation also rents as a tenant at will, retail space at its
Dorchester location, from Eileen Dumouchel (a family member of the
corporation's officers). Rent Expense at this location is $27,000 and
$36,000 for the periods ended March 31, 1996 and June 30,1995
respectively. There is also a note payable to Ms. Dumouchel as
described in note (2).
NOTE 4: COMMITMENTS & CONTINGENCIES:
A) Lease Obligations: In addition to the corporation's Dorchester
location the corporation is committed to various leases to its 7 other
locations. The leases are of varying terms. The estimated future
minimum annual rental expenses are as follows:
March 31, 1997: $389,000
March 31, 1998: $400,200
March 31, 1999: $401,200
March 31, 2000: $402,200
March 31, 2001: $402,200
F-12
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31,1996 and June 30, 1995
For the nine months ended March 31, 1996 and for the year ended
June 30, 1995 the rent expense for all locations was $292,825 and $350,930
respectively.
B) Workman's Compensation Insurance: The corporation insures its
employees against work related injuries through the Massachusetts Retail
Merchants Workers' Compensation Trust. As of March 31, 1996 it has been
determined that the trust has an adequate reserve to cover all expected
claims. The corporation is jointly and severely liable for covered claims
not paid by the trust.
C) Stock Repurchase Agreement: The corporation has entered into an
agreement with the shareholders of the corporation that upon the
disability, retirement, termination, or death of the shareholder, the
corporation must purchase all of the shareholders stock. The price of the
stock shall be its fair market value at a date agreed to by the
shareholders plus or minus any outstanding loan obligations. The
corporation currently is maintaining individual term life insurance
policies on all shareholders (the present face value of the terms policies
is $300,000 per shareholder). The corporation can also (in cases other
than death) repurchase the stock by the payment of 60 equal monthly
installments with simple interest of 6%.
NOTE 5: SUBSEQUENT EVENTS:
The corporation has entered into an informal agreement to sell 80% of its
stock to Nyer Medical Group, Inc. (a public company). Under the current
terms Nyer Medical will pay the shareholders an aggregate of $325,000 in
cash and 20,000 to 31,000 shares of its stock (to be determined later).
In addition Nyer will invest $200,000 in working capital and place
$800,000 in escrow to be used as directed by the board of directors.
D.A.W. Inc. and Nyer Medical, Inc. will jointly control the board of
directors of D.A.W. Inc. If D.A.W. Inc. does not generate at least
$300,000 in adjusted pre-tax earnings in the first year of operations
after the acquisition, the purchase price may be adjusted.
NOTE 6: STOCKHOLDERS' EQUITY:
On March 29, 1996 the directors elected to cancel all existing and
outstanding stock certificates (5,520 shares of no par common) and
exchange them for 2,500 shares of no par common stock. There was no
effect on the corporation's equity value.
On July 1, 1994 there were three prior adjustments to retained earnings.
They were as follows"
A) Only July 1, 1994 due to Chapter 11 reorganization the assets
of the corporation were written down to their fair market value
and depreciation calculated over the remaining useful lives.
The cumulative change to retain earnings was a reduction of
$80,518.
F-13
D.A.W. INC.
Notes Accompanying Financial Statements at
March 31, 1996 and June 30, 1995
B) At March 31, 1996 it was determined that the estimated lives
of leasehold improvements was being calculated incorrectly.
Therefore the July 30, 1995 income statement was restated to
reflect the additional $14,870 of depreciation. Also the July 1,
1994 retained earnings was adjusted to reflect the prior period
adjustment of $55,281 of additional depreciation.
C) At March 31, 1996 it was determined that the corporation had
incorrectly calculated its deferred tax assets/ The July 30, 1995
income statement was restated to reflect the additional $32,408
provision for income taxes. Also the July 1, 1994 retained
earnings was adjusted to reflect the prior period adjustment of
$62,336 of additional deferred tax assets.
F-14
Pro Forma Condensed Balance Sheet as of June 30, 1996 F-15
Notes to Pro Forma Balance Sheet F-16
Notes Accompanying Financial Statements of D.A.W., Inc. F-16
Pro Forma Condensed Statement of Earnings for the year ended
December 31, 1995 F-17
Notes to Pro Forma Condensed Statements of Earnings for the year ended
December 31, 1995 F-17
Pro Forma Condensed Statement of Earnings for the six months ended
June 30, 1996 F-18
Notes to Pro Forma Condensed Statement of Earnings for the six months
ended June 30, 1996 F-19
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
BALANCE SHEET
The following pro forma condensed balance sheet combines the consolidated
balance sheet for Nyer Medical Group, Inc. and Subsidiaries as of
June 30, 1996 and the combined balance sheet for D.A.W., Inc. and F.M.T.,
Inc. as of June 30, 1996 after giving the effect to the adjustments described
in Note A below.
This pro forma condensed balance sheet should be read in conjunction with
the financial statements and related notes of D.A.W., Inc. included
elsewhere in this filing and Nyer Medical Group, Inc. and Subsidiaries
Form 10-QSB dated June 30, 1996.
Nyer Medical D.A.W. Inc.& Combined
Group, F.M.T. Inc. Pro Forma Pro Forma
June 30, 1996 June 30, 1996 Adjustments (Unaudited)
Balance Sheet
Cash $ 4,687,392 $ 250,409 $ (325,000)6 $ 4,612,801
Accounts Receivable, net
1,696,804 919,631 2,616,435
Inventories, net
1,450,945 1,103,462 486,9831 3,041,390
Prepaid expenses
38,013 44,589 82,602
Deferred taxes
8,713 8,713
Receivable from rel parties
7,501 31,889 ( 31,889)10 7,501
Total Current Assets
7,880,655 2,358,693 130,094 10,369,442
Property, plant & equipment
1,365,355 1,859,759 (1,684,725)2 1,540,389
Less accumulated depreciation
& amortization (623,612) (1,471,312) 1,471,312 2 (623,612)
Total PP&E 741,743 388,447 (213,413) 916,777
Goodwill, net 572,517 49,365 (49,365) 572,517
Deferred taxes 2,716 210,508 213,224
Other
145,145 47,608 299,521 492,274
Total other assets 717,662 99,689 460,663 1,278,014
Total assets
$9,340,060 $2,846,829 $ 377,345 $12,564,234
Nyer Medical D.A.W. Inc.& Combined
Group, F.M.T. Inc. Pro Forma Pro Forma
June 30, 1996 June 30, 1996 Adjustments (Unaudited)
Notes payable to rel parties
$ 324,324 $ 47,889 $ (31,889)10 $ 340,324
Current portion-ltd
35,383 284,529 319,912
Accounts payable
1,175,347 926,339 2,101,686
Deferred taxes 212,0008 212,000
Accrued payroll & rel taxes
190,545 71,357 261,902
Accrued other expenses
93,619 54,864 148,483
Total current liabilities
1,819,218 1,384,978 180,111 3,384,307
Long term debt
435,271 813,408 1,248,679
Due to related parties
34,667 34,667
Other liabilities
107,245 107,245
Minority interest
142,239 348,8306 491,069
Preferred stock-Class A
1 1
Preferred stock-Class B
30 30
Common stock
349 37,169 (37,167) 351
Additional paid in capital
9,844,412 38,652 316,281 10,199,345
Accumulated deficit
(2,901,460) 430,710 (430,710)7 (2,901,460)
Total stockholders'
equity
6,943,332 506,531 (151,596) 7,298,267
Total liabilities and
stockholders' equity
$9,340,060 $2,846,829 $ 377,345 $12,564,234
F-15
Notes To Pro Forma Balance Sheet
A. The adjustments to the pro forma balance sheet assume the acquisition of
D.A.W., Inc. & F.M.T., Inc. by Nyer Medical Group, Inc. was consummated on
June 30, 1996. The following adjustments have been provided in connection
with the acquisition pursuant to Accounting Principles Board Opinion Number
16:
1. Adjustment to record the cash payment of $325,000 to the sellers
for a non-compete agreement.
2. Elimination of D.A.W., Inc.'s LIFO reserve to adjust the
inventory to fair market value.
3. Elimination of intercompany balances between D.A.W., Inc. and
F.M.T., Inc.
4. Adjustment to reflect the cost of D.A.W., Inc.'s and F.M.T.,
Inc.'s fixed assets to their fair market value and proportionate
allocation of the excess of the fair market values of assets
acquired over the purchase price.
5. Adjustment to reflect the fair market value of D.A.W., Inc.'s
goodwill at zero.
6. Adjustment to record deferred taxes for the difference between
the book basis and the tax basis of net assets acquired.
7. Adjustment to reflect the fair market value of other non-current
assets acquired and proportionate allocation of the excess of
the fair market values of assets acquired over the purchase
price.
8. Adjustments to reflect the issuance of Nyer Medical Group,
Inc.'s common stock totalling $297,500 in conjunction with the
purchase of D.A.W., Inc.'s and F.M.T., Inc.'s stock .
9. Elimination of D.A.W., Inc.'s and F.M.T., Inc.'s equity accounts
and adjustment for the minority shareholders.
F-16
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
STATEMENT OF EARNINGS
The following pro forma condensed statement of earnings combines
the consolidated statement of earnings for Nyer Medical Group, Inc.
for the year ended December 31, 1995 and the combined statement of
earnings for D.A.W., Inc. and F.M.T., Inc. for the year ended
December 31, 1995 after giving effect to the pro forma adjustments
described in Note B below.
This pro forma condensed statement of earnings should be read in
conjunction with the financial statements and related notes of
D.A.W., Inc. included elsewhere in this filing and Nyer Medical
Group, Inc. and Subsidiaries; Form 10-K dated December 31, 1995.
This statement does not purport to be indicative of the results
which actually would have occurred had the acquisition been made on
or prior to January 1, 1995.
Year-ended December 31, 1995
Nyer Medical D.A.W. Inc.& Pro Forma Combined
Group, F.M.T. Inc. Adjustments Pro Forma
Unaudited
Net sales
$ 9,046,018 $12,791,981 $ $21,837,999
Cost of goods sold
6,966,817 9,712,951 59,1521 16,738,920
SG&A expenses
2,600,454 2,979,772 (67,075) 5,513,151
R&D expenses
21,000 21,000
9,588,271 12,692,723 (7,923) 22,273,071
Operating income(loss)
(542,253) 99,258 7,923 (435,072)
Interest expense
(63,806) (78,597) (142,403)
Interest income
9,068 22,587 (16,250)4 15,405
Other
(789) 13,176 12,387
Minority interest
12,511 9,7005 22,211
Net income(loss) before tax
(585,269) 56,424 1,373 (527,472)
Income taxes
(27,150) 8,1506 (19,000)
Net income(loss)
(585,269) 29,274 9,523 (546,472)
Notes to Pro Forma Statement of Earnings
B. The adjustments to the pro forma statement of earnings assume the
acquisition of D.A.W., Inc. and F.M.T., Inc. by Nyer Medical Group, Inc. was
consummated on January 1, 1995. The following adjustments have been provided
in connection with the acquisition pursuant to Accounting Principle Board
Opinion Number 16:
1. Elimination of the current year's LIFO charge recorded by D.A.W., Inc.
2. Additional amortization expense of the non-compete agreement for $65,000.
3. Adjustment for depreciation expense on the net amount of fair market value
of fixed assets acquired less allocation of the excess of the fair market
value of assets acquired over the purchase price. Fixed assets and other
non-current assets acquired are being depreciated of amortized over periods
ranging from 3to15 years.
4. Reduction of interest income of $16,250 resulting from reduced investment
balances at applicable rates.
5. Adjustment for minority interest on earnings.
6. Adjustment for income taxes based on applicable rates.
F-17
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
STATEMENT OF EARNINGS
The following pro forma condensed statement of earnings combines
the consolidated statement of earnings for Nyer Medical Group, Inc.
and Subsidiaries for the six months ended June 30, 1996 and the
combined statement of earnings for D.A.W., Inc. and F.M.T., Inc.
for the six months ended June 30, 1996 after giving the effect
to the pro forma adjustments described in Note C below.
This pro forma condensed statement of earnings should be read in
conjunction with the financial statements and related notes of
D.A.W., Inc. included elsewhere in this filing and Nyer Medical
Group, Inc. and Subsidiaries' Form 10-QSB dated June 30, 1996. This
statement does not purport to be indicative of the results which
actually would have occurred had the acquisition been made on or
prior to January 1, 1996.
Six months ended June 30, 1996
Nyer Medical D.A.W. Inc.& Pro Forma Combined
Group, F.M.T. Inc. Adjustments Pro Forma
Unaudited
Net sales
$ 7,109,115 $ 7,401,986 $ $14,511,101
Cost of goods sold
5,698,920 5,862,217 38,3971 11,600,074
SG&A expenses
1,478,999 1,609,060 (48,778) 3,039,281
7,177,919 7,471,277 (9,841) 14,639,355
Operating income(loss)
(68,804) (69,291) 9,841 (128,254)
Interest expense
(33,376) (32,819) (66,195)
Interest income
49,048 12,547 (8,125)5 53,470
Other
2,199 4,980 7,179
Minority interest
(5,829) 14,3186 8,489
Net income(loss) before tax
(56,762) (84,583) 16,034 (125,311)
Income taxes
(633) 6337 0
Net income(loss)
$ (56,762) $ (85,216) $ 16,667 $ (125,311)
F-18
NOTES TO PRO FORMA STATEMENT OF EARNINGS
C. The adjustments to the pro forma statement of earnings assume the
acquisition of D.A.W. Inc. and F.M.T. Inc. by Nyer Medical Group, Inc. was
consummated on January 1, 1996. The following
adjustments have been provided in connection with the acquisition
pursuant to Accounting Principle Board Opinion Number 16.
1. Elimination of the current year's LIFO charge recorded by
D.A.W., Inc.
2. Additional amortization expense of the non-compete agreement
for $32,500.
3. Adjustment for depreciation expense on the net amount of fair market
value of assets acquired over the purchase price.
Fixed assets and other non-current assets acquired are being
depreciated or amortized over periods ranging from 3 to 15
years.
4. Reduction of interest income of $8,125 resulting from reduced
investment balances at applicable rates.
5. Adjustment for minority interest on earnings.
6. Adjustment for income taxes assuming any net operating loss
benefit would be offset by a 100% valuation allowance.
F-19
HOLBROOK, KAPLAN, and PASTORE
Certified Public Accountants P.C.
292 Tosca Drive
Stoughton, MA 02072
(617)-341-3266 Fax: (617)-341-3279
Board of Directors and Shareholders of
D.A.W., Inc. and F.M.T. Franchise Company, Inc.
Nyer Medical Group, Inc.
RE: Consent of Independent Accountants
We consent to the incorporation by reference on Form 8-K/A No. 3
of our reports dated June 18, 1996, on our audits of the financial
statements of D.A.W. Inc. as of March 31, 1996 and June 30, 1995,
and for the 9 months ended March 31, 1996 and the year ended
June 30, 1995.
Holbrook, Kaplan and Pastore, CPAs, P.C.
/s/ Holbrook, Kaplan and Pastore,
CPA's, P.C.
Stoughton, Massachusetts
October 22, 1996
