SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 000-20175
Nyer Medical Group, Inc.
(Name of small business issuer in its charter)
FLORIDA 01-0469607
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1292 Hammond Street, Bangor, Maine 04401
(Address of principal executive offices) (Zip code)
Securities registered under Section 12(b) of the Securities Act:
Name of Exchange
Title of Each Class on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.0001
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months, and (2) has been subject to such filing requirements for
the past 90 days. Yes X No _
Check whether there is no disclosure of delinquent filers in
response to item 405 of Regulation S-B not contained in this form,
and no disclosure will be contained to the best of the registrant's
knowledge, in the definitive proxy or information statement
incorporated by reference in Part III of this Form 10-KSB or
amendment to Form 10-KSB. [ ]
1 of 45
State issuer's revenues for its most recent fiscal year.
$21,093,488
The aggregate market value of the Company's voting stock held
by non-affiliates as of April 11, 1997 was approximately
$12,807,965 based upon the closing price. There were 3,400,093
shares of common stock outstanding as of April 11, 1997.
Documents Incorporated by Reference: See Item 9-13
Transitional Small Business Disclosure Format:
Yes _ No X
PART I
ITEM 1. Description Of Business.
General
Nyer Medical Group, Inc. (the "Company") is a holding company
with various interests in the medical products business. It also
distributes equipment, supplies and novelty items to emergency
medical services companies, fire departments and police
departments. The Company owns all of the outstanding capital
stock of ADCO Surgical Supply, Inc. ("ADCO") and ADCO South
Medical Supplies, Inc. ("ADCO South"). The Company also owns
90% of the outstanding stock of Nyle Home Health Supplies, Inc.
("Nyle Home Health"). The remaining 10% of Nyle Home Health is
owned by Dr. Howard Parker, a director of the Company. The Company
owns 80% of the stock of Anton Investments, Inc. ("Anton") and
Conway Associates, Inc. ("Conway"). Mr. Michael Anton, a director
of the Company, owns the remaining 20% of the stock of Anton and
Conway. The Company owns 80% of the outstanding stock of SCBA,
Inc. ("SCBA"), with the remaining 20% of SCBA also being owned by
Mr. Michael Anton, a director of the Company. SCBA repairs closed
breathing apparatus equipment used by fire departments. The
Company owns 80% of a retail pharmacy chain, D.A.W. (Eaton). The
remaining 20% of the stock is owned by 5 individuals who are former
shareholders of Eaton. The Company also owns 80% of a franchising
company, FMT, Inc.(FMT). The remaining 20% is owned by the same
individuals as mentioned above. FMT is involved in the franchising
of pharmacy outlets. The Company started a new company in December
of 1996, Nyer Nutritional Systems, Inc. ("Nyer Nutritional"). The
Company owns 80% of the outstanding stock of Nyer Nutritional, Mr.
Doyle Boatwright, a director of the Company, owns the remaining
20%. Nyer Nutritional is currently distributing their patented
liquid nutritional formula for tube feedings. The Company also
currently owns 34.6% (34.6% as of January 1997 and 56.5% as of
December 31, 1996) of the outstanding stock of Genetic Vectors,
Inc. ("Vectors"). Having completed an Initial Public Offering in
December 1996, 512,000 shares of Vectors common stock was spun-off
to the Company's shareholders, in January 1997.
Medical Products/Services Businesses
ADCO - ADCO South - Nyle Home Health
ADCO started as a quality distributor of medical supplies over
34 years ago and is engaged in business throughout New England.
In fiscal 1996, ADCO generated net sales of approximately $4.51
million. ADCO South, which commenced operations in 1992 and serves
South Florida, generated approximately $1.20 million in net sales
for 1996. The products supplied by ADCO/ADCO South include
motorized rehabilitative equipment such as stair glides, chair
lifts, scooters, wheelchairs and hospital beds, various kinds of
rehabilitative aids, surgical gloves (whose market is rapidly
expanding into non-traditional areas), first-aid equipment utilized
by persons who are rehabilitating from operations, serious
illnesses and accidents, diagnostic kits, laboratory and diagnostic
equipment and supplies, incontinent supplies, surgical and medical
equipment, both disposable and reusable, disposable medical
supplies and various other products including nursing uniforms and
shoes. The Company estimates that ADCO/ADCO South's in-stock
inventory consists of over 4,000 different products. In addition,
within 48 hours, ADCO/ADCO South can deliver approximately 25,000
additional products to their customers.
Pursuant to trade practice, ADCO is the semi-exclusive
northern New England area distributor for the product lines of
various manufacturers including two lines of incontinence products
which accounted for approximately $600,000 in revenues in fiscal
1996.
In addition, through its membership in the Central Independent
Dealer Association ("CIDA"), a nationwide group of approximately 72
wholesale distributors, ADCO enjoys certain semi-exclusive distrib-
ution rights. CIDA members are also offered additional product
discounts not otherwise readily available to regional or local
distributors.
With new medical technology enabling longer life spans
coupled with a demographic trend of the aging of "baby boomers" and
increased federal legislation concerning the handicapped, the
Company believes the demand for ADA (American Disabilities Act)
items will increase during the next few decades.
ADCO's marketing strategy involves making regular direct
contact with physicians, nurses, nursing homes and hospitals. New
business is sought from smaller customers using traditional
approaches such as sales representatives, direct mail and
advertisements. ADCO South generally solicits business from
physicians due to the high number of physicians per capita in the
South Florida market. The Company's salespeople serve existing
customers through periodic visits where warranted and telephone
inquiries designed to solicit additional business and maintain good
relationships with such customers.
ADCO offers "in house" equipment installation and repair
services for large, motorized rehabilitative equipment, such as
stair glides, wheelchairs, chair lifts and scooters. In addition,
ADCO has arranged for training of their service technician to
provide service and repairs to physicians for sterilizers,
autoclaves, electrocardiographs, centrifuges, examination tables
and other equipment used in physician offices and clinics. These
reconditioning services enable the Company to provide extensive
customer support. ADCO's competitors generally contract out
installation thereby yielding control of scheduling and quality
control. The service department allows ADCO to enjoy what the
Company believes is a distinct, competitive advantage over other
medical distributors.
ADCO achieves over a 93% plus order fill rate which serves to
further increase customer service and loyalty. ADCO's inventory
turns over approximately four to five times per year due to its
high service levels and a large inventory of specialty home care
and rehab equipment.
ADCO is one of the larger independent wholesale distributors
operating within New England excluding national competitors that
concentrate on selling to hospitals. ADCO maintains approximately
1,075 active customer accounts comprised primarily of physicians
and long-term care facilities.
ADCO has established a 3,000 square foot retail home health
store within its warehouse facility as a revenue producing, retail
extension to ADCO's traditional wholesale operation. The retail
store was initially started to provide ADCO with increased
revenues, retail merchandising experience and market research and
consumer information on the products, markets and customers it
serves. ADCO's retail operation has increased its purchasing
power within certain product categories. Retail sales require
minimal additional overhead costs due to the fact that the retail
home health store is located within the existing warehouse. Future
off-site stores are being contemplated to take advantage of the
growing retail health care needs of an aging customer base.
ADCO provides all types of medical equipment and supplies to
the public including stair glides, wheelchairs, chair lifts,
nursing uniforms, adult undergarments, and many disposable medical
items. The Company believes that the retail store maintains an
excellent competitive advantage due to its relationship with the
warehouse facility. The warehouse provides ADCO's retail operation
with an extensive inventory consisting of products from over 400
manufacturers. In stock items are immediately available when ADCO
retail customers request them.
The retail store is also able to capitalize upon ADCO's
installation and repair facility. Additionally, since much of
ADCO's general and administrative expenses are already in place
with the existing wholesale operation, ADCO believes the retail
facility produces profit margins equal to the general retail home
health product industry.
Retail store customers include doctors and nurses, preferring
to personally purchase rather than order equipment by telephone or
through catalogs, patients requiring rehabilitative equipment and
the general public.
ADCO South is a medical supplies wholesaler which operates out
of a warehouse facility in West Palm Beach, Florida. ADCO South
generally concentrates on supplying physicians with medical
supplies and medical equipment. ADCO South currently has seven
full-time employees consisting of one office manager, three outside
salespersons, one inside salesperson, one purchasing office clerk
and one warehouse clerk. There is also one part-time salesperson.
These employees are all experienced local hires with local
contacts. No training or other expense was incurred in their
hiring. These employees participate in the Company's standard
benefits. Sales currently come primarily from West Palm Beach,
Fort Lauderdale, Martin County, and Indian River County north of
West Palm Beach. ADCO South continues to work on expanding its
presence in the St. Lucie County area in the Florida gold coast
region and the greater Miami area.
Marketing
The marketing efforts of the medical products business are
headed by ADCO's vice president of sales and general manager,
William Clifford. Mr. Clifford is also the Company's vice-
president of sales. The Company is actively marketing group
buying programs to solicit the large number of physicians, long-
term care facilities, and clinics that are consolidating through
its national CIDA Group Provider Program. This program enables
the customers to receive the pricing benefits of a large national
organization yet provide customers with the benefits of dealing
with independent dealers.
ADCO's sales are achieved through the services of five
independent sales representatives who travel throughout New England
contacting existing and potential customers and through tele-
marketing, catalogs and mailing campaigns for existing customer
accounts. ADCO South's selling efforts are also directed by
Mr. Clifford, who is assisted by the three Florida-based sales-
persons.
Competition
All aspects of the Company's medical products business are
subject to significant competition. The Company's national
competitors generally have substantially greater financial
resources and other competitive advantages, although they trad-
itionally concentrate on hospitals. Nonetheless, ADCO/ADCO South
believe they have certain competitive advantages which enable them
to compete favorably with larger competitors because of their
ability to be flexible and creative for their customers.
Unlike major competitors that concentrate on serving large
hospitals, ADCO derives only limited revenues from hospitals.
ADCO serves hospitals on a specialty basis providing equipment
and services to physician managed and owned offices. ADCO South
does not service hospitals and has no intention of attempting to
serve that market. ADCO estimates that approximately 30% of its
wholesale business is derived from sales to physicians, 40% to
nursing homes, 10% to its home care division, 5% to supply ADA
accessibility equipment, 5% to hospitals, and 10% to various other
health care consumers. The most important competitive factors are
ADCO/ADCO South's commitment to service and ADCO's ability to
repair rehabilitative and medical equipment throughout its large
market area.
The national market for wholesale distribution of medical and
home health care supplies is served in large part by Baxter, Durr-
Fillauer, General Medical, McKesson, PSSI and Owens & Miner. PSSI
is the largest national supplier of supplies to physician offices
and clinics. Although hospitals are believed to constitute most of
these company's largest customer group, these companies claim to
serve over 17,000 other customers including physicians and clinics
throughout the United States including the New England area.
Despite the presence of large companies, ADCO/ADCO South believe
the distribution of medical products in physician sites and long-
term care facilities are still controlled by many small local and
regional distributors.
Backlog/Seasonality
The Company's medical products business has never had a
significant amount of back orders due in large part to the fact
that it fills its orders rapidly and has a very high in stock-order
fill rate.
The Company's medical products/services businesses generally
are not seasonal. Accordingly, the Company does not believe a
comparison of operating results by season would be meaningful.
EMT, Fire, Police Products/Services Businesses
Anton Investments, Inc. - Conway Associates, Inc - SCBA,Inc.
Anton is a distributor of fire, police and rescue equipment
and supplies that are sold to municipal and industrial accounts
throughout most of the New England area. Anton generated
approximately $3,232,792 in net sales for 1996.
Prior to the Company purchasing an 80% interest in Anton
Investments Inc. in 1993, (together with Mr. and Mrs. Anton
purchasing the other 20%) Anton (doing business as Anton
Enterprises) had been in business since 1980. Anton conducts
approximately 80 percent of its business with municipal and
industrial fire departments, while law enforcement agencies and
emergency rescue units comprise 10 percent each. Anton continues
to broaden its market area, with approximately 60 percent of its
sales now taking place in Maine, 25 percent in New Hampshire, 5
percent in Vermont, 5 percent in Massachusetts, with the remainder
outside of New England.
The Company divides its activities among four overlapping
areas: (1) the distribution of equipment used by municipal and
industrial fire departments, public law enforcement agencies,
emergency medical and rescue units; (2) the sale of turnout gear,
custom uniforms, footwear and other items of apparel worn by
these professions; (3) the sales and services of new and used
fire apparatus; and (4) the exclusive gift shop for the fire,
police and rescue personnel and their families, with merchandise
such as badges, insignias decals, helmet fronts, vehicle markers,
flashing warning lights, children and adult t-shirts, toys, rings
and novelty gift items.
Anton continues to represent Ferrara Fire Apparatus, Inc. a
prominent Louisiana-based manufacturer of fire trucks. Many of the
leading manufacturers in the public safety products line have
chosen Anton as their exclusive dealer or master distributor in all
or part of the northern New England region.
Anton maintains a fully equipped service center at its
Scarborough, Maine location, doing installation and service on
emergency warning lights, major fire pump repairs and SCBAs (self-
contained breathing apparatus). Anton also has a fully equipped
service vehicle available for 24-hour emergency calls.
Anton maintains an extensive inventory of its most popular
products at its Scarborough headquarters. Inventory is bought
through manufacturers, or purchased from Michael Anton's inventory
(which was purchased prior to the acquisition by Mr. Anton). While
Anton is generally able to fill orders from its own inventory on a
same day basis, the Company has established arrangements with most
of its suppliers whereby non-inventoried items and special orders
can be drop-shipped by the manufacturer to the customer with the
same degree of responsive service.
The sales staff of Anton have extensive backgrounds in fire-
rescue and/or law enforcement.
Anton's sales staff consists of one full-time outside sales
representative, a fire apparatus sales manager, and four inside
sales representatives who handle price quotes, competitive bids and
walk-in trade at the retail store. There is one full-time inside
sales manager in the Massachusetts location.
The Company and Michael Anton and his wife, acquired 80% and
20%, respectively, of Conway's stock in February 1996. Conway is
located in Massachusetts. Conway's net sales for 1996 were
approximately $5,229,600.
Conway conducts about 95% of its business with municipal and
industrial fire departments, with the remainder being emergency
rescue units throughout New England. Conway has been in business
since 1971. Conway's market area includes approximately 65% of
its sales from Massachusetts, 15% in New Hampshire, 10% in Vermont,
8% in Maine, with the remainder outside of New England.
The Company distributes mainly to the following types of
businesses: municipal and industrial fire departments, industrial
and power supply companies, and emergency medical and rescue units.
Conway sells turnout gear, footwear and other items of clothing
worn by these companies, equipment and supplies that are used in
these industries, and the sales and service of new and used fire
and ambulance apparatus.
Conway represents 3-D Manufacturing, Inc., a Wisconsin-based
manufacturer of fire trucks.
Conway maintains a limited inventory. Conway has access to
Anton's inventory located in Massachusetts and Scarborough, Maine,
and through its many suppliers, has access to having items drop-
shipped or shipped directly to the Company within a few days.
The Company and Michael Anton and his wife, acquired 80% and
20%, respectively, of SCBA's stock in February 1996. SCBA is
located in Massachusetts with Conway. SCBA's net sales for 1996
were approximately $38,000. SCBA services fire department's and
industrial company's self-contained breathing apparatus gear.
Marketing and Sales
Anton's marketing and sales are headed by Michael Anton,
President of Anton and a director of the Company, Anton markets and
sells its products through direct calls, retail store, and its own
catalog with the assistance of the outside and inside sales force.
Sales and marketing are conducted in New England.
Conway's marketing and sales are headed by Brian Barton, Sales
Manager. Their marketing and sales are achieved through flyers,
direct call from the inside and outside sales force.
Competition
All areas of the Anton's and Conway's fire, police and rescue
products are subject to competition. Some of this competition is
through companies who use direct mail or via tele-marketing
efforts. Despite the presence of competition, Anton and Conway
believes its sales force, extensive inventory, and emphasis on
service give them an edge over the competition.
Backlog/Seasonality
The businesses of Anton, Conway, and SCBA does not experience
significant back orders. The exception would be the sale of fire
trucks. The lead time traditionally is between 150-180 days before
delivery.
The businesses of Anton, Conway, and SCBA generally are not
seasonal. A comparison of seasonal figures would not be
meaningful.
Eaton Apothecary
In August 1996, the Company acquired 80% of Eaton, a
profitable nine-store chain of pharmacies operating in the greater
Boston area. The Company paid $411,698 and issued 20,000 shares of
its common stock, with a value of $297,500. The Agreement provides
an adjustment mechanism to reduce the purchase price by up to
$100,000 if Eaton's income before taxes during the first year
following the closing is not at $300,000. In addition, the Company
contributed an additional $1,000,000 in working capital which funds
may only be used for the business of Eaton as agreed upon between
the Company and the sellers, who remained as managers of Eaton.
Finally, the Company guaranteed that the 20,000 shares of its
common stock issued to the Sellers will have a fair market value
equal to $175,000 two years following the closing date. Consistent
with its policy of requiring less than wholly-owned subsidiaries to
reimburse the Company for its costs in providing management
services, Eaton has a service agreement with the Company, where
they will pay to the Company, a fee equal to one-third of 1% of
their net sales for the prior fiscal quarter in exchange for
services performed. Additionally, Eaton is required to reimburse
the Company for additional legal, auditing, and accounting fees and
costs.
Each of the five sellers (except in one case the husband of a
member) entered into five-year employment agreements with Eaton
through which each receives a base annual salary and a percentage
of annual pre-tax operating income in excess of $450,000.
Through a separate shareholders' agreement, control of the board
directors of Eaton is split between the Company and the minority
shareholders and the Company is obligated to elect one person
designated by the minority shareholders to its board of directors.
Mr. David Dumouchel is serving as a director in that capacity.
Eaton operates in a highly competitive business environment.
Its primary competition in its markets are the Walgreen and CVS
chains and mail order prescription services. To date, pharmacies
in supermarket and discount warehouse stores, such as Walmart,
have not gained significant market share in communities served
by Eaton.
Eaton currently occupies a niche in the market not covered by
the larger chain stores. Average store size is approximately 2,000
square feet (versus 10,000-20,000 for the average chain), with the
pharmacy department as the central focus to the customer. Unlike
the national chains, each store is supervised and managed by a
registered pharmacist without the presence of a separate front
store management organization. Eaton offers free delivery
service of prescription medication to the local community. This
customer benefit gives Eaton an important competitive advantage for
the shut-in customer. Eaton operates six full-time delivery
vehicles with each vehicle averaging 75-100 deliveries per day.
The presence of this service allows Eaton the ability to reach a
broader geographic market and the ability to locate its stores in
neighborhood settings rather than in high traffic, high cost
shopping centers.
The majority (approximately 75%) of Eaton's sales come
from sales of prescription medication to the general public. The
balance comes mainly from sales of "core drugstore categories" such
as patent medication, surgical supplies, health and beauty aids,
greeting cards, and candy. Eaton does not compete, nor intend to
compete, in the broader chain drug store arena. It does not stock
housewares, automotive, electrical supplies, convenience foods, or
seasonal novelties.
Nyer Nutritional Systems, Inc.
In December 1996, the Company organized Nyer Nutritional
acquired 80% of its common stock and issued the remaining 20% to
Mr. Doyle Boatwright ("Boatwright") of Phoenix, Arizona. Mr.
Boatwright became president of Nyer Nutritional and a director of
the Company. As consideration for the issuance of the Nyer
Nutritional stock to Mr. Boatwright, he licensed to the Company
four patents and one patent pending relating to tube feeding.
Additionally, under the terms of the exclusive worldwide license,
Nyer Nutritional is obligated to pay Mr. Boatwright and his
associates royalties of 8% of net sales. The patents relate to a
low ph liquid food used in tube feedings and an application to
simplify and reduce the risk of infection and mortality from tube
feedings using a heavy-duty feeding bag. One combined patent is
pending on the administration set and the heavy-duty feeding bag.
Nyer Nutritional distributes the liquid tube feeding
nutritional product, which is sold under the name AMTFTM, in eight-
ounce cans. The letters refer to anti-microbial in tube feeding.
The label states that because AMTFTM does not support bacterial
growth, it can reduce the incidence of enteral (medical food)
linked diseases such as gastroenteritis and sepsis. Although AMTFTM
may be administered through any kind of feeding bag, Nyer
Nutritional's feeding bag (patent pending) is designed for up to
seven days continuous use without having to be changed in contrast
to the current bag offered by competitors which must be changed
every day.
Nyer Nutritional commenced marketing AMTFTM in January 1997 at
the industry's major trade show. AMTFTM also offers for sale a
plastic administration set which connects the patient to the
feeding bag and an electronic feeding pump. AMTFTM and the feeding
bags are produced by third parties for Nyer Nutritional. The
management of Nyer Nutritional is confident that if either of the
third parties encounters problems in producing or shipping products
to Nyer Nutritional, adequate replacement manufacturers can be
located.
Nyer Nutritional recently hired a vice president of sales to
assist it in marketing its products. Initial sales to a Phoenix,
Arizona area hospital occurred in March 1997. Nyer Nutritional is
currently negotiating with major pharmaceutical and medical
companies to distribute its products in a large Asian country and
in South America. Because the competitors are major pharmaceutical
companies, Nyer Nutritional is actively seeking strategic alliances
to market its products in order to significantly reduce marketing
costs and at the same time increase the possibility of gaining
market share. There can be no assurances that Nyer Nutritional
will be successful in this regard.
Consistent with its policy of requiring less than wholly-owned
subsidiaries to reimburse the Company for its costs in providing
management services, Nyer Nutritional pays to the Company a monthly
management fee equal to the greater of $2,000 or one percent of net
sales for the prior quarter. Additionally, Nyer Nutritional is
required to reimburse the Company for additional legal, auditing
and accounting fees and costs.
Biotechnology Business
Genetic Vector Inc.
The Company acquired 100% of the capital stock of Genetic
Vectors Inc. ("Vectors") shortly after its organization in December
1991. In March 1996, the Company entered into an agreement whereby
the Company exchanged shares of its preferred stock held by the
founders of Vectors and issued to them 20% of the outstanding
common stock of Vectors. The agreement outlined the steps through
which the Company would spin-off to the Company's shareholders a
portion of the shares of Vectors' common stock held by it and
Vectors would engage in a bridge financing and a subsequent initial
public offering. As further part of the agreement, the Company
agreed to make certain interim payments to Vectors and assumed
certain liabilities of Vectors. Furthermore, in exchange for
consulting services to be rendered by the founders of Vectors and
their son relating to the spin-off and public offering, the Company
issued to them an aggregate of 8,000 of its non-qualified stock
options exercisable at $4-5/8th per share. Finally, pursuant to the
agreement, the Company granted the founders of Vectors a proxy
through which the Company agreed to vote its shares of common stock
of Vectors in order to elect a board of directors of Vectors
comprised of one person designated by the Company and remaining
persons selected by the founders.
During June/July 1996, Vectors sold 110,000 shares of its
common stock at $5.00 per share at which time the Company ceased
its financial support of Vectors. Effective December 20, 1996,
Vectors sold 500,000 shares of its common stock to the public at
$10.00 per share and thereafter sold an additional 75,000 shares at
the same price to cover over-allotments of the underwriters. In
reliance upon Vectors' initial public offering, the Company
subsequently spun-off as a dividend to its shareholders 512,132
shares of Vectors' common stock.
The Company is currently obligated to deliver an additional
9,166 shares of Vectors' common stock owned by it to the holders of
55,000 warrants of the Company issued in connection with the
Company's 1992 initial public offering.
The Company is also required to deliver 8,333 and 1,666 shares
of Vectors' common stock to Vector's president and a non-employee
director, respectively, in connection with their exercise of stock
options and the Company is obligated to reserve an additional
19,000 shares of Vectors' common stock against the future
exercise of stock options held by members of its board of
directors. After deducting the shares it is obligated to deliver
or reserve as described above, the Company will retain 771,116
shares of Vectors' outstanding common stock.
Pursuant to the agreement entered into in March 1996, Vectors
appointed Mr. William Clifford, an officer and director of the
Company, to serve on the Vectors' board of directors. In addition
to any indemnification agreements which Mr. Clifford may have from
Vectors, the Company has agreed to indemnify Mr. Clifford against
any liability he may incur arising from his service on the Vectors'
board of directors subject only to limitations imposed by law.
Vectors is a development stage company which holds certain
proprietary rights to certain biotechnology products. According to
the Prospectus for the Vectors' initial public offering, it
expects sales of the modified version of its initial product to
commence in September 1997. Other than nominal
revenue from operations incurred in connection with trial
marketing, Vectors has never generated any revenues from
operations.
Employees
The Company believes that its employees represent one of its
most valuable resources. Including its executive officers and
outside sales force, the Company has 106 full-time and 42 part-time
employees as of the date of this report. ADCO employs 28,
including 1 part-time employee, ADCO South employs 7 full-time and
1 part-time persons, Anton has 12 full-time employees and 2 part-
time employees, Conway employs 10 full-time and 8 part-time
employees, SCBA uses Conway's personnel, Eaton employs 45 full-time
and 30 part-time employees, and Nyer Nutritional employs 3 full-
time employees. The Company employs one full-time person. None of
the Company's employees are covered by a collective-bargaining
agreement. Management believes that the Company's relationship
with its employees is excellent and that it has a loyal work force.
ADCO/ADCO South, Eaton provides health, dental, and life insurance
for all employees after three months of employment. Anton
provides for health insurance for its employees. The Company
currently does not provide a retirement plan for its employees.
ITEM 2. Description Of Property.
The Company's executive offices and those of ADCO and Nyle
Home Health are currently located at 1292 Hammond Street, Bangor,
Maine where ADCO's warehouse and retail store are also located in
a 23,000 square foot facility.
ADCO is responsible for all utilities, sewer fees, property
taxes, assessments and repairs and maintenance necessary to keep
the property in working order and in compliance with city codes.
ADCO maintains a $2,000,000 public liability insurance policy on
the property which includes $1,000,000 of umbrella coverage.
ADCO South leases approximately 7,812 square feet of warehouse
and office space located in West Palm Beach, Florida. ADCO South
has a lease for a term of three years, terminating on May 31, 1997.
The monthly rental is $3,500, through May of 1997. Monthly rent
includes all taxes, sewer fees, water bills and electric bills.
ADCO South is required to maintain public liability insurance,
including bodily injury and property damage insuring both ADCO
South and the Lessor. Coverage is maintained through the Company's
master policy.
Anton leases approximately 11,800 square feet of warehouse and
office space located in Scarborough, Maine, from Michael and Paula
Anton. The monthly rental is $4,000. All sewer fees, water bills
and electric bills are paid separately by Anton Investments, Inc.
Anton leases approximately 800 square feet of showroom and
office space in Pembroke, New Hampshire. The monthly rental
is $900. Monthly rent includes all taxes, sewer fees, water
bills and electric bills. The lease expires May 31, 1998.
Anton also leases approximately 2,000 square feet of warehouse
and office space located in Wilmington, MA. The monthly rental
is $1,500. All sewer fees, water bills, and electric bills are paid
separately by Anton. Lease expires February 1998.
Conway leases approximately 11,200 square feet of warehouse
and office space located in Haverhill, Massachusetts. The monthly
rental is $3,792. All sewer fees, water bills, and electric bills
are paid separately by Conway. Their lease is currently up for
renewal.
SCBA occupies approximately 500 square feet of warehouse space
in Conway's building in Haverhill, Massachusetts.
Eaton currently leases 9 stores, averaging approximately 2,000
square feet each, throughout the suburban Boston area. Their
monthly lease payments range from $2,500 to $6,146. The leases
have varying expirations dates with all having renewable leases.
Nyer Nutritional currently leases approximately 650 square
feet of office space in Phoenix, Arizona. The monthly rental
is $547. Monthly rent includes all taxes, sewer fees, water
bills and electric bills. They are currently leasing on a month
to month basis.
The Company believes that the premises are adequate for its
current foreseeable needs.
ITEM 3. Legal Proceedings.
The Company is not a party to any material litigation.
ITEM 4. Changes in Securities. N/A
ITEM 5. Defaults upon Senior Securities. N/A
ITEM 6. Submission of Matters To A Vote of Security Holders.
The Annual Shareholder's meeting was held on September 30,
1996, at 10:00 a.m. at the Corporate Headquarters located at
1292 Hammond Street, Bangor, Maine 04401. A total of 3,573,650
shares were voted.
The following individuals were elected to serve on the
board of directors of the Company until the next annual meeting by
an affirmative vote of 3,573,650.
Name Name
Samuel Nyer Michael Anton
William Clifford, Jr. Donald Lewis, Jr.
Kenneth Nyer, M.D. Howard Parker, M.D.
Daniel Striar
The following items of business were also ratified:
All 3,573,650 shares voted to ratify Coopers & Lybrand, L.L.P.,
as the Company's independent auditors for the year ended,
December 31, 1996.
The shareholders also approved the amendments to the Company's
articles of incorporation relating to corporate governance.
3,004,770 voted yes; 432,880 voted no; and 136,000 voted
to abstain.
All 3,573,650 shares were voted authorizing the
transaction of any other lawful business that properly came up
before the annual meeting of shareholders.
PART II
ITEM 7. Market For Common Equity And Related Stockholder Matters.
Qualification with NASDAQ
The Company's shares of common stock are listed and traded on
the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), Small Capital Market, under the following
symbol: NYER.
The continuation of quotation on NASDAQ is subject to certain
conditions. The failure to meet these conditions may prevent the
Company's common stock from continuing to be quoted on NASDAQ and
may have an adverse effect on the market for the Company's common
stock. No assurances can be given that a trading market will be
maintained for the Company's common stock.
As of April 11, 1997, there were approximately 1,000 holders
of the Company's shares of common stock. The high and low
bid prices for the Company's common shares for each quarterly
period for the last two fiscal years are as follows:
1996 1995
Closing Bids Closing Bids
HIGH LOW HIGH LOW
First Quarter $ 9.50 $ 7.38 $4.25 $1.63
Second Quarter 31.25 8.50 4.75 2.25
Third Quarter 20.00 12.30 5.50 3.25
Fourth Quarter 18.00 12.00 8.00 4.13
Such prices reflect inter-dealer prices and do not reflect
retail mark-ups, mark-downs, or commissions. The Company's shares
are traded sporadically, which may affect such prices.
Although there are no restrictions on the Company's ability to
pay dividends, to date the Company has not declared any cash
dividends on any class of security nor does it anticipate doing so
in the foreseeable future.
ITEM 8. Management's Discussion And Analysis or Plan of Operation.
The following discussion which provides information with
respect to the Company's results of operations, liquidity, and
capital resources on a comparative basis for the years ended
December 31, 1996 and 1995, should be read in conjunction with the
Consolidated Financial Statements and related notes appearing
elsewhere in this Report.
Year Ended December 31, 1996 compared to Year Ended December
31, 1995.
Total revenues for 1996 increased by approximately 133.4% from
1995 to approximately $21.0 million from approximately $9.0 million
in sales in 1995. Two major reasons contributing to this increase
were the acquisition of two subsidiaries, Conway and Eaton.
Conway had net sales of approximately $5.2 million in eleven months
while Eaton contributed approximately $6.6 million in net sales
over a 5-month period. ADCO's sales increased by 6% to $4.8
million over $4.5 million in 1995. This increase was due to ADCO's
success in securing more long-term care business. ADCO South's
1996 sales decreased by approximately 4% to $1.20 million from
$1.25 million in 1995. This slight decrease is attributable to
decline in capital equipment sales. Anton's net sales remained
approximately the same as last year at $3.23 million. SCBA had net
sales of $38,0000 for 1996 as compared to 0 for 1995.
The Company's overall gross margin was approximately 20.2% in
1996 as compared 23.0% in 1995. The reason for the decline in
margin is attributable to Conway's gross profit margin of 12.6%.
The reason for this low margin is due to the lower margin
that are associated with fire truck sales. Fire truck sales in
1996 were $2.6 million. ADCO's gross margin decreased to
25.7% as compared to 26.0% in 1995. This slight decrease is due to
the increased business in the nursing home market. ADCO South's
gross margin in 1996 increased to 27.5% as compared to 22.8% in
1995. This increase was due to less capital equipment sales, which
have lower margins, and a greater emphasis was put on increasing
their margins in 1996. The Company believes this is within the
South Florida market average. Anton's gross margin was 15.1% for
1996 as compared to 18.4% in 1995. This is the result of lower
than expected gross profit margins on fire truck and equipment
sales. Their average gross margin on a fire truck is 3.2%. Sales
for fire trucks in 1996 were $982,992 as compared to approximately
$721,500 for 1995. Eaton had a gross profit margin of 22.4%.
SCBA had a gross profit margin of 85%. Most of the cost of sales
is labor related.
Selling, general and administrative expenses increased
approximately 44% in 1996 to approximately $4.7 million from $2.62
million in 1995. The increases came from mainly Conway and
Eaton. Conway added approximately $653,000 while Eaton added
an additional $1.3 million to selling, general and administrative
expenses. ADCO's overhead remained constant as compared to 1995.
ADCO South had minimal decrease in overhead. Anton had an increase
of approximately $26,000, of which they recognized a one time
accounts receivable write-offs of $20,000. Corporate expenses
increased in 1996 as compared to 1995 by $116,793. This increase
was attributable additional consulting, accounting and legal
fees for 1996. Vectors contributed to the Company's overall
selling, general, and administrative expenses of $210,145. Nyer
Nutritional contributed approximately $36,000 for the year 1996
for office and general operating expenses.
In total, the Company experienced a net loss of ($418,811) in
1996 as compared to a net loss of ($585,269) in 1995. This loss is
attributable to the following: a loss of approximately ($67,797)
was experienced by the medical and surgical, and nutritional supply
companies as compared to ($204,000) in 1995. Nyer Nutritional is
at the start-up phase and experienced a loss of $36,000 which is
included in the medical and surgical, and nutritional division;
a loss of approximately ($107,000) resulted in the emt, police, and
fire equipment and supplies division as compared to a loss of
approximately ($50,000) for the year 1995; income of $128,927 was
recognized by the company from their newly acquired retail
pharmacy chain; a loss of ($357,585) in the biotech division as
compared to a loss of ($224,000) in 1995; and a corporate loss of
approximately ($14,429) in 1996 as compared to ($192,000)in 1995.
Liquidity and Capital Resources
The Company's sources of working capital to date has been
their initial public offering, the receipt of funds from
the sales of stock pursuant to regulations D and S under the
Securities Act of 1933. In fiscal 1995, the Company sold 290,000
shares of common stock and received net proceeds of $775,000.
In 1996, the Company sold 752,815 shares of common stock under
Regulation S of the Securities Act of 1933, which netted proceeds
of $5,340,042. In connection with this sale, the Company issued
388,908 warrants to purchase additional common stock at a weighted
average exercise price of $7.32 per share. Subsequently, 346,408
warrants were exercised, for which the Company issued 321,278
shares of common stock for net proceeds of $1,963,703. The
remaining 42,500 warrants not exercised expired in October 1996.
In addition, in July and October, 1996, 55,000 warrants that were
issued in connection with the Company's 1992 Initial Public
Offering, were exercised with proceeds to the Company of $330,000.
In 1996, 18,000 stock options were exercised and the Company netted
proceeds of $83,200.
Net cash used by operating activities was ($206,278) for the
year ended December 31, 1996 and ($413,316) for the year ended
December 31, 1995. The primary use of cash from operations in 1996
was used to increase inventoies and accounts receivables.
In 1996 and 1995, the net cash (used) in investing activities was
($1,061,712) and ($50,606), respectively. Fixed assets acquired in
1996 totaled $167,707 and was comprised of vehicle additions and
other equipment. Net cash provided by financing activities was
$7,398,779 and $628,000 in 1996 and 1995, respectively.
In January 1997, the Company completed its spin-off of
Vector's common stock which resulted in 512,071 shares of common
stock being distributed as a dividend to shareholders of Nyer.
After the completion of the spin-off, Nyer held 34.6% of the
outstanding common stock of Vectors. Although the Company intends
the spin-off to qualify as a tax-free exchange, under Internal
Revenue Service rules, this transaction may not qualify as a such.
The effect on future results has not yet been determined.
Business in the first quarter of 1997 continues to be very
competitive. ADCO continues to focus on its long-term care market
and is pursuing more business with physician groups. ADCO's sales
of its accessibility equipment continue to increase as compliance
is being acted on throughout the State of Maine. ADCO South is
currently looking to hire a local sales representative to actively
solicit business in its local market area. ADCO South is also
continue to explore entering the high volume incontinence
and glove markets in long-term care facilities in South Florida.
Anton has enlarged its Scarborough service center to better handle
refurbishing of fire trucks. Anton, Conway, and SCBA are looking
at ways to better utilize their combined products and service
capabilities in order to increase sales and gross profit dollars
in 1997.
Eaton is looking at potential acquisitions to further enhance
its position as the leading independent pharmacy chain in the
greater North Shore area of Massachusetts. Eaton will also try to
expand its marketing and sales of home health care products and
accessibility products. This will continue to enhance its
reputation as a leading provider of professional pharmacy supplies
and equipment.
Nyer Nutritional's products are actively being marketed to
home health care providers and agencies throughout the United
States. Nyer Nutritional also is working on developing world wide
contracts on its patented nutritional products. The company has
received several trial orders.
The Company anticipates at current cash levels is adequate
to fund the operating needs and potential acquisitions for the
foreseeable future.
Selected Financial Data
1996
1995 1994 1993
1992
Summary of Operations:> [C]
Sales and other revenues $21,093,488
$9,046,018 $8,248,223 $6,686,186 $5,489,608
Cost of sales 16,834,712
6,966,817 6,172,776 4,688,230 3,838,112
Gross Margin 4,258,776
2,079,201 2,075,447 1,997,956 1,651,496
Selling,general, and admin 4,469,988 2,390,157 2,753,873
2,360,194 1,808,143
Operating expenses-Genetic Vectors 157,822
211,086
Research and development costs-Genetic Vectors 52,323
21,000 42,931 74,546 131,824
Operating (loss)income (421,357) (543,042) (721,357) (436,784)
(288,471)
Equity in loss of subsidiary 147,440
Interest (income) expense, net (147,907) 54,738 53,241
29,295 12,896
(Loss) income before minority interest (420,890) (597,780)
(774,598) (466,079) (301,367) nterest
2,079 12,511 8,302 (8,985)
Net (loss $ (418,811) $ (585,269) $ (766,296) $ (475,064)
$ (301,367)
Per Share Data:
Net(loss) (.14)
(.29) (.41) (.26) (.20)
Year-End Position:
Total assets $17,141,829 $3,804,987 $3,756,408 $4,236,661
$4,071,137
Property, plant, and equipment, net 1,020,799 764,031
833,019 909,755 747,900 king capital
9,057,883 708,946 589,879 1,317,562 1,779,602
Long-term debt(excluding current portion)
1,246,843 451,401 454,564 699,411 451,804
interest 648,003 31,372 43,883 52,185
Shareholders' equity 11,935,387 1,359,715 1,298,021
1,912,442 2,387,506
Financial Ratios:
Gross margin % to sales 20.0 23.0 25.0 29.9
30.0
Net (loss) % to sales
(2.0) (6.5) (9.3) (7.1) (5.4)
Current ratio
3.7 1.4 1.3 1.8 2.4
Other Data:
Weighted average common shares
outstanding
2,974,789 2,021,495 1,858,890 1,789,726 1,477,135
Capital expenditures 167,707 44,342 9,816
196,846 674,493
Depreciation and amortization 198,645 123,653 193,682
132,986 70,401
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Page(s)
Report of Independent Accountants F 1
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31,
1996 and 1995 F 2-3
Consolidated Statements of Operations for the
years ended December 31, 1996 and 1995 F 4
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 1996 and 1995 F 5
Consolidated Statements of Cash Flows for
the years ended December 31, 1996 and 1995 F 6-7
Notes to Consolidated Financial Statements F 8-19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Nyer Medical Group, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Nyer Medical
Group, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether 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 the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all
material respects, the consolidated financial position of Nyer Medical Group,
Inc. and Subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Portland, Maine
April 4, 1997
/S/ Coopers & Lybrand,L.L.P.
F-1
NYER MEDICAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Current assets:
Cash and cash equivalents $ 6,392,888 $ 262,099
Accounts receivable, less
allowance for doubtful accounts
of $167,502 and $99,585 at
December 31, 1996 and 1995,
respectively 2,629,847 1,076,299
Inventories, net 3,161,925 1,250,434
Prepaid expenses 118,577 55,585
Receivables from related parties 66,242 27,028
Total current assets 12,369,479 2,671,455
Property, plant and equipment, at
cost:
Land 92,800 92,800
Building 638,624 623,274
Leasehold improvements 290,606 2,703
Machinery and equipment 65,120 51,576
Transportation equipment 213,006 159,360
Office furniture, fixtures,
and equipment 413,133 397,745
1,713,289 1,327,458
Less accumulated depreciation
and amortization (692,490) (563,427)
1,020,799 764,031
Goodwill and other deferred assets,
net of accumulated amortization of
$135,043 and $71,460 at December 31,
1996 and 1995, respectively 910,030 220,921
Advances due from related companies 42,438 41,825
Investment in unconsolidated
subsidiary 2,683,112
Other 115,971 106,765
3,751,551 369,511
Total assets $17,141,829 $ 3,804,987
The accompanying notes are an integral part
of the consolidated financial statements.
F-2
NYER MEDICAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
Current liabilities:
Notes payable due related parties $ 309,372 $ 486,324
Current portion of long-term debt 324,208 181,991
Accounts payable 2,315,528 926,597
Accrued payroll and related taxes 122,622 185,681
Accrued expenses and other
liabilities 239,866 181,906
Total current liabilities 3,311,596 1,962,499
Long-term debt, net of current
portion 1,246,843 451,401
Minority interest 648,003 31,372
Commitments (leases)
Shareholders' equity:
Class A Preferred stock, par value
$.0001, Authorized, issued and
outstanding: 2,000 shares 1 1
Class B Preferred stock, par value
$.0001, Authorized: 300,000 shares;
issued and outstanding: 0 and
300,000 shares at December 31, 1996
and December 31, 1995, respectively 30
Common stock, par value $.0001
Authorized: 10,000,000 shares;
issued and outstanding:
3,400,093 and 2,183,000 shares
at December 31, 1996 and 1995,
respectively 341 218
Additional paid-in capital 15,314,055 4,354,165
Stock sale receivable (115,500) (150,000)
Accumulated deficit (3,263,510) (2,844,699)
Total shareholders' equity 11,935,387 1,359,715
Total liabilities and
shareholders' equity $17,141,829 $3,804,987
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996 and 1995
1996 1995
Net sales $21,093,488 $9,046,018
Cost and expenses:
Cost of goods sold 16,834,712 6,966,817
Selling and retail 2,352,786 942,570
Warehouse and delivery 362,048 288,715
Administrative 1,762,463 1,158,083
Operating expenses-Vectors 210,145 232,086
21,522,154 9,588,271
Operating loss (428,666) (542,253)
Other income (expense):
Equity in loss of unconsolidated
subsidiary (147,440)
Interest expense (76,253) (63,806)
Interest income 224,160 9,068
Other 7,309 (789)
Total other expense 7,776 (55,527)
Loss before
minority interest (420,890) (597,780)
Minority interest 2,079 12,511
Net Loss $ (418,811) $ (585,269)
Loss per common share $ (.14) $ (.29)
Weighted average number of common
stock and common stock equivalents
outstanding 2,974,789 2,021,495
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
Class A Class B
Preferred Stock Preferred Stock Common Stock Additional Total
Paid-in Stock Sale Accumulated Shareholders'
Shares Amount Shares Amount Shares Amount C apital Receivable
Deficit Equity
Balance,
December 31, 1994
2,000 $ 1 300,000 $30 1,893,000 $189 $ 3,557,231
$(2,259,430) $ 1,298,021
Issuance of common
stock 265,000 26
671,937 $ (150,000) 521,963
Exercise of common
stock options 25,000 3
124,997 125,000
Net loss
(585,269) (585,269)
Balance,
December 31, 1995 2,000 1 300,000 30 2,183,000 218
4,354,165 (150,000) (2,844,699) 1,359,715
Proceeds-stock
subscription
receivable
150,000 150,000
Stock options exercise
receivable 50,000 5 115,495 (115,500)
0
Issuance of common
stock 752,815 75
5,339,967 5,340,042
Exercise of common
stock warrants 376,278 39
2,293,670 2,293,709
Exercise of common
stock options 18,000 2
117,698 117,700
Purchase of subsidiary 20,000 2
297,498 297,500
Retirement of
class B preferred
stock (300,000) (30)
30 0
Increase in
proportionate
investment in equity
of unconsolidated
subsidiary
2,795,532
2,795,532
Net loss
(418,811) (418,811)
Balance,
December 31, 1996 2,000 $ 1 0 $ 0 3,400,093 $341
$15,314,055 $ (115,500) $(3,263,510) $11,935,387
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
1996 1995
Cash flows from operating
activities:
Net loss $ (418,811) $ (585,269)
Adjustments to reconcile to net cash
used in operating activities
Loss of unconsolidated
subsidiary 147,440
Depreciation and amortization 198,645 123,653
Compensation expense in connection
with common stock option exercise 35,000
Minority interest (2,079) (12,511)
Changes in certain working capital
elements (166,473) 60,811
Net cash flows used in
operating activities (206,278) (413,316)
Cash flows from investing activities:
Acquisition of subsidiaries, net of
cash acquired (808,229)
Purchase of property, plant and
equipment (167,707) (44,342)
Sale/recovery of property, plant,
and equipment 3,898
Net change in advances due from
related companies (613) 2,562
Increase in other assets (85,163) (12,724)
Net cash used in investing
activities (1,061,712) (50,606)
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 26,020 42,797
Payments of long-term debt (316,740) (112,096)
Payments on line of credit (75,000)
Net (repayments to)proceeds from
notes due related parties (176,952) 125,336
Proceeds from issuance of common
stock 5,340,042 521,963
Proceeds from stock subscription
receivable 150,000
Proceeds from exercise of common
stock warrants 2,293,709
Proceeds from exercise of stock
options 82,700 125,000
Net cash provided by
financing activities 7,398,779 628,000
Net increase in cash
and cash equivalents 6,130,789 164,078
Cash and cash equivalents at
beginning of period 262,099 98,021
Cash and cash equivalents at
end of period $6,392,888 $ 262,099
The accompanying notes are an integral
part of the consolidated financial statements.
F-6
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
1996 1995
Changes in certain working capital
elements:
Accounts receivable, net (583,908) (7,810)
Inventories (122,547) 33,997
Prepaid expenses (14,332) (12,387)
Receivables from related parties (39,214) 28,652
Accounts payable 726,402 (73,851)
Accrued payroll and related taxes (115,005) 73,764
Accrued expenses and other liabilities (17,869) 18,446
Net change $ (166,473) $ 60,811
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest $ 69,218 $ 56,422
The acquisition of subsidiaries, net of cash acquired, is summarized
as follows:
Working capital, other than cash $1,567,283
Property, plant and equipment 267,299
Other assets 349,470
Goodwill 379,550
Long-term debt (934,163)
Minority interests (523,710)
Common stock (297,500)
Cash paid for acquisitions $ 808,229
Non-cash transactions:
During 1996, an officer of the Company exercised 50,000 stock options for
which the Company received a note receivable for $115,500.
Additionally, the exercise of 50,000 warrants, by an unaffiliated third
party, resulted in a cash less exercised with the equivalent issuance of
24,870 shares of common stock.
The accompanying notes are an integral
part of the consolidated financial statements.
F-7
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
The Company
Nyer Medical Group, Inc. ("Company") is a holding company with operations
in the medical products distribution, biotechnology, nutritional tube
feeding products, emergency medical services, fire, and police equipment and
supplies businesses. The Company's wholly-owned subsidiaries, ADCO
Surgical Supply, Inc. (ADCO), ADCO South Medical Supplies, Inc. (ADCO South)
and 90% owned Nyle Home Health Supplies, Inc. (Nyle Home Health) are engaged
in the wholesale and retail sale of surgical and medical equipment and
supplies throughout New England and Florida. The Company's biotechnology
business, which develops products for molecular biology research and
biotechnology industrial applications is conducted through Genetic Vectors,
Inc., (Vectors), which the Company owns 56.5%.( See Note 9). Anton
Investments, Inc., 80% owned by the Company, is engaged in the wholesale
and retail sales of
equipment, supplies, and novelty items to emergency medical services, fire
departments and police departments located throughout most of New England.
Conway Associates, Inc., 80% owned by the Company, is engaged in the
wholesale sales of equipment and supplies to emergency medical services and
fire departments throughout New England. SCBA, Inc. (SCBA), 80% owned by
the Company, is engaged in the servicing of fire department's self contained
breathing apparatus. D.A.W., Inc.(Eaton Pharmacy),80% owned by the Company,
is a chain of nine pharmacy drug stores with sales in the suburban Boston
area and its related company, FMT, Inc.(FMT), which is also 80% owned by the
Company, is involved in the franchising of pharmacy retail outlets. Nyer
Nutritional Systems, Inc., (Nyer Nutritional), is also 80% owned by the
Company. This subsidiary is considered to be in the start-up phase of
operations and is developing a patented liquid nutritional formula for
medically supervised patient tube feedings.
The Company is a subsidiary of Nyle International Corp. (Nyle).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. All intercompany transactions have
been eliminated in consolidation.
The accounts of Vectors is accounted for under the equity method of
accounting whereby the Company's proportionate share of their earnings
or losses are recorded as other income (expense) (see note 9).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers investments with original maturities of three months
or less when purchased to be cash and cash equivalents.
continued
F-8
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies, continued:
Inventories
Inventories, net are stated at the lower of cost (first-in, first-out
method) or market, with the exception of the retail pharmacies which use
the last-in, first-out method (LIFO) due to the acquisition of Eaton
Pharmacys. Of the total inventories, 60% are
on the LIFO method. As 1996 is considered the base year for LIFO
inventories, the replacement costs of inventory is equal to its LIFO cost.
Property, Plant and Equipment
Property, plant, and equipment are recorded at cost. Leasehold improvements
are capitalized, while repair and maintenance costs are charged to
operations as incurred. When assets are retired or disposed of, the cost
and accumulated depreciation 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.
For financial reporting purposes, depreciation is computed principally using
the straight-line method over estimated service lives of the related assets
as follows:
Years
Building 15
Leasehold Improvements 10
Machinery and equipment 3 - 10
Transportation equipment 3 - 5
Office furniture, fixtures and equipment 3 - 10
Income Taxes
The Corporation files a consolidated federal income tax return. The
Company 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 attributable 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.
Fair Value of Financial Instruments
At December 31, 1996, the carrying amounts of the Company's financial
instruments included in current assets and current liabilities approximate
fair value because of the short maturity of those instruments. The carrying
amounts of the Company's long-term debt also approximates their fair value
as of December 31, 1996 based upon the borrowing rates currently available
to the Company for loans with similar terms and maturities.
Goodwill and other intangible assets
Goodwill, which represents the excess of the 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 various periods,
ranging from 15 to 40 years. Other intangible assets acquired in
connection with
continued
F-9
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies, continued:
Goodwill and other intangible assets, continued
acquisitions are being amortized on a straight line basis over periods
ranging from 5 to 6 years. Amortization expense charged to operations for
all deferred charges was $63,583 in 1996 and $14,221 in 1995.
Impairment Accounting
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," (SFAS No. 121) in 1996. The Company reviews the
recoverability of its long-lived assets, including goodwill and other
intangible assets, when events or changes in circumstances occur that
indicate that the carrying value of the asset may not be recoverable. The
measurement of possible impairment is based on the Company's ability to
recover the asset from the expected future pre-tax cash flows (undiscounted
and without interest charges) of the related operations. The measurement of
impairment requires management to make estimates of expected future cash
flows related to long-lived assets. It is at least reasonably possible that
future events or circumstances could cause these estimates to change. The
Company's policy on impairment prior to the adoption of SFAS No. 121 was not
materially different.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No.
128) and No. 129, "Disclosure of Information About Capital Structure" (SFAS
No. 129). SFAS No. 128 will require a change in how the Company calculates
earnings per share and SFAS No. 129 will require disclosure of certain
information about the Company's capital structure. The requirements of
these pronouncements are effective for the Company's fiscal year ending
December 31, 1997 and the impact of these statements on the Company's
financial statements has not yet been determined.
Loss Per Common Share
Loss per share of common stock has been determined by dividing the net loss
by the weighted average number of shares of common stock and common stock
equivalents outstanding, when considered dilutive.
2. Related Party Transactions:
Receivables from related parties consisted of the following at December
31, 1996 and 1995:
1996 1995
Note receivable from officer $ 5,000 $
Receivable from unconsolidated
subsidiary 44,444
Receivable from affiliate $ 16,798 27,028
Total current receivable from
related parties $ 66,242 $ 27,028
Non-current receivables from related
parties $ 42,438 $ 41,825
continued
F-10
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Related Party Transactions: continued,
Note receivable from officer was a loan to the Vice-President of Sales, for
$10,000, with repayments of principal plus interest of 7.5% being made
on a quarterly basis. The balance of $5,000 at December 31, 1996 plus
accrued interest was paid in full on March 31, 1997.
Receivable from unconsolidated subsidiary of $44,444 was repaid
January 1997.
The receivable from an affiliate is for products sold to a company which is
owned by an officer and director of the Company. Total sales were $87,350
and $60,450, for 1996 and 1995, respectively.
Non-current receivables from related parties consist of cash advances made
to Nyle. Interest is charged at 9% annually and payments are made
periodically.
Notes payable due to related parties consisted of the following at December
31, 1996 and 1995:
1996 1995
Demand note payable to shareholder
non-interest bearing $ 309,372 $ 324,324
Demand note payable to shareholder
with interest at 8% 149,500
Demand note payable to affiliate with
interest at 8% 12,500
$ 309,372 $ 486,324
The Company has an employment agreement with its Chief Executive Officer,
at a base annual salary of $125,000. This agreement expires October 1,
1999. In addition, a note receivable for the exercise of 50,000 stock
options was due from this officer for $115,500, with interest payable
quarterly with an annual interest rate of 6.25%, with all unpaid accrued
interest and principal due August of 1999. This receivable has been
off-set against the stockholders' equity section on the balance sheet.
3. Acquisitions and Investments:
In February 1996, the Company acquired 80% of the outstanding common stock
of Conway Associates, Inc. and an affiliated company, SCBA, Inc. The
consideration paid in cash was $431,855. Conway and SCBA, located in
Haverhill, Massachusetts, is engaged in the wholesale and retail sales of
equipment and supplies to emergency medical services and fire departments
throughout New England.
In August, the Company acquired 80% of the common stock D.A.W., Inc.
and an affiliated company, F.M.T., Inc. D.A.W. is an operator of retail
pharmacies in eastern Massachusetts and F.M.T. is involved with the
franchising of retail pharmacies. The consideration paid was $709,198
which included the issuance of 20,000 shares of common stock of the Company
valued at $297,500, cash payment of $325,000 for a non-compete agreement,
and acquisition costs of $86,698. In addition, the Company contributed
working capital to $1,000,000, for which $200,000 is attributable to
the minority interest. In connection with this transaction, the Company has
guaranteed that the value of the common stock issued to the sellers will be
at least $8.75 per share on the second anniversary of the acquisition date.
In event the value of the common stock is below this amount, the Company
continued
F-11
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions and Investments: continued,
is obligated to either pay cash for the difference in value, issue
equivalent amount of additional shares of common stock, or repurchase the
sellers common stock at the guaranteed value. In addition, the sellers
have guaranteed a certain level of net income twelve months after the
acquisition date and may be obligated to pay the Company up to $100,000
if the income levels are not met.
The aforementioned acquisitions are being accounted for under the purchase
method of accounting, and accordingly, the results of operations of these
companies are included in the accompanying consolidated financial statements
from their respective dates of acquisition. The purchase prices have been
allocated to assets acquired and liabilities assumed, and is summarized as
follows:
Current assets $2,843,163
Property, plant and equipment 267,299
Intangible and other assets 349,470
Goodwill 379,550
Current liabilities (1,240,556)
Long term liabilities ( 934,163)
Minority interests (523,710)
$1,141,053
The following unaudited pro forma financial information for the Company
gives effect to the DAW, FMT and Conway acquisitions as if they had
occurred on January 1, 1995. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of
results of operations had the acquisitions occurred on the date
indicated, or which may result in the future:
1996 1995
Net sales $29,729,138 $25,595,525
Net loss $ (498,785) $ (571,572)
Net loss per share $ (.17) $ (.28)
In December 1996, the Company incorporated Nyer Nutritional Systems, Inc.,
in Delaware. This subsidiary was capitalized with cash of $300,000 for
80% of the common stock of the Company. A minority shareholder also
contributed the rights to patented technology for the remaining 20% of
common stock. This subsidiary is developing a liquid nutritional
formula for the medically supervised feeding of hospital patients and is
currently in the start up phase of operations.
continued
F-12
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Debt:
Long-term debt at December 31, 1996 and 1995, consisted of the following:
1996 1995
ADCO Surgical Supply, Inc:
Note payable in equal monthly
installments of $6,250 plus interest
at 7.3% through November 1997;
collateralized by inventory and
receivables. Repaid in March 1996. $ 143,750
Note payable in equal monthly installments
of $4,675 including interest at 7%,
through July 1996; the interest rate
changed to 8 1/4% in August of 1996;
collateralized by land and building
due in 2008. $ 427,415 450,249
Eaton Pharmacy:
Note payable to the Internal Revenue
Service, payable in equal quarterly
installments of $11,007 plus interest at 7%.
The note will mature in April 1998. The
note is guaranteed by minority shareholders
of Eaton Pharmacy. 60,384
Note payable to the Commonwealth of Massachusetts,
Department of Revenue, payable in equal monthly
installments of $9,286 plus interest at 7%. The
note will mature in August 1998. The note is
guaranteed by minority shareholders of
Eaton Pharmacy. 58,282
Note payable in monthly installments of
$1,167(without interest). The note will mature
in December 1998 and is collateralized by
certain assets of Eaton Pharmacy. 26,833
Note payable in equal monthly payments of
$2,934(without interest). The note will
mature in January 1997, and is collateralized
by certain assets of Eaton Pharmacy. Repaid in
February 1997. 6,934
Note payable to vendor, payable in equal
monthly installments of principal and interest of
$2,724. Interest is charged at prime rate
(8 1/4% at December 31, 1996). Repaid in
February 1997. 81,731
Note payable to former shareholder of Eaton
Pharmacy, payable in equal monthly installments
of $1,333 plus interest on the unpaid balance
at prime rate(8 1/4% at December 31, 1996). The
note will mature in August 2000 and is
collateralized by certain assets of Eaton
Pharmacy. 42,667
continued
F-13
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Debt: continued,
Note payable in equal monthly installments of
$4,500 plus interest on the unpaid balance at
prime rate 8 1/4% at December 31, 1996). A final
balloon payment of $30,000 will be paid upon
maturity in August 2000. The note is
collateralized by certain assets of Eaton
Pharmacy. 174,000
Note payable to vendor, payable in equal
monthly installments of principal and interest
of $5,423. Interest is charged at prime rate
8 1/4% at December 31, 1996). Repaid in
February 1997. 503,666
Note payable to vendor, payable in equal
monthly installments of principal and interest
of $2,083. Interest is charged at prime rate
plus 2%(10 1/4% at December 31, 1996).
Repaid in February 1997. 125,000
Various notes payable and fully paid at
March 31, 1997: 14,742
Other Subsidiaries
Notes payable due in various installments
at rates ranging up to 17.5%, collateralized
by certain equipment and vehicles. 49,397 39,393
1,571,051 633,392
Less current portion 324,208 181,991
$1,246,843 $ 451,401
The maturities of long term debt (adjusted to reflect payments already
paid in 1997) at December 31, 1996 are as follows:
1997 $ 939,832
1998 170,058
1999 82,315
2000 60,802
2001 33,441
Thereafter 284,603
$1,571,051
The Company's line of credit expired in 1995.
The long term debt of ADCO and other subsidiaries, is collateralized by the
Company's inventory, accounts receivable and vehicles as well as personal
guarantees of the Company's chairman.
continued
F-14
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Income Taxes:
During 1996, the Company's ownership percentage in Vectors declined below
the threshold required for the filing of consolidated tax returns. As a
result, NOL carryforwards of approximately $735,000 attributable to Vectors
are no longer available to the Company. At December 31, 1996, the Company
had a remaining net operating loss (NOL)carryforwards of approximately
$1,636,000 available to offset future taxable income. The NOL carryforwards
will expire in the years 2002 to 2011. In the event of a change in
ownership of the Company, the utilization of the NOL carryforward may be
subject to limitation under certain provisions of the Internal Revenue
Code. In addition, certain provisions dealing with consolidated returns
may limit the utilization of approximately $175,000 of NOL carryforward
by certain members of the consolidated group.
The tax effect of temporary differences that give rise to significant
portions of deferred taxes at December 31, 1996 and 1995 consisted of:
1996 1995
Deferred tax assets(liabilities):
Depreciation $ (54,000) $ (12,000)
Reserves 115,000 75,000
Net operating loss carryforwards 654,000 829,000
Total net deferred tax assets
before valuation reserve 715,000 892,000
Valuation reserve (715,000) (892,000)
Total net deferred tax
assets $ - $ -
The Company has recorded a valuation reserve for the total amount of
net deferred tax assets due to the uncertainty of their future
realization.
6. Lease Obligations:
The Company rents office and warehouse space with varying lease expiration
dates through June of 2003. All leases have options to extend the lease
terms. Total rent expense for the years ended December 31, 1996 and 1995,
was $286,084 and $77,408, respectively.
Future minimum lease payments at December 31, 1996 are as follows:
1997 $ 492,963
1998 468,098
1999 375,533
2000 286,415
2001 105,462
Thereafter 70,821
$1,799,292
continued
F-15
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Capital Stock:
Each share of Class A preferred stock has voting rights equal to 1,000
shares of common stock. In March of 1996, the Company exchanged 20% of
Vectors' stock for all of the Class B Preferred Stock of the Company
which was then retired. The Company subsequently spun-off 32% of its
holding of the outstanding stock of Vectors (see note 9).
In 1996, the Company sold 752,815 shares of common stock under Regulation
S of the Securities Act of 1933, which netted proceeds of $5,340,042.
In connection with this sale, the Company issued 388,908 warrants to
purchase additional common stock at a weighted average exercise price of
$7.32 per share. Subsequently, 346,408 warrants were exercised, for which
the Company issued 321,278 shares of common stock for net proceeds of
$1,963,703. The remaining 42,500 warrants not exercised expired in
October 1996. In addition, in July and October, 1996, 55,000 warrants
that were issued in connection with the Company's 1992 Initial Public
Offering, were exercised with proceeds to the Company of $330,000.
The Company has a Stock Option Plan (Plan) which provides for the awards of
shares of common stock to employees, directors, and consultants of the
Company. The Plan provides for automatic grants of 12,000 non-qualified
options vesting semi-annually over a three-year term to all non-employee
directors. In January 1995, the Board of Directors approved an amendment to
the Plan increasing the number of shares from 150,000 to 275,000 shares.
At the same time, the Company granted its president, non-qualified options
to purchase 90,000 shares of common stock, exercisable at $2 5/32 per share
over a five-year period. Of the 90,000 options, 30,000 are immediately
vested and the remaining 60,000 vest in equal increments of 20,000 options
each year over a three-year period subject to its president's continued
employment.
A summary of changes in common stock options during 1996 and 1995 is:
Weighted average
Shares exercise price
Outstanding grants at December 31, 1994 109,000 $ 4.81
Granted 90,000 $ 2.16
Exercised (25,000) $ 5.00
Outstanding grant at December 31, 1995 174,000 $ 3.41
Granted 56,000 $13.52
Exercised (68,000) $ 2.92
Canceled - -
Outstanding grants at December 31, 1996 162,000 $ 7.55
Options exercisable at December 31, 1995 120,000
Options exercisable at December 31, 1996 92,000
At December 31, 1996, 40,000 options are exercisable at $2.16 per share,
74,000 options are exercisable at $4.75 per share, and 48,000 options are
exercisable at $16.38.
In 1995, the Financial Accounting Standards Board issued "Statement of
Financial Accounting Standard (SFAS) No. 123 - Accounting for Stock-Based
Compensation." This statement requires a fair value based method of
accounting for employee stock options and would result in expense
recognition for the Company's employee stock plans. It also permits a
company to continue to measure compensation expense for such plans using the
continued
F-16
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Capital Stock: continued,
intrinsic value based method as prescribed by Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees."
The Company has elected to follow APB 25 in accounting for its employee stock
plans, and accordingly, recorded compensation expense of $35,000 for the
grant of stock options with an exercise price below fair market value of
the stock on the date of grant. These options vested immediately and were
also exercised in 1996. No compensation expense for other stock options
granted has been recognized. Had compensation expense for the Company's
stock plans been determined based on the fair value requirements of SFAS
No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
1996 1995
Net loss: As reported$ (418,811) $ (585,269)
Pro forma $ (459,631) $ (593,639)
Loss per share: As reported$ (.14) $ (.29)
Pro forma $ (.15) $ (.29)
The fair value of stock options in the pro forma accounts for 1996 and 1995
is not necessarily indicative of the future effects on net income and
earnings per share. The fair value of each stock option grant has been
estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions for 1996 and 1995:
risk-free interest rate of 7.% and 6.5%, respectively, expected life of
three years, volatility of 15%, and no dividend yield.
continued
F-17
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Business Segments:
The Company had four active business segments in 1996 and 1995 (1)
wholesale and retail sale of surgical and medical equipment and supplies,
(2) biotechnology business involved in developing products for molecular
biology research and biotechnology industrial applications, (3) wholesale
and retail distribution of equipment, supplies, and novelty items to
emergency medical services, fire departments, and police departments, and
(4) retail pharmacy drug store chain.
Summary data for the year ended December 31, 1996 is as follows:
Medical Biotechnology EMT, Fire
and Research Police Retail
Surgical and Equipment Pharmacy
Supplies Development and Supplies Chain
Corporate Consolidated
Net Sales $6,024,664 $8,500,565 $6,568,259
$21,093,488
Operating
loss (22,273) (210,145) (88,993) 173,186 (280,441)
(428,667)
Identifiable
assets 3,037,012 1,908,987 4,518,906 7,676,924
17,141,829
Capital
expenditures 20,159 82,275 61,092
4,181 167,707
Depreciation
and
amortization 82,664 2,087 63,723 43,890
6,281 198,645
The biotechnology segment incurred an additional loss of $147,440 since
September 30, 1996,
when the Company deconsolidated its accounts effective October 1, 1996
(See note 9).
Summary data for the year ended December 31, 1995 is as follows:
Medical Biotechnology EMT, Fire
and Research Police
Surgical and Equipment
Supplies Development and Supplies Corporate Consolidated
Net Sales $5,835,323 $ 9,116 $3,201,579 $9,046,018
Operating
loss (76,042) (222,970) (44,491) $(198,750) (542,253)
Identifiable
assets 2,670,982 111,026 886,202 136,777 3,804,987
Capital
expenditures 40,596 3,111 635 44,342
Depreciation
and
amortization 81,206 1,477 35,556 5,414 123,653
continued
F-18
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Spin-Off of Genetic Vectors:
During 1996, the Company announced plans to spin-off 32% of its investment
in Vectors common stock to the shareholders of the Company. In addition,
the Company exchanged 20% of the common stock of Vectors for all of the
Class B Preferred Stock of the Company, which was held by an officer and
related party of Vectors. The Class B stock was then retired. The Company
consolidated the results of Vectors through September 30, 1996 and recorded
a net loss through that period of $210,145 that was attributable to
Vectors. From October 1, 1996 through December 31, 1996, the Company used
the equity method of accounting to account for the results of its
investment in Vectors, which resulted in the Company recording an
additional net loss of $147,440. The Company recognized a total net loss
in connection with Vectors of $357,585. In December 1996, Vectors
completed its Initial Public Offering by selling 575,000 shares of common
stock, which resulted in Vectors receiving net proceeds after offering
expenses of approximately $4,570,000. In accordance with Securities and
Exchange Commission rules, the Company has increased its investment in
Vectors for its proportionate share of the carrying value of Vectors at
December 31, 1996. This resulted in an increase of $2,795,532 to the
Company's investment in unconsolidated subsidiary account on the balance
sheet, with a corresponding offset to additional paid in capital under
the stockholders' equity section on the balance sheet.
In January 1997, the Company completed its spin-off of Vector's common
stock which resulted in 512,071 shares of common stock being distributed
as a dividend to shareholders of Nyer. After the completion of the
spin-off, Nyer held 34.6% of the outstanding common stock of Vectors.
Although the Company intends the spin-off to qualify as a tax-free
exchange, under Internal Revenue Service rules, this transaction may not
qualify as a such.
Accordingly, the Company may be liable for income taxes on this
exchange, which amounts and the corresponding effect on the 1997 financial
statements has not yet been determined. As a result, no amount has been
reflected for such a contingency in the consolidated financial statements
for the year ended December 31, 1996.
As of January 1997, the Company owns 809,281 shares of restricted common
stock of Vectors. The Company can not sell, publicly offer or otherwise
transfer its shares until January 21, 1998, without the express written
consent of Genetic Vectors, Inc., of which, 38,165 are required to be
transferred or reserved.
The financial position and results of Genetic Vectors, which has
been audited by another accounting firm, as of and for the year
ended December 31, 1996 is as follows:
Current assets $4,745,208
Non-current assets 172,596
$4,917,804
Current liabilities $ 170,527
Stockholders' equity 4,747,277
$4,917,804
Net sales $ --
Operating expenses 393,494
Net loss $ (393,434)
F-19
ITEM 8.Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
None
PART III
ITEM 9. Directors, Executive Officers, Promoters And Control Persons;
Compliance With Section 16 Of The Exchange Act.
Incorporated by reference from proxy statement to be filed
within 120 days after fiscal year end.
ITEM 10. Executive Compensation.
Incorporated by reference from proxy statement to be filed
within 120 days after fiscal year end.
ITEM 11. Security Ownership Of Certain Beneficial Owners And Management.
Incorporated by reference from proxy statement to be filed
within 120 days after fiscal year end.
ITEM 12. Certain Relationships and Related Transactions.
Incorporated by reference from proxy statement to be filed
within 120 days after fiscal year end.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NYER MEDICAL GROUP, INC.
Registrant
By:/s/ Samuel Nyer
Samuel Nyer, President
(Chief Executive Officer)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on the
14th day of April 1997.
Signature Title
/s/ Samuel Nyer Chairman of the Board,
Samuel Nyer President, Director,
and Secretary
/s/ Karen L. Wright Treasurer (Chief Financial
Karen L. Wright and Accounting Officer)
/s/ Doyle Boatwright Director
Doyle Boatwright
/s/ Michael Anton Director
Michael Anton
/s/ William Clifford, Jr. Vice President of
William Clifford, Jr. Sales, Director
/s/ David Dumouchel Director
David Dumouchel
/s/ Donald Lewis Director
Donald Lewis
/s/ Kenneth Nyer Director
Kenneth Nyer, M.D.
/s/ Howard Parker Director
Howard Parker, M.D.
/s/ Daniel Striar Director
Daniel Striar
EXHIBIT INDEX
Sequential
Exhibit No.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
2. Articles of Incorporation of Nyer Medical Group, Inc.,
(1)
2.1 Amendment to Articles of Incorporation of Nyer Medical
Group, Inc.(1)
2.2 Second Amendment to Articles of Incorporation of Nyer
Medical Group, Inc.(1)
3. Bylaws of Nyer Medical Group, Inc.(1)
4. 1993 Stock Option Plan(2)
4.1 Amendment to 1993 Stock Option Plan(3)
10. Agreement between Nyer Medical Group, Inc. and Dr. and
Mrs. McCabe and Mr. McCabe, Jr.
10.1 Stock Purchase Agreement - Conway Associates, Inc.(4)
10.2 Stock Exchange Agreement and Plan of Reorganization -
Eaton Apothecary(5)
10.3 License Agreement - Nyer Nutritional Systems, Inc.(4)
(1) Contained in Registration Statement on Form S-18 filed on
April 13, 1992.
(2) Contained in Form 10-K filed ___________1996.
(3) Contained in Form 10-K filed April__, 1996.
(4) To be filed by amendment.
(5) Contained in Form 8-K filed August__, 1996.
