SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No. 000-20175
Nyer Medical Group, Inc.
(Name of 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 Exchange 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-K or
amendment to Form 10-K. [ ]
1 of 61
State issuer's revenues for its most recent fiscal year:
$39,856,911
The aggregate market value of the Company's voting stock held
by non-affiliates as of April 13, 2000 was approximately
$16,707,424 based upon the closing price. There were 3,737,789
shares of common stock outstanding as of April 14, 2000.
Documents Incorporated by Reference: None
Transitional 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 formed
Nyer Internet Companies, Inc. ("NIC") in 1999 of which the Company
owns 100% of the stock. The Company owns 80% of the stock of Anton
Investments, Inc. ("Anton") and Conway Associates, Inc. ("Conway").
Mr. Michael Anton, a former director, 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. Anton. SCBA repairs closed breathing apparatus
equipment used by fire departments. The Company owns 80% of a
retail pharmacy chain, D.A.W., Inc. ("Eaton"). The remaining 20%
of the stock is owned by five 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 former five shareholders of Eaton. Nyer Nutritional
Systems, Inc. ("Nyer Nutritional") has patented liquid nutritional
formulas for tube feedings. The Company owns 80% of the outstanding
stock of Nyer Nutritional; Mr. Doyle Boatwright, a director of the
Company, owns the remaining 20%. The Company also currently owns
24.8% of the outstanding stock of Genetic Vectors, Inc.("Vectors").
The Company reports both Nyer Nutritional and Vectors as
discontinued operations.
Medical Products/Service
ADCO - ADCO South
ADCO started as a quality distributor of home health, medical,
surgical and laboratory supplies and equipment in Bangor, Maine
in 1963. In fiscal year 1999, ADCO generated net sales of
approximately $6.2 million. ADCO supplies all areas of health care
products. ADCO sells to physician offices, clinics, health
centers, nursing homes, visiting nurse associations, individual
health care consumers and specialty equipment to hospitals. The
products supplied include gloves, incontinence products, laboratory
supplies and equipment, surgical supplies and equipment as well
as diagnostic equipment.
The various products supplied by the retail division are
motorized rehabilitative equipment such as stair glides, chair
lifts, scooters, wheelchairs and hospital beds, various kinds of
rehabilitative aids utilized by persons who are rehabilitating from
operations, serious illnesses and accidents, diagnostic kits,
incontinence supplies, medical equipment (both disposable and
reusable), oxygen and associated supplies, diabetic supplies, and
various other products including nursing uniforms and shoes.
In August 1998, the Company started a division called Nyer
Diabetic Supplies. This division delivers blood glucose meters,
test strips, lancets and penlets, control solutions and alcohol
prep pads to individual diabetics directly at their homes. This
division had approximately $80,000 in sales in 1999. The Company
believes direct home delivery, especially for the elderly, is
practical and economical because it eliminates the time and money
spent traveling to pick up the diabetic supplies. The Company also
does direct billing to the insurance companies and Medicare. The
Company has done advertising via television and a direct mailing in
Northern and Southern Maine. Nyer Diabetic Supplies currently has
approximately 220 customers.
In February 1999, ADCO started a respiratory therapy division
within its home care operations. This division specializes in
oxygen and nebulizer supplies and equipment for patients who have
chronic respiratory problems, as well as BIPAP/CPAP equipment for
patients with sleep disorders. The population of respiratory
patients is increasing every day due to smoking and Chronic
Obstructive Pulmonary Disease (COPD), the most common respiratory
disease. Currently, this division has 158 patients and the
Company expects to increase this number with the ADCO name and
the quality of service that is provided. All of ADCO's home
care division customers now have access to a respiratory therapist
or a service technician 24 hours a day. ADCO currently employs
one full time and two part-time respiratory therapists.
ADCO's management believes with these two new divisions, the
synergy of combining its existing products with its new products
and services, gives ADCO the opportunity to promote one stop
shopping.
ADCO is one of the larger independent wholesale medical
distributors located in New England (excluding national
competitors). It has a wholesale customer base of over 1,525
active customers.
ADCO and ADCO South provide over 5,000 stocked items out of
their respective warehouses and have access to the inventory of
over 5,000 of the industries suppliers. Although the inventories
of both companies share common items, the need for items relative
to their geographic regions are accomplished through the warehouses
of both companies. This enables a larger mix of products to be
available from either company through inter-company transfers and
benefit from the synergies available from two combined inventories.
ADCO, pursuant to industry trade practices, is the semi-
exclusive distributor of two different lines of incontinence
products and generates over 10% of its annual volume from these
companies.
ADCO/ADCO South are members of the National Distribution and
Contracts (NDC), a coalition of three dealer associations; ABCO,
Starline, and CIDA. This is a nationwide group of over 220
wholesale distributors who join together for private label
branded products and price concessions from industry suppliers.
ADCO enjoys semi-exclusive rights to CIDA products in its primary
market areas. The combination of the three groups positions NDC
to compete with the large national distributors. NDC's dealer
network is the largest coalition of independent dealers in the
United States.
ADCO is one of Maine's leading suppliers of accessibility
equipment. The need for this equipment continues to grow with the
trend towards longer life spans and the enactment of the ADA
(American Disabilities Act).
ADCO also has an in-house service department to service the
needs of its customers. It also maintains an inventory of common
types of equipment to meet the needs of those customers who require
loaner equipment while theirs is being repaired.
ADCO achieves over a 95% plus order fill rate which serves to
further increase customer service and loyalty. ADCO's inventory
turns over only six to seven times per year due to its desire to
maintain high service levels and a large inventory of specialty
home care and rehab equipment.
ADCO derives 86% of its revenues from sales to wholesale
customers (which primarily includes nursing homes and physician
offices), while the balance comes from its retail and home health
customers. ADCO maintains a 23,000 square foot facility and has a
3,000 square foot retail showroom located within its building.
In 1997, ADCO opened a small branch office outside of Las
Vegas, Nevada, ADCO Southwest, and intends to use it to grow it
into a larger independent supplier of medical supplies and
equipment to the growing market area of the Southwest. The
employees of this branch have extensive knowledge of the sales of
pharmaceuticals and are helping ADCO/ADCO South expand their
business into the distribution of pharmaceuticals.
ADCO South began operations in 1992. ADCO South generated
approximately $1.2 million in net sales for 1999. ADCO South's
sales are from medical supplies and equipment primarily to
physicians and clinics in the Palm Beach and Broward county areas
of South Florida. It does virtually no home health care business.
ADCO South operates out of a 6,172 square foot building located in
West Palm Beach, Florida.
Marketing
The marketing efforts of the medical products business are
headed by ADCO's vice president of sales and general manager,
William Clifford. The Company continues to market its group
buying programs to a large number of physicians, long-term care
facilities, and clinics through its national NDC 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. ADCO also telemarkets sales as a plan to supplement
traditional sales methods in order to increase sales.
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 tra-
ditionally 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 35% of its
wholesale business is derived from sales to physicians, 35% 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. 90% of ADCO South and ADCO Southwest sales
are derived from physicians, with 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, Durr-
Fillauer, McKesson, PSSI, Cardinal 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.
In May of 1999, the Company embarked on both business to
business (b2b) and business to consumer (b2c) internet commerce,
beginning with an interactive web site, medicalmailorder.com.
The Company is developing multiple web sites. The purpose of
these sites will be to develop a medical mall on line and using
store directories to direct internet customers to the appropriate
site that best fits their medical needs. The Company currently
owns four active web sites that have interactive and secure
on line transactions. The combination of the synergies from
our medical distribution businesses and the power of the internet
should provide future growth for this division.
Nutritional Supplies
Nyer Nutritional Systems, Inc.
Nyer Nutritional is an 80% owned subsidiary started in
December of 1996. The business is based on five patents designed
to promote a line of medical foods that have unique antimicrobial
properties. Medical foods is a category that is regulated
separately by the Food and Drug administration, as opposed to
dietary supplements and grocery type food products. Most medical
foods are prescribed by a physician and used for patients that have
special dietary needs tied into a disease or post-surgical medical
condition.
In February 1999, Nyer Nutritional filed a lawsuit in federal
court in Arizona (see Item 3 Legal Proceedings).
As of the date of this report, Nyer Nutritional attempts
to bring its product to market have been unsuccessful.
Nyer Nutritional ceased active operations in the fall of
1999. The Company, as of the date of this report, has invested
$2,270,935 into Nyer Nutritional.
In October 1999, the Board of Directors approved a plan to
dispose of its investment in Nyer Nutritional. The Company has
signed a letter of intent with National Distribution and
Contracting, Inc. ("NDC") to sell the assets of Nyer Nutritional,
subject to the successful completion of a clinical trial and
execution of a patent license assignment by the 20% owner of
Nyer Nutritional, who owns the patents. The Company expects to
complete the transaction no later than July 15, 2000. The Company
has reported Nyer Nutritional as a discontinued operation in its
financial statements. Nyer Nutritional did not have any sales in
1999.
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 $3.1 million in net sales for 1999.
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 55 percent of its
sales now taking place in Maine, 25 percent in New Hampshire, 3
percent in Vermont, 15 percent in Massachusetts, with the remaining
2 percent outside of New England.
Anton 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 maintains an extensive inventory of its most popular
products at its various locations, which includes Maine, New
Hampshire, Massachusetts, and New York. While Anton generally is
able to fill orders from its own inventory on a same day basis,
Anton 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 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 1999 were
approximately $3.9 million.
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 52% of
its sales from Massachusetts, 15% in New Hampshire, 12% in New
York, 10% in Vermont, 8% in Maine, with the remainder outside of
New England.
Anton and Conway distribute 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 maintains a limited inventory. Conway has access to
Anton's inventory and through its many suppliers, has access to
having items drop-shipped or shipped directly to them within a few
days.
The Company has a policy requiring less than wholly-owned
subsidiaries to reimburse the Company for its costs in providing
management services. Anton is required to reimburse the Company
a monthly management fee of $1,500. Conway's monthly management
fee is $2,000. Anton and Conway are required to reimburse the
Company for any additional legal, auditing and accounting fees and
costs.
During 1999, the Company recorded an impairment loss of
$280,445, as a result of continuing and increasing operating losses
in the Conway business. See Item 7, Management's Discussion and
Analysis for additional information.
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 1999
were approximately $33,000. SCBA services fire department's and
industrial company's self-contained breathing apparatus gear.
Marketing and Sales
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 throughout New England.
Conway's marketing and sales are currently managed by Ross
Wood, Sales Manager. The marketing and sales are achieved through
flyers and direct calls from the inside and outside sales force.
Competition
All of 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 telemarketing 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 do 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.
Retail Pharmacies Businesses
Eaton Apothecary
In August 1996, the Company acquired 80% of Eaton Apothecary,
"Eaton", a chain of pharmacies operating in the greater Boston
area. Sales grew from $22.2 million in 1998 to $25.3 million in
1999. This is an increase of 11% over 1998. Each of the five
minority shareholders (except in one case, the husband of a
shareholder) continue employment under a five year employment
contract with Eaton which commenced in August 1996. Control of the
Board of Directors of Eaton is split between representatives from
Nyer and from Eaton. Additionally, one member of Eaton management
occupies a seat on the Company's Board of Directors.
The competitiveness of the retail pharmacy market continues
to intensify with many different channels of retail and non-
retail competition. All of the stores posted sales increases
despite continued competition from national chain drug stores,
supermarket chains, HMO's, and internet services. Eaton did see
its gross profit margin decline approximately 2% in 1999 due to
lower than expected reimbursement rates. Eaton's management
strategy is to move in the opposite direction from the national
chains regarding store size, merchandise mix, and store locations.
Eaton's strategy of developing its prototype of approximately 2,500
sq. ft., with high volume prescription departments, in neighborhood
locations has fared well over the past several years. Virtually
all of Eaton's stores compete head-to-head with CVS and Walgreen
stores.
Pharmacies in supermarkets and deep discount 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 to 20,000 for the
average chain), with the pharmacy department as the central focus
to the customer. Eaton offers free delivery service of prescrip-
tion 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.
"Any willing provider" legislation passed in Massachusetts has
enabled Eaton to serve Harvard/Pilgrim HMO as well as many other
"locked out" sectors of the retail pharmacy market. Because of the
increased available market, management expects sales growth to be
positive, but with continuing pressure on margins. Because of this
trend, management continues to focus energies on cost reductions
from suppliers, and cost containment at store level. Assisted
living facilities are transitory facilities for elderly patients
unable to live at home alone but not brittle enough to require
nursing home care. This market segment is predicted by the
U.S. Census to be the largest growing housing sector in the nation
over the next decade. Because these homes do not offer nursing
care, yet cater to residents unable to manage their own
medications, Eaton management has recognized a tremendous
opportunity to couple its prescription and delivery expertise to
out-service the chain stores to this new market sector. Eaton's
investment in specialized packaging equipment was with the intent
of offering a "fool-proof" medication management system to assisted
living residents. Eaton added an additional "Medicine on TimeTM"
packaging system. This licensed packaging system caters to elderly
clients who are unable to manage their medication regimens yet who
are not frail enough for nursing home care. In addition to
tremendous growth in the assisted living and home-bound sectors,
many leads have developed through word of mouth throughout the
visiting nurse and health center communities which have the
possibility to further additional specialized business
opportunities.
Eaton has opened two new pharmacies within the confines of
busy inner-city health centers.
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 it will pay to the Company a fee equal to one-third of 1% of
its 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.
Forward-Looking Statements
The statements made relating to the anticipated continued
increases in sales, store count and volume discounts of Eaton
throughout the next several years, sales growth, acquisitions,
rapid growth, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The results anticipated by any
and all of these forward-looking statements may not occur.
Important factors that may cause actual results to differ
materially from the forward-looking statements include (1) The
revenues of the pharmacy chain could be affected by increased
competition from large competitors including nationwide and
regional discount operations; (2) The Company and Eaton's ability
to provide financing for acquisitions, renovations and computer
upgrades; (3) The state of the economy in the local communities in
New England where Eaton does business; (4) The general state of the
economy in the United States and elsewhere; (5) The failure of
anticipated orders to materialize due to budgetary and other
factors; (6) The failure of suppliers to timely deliver products;
(7) Factors relating to the health care industry; (8) The loss of
any single large customer; and (9) Future governmental regulation
of pharmaceutical pricing.
Biotechnology Business
Genetic Vectors, Inc.
In December 1998, the Company wrote off its investment in
Vectors. This means going forward, the Company will not
be required to recognize a percent of Vectors operating losses
under discontinued operations; contrarily, if Vectors reports
income, the Company will not include that income in their results
of operations. As of the date of this report, the Company owns
739,216 shares of Vectors common stock which the Company intends to
sell from time to time in the over-the counter market.
Employees
The Company believes that its employees represent one of its
most valuable resources. Including its executive officers, the
Company has 109 full-time and 50 part-time employees as of the date
of this report. ADCO employs 25 full-time and 5 part-time
employees, ADCO South employs 4 full-time employees, Anton employs
10 full-time employees and 2 part-time employees, Conway employs
6 full-time and 1 part-time employees, SCBA uses Conway's
personnel, Eaton employs 60 full-time and 42 part-time employees,
Nyer Nutritional employs 1 full-time employee, and Nyer Internet
employs 2 full-time employees. The Company directly 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.
ITEM 2. Description Of Property.
The Company's executive offices, ADCO and Nyer Internet
are currently located at 1292 Hammond Street, Bangor, Maine where
ADCO's warehouse and retail store are also located in a Company
owned 23,000 square foot facility. ADCO currently leases 2,640
square feet of office and warehouse space located in Henderson,
Nevada. The monthly rental is $2,264. All sewer fees,
water bills, electric bills, and other common areas are paid
separately. The lease expires December 31, 2004.
ADCO South leases approximately 5,372 square feet of warehouse
and office space located in West Palm Beach, Florida. The monthly
rental is $2,916. The 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. The lease expired
December 31, 1999. The Company is currently negotiating a new
lease agreement.
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 $3,500. All sewer fees, water bills
and electric bills are paid separately by Anton. The lease expired
in September of 1998. Their lease will continue on a month-to-
month basis.
Anton leases approximately 800 square feet of showroom and
office space in Pembroke, New Hampshire. The monthly rental
is $1,200. Monthly rent includes all taxes, sewer fees, water
bills and electric bills. The lease expired May 31, 1998. Their
lease will continue on a month-to-month basis.
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. The lease expired February 1998. Their lease
is on a month-to-month basis.
Conway leases approximately 4,000 square feet of warehouse
and office space located in Haverhill, Massachusetts. The monthly
rental is $2,340. All sewer fees, water bills, and electric bills
are paid separately by Conway. Their lease expires November 2002.
Eaton currently leases 13 stores, averaging approximately
2,000 square feet each, throughout the suburban Boston area. Their
monthly lease payments range from $515 to $6,252. The leases
have varying expirations dates with all having renewable leases.
Nyer Nutritional currently leases on a month-to-month basis
approximately 650 square feet of office space in Phoenix, Arizona.
The monthly rental is $547. Monthly rent includes all taxes and
utilities.
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
except as described below. In February 1999, Nyer Nutritional,
the Company's 80% owned subsidiary, filed its Complaint in the
United States District Court for the District of Arizona against
Curtis-Burns Foods, Inc. and Silgan, Inc., the independent
contractors Nyer Nutritional engaged to package its tube feeding
formulas and medical food products. Nyer Nutritional has alleged
that Curtis-Burns and Silgan, breached its contract by providing
defective and unfit products, was negligent, breached an express
warranty, breached an implied warranty of merchantability, breached
an implied warranty of fitness for intended purpose and
misrepresented the efficacy of its products. Nyer Nutritional is
seeking as yet unspecified damages in excess of $75,000, plus
attorney's fees and costs. The defendants have counterclaimed
seeking damages for unpaid bills of approximately $300,000. Both
parties and Nyer Nutritional have denied any liability. The
litigation is in the discovery stage with a discovery cut off
scheduled later this year.
ITEM 4. Submission of Matters To A Vote of Security Holders.
The Annual Shareholder's Meeting was held on October 25,
1999, at 10:00 a.m., at the Corporate Headquarters located at
1292 Hammond Street, Bangor, Maine 04401. A total of 7,407,093
shares were eligible to vote.
Samuel Nyer, William J. Clifford, and Karen L. Wright
were Class A directors, were elected to serve on the board of
directors of the Company for a three-year term, until the annual
meeting of shareholders held in the year 2002. Donald C. Lewis,
Jr., Class A director, was elected to serve on the board of
directors of the Company for a one-year term, until the annual
meeting of shareholders held in the year 2000.
PricewaterhouseCoopers, LLP, was ratified as the Company's
independent auditors for the fiscal year ended December 31, 1999.
PART II
ITEM 5. Market For Common Equity And Related Stockholder Matters.
Qualification with NASDAQ
The Company's shares of common stock are listed and traded on
the Nasdaq SmallCap Market under the symbol: NYER.
The continuation of quotations 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.
As of April 13, 2000, there were approximately 1,125 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:
1999 1998
Closing Bids Closing Bids
HIGH LOW HIGH LOW
First Quarter $ 4.81 $ 3.00 $ 6.50 $ 4.80
Second Quarter 5.13 4.06 5.88 3.69
Third Quarter 8.00 4.94 4.88 2.13
Fourth Quarter 7.88 5.94 4.00 2.00
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.
The Company declared a 10% stock dividend of the Company's
common stock. This resulted in issuance of additional common stock
of 341,696.
ITEM 6: Selected Financial Data
Selected Financial Data
1999 1998 1997
Summary of Operations:
Sales and other revenues $39,856,911 $36,936,034 $33,877,419
Gross Margin 7,535,806 7,746,753 7,474,945
Operating loss (income) from
continuing operations (1,760,010) (410,881) 127,423
(Loss) income from
continuing operations (1,428,625) 153,573 315,950
Net loss (2,172,645) (1,840,191) (934,402)
Per Share Data:
Net(loss) income per weighted
average of common shares
from continuing operations $ (.38) $ .04 $ .08
Net(loss) per weighted average
of common shares from
discontinued operations (.20) (.53) (.33)
Net Loss per weighted average
of common shares $ (.58) $ (.49) $ (.25)
Year-End Position:
Total assets $13,173,635 $14,412,042 $16,108,040
Net working capital 6,831,097 8,410,421 8,071,514
Long-term debt(including
related party and
excluding current
portion) 998,628 1,003,531 533,991
Minority interest 580,312 744,357 674,095
Shareholders' equity 7,228,971 9,032,866 11,024,056
ITEM 6: Selected Financial Data, continued
Selected Financial Data
1996 1995
Summary of Operations:
Sales and other revenues $21,093,488 $ 9,046,018
Gross Margin 4,258,776 2,079,201
Operating loss (income) from
continuing operations (182,680) (542,253)
(Loss) income from
continuing operations (25,385) (362,557)
Net loss (418,811) (585,269)
Per Share Data:
Net(loss) income per weighted
average of common shares
from continuing operations $ (.01) $ (.16)
Net(loss) per weighted average of
common shares from discontinued
operations (.12) (.09)
Net Loss per weighted average
of common shares $ (.13) $ (.25)
Year-End Position:
Total assets $17,141,829 $ 3,804,987
Net working capital 9,057,883 708,956
Long-term debt(including
related party and
excluding current
portion) 1,246,843 451,401
Minority interest 648,003 31,372
Shareholders' equity 11,935,387 1,359,715
ITEM 7. Management's Discussion And Analysis or Plan of Operation.
The following discussion 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,
1999 and 1998, and for the years ended December 31, 1998 and 1997,
and should be read in conjunction with the Consolidated Financial
Statements and related notes appearing elsewhere in this Report.
Year Ended December 31, 1999 Compared to Year Ended December 31,
1998.
NET SALES. Total sales for 1999 increased by approximately 8%
from 1998 to approximately $39.9 million from approximately $36.9
million in 1998. The following table shows sales by subsidiary for
the years 1999 and 1998:
Subsidiary 1999 1998 % increase (decrease)
Eaton $25,268,003 $22,851,707 10.6%
Anton 3,126,338 3,609,985 (13.4)
ADCO 6,222,604 5,510,540 12.9
SCBA 32,533 45,519 (28.5)
ADCO South 1,197,743 1,136,052 5.4
Conway 3,886,395 3,763,983 3.3
Nyer Diabetic 80,250 18,248 339.8
Nyer Internet 43,045 -
$39,856,911 $36,936,034
The reason for this increase in sales is due primarily to the
Company's pharmacy chain, Eaton. In 1999, Eaton sales increased
due to increased volume on prescription drugs as a result of a
marketing campaign focused on assisted-living and home-based
sectors. The Company recorded significant increases in same store
sales at all locations. ADCO sales increased $712,064 in 1999,
as compared to 1998 due mainly to continued growth of its Nevada
division, the introduction of its respiratory division in February
1999 and a refocus of marketing effort to the nursing home and
physician markets. Nyer Diabetic revenues increased primarily due
to increased radio and TV advertising. Conway's revenue includes
the sales of fire trucks (55% of sales were fire trucks in 1999).
The Company intends to focus more on fire equipment and supplies
and less on fire truck sales due to lower margins realized on the
sale of fire trucks. As a result, the Company expects Conway's
sales to decline in the short term with expected increases in gross
margin.
GROSS PROFIT MARGIN. The Company's overall gross margins were
approximately 18.9% in 1999 as compared 21.0% in 1998.
The following is a table of gross margins by subsidiary for
the years 1999 and 1998:
Subsidiary 1999 1998
Eaton 18.3% 20.3%
Anton 22.2 23.8
ADCO 25.5 25.2
SCBA 34.3 53.8
ADCO South 25.5 22.6
Conway 10.4 15.5
Nyer Diabetic 16.3 12.0
Nyer Internet 21.3 -
Eaton's gross margin continues to decline due to lower
reimbursements from managed care organizations. Management believes
they can off set this decline by increased sales volumes and better
product sourcing. Conway's decrease in margin is mainly due to
more lower margin fire truck sales in 1999 as compared to 1998.
Fire truck sales in 1999 totaled $2,152,000 as compared to
$967,000 in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated
selling, general, and administrative expenses increased
approximately 10.5% in 1999 to approximately $9.0 million from
$8.2 million in 1998. The following table shows the break
down by subsidiary (and corporate expenses) as follows:
Subsidiary 1999 1998
Eaton $ 4,845,942 $ 4,418,141
Anton 771,030 806,111
ADCO 1,595,805 1,416,038
SCBA 412 6,440
ADCO South 282,341 260,989
Corporate 764,836 449,567
Conway 638,568 761,385
Nyer Diabetic 46,712 31,594
Nyle Home Health 317 7,369
Nyer Internet 69,408
$ 9,015,371 $ 8,157,634
The largest increase came from Eaton due to higher labor costs and
increased sales volume. Corporate overhead increased due to the
issuance of warrants at a fair market value of $368,750 to a public
relations consulting firm. The Company continues to expand its
communications within the investment community as well as with its
shareholders and potential shareholders. The increases were
partially offset by Conway's reduction of administration overhead
and the closing of its service department. Nyer Internet incurred
$69,408 in start up and web site development cost.
CONTINUING OPERATIONS. The Company sustained a loss from
continuing operations of $(1,428,625) in 1999 as compared to income
of $153,573 in 1998. The following table summarizes the operations
by subsidiary and year.
Subsidiary 1999 1998
Eaton $ (253,496) $ 413,956
Anton (108,810) 14,712
ADCO 3,795 (44,706)
SCBA 2,098 7,236
ADCO South 4,917 (22,409)
Corporate (489,982) (22,891)
Conway (465,848) (154,857)
Nyer Diabetic (33,594) (29,398)
Nyle Home Health (16,449) (8,070)
Nyer Internet (71,256)
$(1,428,625) $ 153,573
The decrease in income from continuing operation's is largely
due to the margin erosion in the pharmacy business as previously
discussed. Also, as previously discussed, the Company recorded an
expense of $368,750 for the issuance of warrants to its public
relations consulting firm. In addition to margin declines at
Conway, the Company, as a result of continuing and increasing
operating losses, recorded an impairment charge of $280,445 to
write off the remaining goodwill associated with the Conway
business. As a result of having less cash on hand, the Company
earned less interest income in 1999 as compared to 1998. In
addition, the Company benefited from the sale of pharmacies which
resulted in a gain of $365,000 in 1998. The combination of these
factors are partially offset by the impact of increased revenues.
DISCONTINUED OPERATIONS. On October 25, 1999, the Board of
Directors approved a plan for the disposal of its investment in
Nyer Nutritional Systems, Inc. The results of NNS have been
reported as a discontinued operation for all periods presented.
The Company has signed a letter of intent with National
Distribution and Contracting Inc. (NDC) to purchase the assets of
NNS, subject to the successful completion of a clinical trial and
execution of a patent license assignment by the 20% owner of Nyer
Nutritional, who owns the patents. The Company expects to complete
the transaction no later than July 15, 2000.
The Company incurred approximately $744,020 of costs related
to the NNS business in 1999. Those costs include a $172,188 charge
for the return of product sold in 1998, as well as costs incurred
for administration and marketing.
The Company has reported the assets to be disposed, primarily
inventory and patents, on the balance sheet as investment in
discontinued operation. Revenues for NNS are $0, $268,431 and
$1,515 for the years ended 1999, 1998 and 1997.
Liquidity and Capital Resources
Net cash used by operating activities was $693,037 for the
year ended December 31, 1999 and $375,460 for the year ended
December 31, 1998. The primary use of cash from operations in 1999
was to fund operations for the Company's Nutritional and medical
supply businesses. The Company partially offset its net loss by
increases in accounts payable and drawing on a credit agreement
with a supplier for material purchases.
In 1999 and 1998, the net cash (used in) provided by investing
activities was $(2,130,162) and $330,095, respectively. The
decrease was largely due to the purchase of marketable securities
for $1,492,000 with cash equivalents. Purchases of stores and
property, plant and equipment increased to $689,777 as compared to
$558,107 in 1998. During 1998, the Company received proceeds of
$946,904 related to the sale of securities and pharmacies as
compared to $50,800 in 1999.
Net cash used in financing activities was $247,227 as compared
to $314,657 in 1998. The decrease is due to lower repayments of
long term debt.
The Company anticipates its current cash resources are
adequate to fund its current operating needs. Additionally,
the Company anticipates receiving cash from the disposal of
Nyer Nutritional in 2000. The Company has retained a financial
advisor to raise capital necessary to expand its business. There
can be no assurance that this capital can be raised or that the
Nyer Nutritional sale will occur.
Genetic Vectors
In December 1998, the Company wrote down its investment in
Vectors to zero due to significant uncertainties regarding the
Company's ability to recover its investment. Based on the
Company's review of currently available public information about
Vectors, there is substantial doubt about Vectors ability to
continue as a going concern. In addition, Vectors and its counsel
have refused to remove the restrictive legends from the Vectors'
stock certificates which limits the Company's ability to sell its
Vectors stock in the public market to one percent of Vectors'
outstanding common stock (approximately 23,000 shares per quarter).
Those restrictions were required to be removed in January 1998.
Even if those restrictions are removed, the Company still believes
that its investment is impaired due to the illiquid nature of the
"bulletin board" market on which Vector's stock trades. The
write down of the Company's investment in Vectors resulted in
a charge to discontinued operations of $1,206,965 which was
partially off set by $298,827 of gains from the sale of a
portion of Vectors' stock.
Year 2000 (Y2K)
IMPACT OF YEAR 2000 - Computer Systems Compliance
The Company computer systems were up and running on January 1,
2000. Subsequent to this date, the Company has not experienced any
material Y2K related events. The costs incurred by the Company to
implement its readiness plan was less than $10,000.
Year Ended December 31, 1998 Compared to Year Ended December 31,
1997.
NET SALES. Total sales for 1998 increased by approximately 9%
from 1997 to approximately $36.9 million from approximately $33.9
million in 1997. The following table shows sales by subsidiary for
the years 1998 and 1997:
Subsidiary 1998 1997 % increase (decrease)
Eaton $22,851,707 $18,050,393 26.6%
Anton 3,609,985 3,803,868 (5.1)
ADCO 5,510,540 5,649,050 (2.5)
SCBA 45,519 26,486 71.9
ADCO South 1,136,052 1,038,294 9.4
Conway 3,763,983 5,294,233 (28.9)
Nyle Home Health 15,095 (100.0)
Nyer Diabetic 18,248 -
$36,936,034 $33,877,419
The reason for this increase in sales is due to the Company's
pharmacy chain, Eaton. In 1998, Eaton acquired two stores
which accounted for the majority of the increase in sales coupled
with the full year impact of the two stores purchased during 1997.
ADCO had a sales decrease of approximately $139,000 in 1998 as
compared to 1997 due mainly to $170,000 less of federal government
sales. Conway's decrease in sales was the result of turnover in
its sales force which occurred in July of 1998, which was not fully
replaced until 1999.
GROSS PROFIT MARGIN. The Company's overall gross margins were
approximately 21.0% in 1998 as compared 22.1% in 1997.
The following is a table of gross margins by subsidiary for
the years 1998 and 1997:
Subsidiary 1998 1997
Eaton 20.3% 21.8%
Anton 23.8 26.5
ADCO 25.2 25.5
SCBA 53.8 67.3
ADCO South 22.6 27.1
Conway 15.5 14.8
Nyer Diabetic 12.0
Nyle Home Health 30.2
Eaton's gross margin declined due to lower reimbursements
from insurance companies, medicare and medicaid. They believe
they can off set this decline by increased sales volume. Anton's
gross margin was lower in 1998 as compared to 1997 due to a one-
time inventory adjustment related to the purchase of certain
inventory items at a discount from Michael Anton in 1997. ADCO
South's gross margin declined due to increased competition and
increased equipment sales which generally have lower margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated
selling, general, and administrative expenses increased
approximately 11.0% in 1998 to approximately $8.2 million from
$7.3 million in 1997. The following table shows the break
down by subsidiary (and corporate expenses) as follows:
Subsidiary 1998 1997
Eaton $ 4,418,141 $ 3,593,647
Anton 806,111 783,802
ADCO 1,416,038 1,416,103
SCBA 6,440 739
ADCO South 260,989 283,965
Corporate 449,567 384,318
Conway 761,385 819,218
Nyer Diabetic 31,594
Nyle Home Health 7,369 65,730
$ 8,157,634 $ 7,347,522
The increase came primarily from Eaton due to the higher costs
associated with the two stores acquired in 1998 coupled with the
effect of two stores acquired in 1997. Corporate overhead
increased due to the addition of two public relations firms in
1998. The Company wanted to improve its communications within the
investment community as well as with its shareholders and potential
shareholders. As of the date of this report, the Company has one
public relations firm. Conway's decrease in selling, general, and
administrative expenses can be directly associated with its decline
in sales.
CONTINUING OPERATIONS. The Company earned income from continuing
operations of $153,573 in 1998 as compared to income of $315,950 in
1997. The following table summarizes the operations
by subsidiary and year.
Subsidiary 1998 1997
Eaton $ 413,956 $ 257,135
Anton 14,712 163,365
ADCO (44,706) 11,314
SCBA 7,236 6,464
ADCO South (22,409) (19,470)
Corporate (22,891 9,586
Conway (154,857) (51,271)
Nyer Diabetic (29,398)
Nyle Home Health (8,070) (61,173)
$ 153,573 $ 315,950
The income of Eaton includes a $365,000 gain for the sale of
two stores. Without the sale of the two stores, Eaton only
realized income of approx $48,000 due to the decline in gross
margin. Anton's net income dropped due to a one-time inventory
pick up in 1997 related to the purchase of inventory items at a
discount from Michael Anton. ADCO incurred additional overhead
costs associated with its branch located in Nevada. Conway's loss
can be attributed to a turnover of their sales force in mid July of
1998. This caused a loss of revenues which they are currently
rebuilding. Conway starting rebuilding its sales force in October
1998. It has taken the Company longer than anticipated to replace
its sales force due to the experience and knowledge needed to sell
fire equipment and supplies. In November 1998, they hired a new
sales manager. Nyer Diabetic losses are the result of expenses
associated with an extensive advertising campaign and start up
costs. Corporate expenses are off set by interest income.
The Company recognized a loss from Vectors of $1,561,980 in
1998 as compared to a loss of $725,012 in 1997. The Company
currently owns 24.8% of outstanding common stock in Vectors. As of
December 31, 1998, the Company has written down its investment in
Vectors to zero due to significant uncertainties regarding the
Company's ability to recover its investment. The write down of the
Company's investment in Vectors resulted in a charge to
discontinued operations of $1,206,965.
In 1998, Nyer Nutritional had a net loss of $431,784 as
compared to $525,340 in 1997. The decrease in the loss was
largely due to the first sales of $268,431 and partially offset
by increased selling, general and administrative expenses
associated with bringing the product to market.
ITEM 8: Financial Statements and Supplementary Data
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,
1999 and 1998 F 2-3
Consolidated Statements of Operations for the
years ended December 31, 1999, 1998 and 1997 F 4
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997 F 5
Consolidated Statements of Cash Flows for
the years ended December 31, 1999, 1998 and 1997 F 6-7
Notes to Consolidated Financial Statements F 8-21
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Nyer Medical Group, Inc. and Subsidiaries:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Nyer Medical
Group, Inc. and Subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the respon-
sibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers, LLP
April 7, 2000
F-1
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
Current assets:
Cash and cash equivalents $ 1,066,562 $ 4,136,988
Investment in marketable securities 1,492,185
Accounts receivable, less allowance
for doubtful accounts of $177,739
in 1999 and $188,076 in 1998 3,704,025 3,560,377
Inventories, net 4,289,055 4,073,051
Prepaid expenses 104,923 105,045
Receivables from related parties 3,877 48,139
Investment in discontinued operation 472,855
Total current assets 11,133,482 11,923,600
Property, plant and equipment, at cost:
Land 92,800 92,800
Building 641,508 641,508
Leasehold improvements 543,807 381,702
Machinery and equipment 125,263 223,807
Transportation equipment 338,971 260,285
Office furniture, fixtures,
and equipment 865,310 805,748
2,607,659 2,405,850
Less accumulated depreciation
and amortization (1,073,393) (902,872)
1,534,266 1,502,978
Goodwill and other deferred assets,
net of accumulated amortization of
$412,687 in 1999 and $386,171 in 1998 472,295 802,809
Advances due from related companies 33,592 34,488
Other 148,167
505,887 985,464
Total assets $13,173,635 $14,412,042
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, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
Current liabilities:
Current portion of notes payable
due related party $ 161,508 $ 120,000
Current portion of long-term debt 222,879 236,669
Accounts payable 3,458,835 2,627,292
Accrued payroll and related taxes 235,046 206,465
Accrued expenses and other
liabilities 224,117 322,753
Total current liabilities 4,302,385 3,513,179
Notes payable due related party,
net of current portion 442,820 522,820
Long-term debt, net of current
portion 555,808 480,711
Minority interest 580,312 744,357
Deferred credits 63,339 118,109
Commitments (Notes 3 and 7)
Shareholders' equity:
Class A Preferred stock, par value
$.0001, Authorized, issued and
outstanding: 2,000 shares 1 1
Class B Preferred stock, series 1,
par value $.0001, Authorized:
2,500,000; issued and
outstanding: 1,000 shares at
December 31, 1999 and 1998
Common stock, par value $.0001
Authorized: 10,000,000 shares;
issued: 3,748,789 at December 31,
1999 and 3,407,093 at December
31, 1998 375 341
Additional paid-in capital 17,657,268 15,238,376
Stock sale receivable (115,500) (115,500)
Treasury stock at cost
(11,000 shares at December 31,
1999 and 1998) (52,249) (52,249)
Accumulated deficit (10,260,924) (6,038,103)
Total shareholders' equity 7,228,971 9,032,866
Total liabilities and
shareholders' equity $13,173,635 $14,412,042
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, 1999, 1998, and 1997
1999 1998 1997
Net sales $39,856,911 $36,936,034 $33,877,419
Cost and expenses:
Cost of goods sold 32,321,105 29,189,281 26,402,474
Selling and retail 5,387,487 4,743,353 4,505,173
Warehouse and delivery 681,957 578,755 380,992
Administrative 2,945,927 2,835,526 2,461,357
Impairment loss (Note 3) 280,445
41,616,921 37,346,915 33,749,996
Operating (loss)income (1,760,010) (410,881) 127,423
Other income (expense):
Interest expense (102,850) (122,397) (105,887)
Interest income 146,821 269,258 344,988
Other (Note 5) 123,369 543,602 (533)
Total other income 167,340 690,463 238,568
(Loss) income before
minority interest (1,592,670) 279,582 365,991
Minority interest income(expense) 164,045 (70,262) (26,092)
(Loss) income from continuing
operations before
income taxes (1,428,625) 209,320 339,899
Income taxes 55,747 23,949
(Loss) income from continuing
operations after income taxes (1,428,625) 153,573 315,950
Discontinued operations (Note 2)
Loss from discontinued
operations of NNS through
October 25, 1999 (537,020) (431,784) (525,340)
Loss from disposal of
NNS including operating
losses during the phase
out period (207,000)
Loss from operations of
discontinued subsidiary-
Genetic Vectors (653,842) (725,012)
Net loss on write down of
investment-Genetic Vectors (908,138)
Net loss from discontinued
operations (744,020) (1,993,764) (1,250,352)
Net Loss $(2,172,645) $(1,840,191) $ (934,402)
Basic and diluted loss per share:
Continuing operations $ (.38) $ .04 $ .08
Discontinued operations (.20) (.53) (.33)
Basic and diluted loss per share $ (.58) $ (.49) $ (.25)
Weighted average common shares
outstanding 3,748,789 3,742,085 3,748,665
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, 1999, 1998 and 1997
Class A Class B
Preferred Stock Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
Balance,
December 31, 1996 2,000 $1 0 $0 3,400,093 $341
Issuance of class
B preferred stock 1,000 0
Exercise of common
stock options 7,000 0
Stock issuance
costs
Net loss
Balance,
December 31, 1997 2,000 1 1,000 0 3,407,093 341
Treasury stock
Additional consideration
related to purchase of
subsidiary
Net loss
Balance,
December 31, 1998 2,000 1 1,000 0 3,407,093 341
Issuance of
common stock
warrants
Issuance of
common stock
10% stock dividend 341,696 34
Net loss
Balance,
December 31, 1999 2,000 $1 1,000 $0 3,748,789 $375
The accompanying notes are an integral part of the
consolidated financial statements.
F-5(1)
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1999, 1998 and 1997
Additional Treasury Total
Paid-in Stock Sale Stock Accumulated Shareholders'
Capital Receivable Shares Amount Deficit Equity
Balance,
December 31, 1996
$15,314,055 $(115,500) $(3,263,510) $11,935,387
Issuance of class
B preferred
stock
Exercise of common
stock options 32,339 32,339
Stock issuance
costs (9,268) (9,268)
Net loss (934,402) (934,402)
Balance,
December 31, 1997 15,337,126(115,500) (4,197,912) 11,024,056
Treasury stock (11,000)$(52,249) (52,249)
Additional consideration
related to purchase of
subsidiary (98,780) (98,750)
Net loss (1,840,191) (1,840,191)
Balance,
December 31, 1998 15,238,376(115,500)(11,000)(52,249) (6,038,103) 9,032,866
Issuance of
common stock
warrants 368,750 368,750
Issuance of
common stock
10% stock
dividend 2,050,142 (2,050,176)
Net loss (2,172,645)(2,172,645)
Balance,
December 31, 1999
$17,657,268 $(115,500)(11,000)$(52,249)$(10,260,924)$7,228,971
The accompanying notes are an integral part of the
consolidated financial statements.
F-5(2)
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
Cash flows from operating
activities:
Net loss $(2,172,645) $(1,840,191) $ (934,402)
Adjustments to reconcile net loss to
net cash used in operating
activities
Impairment loss 280,445
Loss of discontinued operation 653,842 725,012
Net loss on write-down of investment-
Genetic Vectors 908,138
Depreciation 291,623 272,935 241,529
Amortization 135,241 143,210 121,751
(Gain) Loss on disposal of property,
plant, and equipment (5,718) 10,869 11,949
Compensation expense in connection
with common stock option exercise 368,750
Gain on sale of other equity securities (75,570)
Gain on sale of pharmacies (25,000) (365,000)
Increase in notes payable to suppliers
for material purchases 270,042
Minority interest (164,045) 70,262 26,092
(Decrease) increase in deferred credit (54,770) (55,224) 173,333
Changes in certain working capital
elements 383,040 (98,731) (1,162,232)
Net cash flows used in operating
activities (693,037) (375,460) (796,968)
Cash flows from investing activities:
Acquisition of stores (273,729) (100,000)
Purchase of property, plant and
equipment (416,048) (458,107) (491,354)
Purchase of marketable securities (1,492,185)
Purchase of short-term investment (76,124)
Increase in investment in
subsidiary (14,090)
Proceeds from sale of Genetic
Vectors' stock 410,210
Proceeds from sale of other
equity securities 151,694
Proceeds from sale of pharmacies 50,800 385,000
Net change in advances due from
related companies 896 3,011 4,939
Decrease (increase) in other assets,net 104 14,411 (161,347)
Net cash (used in) provided by
investing activities (2,130,162) 330,095 (661,852)
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 37,677 27,256 157,400
Payments of long-term debt (246,412) (273,708) (966,933)
Net (repayments) borrowings of
notes to related parties (38,492) (15,956) 349,404
Stock issuance costs (9,268)
Payments for purchase of treasury stock (52,249)
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
1999 1998 1997
Proceeds from exercise of stock
options 32,339
Net cash used in financing
activities (247,227) (314,657) (437,058)
Net decrease in cash
equivalents (3,070,426) (360,022) (1,895,878)
Cash and cash equivalents at
beginning of period 4,136,988 4,497,010 6,392,888
Cash and cash equivalents at
end of period $ 1,066,562 $4,136,988 $4,497,010
Changes in certain working capital
elements:
Accounts receivable, net $ (143,648) $ (384,822)$ (322,708)
Inventories, net (278,075) 81,042 (1,025,854)
Prepaid expenses (987) 13,514 18
Receivables from related parties 44,262 (29,963) 48,066
Accounts payable 831,543 210,113 101 651
Accrued payroll and related taxes 28,581 147,370 (63,527)
Accrued expenses and other liabilities ( 98,636) (135,985) 100,122
Net change $ 383,040 $ (98,731)$(1,162,232)
Supplemental disclosures of cash flow information:
Cash paid during the year for: 1999 1998 1997
Interest $ 100,495 $ 117,466 $ 102,539
The acquisition of pharmacies in 1999 and 1998, net of cash acquired, is
summarized as follows:
1999 1998
Working capital, other than cash $ 173,729 $ 189,314
Property, plant and equipment 70,000
Other assets 10,000
Goodwill and prescription lists 100,000 33,000
Long-term debt (202,314)
Cash paid for acquisitions $ 273,729 $ 100,000
Non-cash transactions:
In connection with the acquisition of a pharmacy chain in 1996, the Company
guaranteed that the value of the common stock issued to the sellers would
be at least $8.75 per share on the second anniversary of the acquisition
date. On the anniversary date, the value of the common stock was below this
amount, and the Company was 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 January
1999, the sellers were paid cash for the difference in value of $98,750.
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" or "Nyer") is a holding company with
operations in the medical products distribution, biotechnology, nutritional
tube feeding products, emergency medical services, fire, and police equip-
ment and supplies businesses. The Company's wholly-owned subsidiaries, ADCO
Surgical Supply, Inc. (ADCO), and ADCO South Medical Supplies, Inc. (ADCO
South) are engaged in the wholesale and retail sale of surgical and medical
equipment and supplies throughout New England and Florida. Anton
Investments, Inc. (Anton), and Conway Associates, Inc. (Conway), each
80% owned by the Company, are 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.
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 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 and is accounted for as a
discontinued operation (see note 2). The Company owns a 24.8% interest in
a biotechnology company, Genetic Vectors, Inc. (Vectors), accounted for as
a discontinued operation (see note 2).
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 and controlled subsidiaries. All intercompany
transactions have been eliminated in consolidation.
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.
Revenue Recognition
Revenues are recognized when goods are shipped to customers and services
rendered.
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
Marketable Securities
Marketable securities are classified as available for sale and are
reported at amortized cost which approximates fair market value. At
December 31, 1999, marketable securities include federal government agency
notes which mature at various dates from June 2000 through August 2001.
Inventories
Inventories consist primarily of medical, fire, EMT, and police equipment
and supplies and pharmaceuticals. 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). Of the
total inventories, 64% are on the LIFO method. The replacement costs of
inventory exceeded LIFO cost by $197,998 in 1999 and $141,750 in 1998.
Property, Plant and Equipment
Property, plant, and equipment are recorded at cost. Leasehold improve-
ments 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, 1999, 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, 1999 based upon the borrowing rates currently available
to the Company for loans with similar terms and maturities.
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
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 5 to 40 years. Other intangible assets acquired in connection with
acquisitions are being amortized on a straight line basis over periods
ranging from 5 to 6 years.
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. See
Note 3 for discussion of impairment charges recorded during 1999.
Earnings Per Share
In February 1997, FASB issued SFAS No. 128, Earnings per Share. SFAS
provides reporting standards for basic and diluted earnings per share and
is effective for financial statement periods ending after December 15,
1997. Basic earnings per share is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period, which during 1999, 1998 and 1997, were 3,748,789
3,742,085, and 3,748,665, respectively. Diluted earnings per share
considers the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity. The diluted weighted average number of common
shares outstanding equaled basic in 1999, 1998 and 1997. All prior period
earnings per share data has been restated to reflect a 10% stock dividend
declared during 1999 (see note 9).
Reclassifications
Certain amounts in 1998 and 1997 have been reclassified to conform to the
1999 presentation.
continued
F-10
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Discontinued operations:
Genetic Vectors, Inc.
In March of 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. 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 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 December 1996, 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. The Company currently owns 24.5%
of Vectors outstanding common stock.
In August 1997, the Board of Directors approved a plan for the disposal
of its investment in Vectors. This investment is being accounted for
as a discontinued operation, and accordingly, the Company's share of
losses of Vectors is segregated in the consolidated statements of
operations.
In December 1998, the Company wrote down its investment in Vectors to
zero due to significant uncertainties regarding the Company's ability to
recover its investment. Based on the Company's review of currently
available public information about Vectors, there is substantial doubt
about Vectors ability to continue as a going concern. In addition,
Vectors and its counsel have refused to remove the restrictive legends from
the Vectors' stock certificates which limits the Company's ability to sell
its Vectors stock in the public market to one percent of Vectors' out-
standing common stock (approximately 29,700 shares per quarter). Those
restrictions were required to be removed in January 1998. Even if those
restrictions are removed, the Company still believes that its investment is
impaired due to the illiquid nature of the "bulletin board" market on which
Vector's stock trades. The write down of the Company's investment in
Vectors resulted in an additional charge to discontinued operations of
$1,206,965.
The Company owned 739,216 shares of restricted common stock of Vectors as of
December 31, 1999 and 1998 and 790,616 shares as of December 31, 1997.
continued
F-11
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Discontinued operations, continued
The financial position and results of Genetic Vectors, which has
been serviced by another accounting firm, as of and for the nine months
ended September 30, 1999, and as of and for the year ended December 31,
1998 are as follows:
Unaudited Audited
September December
1999 1998
Current assets $ 115,658 $ 242,521
Non-current assets 596,335 671,204
$ 711,993 $ 913,725
Current liabilities $ 793,040 $ 350,150
Stockholders' equity/(deficit) (81,047) 563,575
$ 711,993 $ 913,725
Total revenues $ 34,788 $ 47,172
Cost of Goods Sold 16,296
Operating expenses 1,681,572 2,684,446
Interest, net 4,958 61,807
Net loss $(1,658,122) $(2,575,467)
Nyer Nutritional Systems, Inc. (NNS)
On October 25, 1999, the Board of Directors approved a plan for the disposal
of its investment in Nyer Nutritional Systems, Inc. (NNS). The results of
NNS have been reported as a discontinued operation for all periods presented.
The Company has signed a letter of intent with National Distribution and
Contracting Inc. (NDC) to sell the assets of NNS, subject to the successful
completion of a clinical trial and execution of a patent license assignment
by the 20% owner of Nyer Nutritional, who owns the patents. The Company
expects to complete the transaction no later than July 15, 2000.
The Company has reported the assets to be disposed, primarily inventory and
patents, on the balance sheet as investment in discontinued operation.
Revenues for NNS are $0, $268,431 and $1,515 for the years ended 1999, 1998
and 1997.
3. Impairment:
In December 1999, as a result of continuing and increasing operating losses,
the Company determined that certain assets in its EMT, fire, and police equip-
ment and supplies segment (the EMT segment) were impaired. The Company reviewed
the expected future cash flows for each operating unit in its EMT segment and
determined that certain assets which continue to be operated were impaired.
As a result, the Company recorded an impairment charge of $280,445 related to
goodwill associated with its subsidiary, Conway Associates, Inc.
continued
F-12
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Related Party Transactions:
Receivables from related parties consisted of the following at December
31, 1999 and 1998:
1999 1998
Note receivable from officer $ 42,664
Receivable from related party $ 3,877 5,475
Total current receivable from
related parties $ 3,877 $ 48,139
Advances due from related companies,
non-current $ 33,592 $ 34,488
The note receivable from officer was a loan made to the president and chief
executive officer of Nyer Nutritional in the amount of $50,000 plus
interest at 8% annually off-set by royalties due to the officer of $8,340.
This note and interest were offset in full by guaranteed royalties to
the officer. Total guaranteed royalties were $75,000 in 1999 and $8,340
in 1998.
The receivable from related party is for products sold to a company which is
owned by an officer and director of the Company. Total sales were $4,475,
$15,968 and $83,613 for 1999, 1998 and 1997, respectively.
Advances due from related companies consist of cash advances made to Nyle.
Interest is charged at 9% annually and payments are made periodically.
Notes payable to related parties (a former employee and director) were
$604,328 and $642,820 at December 31, 1999 and 1998, respectively.
Principal payments of $10,000, are due monthly, interest accrues at 7%.
Interest expense related to this note was $41,508 in 1999.
The Company has an employment agreement with its Chief Executive Officer,
at a base annual salary of $140,000. This agreement expires October 25,
2001. As part of the CEO's agreement, the Company granted him 500,000
non-qualified options to purchase the Company's Common Stock at an
exercise price of $6.437 per share. 250,000 of the options vest on
October 25, 1999, with the remaining to vest on October 25, 2000.
In the event of death, disability, or special termination, the remaining
250,000 will vest immediately. 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 2000. This
receivable has been off-set against the stockholders' equity section on the
balance sheet. As of December 31, 1999, all accrued interest has been
paid.
5. Acquisitions, and Divestitures:
In August 1996, 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. In connection with this transaction, the
continued
F-13
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Acquisitions, and Divestitures: continued
Company 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 January 1999, the sellers were paid cash for the
difference in value, which amounted to $98,750.
During 1999, the Company purchased the inventory and prescription lists of
a pharmacy for $273,728. Approximately $100,000 of the purchase price
was allocated to goodwill and prescription lists which are being amortized
over 15 years.
During 1998, the Company purchased the assets of two pharmacies for total
consideration of $302,000, including notes payable to the sellers of
$202,000. The purchase price was allocated to the fair value of the assets
purchased and resulted in goodwill of $33,000.
During 1999, the Company sold certain pharmacy assets for cash of $50,800,
resulting in a gain of approximately $25,000 which is recorded in other
income.
In December 1998, the Company sold the assets and prescription lists of two
pharmacies for approximately $608,000 in cash, of which $223,000 was
received in January 1999. The transaction resulted in a gain of
approximately $365,000 which is recorded in other income in 1998.
6. Debt:
Long-term debt at December 31, 1999 and 1998, consisted of the following:
1999 1998
ADCO Surgical Supply, Inc:
Note payable in equal monthly installments
of $4,675 including interest at 8 1/4%
collateralized by land and building,
due in March 2008. $ 331,522 $ 373,839
Eaton Pharmacy:
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 (7 3/4% at December 31, 1998).
The note was paid in full in 1999. 10,667
Note payable in equal monthly installments of
$4,500 plus interest on the unpaid balance at
prime rate (7 3/4% at December 31, 1998). A final
payment of $10,000 was made on the balloon note
in February 2000. The note is collateralized
by certain assets of Eaton Pharmacy. 10,000 66,000
Note payable in equal monthly installments of
$3,693 including interest at 7%. The note will
mature in June 2000 and is collateralized by
certain assets of the Weston Pharmacy. 21,713 62,914
continued
F-14
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Debt: continued,
Note payable in equal monthly installments of
$1,043 including interest at 7%. The note was
paid in full in September 1999. 9,122
Note payable in equal monthly installments of
$3,023 including interest at 7%. The note will
mature in May 2001 and is collateralized by
certain assets of Sherborn Apothecary. 48,783 80,426
Note payable in equal monthly installments of
$3,287 including interest at 7%. The note will
mature in March 2001 and is collateralized by
certain assets of Three S Pharmacy. 47,071 81,887
Notes payable in equal monthly installments of
$6,150 including interest at 9.75%. The note
will mature in December 2000 and is collateralized
by inventory of the Upton Pharmacy. 70,042
Line of credit with a balloon payment due
in July 2001. The interest rate is prime
(8.50% at December 1999) and is collateralized by
certain assets of Eaton Pharmacy. 200,000
Other Subsidiaries
Notes payable due in various installments
at rates ranging up to 9 1/4%, collateralized
by certain equipment and vehicles. 49,556 32,525
778,687 717,380
Less current portion 222,879 236,669
$ 555,808 $ 480,711
The maturities of long term debt at December 31, 1999 are as follows:
2000 $ 222,879
2001 278,011
2002 41,831
2003 37,460
2004 40,670
Thereafter 157,836
$ 778,687
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-15
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Income Taxes:
At December 31, 1999, the Company had a remaining net operating loss
(NOL)carryforwards of approximately $2,182,000 available to offset future
taxable income. The NOL carryforwards will expire in the years 2002 to
2021. 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, 1999 and 1998 consisted of:
1999 1998
Deferred tax assets(liabilities):
Depreciation $ 22,000 $ 1,000
Reserves 388,000 255,000
Net operating loss carryforwards 869,000 256,500
Total net deferred tax assets
before valuation reserve 1,279,000 512,500
Valuation reserve (1,279,000) (512,500)
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.
8. Commitments:
Operating Leases
The Company rents office and warehouse space with varying lease expiration
dates through May of 2010. All leases have options to extend the lease
terms. Total rent expense for the years ended December 31, 1999 and 1998,
was $784,874 and $707,388, respectively.
Future minimum lease payments at December 31, 1999 are as follows:
2000 $ 574,209
2001 379,838
2002 254,621
2003 212,861
2004 165,611
Thereafter 595,199
$2,182,339
Purchase Commitment
A subsidiary of the Company has an agreement with a supplier to purchase
$2,600,000 of inventory each quarter through the year 2001. The Company
received $200,000 from the supplier upon signing of the agreement, which
continued
F-16
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Commitments: continued,
is being amortized over the term of the contract, such amortization is
included in other income. Additionally, the supplier has made available a
$200,000 line of credit to purchase this inventory. The line of credit is
collateralized by substantially all of the assets of the subsidiary. The
full line of credit was used in July of 1999 to purchase inventory. The
line of credit is to be paid in full with a balloon payment in July 2001
(see note 5).
9. Capital Stock:
Each share of Class A preferred stock has voting rights equal to 1,000
shares of common stock.
Each share of Class B Preferred Stock (series 1) has voting rights equal
to 2,000 shares of common stock.
In 1998, the Company purchased 11,000 shares of its own common stock from
the open market for a total of $52,249.
During 1999, the Company approved a 10% stock dividend to stockholders of
record on January 14, 2000. The dividend was included in the balance
sheet as of December 31, 1999. Earnings per share have been restated as if
the shares were issued as of January 1, 1997.
During 1997, the Company issued 20,000 warrants to a third party in
connection with services provided. The exercise price for each warrant is
$14.75 and are only exercisable if the stock price exceeds 120% of the
exercise price. These warrants were not exercised during 1999 or 1998.
In October 1999, the Company issued 150,000 stock warrants to a third party
in connection with consulting services provided. The stock warrants vested
immediately. The options are priced in three 50,000 warrant blocks. Block
one is for 50,000 to be exercised $8.00 per share; block two is 50,000 to be
exercised at $9.00 per share; and block three is 50,000 to be exercised at
$11.00 per share. The warrants will be in force for as long as the
consulting services are retained by the Company and for two years there-
after. The consultant services have customary piggy-back registration
rights with respect to any shares of common stock issuable upon exercise of
options. The consulting agreement was effective October 1999 and expires
September 2000. The Company recorded expense of $368,750, equal to the
estimated fair market value of the warrants. The fair market value was
calculated using the Black-Sholes options pricing model, assuming 5.9%
risk-free interest, 0% dividend yield, 60% volatility, and three year
expected life.
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. The maximum term of options granted under the Plan is ten years.
continued
F-17
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Capital Stock: continued,
A summary of changes in common stock options during 1999, 1998 and 1997 is:
Weighted average
Shares exercise price
Outstanding grants at December 31, 1996 162,000 7.64
Granted in 1997 89,000 5.33
Exercised in 1997 (7,000) 4.62
Canceled in 1997 (8,000) 16.75
Outstanding grants at December 31, 1997 236,000 6.55
Granted in 1998 22,000 3.75
Canceled in 1998 (10,000) 16.75
Outstanding grants at December 31, 1998 248,000 6.30
Granted in 1999 540,000 6.44
Outstanding grants at December 31, 1999 788,000 6.36
Options exercisable at December 31, 1997 146,000 6.11
Options exercisable at December 31, 1998 198,000 6.34
Options exercisable at December 31, 1999 480,000 6.42
The weighted average grant date fair market value was $3.70, $1.68
and $2.71 for options granted during 1999, 1998 and 1997.
Options outstanding at December 31, 1999:
Range of Total/ Exercise Weighted
Exercise price Exercisable Price Average Life
$2.31 - $3.38 60,000/42,000 $2.67/$2.36 4.9 years
$4.62 - $6.88 692,000/402,000 $6.14/$5.91 8.8 years
$16.75 36,000/36,000 $16.75/$16.75 6.3 years
On January 1, 1996, the Company adopted SFAS No. 123, Accounting for
Stock-Based Compensation. As permitted by SFAS No. 123, the Company
has chosen to apply APB Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations in accounting for its
Plan. Accordingly, no compensation cost has been recognized for
options granted under the Plan. Had compensation cost for the Company's
Plan been determined based upon the fair value at the grant dates for
awards under the Plan consistent with the method of SFAS No. 123, the
Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below.
1999 1998 1997
Net loss: As reported $(2,172,645) $(1,840,191) $ (934,402)
Pro forma $(3,397,152) $(2,047,592) $(1,147,078)
Loss per share: As
reported $ (.58) $ (.54) $ (.27)
Pro forma $ (.91) $ (.59) $ (.34)
continued
F-19
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Capital Stock: continued,
The fair value of stock options in the pro forma accounts for 1999, 1998 and
1997 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:
1999 1998 1997
Risk-free interest 6.4% 5.3% 6.6%
Dividend yield 0% 0% 0%
Expected volatility 60% 70% 70%
Expected life (years) 5 3 3
10. Business Segments:
The Company had three active business segments in 1999, 1998 and 1997:
(1)wholesale and retail sale of surgical, diabetic, medical equipment and
supplies, (2) wholesale and retail distribution of equipment, supplies, and
novelty items to emergency medical service, fire departments, and police
departments, and (3) retail pharmacy drug store chain. Business segments are
determined based on products or services offered for sale. Corporate assets
include assets of discontinued operations.
Summary data for the year ended December 31, 1999 is as follows:
Diabetic,
Medical, and EMT, Fire, Police Pharmacy
Surgical Supplies Equip and Supplies Chain Corporate Consolidated
Net Sales $7,543,642 $7,045,266 $25,268,003 $39,856,911
Operating
(loss)income (84,507) (585,612) (325,054) $ (764,837) (1,760,010)
Total assets 2,964,787 2,005,722 5,568,424 2,634,702 13,173,635
Capital
Expenditures 85,053 184,773 142,626 3,596 416,048
Depreciation
and
amortization 104,190 84,570 233,096 5,008 426,864
Interest income (8,981) (9,175) (128,665) (146,821)
Interest
expense 33,894 42,118 26,838 102,850
Summary data for the year ended December 31, 1998 is as follows:
Diabetic,
Medical, and EMT, Fire, Police Pharmacy
Surgical Supplies Equip and Supplies Chain Corporate Consolidated
Net Sales $6,664,840 $7,419,487 $22,851,707 $36,936,034
Operating
(loss)income (68,980) (104,355) 212,020 $ (449,566) (410,881)
Total assets 2,738,177 2,371,877 5,083,585 4,218,403 14,412,042
Capital
Expenditures 43,173 46,669 437,808 457 528,107
Depreciation
and
amortization 98,642 68,642 188,036 60,825 416,145
Interest income (11,579) (33,746) (223,933) (269,258)
Interest
expense 47,961 10,782 63,654 122,397
F-20
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Business Segments, continued
Summary data for the year ended December 31, 1997 is as follows:
Diabetic,
Medical, and EMT, Fire, Police Pharmacy
Surgical Supplies Equip and Supplies Chain Corporate Consolidated
Net Sales $6,702,439 $9,124,587 $18,050,393 $33,877,419
Operating
(loss)income (39,708) 206,514 344,935 $ (384,318) 127,423
Total assets 2,958,025 2,477,876 4,371,623 6,300,516 16,108,040
Capital
Expenditures 115,853 53,398 150,420 171,683 491,354
Depreciation
and
amortization 97,132 66,243 174,303 25,602 363,280
Interest income (11,564) (118,404) (215,020) (344,988)
Interest
expense 40,642 7,316 57,929 105,887
ITEM 9. Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
None
PART III
ITEM 10. Directors, Executive Officers, Promoters And Control Persons;
Compliance With Section 16 Of The Exchange Act.
Present directors and executive officers of the Company, their ages and
positions held are as follows:
Name Age Position
Samuel Nyer 74 Chairman of the Board,
President, Secretary,
and Director
William J. Clifford, Jr. 50 Vice-President-Sales
and Director
Karen L. Wright 38 Treasurer, Vice-
President-Finance,
Assistant Secretary,
and Director
Doyle W. Boatwright 61 Director
Stanley Dudrick, M.D. 65 Director
David P. Dumouchel 38 Director
Donald C. Lewis, Jr. 62 Director
Kenneth L. Nyer, M.D. 41 Director
The Company's Board of Directors is divided into three classes of
directors, A, B, and C. Class A Directors, Messrs. Nyer, Clifford,
and Ms. Wright, will be up for re-election in the year 2002 and Mr Lewis
will be up for re-election 2000. Class B Directors, Messrs. Boatwright,
Dumouchel, and Dr. Nyer, will be up for re-election in the year 2001. Class C
Director, Dr. Stanley Dudrick will be up for re-election in the year 2000.
Samuel Nyer has been Chairman of the Board, president and secretary of
the Company since December 1991. He served as a director of Genetic
Vectors, Inc. from December 1991 to June 1996. Mr. Nyer also serves
on the board of directors of each of the Company's subsidiaries. Since
1985, Mr. Nyer has been chairman of the board of Nyle, a manufacturer
of drying equipment. Nyle, a publicly held corporation, is the Company's
principal shareholder. Mr. Nyer has interests in a number of small
businesses in the Bangor, Maine area.
William J. Clifford, Jr. has been vice-president of sales and a
director of the Company since December 1991, and vice-president and
general manager of ADCO and ADCO South since 1988 and 1992, respectively.
Mr. Clifford was a director of Vectors from June 1996 through April 30,
1997. From 1973 to 1988, Mr Clifford was general sales manager of ADCO.
Mr. Clifford has over 27 years experience in the medical supply industry
and possesses substantial experience in medical warehousing, purchasing,
sales and sales management. He has been an employee of ADCO since 1973.
Karen L. Wright has been treasurer of the Company since 1991 and vice-
president of finance and assistant secretary of the Company since January
1997. She was appointed to the Board in April of 1997. She was also
appointed to the Board of Nyle as a Director in 1998. From 1985 through
1987, Ms. Wright was ADCO's assistant comptroller, from 1987 through the
present time Ms. Wright has been ADCO's comptroller and treasurer. Ms.
Wright received her Bachelors of Science Degree in Accounting from Husson
College, Bangor, Maine in 1985.
Doyle W. Boatwright has been a director of the Company since December
1996 and is president of Nyer Nutritional. The Company owns 80% of Nyer
Nutritional and Mr. Boatwright owns the remaining 20%. From September 1995
through December 1996, Mr Boatwright was president and founder of
Boatwright Laboratories, Inc., which owned the enteral nutritional product
patents now held by Nyer Nutritional. From 1989 through September 1995,
Mr. Boatwright was president and founder of DigniCare, Inc., a company
providing enteral, wound care and urological products to Medicare patients.
Stanley Dudrick, M.D. has been a director of the Company since March
1997. Since January 2000, Dr. Dudrick has been Chairman for the
Department of Surgery at Bridgeport Hospital/Yale-New Haven Health Systems,
located in Bridgeport, Connecticut, and is affiliated with Yale Medical
School. From November 1994 until December 1999, Dr. Dudrick had been
Associate Chairman for St. Mary's Hospital, Department of Surgery. St.
Mary's, which is located in Waterbury, Connecticut, is affiliated with
Yale Medical School. Since 1982, Dr. Dudrick also has been a Clinical
Professor of Surgery at the University of Texas Health Science Center at
Houston. Dr. Dudrick is nationally known in the field of enteral
nutrition and has received numerous awards and honors, is an editorial
consultant and on the board of numerous medical journals including those
specializing in nutrition and has published widely on the subject.
David P. Dumouchel has been a director of the Company since August 1996.
Mr. Dumouchel has also been a director of the Company's 80% owned
subsidiary, D.A.W., Inc. d/b/a Eaton Apothecary since August 1996. Mr.
Dumouchel has been vice-president of Eaton since 1988. Mr. Dumouchel
is a registered pharmacist in the State of Massachusetts. Mr. Dumouchel
received his Bachelors of Science Degree in Pharmacy from Purdue
University in 1983, and his Masters of Business Administration from Amos
Tuck School at Dartmouth College in 1986.
Donald C. Lewis, Jr. has been a director of the Company since July 1993.
Mr. Lewis has been president and director of Nyle, the Company's
principal shareholder, since January 1985.
Kenneth L. Nyer, M.D. has been a director of the Company since December
1991. Dr. Nyer is a specialist in internal medicine and has practiced at
the Albert Einstein Hospital, Bronx, New York since 1993. He previously
practiced at North Shore University Hospital, Manhasset, New York from
1987 to 1993. Dr. Nyer held a faculty position at the Cornell
University Medical School since 1987. Dr. Nyer is the son of Mr. Samuel
Nyer.
Delinquent Filings
To the best of the Company's knowledge, Mr. Michael Anton, an officer and
director of the Company's subsidiary, Anton, failed to timely file one Form
4, covering a transaction required to be filed with the Securities and
Exchange Commission. Also, to the best of the Company's knowledge, Mr.
Don Lewis and Dr. Gary Parker failed to file one Form 4, covering a
transaction required to be filed with the Securities and Exchange
Commission. To the best of the Company's knowledge Forms 3 and 5 have
been filed, as required.
Limited Liability of Directors
Under Florida law, the Company's directors are protected against personal
liability for monetary damages from breaches of their duty of care. As a
result, the Company's directors will not be liable for monetary damages
from negligence and gross negligence in the performance of their duties.
They remain liable for monetary damages for any breach of their duty of
loyalty to the Company and its stockholders, as well as acts or omissions
not made in good faith or which involve intentional misconduct or a
knowing violation of law and for transactions from which a director
derives improper personal benefit. They also remain liable under another
provision of Florida law which makes directors personally liable for
of the Company's directors under federal or applicable state securities
laws is also unaffected. The Company does not carry any directors'
unlawful dividends, stock repurchases or redemptions and expressly sets
forth a negligence standard with respect to such liability. While the
Company's directors have protection from awards of monetary damages for
breaches of the duty of care, that does not eliminate their duty of care.
Equitable remedies, such as an injunction or rescission based upon a
director's breach of the duty of care, are still available.
ITEM 11. Executive Compensation.
The following table sets forth certain information with respect to the
annual and long-term compensation paid by the Company for services
rendered during the fiscal years ended December 31, 1999, 1998 and 1997
to the Company's chief executive officer. A subsidiary's president and
chief executive officer received compensation exceeding $100,000 for the
fiscal years ended December 31, 1999, 1998 and 1997. No other executive
officer received compensation exceeding $100,000 for the fiscal years
ended December 31, 1999, 1998, or 1997.
Annual Compensation Long Term Compensation
Name and Securities
Principal Other Restricted Underlying LTIP
Position Year Salary($) Compensation($) Options/SARS(#)
Samuel Nyer 1999 $127,308 $4,200 40,000(2)
Chief 1998 125,000 4,200 30,000
Executive 1997 125,000 4,200 30,000
Doyle Boatwright 1998 121,253 $7,320 0
President and 1997 119,995 7,320 0
Chief executive
of an 80% owned subsidiary
The Company has not paid any cash compensation to any person for
serving as a director.
Employment Agreements
The Company employs its officers and employees pursuant to oral agree-
ments, with the exception of Mr. Samuel Nyer, five minority shareholders
of Eaton.
The Company entered into a two-year written employment agreement with
Mr. Samuel Nyer at a base annual salary of $140,000 effective October
25, 1999. Mr. Nyer's employment agreement also provides for use of a car
and automobile insurance at an annual cost of $4,200. The agreement
also provided for the issuance to Mr. Nyer, of 1,000 shares of Series 1
Class B Preferred Stock. Each share of Preferred Stock carries 2,000
votes on all matter concerning the vote of common shareholders. The
Preferred stock may be voted and was fully vested October 1999, subject
to a substantial risk of forfeiture as provided in Mr. Nyer's employment
agreement. The shares were issued February 18, 1997 after receipt of
a fairness opinion from an independent third party.
The Company entered into a five-year employment agreement, with a one-
year non-compete, with five minority shareholders of Eaton. The base
salary for each is $65,000 effective August 5, 1996. In August 1998,
this was amended to a base salary for each of $78,000. Each agreement also
provides for full insurance coverage on the Employee's personal vehicle
and a vehicle allowance with an annual cost of $3,600. Each also receive
life-insurance coverage in the aggregate amount of $800,000, including a
separate single policy in the amount of $300,000, which the Employee's
designee shall be the owner and beneficiary.
The Company has an oral employment agreement with Mr. William J.
Clifford, Jr. vice president and director, which provides for an
annual base salary of $71,464 and use of an automobile, including all
expenses associated with it at an annual cost of $14,440. The Company
has an oral employment agreement with Ms. Karen L. Wright, treasurer,
which provides for an annual base salary of $55,000.
Stock Option Plans
In July 1993, the Company established the 1993 Stock Option Plan (the
"Plan") covering 150,000 shares of common stock which was approved by
shareholders at the Company's annual meeting in October 1993. In 1995,
the board of directors and the shareholders approved an amendment to
the Plan by increasing the number of shares from 150,000 to 275,000
shares. In October 1999, the Company approved an amendment to the plan
by increasing the number of shares from 275,000 to 1,000,000. The Plan
provides: (a)officers and other employees of the Company and its
subsidiaries opportunities to purchase stock in the Company pursuant to
options granted thereunder which qualify as incentive stock options
("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended and (b) directors, executive officers, employees and consultants
of the Company and its subsidiaries opportunities to purchase stock in
the Company pursuant to options granted hereunder which do not qualify as
ISOs ("Non-Qualified Options").
The Plan is administered by the option committee which is comprised of
Donald C. Lewis, Jr., and Dr. Kenneth L. Nyer, two of the Company's
outside directors. The board of directors has the authority to (i)
determine the employees of the Company and its subsidiaries to whom ISOs
may be granted, and to determine to whom Non-Qualified Options may be
granted; (ii)determine the time or times at which options may be granted;
(iii) determine the exercise price of shares subject to options; (iv)
determine whether options granted shall be ISOs or Non-Qualified Options;
(v) determine the time or times when the options shall become exercisable,
the duration of the exercise period and when the options shall vest; (vi)
determine whether restrictions such as repurchase options are to be imposed
on shares subject to options and the nature of such restrictions, if any,
and (vii) interpret the Plan and promulgate and rescind rules and
regulations relating to it.
Effective in April 1997, under the Plan, all directors automatically
receive a grant of non-Qualified Options which vest semi-annually each
June 30th and December 31st over a three-year period. The exercise price
of such options as provided for in the Plan is the closing price of the
Company's common stock on the last business day prior to the grant of
options. The number of options for each director is based on whether
such person is serving a one, two or three year term; for each year of a
director's term, 4,000 options are granted. After all directors begin
serving a three year term, each director will receive an initial grant of
12,000 options at the time of election, appointment or vesting of all
prior options.
In January 1995, the Company granted Mr. Sam Nyer, its president, non-
qualified options to purchase 90,000 shares of common stock, exercisable
at $2.31 per share vesting over a five-year period. Of the 90,000
options, 50,000 were exercised in 1996, the remaining 40,000 are vested.
ITEM 12. Security Ownership Of Certain Beneficial Owners And Management.
The following table sets forth information as of December 31, 1999, based
on information obtained from the persons named below, with respect to the
beneficial ownership of shares of common stock by (i) each person known
by the Company to be the owner of more than five percent of the
outstanding shares of common stock, (ii) each director, and (iii) all
executive officers and directors as a group. The table includes the Class
A preferred stock which has 2,000,000 votes and Class B preferred stock
which has 2,000,000 votes.
Amount and Nature
Name and Address of of Beneficial Percentage of
Class Beneficial Owner Ownership Class Owned
Common Stock, Samuel Nyer 5,112,000 ,,,9 63.8%
Class A c/o ADCO
Preferred 1292 Hammond Street
Stock, and Bangor, Maine 04401
Class B
Preferred Stock
Common Stock Nyle International Corp. 2,710,000 35.7%
and Class A 72 Center Street
Preferred Brewer, Maine 04412
Stock
Common Stock William J. Clifford, Jr. 24,000 8, *
1292 Hammond Street
Bangor, Maine 04401
Common Stock Karen L. Wright 18,000 8,, *
1292 Hammond Street
Bangor, Maine 04401
ITEM 12. Security Ownership Of Certain Beneficial Owners And Management,
continued:
Amount and Nature
Name and Address of of Beneficial Percentage of
Class Beneficial Owner Ownership 5 Class Owned
Common Stock Doyle W. Boatwright 12,000 8 *
6829 N. 12th Street
Suite 207
Phoenix, AZ 85014
Common Stock Stanley Dudrick, M.D. 12,000 *
c/o St. Mary's Hospital
56 Franklin Street
Waterbury, CT 06706
Common Stock David Dumouchel 16,000 8 *
111 Canal Street
Salem, MA 01970
Common Stock Donald C. Lewis, Jr. 19,000 9,, *
c/o Nyle International Corp.
72 Center Street
Brewer, Maine 04412
Common Stock Kenneth L. Nyer, M.D 26,0009,14 *
48 Old Orchard Road
New Rochelle, New York 10804
All directors and executive officers 7,949,0005,6,7,8,9,10, 64.3%
of the Company as a group (eight 11,12,13,14
persons)5
* less than 1% of class
ITEM 13. Certain Relationships and Related Transactions.
Prior to 1991, the Company and Nyle each engaged in inter-company
loans. At December 31, 1999, the Company was owed $33,592 by Nyle.
As of March 31, 2000, Nyle owed the Company $33,592 (plus accrued
interest). Nyle pays the Company principal and interest of 9% per
annum on an infrequent basis. The Company is currently subject to a
provision of the Florida General Corporation Law which restricts loans
to affiliated parties and therefore the Company has not lent any further
sums to its affiliates.
Mr. Samuel Nyer, president of the Company, is a guarantor of ADCO's
institutional loan. See Notes to "Consolidated Financial Statements".
ADCO employs two relatives of Mr. William Clifford, a director of the
Company and vice president and general manager of ADCO. One relative is
employed as a retail store manager, and the other as a sales represen-
tative. ADCO also employs three relatives of Ms. Karen Wright, the
Company's treasurer and principal accounting and chief financial officer.
One relative is employed as ADCO's assistant comptroller, one as a data
entry clerk and the other is employed in the receiving department. The
Company believes that the compensation paid to these individuals is no
greater than unrelated persons would receive.
In February 1997, as required by his October 1996 employment
agreement, the Company issued 1,000 shares of series 1 class B preferred
stock, to Mr. Samuel Nyer. The shares had been previously authorized
subject to a delivery of a fairness opinion from an independent
investment banker, of which the opinion was received February 1997.
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:// Samuel Nyer
Samuel Nyer, President
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person(s)
on behalf of the Registrant and in the capacities indicated on the
14th day of April 2000.
Signature Title
/s/ Samuel Nyer Chairman of the Board,
Samuel Nyer President, Director,
and Secretary
/s/ William Clifford, Jr. Vice President of
William Clifford, Jr. Sales, Director
/s/ Karen L. Wright Treasurer, Vice President
Karen L. Wright of Finance, Assistant
Secretary, and Director
/s/ Doyle Boatwright Director
Doyle Boatwright
/s/ Stanley Dudrick, M.D. Director
Stanley Dudrick, M.D.
/s/ David Dumouchel Director
David Dumouchel
/s/ Donald Lewis Director
Donald Lewis
/s/ Kenneth Nyer, M.D. Director
Kenneth Nyer, M.D.
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)
2.3 Third Amendment to Articles of Incorporation of Nyer
Medical Group, Inc.
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.
10.2 Stock Exchange Agreement and Plan of Reorganization -
Eaton Apothecary(3)
10.3 License Agreement - Nyer Nutritional Systems, Inc.
10.4 Employment Agreement - Samuel Nyer(4)
10.5 Employment Agreement - Doyle Boatwright(4)
(1) Contained in Registration Statement on Form S-18 filed on
April 13, 1992.
(2) Contained in Form 10-KSB filed April 1996.
(3) Contained in Form 8-K filed August 1996.
(4) Contained in Form 10-KSB filed April 1997.
THIRD AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
NYER MEDICAL GROUP, INC.
Pursuant to Sections 607.0602 and 607.1002, Florida Statutes, the undersigned
hereby certifies that the following Third Amendment to the Articles of
Incorporation of Nyer Medical Group, Inc. has been adopted:
1. The name of the corporation is Nyer Medical Group, Inc.
2. Article IV is amended by adding a new Section A which reads:
(1) 1,000 shares of Series 1 Class B Preferred Stock (the "Series 1 Stock")
may be issued.
(2) The Series 1 Stock is not convertible into common stock but carries the
right to 2,000 votes per share on all matters requiring a vote of the
common shareholders and preferred shareholders.
(3) In all other respects, the Series 1 Stock shall be treated like common
stock except where otherwise provided by the Florida Statutes.
3. The amendment was adopted on September 30, 1996, subject to filing the
Second Amendment to the Articles of Incorporation.
4. This amendment was adopted by the board of directors.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Articles of Incorporation this 29 day of January 1997.
(CORPORATE SEAL) NYER MEDICAL GROUP, INC.
By:// Samuel Nyer
Samuel Nyer, President
PricewaterhouseCoopers, L.L.P.
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement
of Nyer Medical Group, Inc. on Forms S-8 (File Nos. 333-05635 and 333-05647)
of our report dated April 7, 2000, relating to the consolidated financial
statements, which report is included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers, L.L.P.
April 13, 2000
[ARTICLE] 5
[CIK] 0000884647
[NAME] NYER MEDICAL GROUP, INC
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] DEC-31-1999
[CASH] 1,066,562
[SECURITIES] 1,492,185
[RECEIVABLES] 3,885,641
[ALLOWANCES] 177,739
[INVENTORY] 4,289,055
[CURRENT-ASSETS] 11,133,482
[PP&E] 2,607,659
[DEPRECIATION] 1,073,393
[TOTAL-ASSETS] 13,173,635
[CURRENT-LIABILITIES] 4,302,385
[BONDS] 1,061,967
[PREFERRED-MANDATORY] 0
[PREFERRED] 1
[COMMON] 375
[OTHER-SE] 7,228,595
[TOTAL-LIABILITY-AND-EQUITY] 13,173,635
[SALES] 39,856,911
[TOTAL-REVENUES] 40,127,101
[CGS] 32,321,105
[TOTAL-COSTS] 32,321,105
[OTHER-EXPENSES] 9,459,861
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 102,850
[INCOME-PRETAX] (1,428,625)
[INCOME-TAX]
[INCOME-CONTINUING] (1,428,625)
[DISCONTINUED] (744,020)
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (2,172,645)
[EPS-BASIC] (.58)
[EPS-DILUTED] 0
</TABLE>
