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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, 2000
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 63
State issuer's revenues for its most recent fiscal year:
$41,975,445
The aggregate market value of the Company's voting stock held
by non-affiliates, as of March 29, 2001, was approximately
$9,635,258 based upon the closing price. There were 3,742,189
shares of common stock outstanding as of March 29, 2001.
Documents Incorporated by Reference: None
Transitional Business Disclosure Format:
Yes _ No X
2
PART I
ITEM 1. Description Of Business.
General
Nyer Medical Group, Inc. (Company or Nyer) a Florida
corporation incorporated in 1991, is a holding company with
operations in the following segments:
Medical and surgical supplies, diabetic and internet. Two
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. ADCO also has
operations in the Las Vegas, Nevada area. Additionally, ADCO has
a division that delivers blood glucose meters, test strips, lancets
and penlets, control solutions and alcohol prep pads to individual
diabetics directly at their homes. Nyer Internet, Inc. (NIC),
which is also a wholly-owned subsidiary, is involved in internet
sales of medical equipment and supplies.
EMT, fire, police equipment and supplies. Anton Investments,
Inc. (Anton) and Conway Associates, Inc. (Conway), each 80% owned
by the Company, sell wholesale and retail equipment, supplies and
novelty items to emergency medical services, fire and police
departments throughout most of New England. SCBA, Inc. (SCBA), 80%
owned by the Company, repairs and services fire department's self-
contained breathing apparatus.
Pharmacy chain. D.A.W., Inc. (Eaton), 80% owned by the
Company, is a chain of pharmacy drug stores located in the suburban
Boston, Massachusetts area.
Corporate. Included in corporate segments are two entities,
both are accounted for as discontinued operations. Nyer
Nutritional Systems, Inc., (Nyer Nutritional), incorporated in
Delaware in 1996, 80% owned by the Company, has patented liquid
nutritional formulas for tube feedings. Genetic Vectors, Inc.
(Vectors), is a biotechnology company based in Florida, of which
the Company owns a 19.8% interest.
We are a subsidiary of Nyle International Corp. (Nyle).
For additional industry segment information for the
three years ended December 31, 2000, see footnote 12 in the Notes
to Consolidated Financial Statements.
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 2000, ADCO generated net sales of
approximately $6.5 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 their 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, we 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.
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. Currently, this division has 285 patients
as compared to 158 patients for the same period in 1999. We expect
to increase this number with the ADCO name and the quality of
service provided to our customers. ADCO currently employs two-full
time respiratory therapists. Therefore, all of ADCO's home care
division customers now have access to a respiratory therapist or a
service technician 24 hours a day.
ADCO is one of the larger independent wholesale medical
distributors located in New England (excluding national
competitors), with a wholesale customer base of over 1,375
active customers.
ADCO and ADCO South provide over 5,000 stocked items in their
respective warehouses and have access to the inventory of over
5,000 of the industry's suppliers. Although the inventories of both
companies share common items, the need for items relative to their
geographic regions are accomplished through warehouse transfers.
This enables a larger mix of products to be available from either
company and both benefit from the synergies available from two
combined inventories.
ADCO, pursuant to industry trade practices, is a distributor
for two lines of incontinence products and generates over 10% of
its annual revenues from these lines.
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 230
wholesale distributors who join together for private label branded
products and price concessions from industry suppliers. ADCO
enjoys 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 also has an in-house service department to repair the
customer's equipment. 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 serviced.
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 89% 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 facility.
In 1997, ADCO opened a small branch office outside of Las
Vegas, Nevada, ADCO Southwest. The employees of this branch have
extensive knowledge of the sale of pharmaceuticals and are helping
ADCO/ADCO South expand their business into the distribution of
pharmaceuticals. ADCO/ADCO South currently have 9% of their sales
in pharmaceuticals.
ADCO South began operations in 1992. ADCO South generated
approximately $1.25 million in net sales for 2000. 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
We continue to market our group buying programs to a large
number of physicians, long-term care facilities and clinics
through the national NDC Group Provider Program. This program
enables customers to receive the pricing benefits of a large
national organization, while providing customers with the
advantages of interacting with independent dealers.
ADCO's sales are achieved through the services of four
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 assisted by the three
Florida-based salespersons.
Competition
All aspects of the our medical products business are subject
to significant competition. Our national competitors generally
have substantially greater financial resources and other
competitive advantages, although they traditionally 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, 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 larger 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
Our 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.
Our medical products/services business generally are not
seasonal.
Nyer Internet
In May of 1999, we 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. These sites will be used to aid in
directing the consumers through an on-line medical mall and its
store directories to locate the appropriate site that best fits
their medical needs. We currently own four active web sites
that have interactive and secure on-line transactions. The
synergies from our medical distribution business with our on-line
business has enabled us to grow this subsidiary. Their sales for
2000 were $312,507 as compared to $43,045 for 1999.
Nutritional Supplies
Nyer Nutritional Systems, Inc.
Nyer Nutritional is an 80% owned subsidiary started in
December of 1996 and is based on five patents designed to promote
a line of medical foods that have unique antimicrobial properties.
Nyer Nutritional is currently inactive. Medical foods are
regulated separately by the Food and Drug administration, as
opposed to dietary supplements and grocery food products. Most
medical foods are prescribed by a physician and used for patients
who have special dietary needs because of a disease or post-
surgical medical condition. Nyer Nutritional ceased active
operations in the fall of 1999. We have invested $2,243,689 into
Nyer Nutritional as of the date of this report.
In October 1999, the Board of Directors approved a plan to
dispose of its investment in Nyer Nutritional. However, Nyer
Nutritional's letter of intent, to sell its assets, expired July
15, 2000. No further actions are contemplated until a resolution
is reached on the pending lawsuit. Therefore, we have reported
Nyer Nutritional as a discontinued operation in our financial
statements in both 2000 and 1999. Nyer Nutritional did not have
any sales in 2000.
In December 2000, Nyer Nutritional filed a lawsuit in federal
court in Maine against the proposed buyer (see ITEM 3. Legal
Proceedings).
EMT, Fire, Police Products/Services Business
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 $2.5 million in net sales for 2000.
Prior to our purchase of an 80% interest in Anton Investments
Inc. in 1993, (together with Mr. and Mrs. Michael Anton retaining
the other 20%), Anton had been in business since 1980. Anton
conducts approximately 80% of its business with municipal and
industrial fire departments, while law enforcement agencies and
emergency rescue units comprise 10% each. Anton continues to
broaden its market area, with approximately 55% of its sales now
taking place in Maine, 25% in New Hampshire, 3% in Vermont, 15%
in Massachusetts, with the remaining 2% 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, insignia 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,
it 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 Mr. and Mrs. Michael Anton, acquired 80% and
20%, respectively, of Conway's stock in February 1996. Conway is a
distributor of fire and rescue equipment and supplies that are sold
to municipal and industrial accounts throughout most of the New
England area. Conway is located in Massachusetts. Conway had net
sales in 2000 of approximately $2.3 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. Its market area is approximately 40% in Massachusetts,
18% in New Hampshire, 28% in New York, 5% in Vermont, 5% in Maine,
with the remainder outside of New England.
Anton and Conway distribute to the following: 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. It has access to
Anton's inventory and through its many suppliers, can drop ship
or ship items directly to customers within a few days.
We have a policy requiring less than wholly-owned
subsidiaries to reimburse us monthly for its costs in providing
management services as follows: Anton $1,500; Conway $2,000; and
SCBA $250. They are also required to reimburse the Company for any
additional legal, auditing and accounting fees.
During 1999, we recorded an impairment loss of $280,445, as a
result of continuing and increasing operating losses at Conway.
During 2000, we recorded an impairment loss of $42,666, as a result
of continuing and increasing operating losses at Anton. See ITEM
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, for additional information.
Mr. and Mrs. Michael Anton resigned from Anton Enterprises
in October and November 1999, respectively. In March 2001,
they opened a business similar to Anton's business. Anton's
sales have been declining since 1997 due to increased competition
as competitors opened new locations in Anton's territories.
Marketing and Sales
Anton markets and sells its products throughout New England
via telemarketing, a retail store and its own catalog, and an
inside and outside sales force.
Conway's marketing and sales are achieved through flyers and
direct calls from 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 utilizing direct mail or 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
Anton and Conway do not experience significant back orders at
any time during the year.
Anton and Conway business are not generally seasonal.
Retail Pharmacies Business
Eaton Apothecary
In August 1996, we acquired 80% of D.A.W., Inc. d/b/a Eaton
Apothecary, (Eaton), a chain of pharmacies operating in the greater
Boston area. Sales grew from $25.3 million in 1999 to $29.1
million in 2000. This is an increase of 15.2%. Eaton had 11
stores as of the date of this report and had 12 as of December
1999. 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 Eaton. Additionally, one member of
Eaton's management occupies a seat on our 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's gross
profit margin increased to 19.2% as compared to 18.3% for 1999.
Eaton's management strategy is to move in the opposite direction
from the national chains regarding store size, merchandise mix and
store locations. Its strategy to develop its prototype of
locations with approximately 2,500 square feet, 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 the
communities served by Eaton. Eaton currently occupies a niche in
the market not covered by the larger chain stores. Average store
size is approximately 2,500 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
prescription medication to their clientele. 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. 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 the 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. Therefore,
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. The U.S. Census predicts this
market segment 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's management has recognized a tremendous
opportunity to couple its prescription and delivery expertise to
"out-service" the chain stores. Eaton's investment in specialized
packaging equipment was with the intent of offering a "fool-proof"
medication management system to residents in assisted living
facilities. 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
growth in the assisted living and home-bound sectors, many new
customers have been gained by word of mouth throughout the visiting
nurse and health center communities.
Consistent with its policy of requiring less than wholly-owned
subsidiaries to reimburse us for its costs in providing management
services, Eaton has a service agreement with us where they pay a
fee equal to one-third of 1% of its net sales for the prior fiscal
quarter in exchange for services performed. This fee is capped at
$80,000 annually. Additionally, Eaton is required to reimburse us
for additional legal, auditing and accounting fees.
Biotechnology Business
Genetic Vectors, Inc.
In December 1998, we wrote off our investment in Vectors. As
of the date of this report, we own 739,216 shares of Vectors'
common stock which we intend to sell from time to time in the over-
the counter market. We believe our investment is impaired due to
the illiquid nature of the Over-the-Counter Bulletin Board market
on which Vectors' stock trades. The Company has not sold any
shares since December 1998.
Employees
We believe that our employees represent one of our most
valuable resources. As of the date of this report, including its
executive officers, we have 116 full-time and 83 part-time
employees. ADCO employs 34 full-time employees, ADCO South employs
6 full-time employees, Anton employs 11 full-time employees and 3
part-time employees, Conway employs 6 full-time employees and SCBA
uses Conway's personnel, Eaton employs 55 full-time and 80 part-
time employees, and Nyer Internet employs 3 full-time employees.
We directly employ one full-time person. None of the our employees
are covered by a collective-bargaining agreement. Management
believes that their relationship with its employees is excellent
and has a loyal work force.
ITEM 2. Description Of Property.
Our executive offices, and those of ADCO and Nyer Internet are
currently located at 1292 Hammond Street, Bangor, Maine, where
ADCO's warehouse and retail store are also located in our 23,000
square foot facility, which ADCO owns. ADCO currently has a
mortgage for $273,620 on the building. Our monthly costs,
including mortgage payments and taxes (but excluding utilities)
is $5,770. ADCO also leases 2,640 square feet of office and
warehouse space located in Henderson, Nevada. The monthly rental
is $2,464. 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 rent includes all taxes, sewer fees, water
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. The lease expired December
31, 1999 and the space is rented on a month-to-month basis.
Anton leases approximately 5,295 square feet of warehouse and
office space in Scarborough, Maine. The monthly rental is $2,427.
All property tax, sewer, water, and electric bills and other common
areas are paid separately. The lease expires January 31, 2004.
Anton also rents on a month-to-month basis approximately 800 feet
of garage space from Michael and Paula Anton. The monthly rental
is $1,000.
Anton leases approximately 800 square feet of showroom and
office space in Pembroke, New Hampshire. The monthly rental
is $1,200 which includes all taxes, sewer fees, water and electric
bills. The lease expired May 31, 1998 and the space is rented on
a month-to-month basis.
Anton also leases approximately 2,000 square feet of warehouse
and office space located in Wilmington, Massachusetts. The monthly
rental is $1,500. Sewer fees, water and electric bills are paid
separately by Anton. The lease expired February 1998 and the space
is rented 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 $2,380. Sewer fees, water and electric bills are paid
separately by Conway. Their lease expires November 2002.
Eaton currently leases 11 stores, averaging approximately
2,000 square feet each, throughout the suburban Boston area. Their
monthly lease payments range from $721 to $6,252. The leases
have varying expiration dates with all having renewal options.
We believe our current premises are adequate for our current
foreseeable needs.
ITEM 3. Legal Proceedings
We are not a party to any material litigation except as
described below. In February 1999, Nyer Nutritional, filed a
Complaint in the United States District Court for the District of
Arizona against the independent contractors Nyer Nutritional
engaged to package its tube feeding formulas and medical food
products. Nyer Nutritional alleged that the companies breached
their contract by providing defective and unfit products, were
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 was seeking as yet unspecified
damages in excess of $75,000, plus attorney's fees and costs. The
defendants counterclaimed seeking damages for unpaid bills of
approximately $300,000. Each party has denied any liability. The
litigation was settled in January 2001 by the payment from the
defendants to Nyer Nutritional in the amount of $370,000. All
claims have been resolved and the matter is now closed.
In December 2000, Nyer Nutritional, filed a Complaint in the
United States District Court for the District of Maine against
National Distribution and Contracting, Inc. and Entra-Safe, Inc.,
alleging that the defendants breached a confidentiality and non-use
agreement entered into with Nyer Nutritional as part of a
distribution agreement and a proposed agreement regarding the
purchase of Nyer Nutritional's assets. Nyer Nutritional also
brought claims of conversion, unjust enrichment and
misappropriation of trade secrets against these defendants.
Finally, Nyer Nutritional has alleged that the defendants
wrongfully interfered with its relationship with its consultant.
Nyer Nutritional seeks as yet unspecified damages in excess of
$75,000, plus attorney's fees and costs. Defendants have
counterclaimed making allegations of negligent and fraudulent
misrepresentation and also seeking a declaratory judgement giving
them rights to a patent in dispute. Each party has denied
liability. The litigation is in the early stages of discovery with
discovery to close later in 2001.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Annual Shareholders' Meeting was held on October 23,
2000, at 9:00 a.m., at the Corporate Headquarters located at
1292 Hammond Street, Bangor, Maine 04401. A total of 7,742,189
shares were eligible to vote.
Stanley Dudrick, M.D. was elected to serve on the board of
directors of the Company for a three-year term, until the annual
meeting of shareholders in the year 2003. Donald C. Lewis, Jr.
was elected to serve on our board of directors for a one-year term,
until the annual meeting of shareholders in the year 2001. An
affirmative vote for the election of directors was 6,058,800,
with 573,000 abstaining.
Sweeney, Gates & Co. was ratified as our independent auditors
for the fiscal year ended December 31, 2000. An affirmative vote
for Sweeney, Gates & Co. was 6,058,800, with 573,000 abstaining.
PART II
ITEM 5. Market For Common Equity And Related Stockholder Matters.
Qualification with NASDAQ
Our 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 our
common stock from continuing to be quoted on Nasdaq and may have an
adverse effect on the market for our common stock.
As of March 30, 2001, there were approximately 1,010 holders
of our shares of common stock. The high and low bid prices for our
common shares for each quarterly period for the last two fiscal
years are as follows:
2000 1999
Closing Bids Closing Bids
HIGH LOW HIGH LOW
First Quarter $ 7.00 $ 5.13 $ 4.81 $ 3.00
Second Quarter 6.00 3.13 5.13 4.06
Third Quarter 5.00 3.00 8.00 4.94
Fourth Quarter 4.75 3.38 7.88 5.94
Such prices reflect inter-dealer prices and do not reflect
retail mark-ups, mark-downs, or commissions. Our shares are traded
sporadically, which may affect the prices.
Although there are no restrictions on the our ability to pay
dividends, to date we have not declared any cash dividends on any
class of security nor does it anticipate doing so in the
foreseeable future.
ITEM 6: Selected Financial Data:
2000 1999 1998
Summary of operations:
Sales and other revenues $41,975,445 $39,856,911 $36,936,034
Gross margin 8,981,805 7,535,806 7,746,753
Operating loss (income) from
continuing operations (556,324) (1,760,010) (410,881)
(Loss) income from
continuing operations (330,966) (1,428,625) 153,573
(Loss) from discontinued
operations (307,689) (744,020) (1,993,764)
Net loss (638,655) (2,172,645) (1,840,191)
Per share data:
Net (loss) income per weighted
average of common shares
from continuing operations $ (.09) $ (.38) $ .04
Net (loss) per weighted average
of common shares from
discontinued operations (.08) (.20) (.53)
Net (loss) per weighted average
of common shares $ (.17) $ (.58) $ (.49)
Year-end position:
Total assets $12,634,831 $13,173,635 $14,412,042
Net working capital 5,854,127 6,831,097 8,410,421
Long-term debt(including
related party and excluding
current portion) 551,902 998,628 1,003,531
Minority interest 685,468 580,312 744,357
Shareholders' equity $ 6,612,316 $ 7,228,971 $ 9,032,866
No cash dividends have been declared in the periods presented.
ITEM 6: Selected Financial Data: continued,
1997 1996
Summary of operations:
Sales and other revenues $33,877,419 $21,093,488
Gross margin 7,474,945 4,258,776
Operating income (loss) from
continuing operations 127,423 (182,680)
Income (loss) from
continuing operations 315,950 (25,385)
(Loss) from discontinued
operations (1,250,352) (393,426)
Net loss $ (934,402) $ (418,811)
Per share data:
Net income (loss) per weighted
average of common shares
from continuing operations $ .08 $ (.01)
Net (loss) per weighted average
of common shares from
discontinued operations (.33) (.12)
Net (loss) per weighted average
of common shares $ (.25) $ (.13)
Year-end position:
Total assets $16,108,040 $17,141,829
Net working capital 8,071,514 9,057,883
Long-term debt(including
related party and excluding
current portion) 533,991 1,246,843
Minority interest 674,095 648,003
Shareholders' equity $11,024,056 $11,935,387
No cash dividends have been declared in the periods presented.
ITEM 7. Management's Discussion And Analysis of Financial Condition and
Results of Operations.
The following discussion provides information with respect to our results
of operations, liquidity, and capital resources on a comparative basis for the
years ended December 31, 2000 and 1999 and for the years ended December 31, 1999
and 1998 and should be read in conjunction with the Consolidated Financial
Statements and related notes appearing elsewhere in this report.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.
NET SALES. Total sales for 2000 increased by approximately 5.3% from 1999
to approximately $41.9 million from approximately $39.9 million in 1999.
The following table shows sales by principal subsidiaries for the years 2000
and 1999:
Subsidiary 2000 1999 % increase (decrease)
Eaton $29,104,321 $25,268,003 15.2
Anton 2,489,290 3,126,338 (20.3)
ADCO 6,525,852 6,222,604 4.9
ADCO South 1,247,350 1,197,743 4.1
Conway 2,279,184 3,886,395 (41.4)
Nyer Internet 312,507 43,045 626
Total for
principal subsidiaries $41,958,504 $39,744,128 5.6
Total for all
subsidiaries $41,975,445 $39,856,911 5.3
The reason for the increase in sales is due primarily to our
pharmacy chain, Eaton. In 2000, 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. We recorded significant
increases in same store sales at all locations.
ADCO sales increased $303,248 in 2000, as compared to 1999, due mainly
to continued growth of its Nevada division, the continuing growth of its
respiratory division and a continuing focus on marketing to the nursing home
and physician markets.
Anton had a decrease of $637,048 in 2000 as compared to 1999 sales.
The reason for this decline is Anton's competitors are taking more share of
the market. Anton is trying to off set this with a move to a new location in
Scarborough and increased advertising.
Conway had a decrease of $1,607,211. The main reason for this decrease
is that Conway has decided 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. Fire truck sales in 1999 were approximately $2.1 million as compared
to $0 in 2000.
Nyer Internet's sales increased from $43,045 in 1999 to $312,507 in 2000.
This was Nyer Internet's first full year of sales.
GROSS PROFIT MARGINS. Our overall gross margins were approximately 21.3% in
2000 as compared 18.9% in 1999.
The following is a table of gross margin percentages by principal subsidiaries
for the years 2000 and 1999:
Subsidiary 2000 1999
Eaton 19.2 18.3
Anton 18.3 22.2
ADCO 29.7 25.5
ADCO South 27.4 25.5
Conway 25.3 10.4
Nyer Internet 18.5 21.3
Eaton's gross margin increased in 2000 to 19.2% as compared to 18.3% in
1999 because of increased sales volume and better product sourcing. Anton's
decrease of 3.9% in their margin is mainly due to increased competition in
their marketing areas. Anton is trying to offset this decline with a move to
a new location and increased advertising and marketing. ADCO's gross margin
increased from 25.5% in 1999 to 29.7% in 2000, due to increased sales volume and
better product sourcing. ADCO South had a slight increase of 1.9% over their
gross margin over 1999. Conway had an increase of 14.9% in their gross margin
over 1999 due lack of fire truck sales in 2000 as compared to $2,152,000 in
1999. Conway has decided to focus more on fire equipment and supplies and less
on fire truck sales due to lower margins realized for the sale of fire trucks.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general,
and administrative expenses increased approximately 5% in 2000 to approximately
$9.5 million as compared to $9.0 million in 1999.
The following table shows the break down by principal subsidiaries for the
years 2000 and 1999.
Subsidiary 2000 1999
Eaton $ 5,114,121 $ 4,845,942
Anton 652,513 771,030
ADCO 1,959,085 1,595,805
ADCO South 299,896 282,341
Corporate 621,899 764,836
Conway 599,427 638,568
Nyer Internet 193,002 69,408
Total for
principal subsidiaries $ 9,439,943 $ 8,967,930
Total for all
subsidiaries $ 9,465,463 $ 9,015,371
The largest increase came from Eaton due to higher labor costs and
increased sales volume. ADCO and ADCO South's increases were also primarily due
to higher labor costs and increased sales volume. Corporate overhead decreased
due to a charge in 1999 for issuance of warrants at a fair market value of
$368,750 to a public relations consulting firm. In 2000, we also had increased
public relation expenses due to our continuing effort to improve our commun-
ications with the investment community as well as with its shareholders and
potential shareholders. Nyer Internet had an increase of $123,594 over 1999
due to its first full year of operations and increased sales volume. Anton's
selling, general and administration expenses decreased by $118,517 as compared
to 1999 expenses. The decrease is attributed to decreased sales and expenses
attributed to those sales and expenses attributable to Michael Anton. Conway
had a decrease of approximately $39,141. This reduction is due to less fire
truck related expenses.
CONTINUING OPERATIONS. We sustained a loss from continuing operations of
$330,966 in 2000 as compared to income of $1,428,625 in 1999. The following
table summarizes the operations by principal subsidiaries for the years
2000 and 1999.
Subsidiary 2000 1999
Eaton $ 485,606 $ (253,496)
Anton (290,649) (108,810)
ADCO 11,660 3,795
ADCO South 23,680 4,917
Corporate (332,252) (489,982)
Conway (45,983) (465,848)
Nyer Internet (159,110) (71,256)
Total for
principal subsidiaries $ (307,048) $(1,380,680)
Total for all
subsidiaries $ (330,966) $(1,428,625)
The decrease in the loss from continuing operations is largely due to
Eaton and Corporate. Eaton had net income of $485,606 in 2000 as compared to
a net loss of $253,496 in 1999 due to increased sales volume and better product
sourcing. They also received a settlement in the third quarter of 2000 of
approximately $89,000 for manufacturer overcharges. Corporate had a reduction
in their net loss of $157,730 as compared to 1999. Anton's sales decreased
$637,048 and their gross margin declined 3.9% due to increased competition in
their market place. As a result of continuing and increasing operating losses,
Anton recorded an impairment charge of $42,666 to write off their remaining
goodwill. Anton is trying to offset this with a move to a new location and
increased advertising and marketing. Conway had a decrease in its net loss of
$419,865 as compared to 1999 due to an impairment charge of in 1999 of $280,445
to write off the remaining goodwill and their gross margin increased from 10.4%
in 1999 to 25.3% in 2000. Nyer Internet had a net loss of $159,118 as compared
to a net loss of $71,256 in 1999. This was Nyer Internet's first full year of
operations. Nyer Internet is concentrating on increasing sales and margins to
offset their overhead.
DISCONTINUED OPERATIONS. On October 25, 1999, the Board of Directors approved
a plan for the disposal of its investment in Nyer Nutritional. Their results
have been reported as discontinued operations for all periods presented. See
ITEM 3. Legal Proceedings, for details of subsequent events.
Nyer Nutritional incurred approximately $677,689 of costs related to the
business in 2000 (including approximately $174,000 in litigation expenses) as
compared to $744,020 in 1999. The costs of $677,689 were partially offset by a
settlement received in January 2001 of $370,000 See ITEM 3. Legal Proceedings.
We have reported the assets to be disposed, primarily a lawsuit judgment,
settled in December 2000, received in January 2001 and patents in 2000 as
current and non current assets of discontinued operation. In 1999, we
reported the assets to be disposed, primarily inventory and patents, as
current assets of discontinued operation. Sales for Nyer Nutritional were
$0, $0 and $268,431 for the years ended 2000, 1999 and 1998.
Genetic Vectors
In December 1998, we wrote off our investment in Vectors due to significant
uncertainties regarding the Company's ability to recover its investment. Based
on our 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. Their refusal to do so limits our ability
to sell Vectors' stock in the public market to 1% of Vectors' outstanding common
stock (approximately 37,000 shares per quarter). Even if the restrictive
legend was not removed, we believe our investment is impaired due to the
illiquid nature of the Over-the-Counter Bulletin Board market on which Vectors'
stock trades. The write off of our investment in Vectors resulted in a net
charge to discontinued operations of $908,138 in 1998.
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 principal subsidiaries 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
ADCO South 1,197,743 1,136,052 5.4
Conway 3,886,395 3,763,983 3.3
Nyer Internet 43,045 -
Total for
principal subsidiaries $39,744,128 $36,872,267 7.8
Total for all
subsidiaries $39,856,911 $36,936,034 7.9
The reason for this increase in sales is due primarily to our 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. We 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 revenues included
the sales of fire trucks (55% of sales were fire trucks in 1999). We intend to
focus more on fire equipment and supplies and less on fire truck sales due to
lower margins on the sale of fire trucks. As a result, we expect Conway's sales
to decline in the short term with expected increases in gross margin.
GROSS PROFIT MARGINS. Our overall gross margin percentages were approximately
18.9% in 1999 as compared 21.0% in 1998.
The following is a table of gross margin percentages by principal subsidiaries
for the years 1999 and 1998:
Subsidiary 1999 1998
Eaton 18.3 20.3
Anton 22.2 23.8
ADCO 25.5 25.2
ADCO South 25.5 22.6
Conway 10.4 15.5
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 principal subsidiaries (and corporate expenses):
Subsidiary 1999 1998
Eaton $ 4,845,942 $ 4,418,141
Anton 771,030 806,111
ADCO 1,595,805 1,416,038
ADCO South 282,341 260,989
Corporate 764,836 449,567
Conway 638,568 761,385
Nyer Internet 69,408
Total for
principal subsidiaries $ 8,967,930 $ 8,112,231
Total for all
subsidiaries $ 9,015,371 $ 8,157,634
The largest increase came from Eaton because of 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. We continue to expand our 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. We 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 principal subsidiaries and year:
Subsidiary 1999 1998
Eaton $ (253,496) $ 413,956
Anton (108,810) 14,712
ADCO 3,795 (44,706)
ADCO South 4,917 (22,409)
Corporate (489,982) (22,891)
Conway (465,848) (154,857)
Nyer Internet (71,256)
Total for
principal subsidiaries $(1,380,680) $ 183,805
Total for all
subsidiaries $(1,428,625) $ 153,573
The decrease in income from continuing operations is largely due to the
declining profit margins 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, as a result of continuing and increasing
operating losses, we 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, we 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 as described earlier in this Report.
Liquidity and Capital Resources
Net cash used in operating activities was $239,896 for the year ended
December 31, 2000 as compared to $693,037 for the year ended December 31, 1999.
The primary use of cash from operations in 2000 was to fund operations for our
nutritional, fire, police and rescue equipment and supplies, internet and
corporate operations. We partially offset the net loss by increases in accounts
payable.
In 2000 and 1999, the net cash provided by (used in) investing activities
was $300,886 and $(2,130,162), respectively. The increase was largely due to
the proceeds received from marketable securities of $490,860.
Net cash used in financing activities was $323,715 for 2000 as compared
to $247,227 in 1999. The increase is due to increased repayments of long term
debt and notes to related party.
In June 2000, we signed a definitive agreement to acquire "The Official
Website of the American Academy of Anti-aging Medicine (A4M)" worldhealth.net,
the World Health Network and all of the web site's contents. In June 2000, we
escrowed $100,000. On March 27, 2001, the agreement was terminated and the
$100,000 and stock was forfeited. This amount was reserved at December 31, 2000.
We anticipate our current cash resources to be adequate to fund our current
operating needs.
Forward-Looking Statements
The statements made in ITEM 1, relating to the anticipated increase in
ADCO's respiratory therapy division, Anton's attempt to offset its decline in
revenues and gross profit margins and Eaton's opportunity to serve assisted
living facilities and compete within its market, are forward-looking state-
ments within the meaning of the Private Securities Litigation reform act of
1995 (the "Act"). Additionally, words such as "expects", "intends", "believes"
and similar words are used to identify forward-looking statements within the
meaning of the Act. 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 Eaton could be affected by increased competition from large
competitors including the entrance of Wal-Mart and other 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 the Company does
business; (4) the general state of the economy in the United States and
elsewhere; (5) the failure of suppliers to timely deliver products; (6)
factors which increase costs in the health care industry; (7) the loss of any
single large customer; and (8) future governmental regulation of
pharmaceutical pricing; and (9) the impact of competition from Michael Anton
on Anton's business.
ITEM 8: Financial Statements and Supplementary Data
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Page(s)
Report of Independent Certified Public Accountants F 1
Report of Independent Accountants F 2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31,
2000 and 1999 F 3-4
Consolidated Statements of Operations for the
years ended December 31, 2000, 1999 and 1998 F 5
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998 F 6
Consolidated Statements of Cash Flows for
the years ended December 31, 2000, 1999 and 1998 F 7-9
Notes to Consolidated Financial Statements F 10-26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Nyer Medical Group, Inc.
We have audited the consolidated balance sheet of Nyer Medical Group, Inc. and
subsidiaries at December 31, 2000 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for the year ended
December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nyer Medical
Group, Inc. and subsidiaries, as of December 31, 2000 and the results of its
operations and cash flows for the year ended December 31, 2000, in conformity
with accounting principals generally accepted in the United States of America.
/s/ Sweeney, Gates & Co.
Fort Lauderdale, Florida
March 23, 2001
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Nyer Medical Group, Inc. and Subsidiaries:
In our opinion, the accompanying consolidated balance sheet 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 the results of their
operations and their cash flows for each of the two years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America 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
Portland, Maine
April 07, 2000
F-2
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
Current assets:
Cash and cash equivalents $ 803,837 $ 1,066,562
Investment in marketable securities 1,001,325 1,492,185
Accounts receivable, less allowance
for doubtful accounts of $237,757
in 2000 and $177,739 in 1999 3,825,440 3,704,025
Inventories, net 4,483,448 4,289,055
Prepaid expenses 148,278 104,923
Receivables from related parties 3,932 3,877
Current assets of discontinued
operation 373,012 472,855
Total current assets 10,639,272 11,133,482
Property, plant and equipment, at cost:
Land 92,800 92,800
Building 641,508 641,508
Leasehold improvements 646,839 543,807
Machinery and equipment 161,614 125,263
Transportation equipment 352,953 338,971
Office furniture, fixtures,
and equipment 924,039 865,310
2,819,753 2,607,659
Less accumulated depreciation
and amortization (1,401,223) (1,073,393)
1,418,530 1,534,266
Goodwill and other deferred assets,
net of accumulated amortization of
$543,174 in 2000 and $412,687 in 1999 333,006 472,295
Advances due from related companies 36,615 33,592
Non-current assets of discontinued
operation 207,408 -
577,029 505,887
Total assets $12,634,831 $13,173,635
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
2000 1999
Current liabilities:
Current portion of notes payable
due related party $ 193,419 $ 161,508
Current portion of long-term debt 291,978 222,879
Accounts payable 3,715,992 3,458,835
Accrued payroll and related taxes 277,543 235,046
Accrued expenses and other
liabilities 306,213 224,117
Total current liabilities 4,785,145 4,302,385
Notes payable due related party,
net of current portion 301,622 442,820
Long-term debt, net of current
portion 250,280 555,808
Minority interest 685,468 580,312
Deferred credit - 63,339
Commitments (Notes 3 and 9)
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, 2000 and 1999
Common stock, par value $.0001
authorized: 10,000,000 shares;
issued: 3,753,189 at December 31,
2000 and 3,748,789 at December
31, 1999 375 375
Additional paid-in capital 17,679,268 17,657,268
Stock sale receivable (115,500) (115,500)
Treasury stock at cost
(11,000 shares at December 31,
2000 and 1999) (52,249) (52,249)
Accumulated deficit (10,899,579) (10,260,924)
Total shareholders' equity 6,612,316 7,228,971
Total liabilities and
shareholders' equity $12,634,831 $13,173,635
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
Net sales $41,975,445 $39,856,911 $36,936,034
Cost and expenses:
Cost of goods sold 33,023,640 32,321,105 29,189,281
Selling and retail 5,647,018 5,387,487 4,743,353
Warehouse and delivery 784,742 681,957 578,755
Administrative 3,033,703 2,945,927 2,835,526
Impairment loss (Note 3) 42,666 280,445 -
42,531,769 41,616,921 37,346,915
Operating loss (556,324) (1,760,010) (410,881)
Other income (expense):
Interest expense (89,326) (102,850) (122,397)
Interest income 173,317 146,821 269,258
Other (Note 6) 266,523 123,369 543,602
Total other income 350,514 167,340 690,463
(Loss) income before
minority interest (205,810) (1,592,670) 279,582
Minority interest income(expense) (105,156) 164,045 (70,262)
(Loss) income from continuing
operations before
income taxes (310,966) (1,428,625) 209,320
Income taxes 20,000 - 55,747
(Loss) income from continuing
operations after income taxes (330,966) (1,428,625) 153,573
Discontinued operations: (Note 2)
Loss from discontinued operations
operations of Nyer Nutritional
October 25, 1999 - (537,020) (431,784)
Loss from disposal of Nyer
Nutritional including operating
losses during the phase
out period (307,689) (207,000) -
Loss from operations of
discontinued subsidiary-
Genetic Vectors - - (653,842)
Net loss on write down of
investment-Genetic Vectors - - (908,138)
Net loss from discontinued
operations (307,689) (744,020) ( 1,993,764)
Net Loss $ (638,655) $(2,172,645) $(1,840,191)
Basic and diluted loss per share:
Continuing operations $ (.09) $ (.38) $ .04
Discontinued operations (.08) (.20) (.53)
Basic and diluted loss per share $ (.17) $ (.58) $ (.49)
Weighted average common shares
outstanding 3,752,779 3,748,789 3,742,085
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Class A Class B
Preferred stock Preferred stock Common stock
Shares Amount Shares Amount Shares Amount
Balance,
January 1, 1998 2,000 $1 1,000 $- 3,407,093 $341
Treasury stock
Additional consid-
eration related to
purchase of
subsidiary
Net loss - - - - - -
Balance,
December 31, 1998 2,000 1 1,000 - 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 - 3,748,789 375
Exercise of common
stock options - - - - 4,400 -
Net loss
Balance,
December 31, 2000 2,000 $1 1,000 $- 3,753,189 $375
The accompanying notes are an integral part of the
consolidated financial statements.
F-6(1)
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Additional Treasury Total
Paid-in Stock Sale Stock Accumulated Shareholders'
Capital Receivable Shares Amount Deficit Equity
Balance,
January 1,
1998 $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 (98,750) - - - - (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
Exercise of
common
stock options 22,000 - - - - 22,000
Net loss - - - - (638,655) (638,655)
Balance,
December 31,
2000 $17,679,268 $(115,500)(11,000)$(52,249)$(10,899,579) $6,612,316
The accompanying notes are an integral part of the
consolidated financial statements.
F-6(2)
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
Cash flows from operating
activities:
Net loss $ (638,655) $(2,172,645) $(1,840,191)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Impairment loss 42,666 280,445 -
Loss of discontinued operation - - 653,842
Net loss on write-down of investment-
Genetic Vectors - - 908,138
Depreciation 347,335 291,623 272,935
Amortization 97,021 135,241 143,210
(Gain) Loss on disposal of property,
plant, and equipment 6,279 (5,718) 10,869
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 105,156 (164,045) 70,262
Decrease in deferred credit (63,339) (54,770) (55,224)
Changes in certain working capital
elements (136,359) 383,040 (98,731)
Net cash flows used in
operating activities (239,896 (693,037) (375,460)
Cash flows from investing activities:
Acquisition of stores - (273,729) (100,000)
Purchase of property, plant and
equipment (186,544) (416,048) (458,107)
Purchase of marketable securities - (1,492,185) -
Purchase of short-term investment - - (76,124)
Proceeds from sale of
marketable securities 490,860 - -
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 (3,023) 896 3,011
Decrease in other assets,net (407) 104 14,411
Net cash provided by (used in)
investing activities 300,886 (2,130,162) 330,095
The accompanying notes are an integral part of
the consolidated financial statements.
F-7
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
2000 1999 1998
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 18,000 37,677 27,256
Payments of long-term debt $ (254,428) $ (246,412) $ (273,708)
Net (repayments) borrowings of
notes to related party (109,287) (38,492) (15,956)
Payments for purchase of treasury stock - - (52,249)
Proceeds from exercise of stock
options 22,000 - -
Net cash used in financing
activities (323,715) (247,227) (314,657)
Net decrease in cash and cash
equivalents (262,725) (3,070,426) (360,022)
Cash and cash equivalents at
beginning of period 1,066,562 4,136,988 4,497,010
Cash and cash equivalents at
end of period $ 803,837 $1,066,562 $ 4,136,988
Changes in certain working capital
elements:
Accounts receivable, net $ (491,415) $ (143,648) $ (384,822)
Inventories, net 15,607 (278,075) 81,042
Prepaid expenses (42,246) (987) 13,514
Receivables from related parties (55) 44,262 (29,963)
Accounts payable 257,157 831,543 210,113
Accrued payroll and related taxes 42,497 28,581 147,370
Accrued expenses and other liabilities 82,096 (98,636) (135,985)
Net change $ (136,359) $ 383,040 $ (98,731)
Supplemental disclosures of cash flow information:
Cash paid during the year for: 2000 1999 1998
Interest $ 93,193 $ 100,495 $ 117,466
Income taxes $ 4,221 $ 8,000 $ -
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
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
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-9
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business:
Nyer Medical Group, Inc. (Company or Nyer) a Florida corporation
incorporated in 1991, is a holding company with operations in the following
segments:
Medical and surgical supplies, diabetic and internet. Two 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. ADCO also has operations in the Las Vegas, Nevada area.
Additionally, ADCO has a division that delivers blood glucose meters, test
strips, lancets and penlets, control solutions and alcohol prep pads to
individual diabetics directly at their homes. Nyer Internet, Inc. (NIC),
which is also a wholly-owned subsidiary, is involved in internet sales
of medical equipment and supplies.
EMT, fire, police equipment and supplies. Anton Investments, Inc. (Anton),
and Conway Associates, Inc. (Conway), each 80% owned by the Company, sell
wholesale and retail equipment, supplies and novelty items to emergency
medical services, fire and police departments throughout most of New
England. SCBA, Inc. (SCBA), 80% owned by the Company, repairs and services
fire department's self-contained breathing apparatus.
Pharmacy chain. D.A.W., Inc. (Eaton), 80% owned by the Company, is a chain
of pharmacy drug stores located in the suburban Boston, Massachusetts area.
Its related entity, FMT, Inc.(FMT), which is also 80% owned by the Company,
is involved in the franchising of retail pharmacy outlets.
Corporate. Included in corporate segments are two entities, both are
accounted for as discontinued operations. Nyer Nutritional Systems, Inc.,
(Nyer Nutritional), incorporated in Delaware in 1996, 80% owned by the
Company, has patented liquid nutritional formulas for tube feedings.
Genetic Vectors, Inc. (Vectors), is a biotechnology company based in
Florida, of which the Company owns a 19.8% interest.
The Company is a subsidiary of Nyle International Corp. (Nyle).
2. Summary of significant accounting policies:
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
continued
F-10
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue recognition
The Company recognizes revenue on the sale of its goods and services, net
of estimated costs of returns, allowances and sales incentives, when the
products are shipped to customers. The Company generally sells its
products on open accounts under credit terms customary to the industry.
The Company performs ongoing credit evaluations of its customers and
generally does not require collateral to secure its customers receivables.
Cash and cash equivalents
The Company considers cash and investments with original maturities of three
months or less when purchased to be cash and cash equivalents.
Marketable securities
Marketable securities are classified as available for sale and are reported
at cost which approximates fair market value. At December 31, 2000,
marketable securities include federal government agency notes which mature
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 $268,862 in 2000 and $197,998 in 1999.
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.
continued
F-11
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Property, plant and equipment continued,
For financial reporting purposes, depreciation and amortization are 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
Depreciation and amortization was $444,356, $426,864 and $416,145 for the
years ended December 31, 2000, 1999 and 1998, respectively.
Income taxes
The Company files a consolidated federal income tax return and allocates
tax expense to members of the group on a separate return basis. 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. A valuation allowance is recognized if,
based on the weight of available evidence, it is more likely than not
that some portion or all of the deferred tax asset will not be realized.
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
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 approximate their fair value as of December 31, 2000,
based upon the borrowing rates currently available to the Company for loans
with similar terms and maturities.
Goodwill and other intangible assets
Goodwill, which represents the excess of the costs of companies acquired
over the fair market value of their net assets at dates of acquisition is
amortized on the straight line method over the various periods, ranging
from 5 to 40 years. Other intangible assets acquired in connection with
acquisitions are amortized on a straight line basis over periods ranging
from 5 to 6 years.
continued
F-12
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Impairment accounting
The Company evaluates the recoverability of its property and equipment and
intangible assets in accordance with Statement of Financial Accounting
Standards Board No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121
requires recognition of impairment of long-lived assets, including goodwill
and other intangible assets, in the event the net book value of such assets
exceeds the estimated future undiscounted cash flows attributable to such
assets or the business to which such intangible assets relate. When an
asset exceeds its expected operating cash flow, it is considered to be
impaired and it written down to fair value, which is determined based on
either discounted future cash flows or appraised values. It is at least
reasonably possible that future events or circumstances could cause these
estimates to change. See Note 4 for discussion of impairment charges
recorded during 2000 and 1999.
Earnings per share
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the period. 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 2000, 1999 and 1998. All prior period
earnings per share data has been restated to reflect a 10% stock dividend
declared during 1999 (see note 10).
Reclassifications
Certain amounts in 1998 have been reclassified to conform to the 2000
and 1999 presentation.
3. Discontinued operations:
Genetic Vectors, Inc.
The Company currently owns 19.8% of Genetic Vectors, Inc. 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,
and reports as a discontinued operation.
In December 1998, the Company wrote off its investment in Vectors due to
significant uncertainties regarding the Company's ability to recover its
investment. Based on the Company's review of available public information,
continued
F-13
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Discontinued operations: continued,
there was 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 that limit the
Company's ability to sell its Vectors stock in the public market to 1%
of Vectors' outstanding common stock per quarter (approximately 37,000
shares). Those restrictions were required to be removed in January 1998.
Even if the restrictive legend was removed, we believe our investment is
impaired due to the illiquid nature of the Over-the-Counter Bulletin Board
market on which Vectors' stock trades. The write off of our investment in
Vectors resulted in a net charge to discontinued operations of $908,138
in 1998.
The Company owned 739,216 shares of restricted common stock of Vectors as of
December 31, 2000, 1999 and 1998.
The financial position and results of Vectors, which has been serviced by
another accounting firm, as of and for the nine months ended September 30,
2000, and as of and for the year ended December 31, 1999 are as follows:
Unaudited Audited
September 30, December 31,
2000 1999
Current assets $ 523,638 $ 270,247
Non-current assets 686,370 535,475
$ 1,210,008 $ 805,722
Current liabilities $ 4,455,258 $ 1,237,858
Stockholders' deficit (3,245,250) (432,136)
$ 1,210,008 $ 805,722
Total revenues $ 96,132 $ 44,832
Cost of Goods Sold (25,293) (9,188)
Operating expenses (2,398,530) (1,962,815)
Other (2,678,088) (748,037)
Interest, net (276,577) (131,703)
Net loss $(5,282,356) $(2,806,911)
Nyer Nutritional Systems, Inc.
On October 25, 1999, the Board of Directors approved a plan for the disposal
of its investment in Nyer Nutritional Systems, Inc. (Nyer Nutritional). The
results of Nyer Nutritional have been reported as discontinued operations for
all periods presented.
Nyer Nutritional signed a letter of intent in 1999 to sell its assets, 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.
continued
F-14
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Discontinued operations: continued,
The Company's signed letter of intent expired July 15, 2000 without consummating
the transaction.
In December 2000, Nyer Nutritional, filed a Complaint in the United States
District Court for the District of Maine against certain companies alleging
that the defendants breached a confidentiality and non-use agreement entered
into with Nyer Nutritional as part of a distribution agreement and a proposed
agreement regarding the purchase of Nyer Nutritional's assets.
Nyer Nutritional also brought claims of conversion, unjust enrichment and
misappropriation of trade secrets against the Defendants. Finally, Nyer
Nutritional has alleged that defendants wrongfully interfered with its
relationship with its consultant. Nyer Nutritional seeks as yet unspecified
damages in excess of $75,000, plus attorney's fees and costs. Defendants have
counterclaimed making allegations of negligent and fraudulent misrepresentation
and also seeking a declaratory judgment giving them rights to a patent in
dispute. The parties have denied liability. The litigation is in the early
stages of discovery with discovery to close later in 2001.
Nyer Nutritional is currently inactive.
The Company has reported the assets to be disposed of, primarily a lawsuit
judgment settled in December 2000, received in January 2001 and patents in 2000
and inventory and patents in 1999, on the balance sheet as current and non-
current assets of discontinued operations. Revenues for Nyer Nutritional were
$0, $0 and $268,431 for the years ended 2000, 1999 and 1998.
4. Impairment:
In December 2000, as a result of continuing and increasing operating losses,
the Company determined that goodwill in its EMT, fire, and police equipment 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 of continuing operations were impaired. As a
result, the Company recorded an impairment charge of $42,666 related to goodwill
associated with its subsidiary, Anton Investments, Inc.
In December 1999, as a result of continuing and increasing operating losses,
the Company determined that goodwill in its EMT, fire, and police equipment 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 of continuing operations 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-15
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Related party transactions:
Receivables from related parties consisted of the following at December
31, 2000 and 1999:
2000 1999
Receivable from related party $ 3,932 $ 3,877
Advances due from related companies,
non-current $ 36,615 $ 33,592
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 $515,
$4,475 and $15,968 for 2000, 1999 and 1998, respectively.
Advances due from related companies consist of cash advances made to Nyle.
Interest is charged at 9% annually and payments are made from time to time.
Notes payable to related party (a former employee and director) were
$495,041 and $604,328 at December 31, 2000 and 1999, respectively.
Principal payments of $10,000, are due monthly, interest accrues at 7%.
Interest expense related to this note was $31,911 in 2000 and $41,508
in 1999.
The Company has an employment agreement with its Chief Executive Officer,
executed in October 1999, 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 vested October 25, 1999, with the remaining vested October 25, 2000.
As of the date of this report, none of the options have been exercised.
In 1996, a stock sale 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 2001. This receivable is included in shareholders'
equity section of the balance sheet. As of December 31, 2000, all accrued
interest had been paid.
6. Acquisitions and divestitures:
In August 1996, the Company acquired 80% of the common stock D.A.W., Inc.,
d/b/a Eaton Apothecary, (Eaton) and an affiliated company, F.M.T., Inc.
Eaton 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 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.
continued
F-16
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Acquisitions and divestitures: continued,
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. $385,000 was received in
1998 and $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.
Had the results of these businesses been included in operations commencing
with 1998, the reported results would not have been materially affected.
7. Debt:
Long-term debt at December 31, 2000 and 1999, consisted of the following:
2000 1999
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. $ 285,589 $ 331,522
Eaton:
Note payable in equal monthly installments of
$4,500 plus interest on the unpaid balance at
prime rate. A final payment of $10,000 was made
in February 2000. - 10,000
Note payable in equal monthly installments of
$3,693 including interest at 7%. The note was
paid in full in June 2000. - 21,713
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. 14,852 48,783
Note payable in equal monthly installments of
$3,287 including interest at 7%. The note was
paid in full in 2000. - 47,071
continued
F-17
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Debt: continued,
2000 1999
Notes payable in equal monthly installments of
$6,150 including interest at 9.75%. The note
was paid in full in December of 2000. - 70,042
Line of credit with a balloon payment due in
July 2001. The interest rate is prime (8.50%
at December 31, 2000 and December 1999) and
is collateralized by certain assets of Eaton. 200,000 200,000
Other subsidiaries
Notes payable due in various installments
at rates ranging up to 9 1/4%, collateralized
by certain equipment and vehicles. 41,817 49,556
Total debt at year end 542,258 778,687
Less current portion 291,978 222,879
$ 250,280 $ 555,808
The maturities of long term debt at December 31, 2000 are as follows:
2001 $ 291,978
2002 68,222
2003 59,842
2004 64,387
2005 57,829
$ 542,258
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.
8. Income taxes:
At December 31, 2000, the Company had remaining net operating loss (NOL)
carryforwards of approximately $2,277,000 available to offset future
taxable income. The NOL carryforwards will expire in the years 2002 to
2016. The income tax provision of $20,000 is for a continuing operating
subsidiary. In the event of a change in ownership of the Company, the
utilization of the NOL carryforwards 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 $233,000 of NOL carryforwards by certain members of the
consolidated group.
continued
F-18
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Income taxes: continued,
The tax effect of temporary differences that give rise to significant
portions of deferred taxes at December 31, 2000 and 1999 consisted of:
2000 1999
Deferred tax assets(liabilities):
Depreciation $ 58,000 $ 22,000
Reserves not recognized for tax purposes 370,000 388,000
Impairments not recognized for tax
purposes 183,000 166,000
Net operating loss carryforwards 911,000 703,000
Total net deferred tax assets
before valuation reserve 1,522,000 1,279,000
Valuation reserve (1,522,000) (1,279,000)
Total net deferred tax
assets $ - $ -
The Company has recorded a valuation reserve for the total amount of
net deferred tax assets due to the uncertainty of its future realization.
9. 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, 2000, 1999 and
1998 was $764,431, $784,874 and $707,388, respectively.
continued
F-19
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Commitments: continued,
Operating leases: continued,
Future minimum lease payments at December 31, 2000 are as follows:
2001 $ 487,126
2002 394,493
2003 349,750
2004 263,173
2005 233,184
Thereafter 615,061
$2,342,787
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 or a total
purchase commitment of $52,000,000. The subsidiary received $200,000 from
the supplier upon signing of the agreement, which is being amortized over
the term of the contract, such amortization is included in other income.
The subsidiary reached the purchase commitment in the fourth quarter of
2000. Additionally, the supplier 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 due in July 2001 (see note 7).
Royalty commitment
In December 1996, a subsidiary of the Company entered into a licensing
agreement with its 20% shareholder. This agreement requires guaranteed
royalty payments of $25,000 year ending December 31, 1998, $50,000 year
ending December 31, 1999, $75,000 year ending December 31, 2000 and
$100,000 year ending December 31, 2001 and each year thereafter until the
patents rights expire in 2017. This commitment relates to a discontinued
operation (see note 3).
10. Shareholders' equity:
Class A preferred stock - each share has voting rights equal to 1,000
shares of common stock.
Class B preferred stock (Series 1) - each share has voting rights equal
to 2,000 shares of common stock.
Treasury 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 of 341,696 shares
of common stock to the shareholders of record on January 14, 2000. The
continued
F-20
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Shareholders' equity: continued,
dividend was included in the balance sheet as of December 31, 1999. The
loss per share has been restated as if the shares were issued as of January
1, 1998.
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 2000, 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 continued by the Company and for two years there-
after. The warrants 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 expired September
2000 and was renewed until September 30, 2001. The Company recorded an
expense of $368,750, equal to the estimated fair market value of the
warrants at the date of grant. 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.
11. Employees, directors and consultants stock options and incentive plan:
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, at fair market value, 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.
The following table summarizes stock options outstanding and exercisable
at December 31, 2000:
Outstanding stock options Exercisable stock options
Weighted Weighted
average Weighted average Weighted
Exercise remaining average remaining average
price contractual exercise contractual exercise
range Shares life price Shares life price
$ 2.31-$3.38 56,000 4.9 $ 2.67 52,000 4.9 $ 2.36
$ 4.62-$6.88 727,600 8.8 $ 6.14 671,600 8.8 $ 5.91
$16.75 36,000 5.3 $16.75 36,000 5.3 $16.75
continued
F-21
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Employees, directors and consultants stock options and incentive plan:
continued,
A summary of changes in common stock options during 2000, 1999 and 1998
are:
2000 1999 1998
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
Outstanding at the
beginning of the year 788,000 $6.36 248,000 $6.30 236,000 $ 6.55
Granted 40,000 4.75 540,000 6.44 22,000 3.75
Exercised (4,400) 5.00 - - - -
Canceled (4,000) 3.38 - - (10,000) 16.75
Outstanding at the end
of the year 819,600 $6.30 788,000 $6.36 248,000 $ 6.30
The weighted average grant date fair market value was $4.75, $3.70
and $1.68 for options granted during 2000, 1999 and 1998.
The Company accounts for stock options using 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 loss
and loss per share would have been increased to the pro forma amounts
indicated below:
2000 1999 1998
Net loss: As reported $ (638,655) $(2,172,645) $(1,840,191)
Pro forma $ (747,575) $(3,397,152) $(2,047,592)
Loss per share: As
reported $ (.17) $ (.58) $ (.49)
Pro forma $ (.20) $ (.91) $ (.55)
The fair value of stock options in the pro forma accounts for 2000, 1999 and
1998 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:
2000 1999 1998
Risk-free interest 5.7% 6.4% 5.3%
Dividend yield 0% 0% 0%
Expected volatility 80% 60% 70%
Expected life (years) 5 5 3
continued
F-22
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Business segments:
The Company had three active business segments in 2000, 1999 and 1998:
(1) wholesale and retail sales 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, 2000 is as follows:
Diabetic,
Medical, and EMT, Fire, Police Pharmacy
Surgical Supplies Equip and Supplies Chain Corporate Consolidated
Net Sales $8,085,710 $4,785,415 $29,104,320 $41,975,445
Operating
(loss)income (138,939) (255,689) 460,194 $ (621,890) (556,324)
Total assets 2,921,379 1,681,280 6,054,423 1,977,749 12,634,831
Capital
Expenditures 93,469 400 90,776 1,899 186,544
Depreciation
and
amortization 149,261 60,704 229,969 4,422 444,356
Interest income (14,624) (16,124) (142,569) (173,317)
Interest
expense 30,905 33,451 24,970 89,326
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) (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
continued
F-23
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Business segments: continued,
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
continued
F-24
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Selected quarterly data (unaudited):
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $9,760,241 $10,613,124 $10,570,026 $11,032,054
Gross profit $1,990,743 $ 2,259,877 $ 2,047,564 $ 2,653,621
Loss from continuing
operations $ (139,914) $ (3,640) $ (65,880) $ (121,532)
Net loss from discon-
tinued operations $ (78,475) $ (86,812) $ (118,162) $ (24,240)
Net loss $ (218,389) $ (90,452) $ (184,042) $ (145,772)
Basic and diluted
loss per share:
Continuing
operations $ (.04) $ .00 $ (.02) $ (.03)
Discontinued
operations (.02) (.02) (.03) (.01)
Net loss $ (.06) $ (.02) $ (.05) $ (.04)
1999
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $9,454,434 $ 9,504,138 $ 9,897,925 $11,000,414
Gross profit $1,826,263 $ 1,779,468 $ 1,931,564 $ 1,998,511
Loss from continuing
operations $ (141,788) $ (182,544) $ (93,750) $(1,010,543)
Net loss from discon-
tinued operations $ (84,588) $ (145,327) $ (213,997) $ (300,108)
Net loss $ (226,376) $ (327,871) $ (307,747) $(1,310,651)
Basic and diluted
loss per share:
Continuing
operations $ (.04) $ (.05) $ (.02) $ (.27)
Discontinued
operations (.02) (.04) (.06) (.08)
Net loss $ (.06) $ (.09) $ (.08) $ (.35)
continued
F-25
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Selected quarterly data (unaudited): continued,
1998
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $7,899,806 $ 9,588,371 $ 9,145,172 $10,302,685
Gross profit $1,709,474 $ 2,121,048 $ 1,860,489 $ 2,055,742
(Loss) income from
continuing operations $ (112,978) $ 243,213 $ 163,087 $ (139,749)
Net loss from discon-
tinued operations $ (234,715) $ (283,677) $ (328,317) $(1,147,055)
Net loss $ (347,693) $ (40,464) $ (165,230) $(1,286,804)
Basic and diluted
(loss) income per share:
Continuing
operations $ (.03) $ .07 $ .04 $ (.04)
Discontinued
operations (.06) (.08) (.09) (.30)
Net loss $ (.09) $ (.01) $ (.05) $ (.34)
F-26
ITEM 9. Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure.
The Company changed accountants in 2000 from PricewaterhouseCoopers,
LLP to Sweeney, Gates and Co.
There were no disagreements with the Accountants.
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 75 Chairman of the Board,
President, Secretary,
and Director
William J. Clifford, Jr. 51 Vice-President-Sales
and Director
Karen L. Wright 38 Treasurer, Vice-
President-Finance,
Assistant Secretary,
and Director
Doyle W. Boatwright 63 Director
Stanley Dudrick, M.D. 65 Director
Donato Mazzola 42 Director
Donald C. Lewis, Jr. 63 Director
Kenneth L. Nyer, M.D. 42 Director
The Company's Board of Directors is divided into three classes of
directors. Messrs. Boatwright, Lewis and Mazzola and Dr. Nyer's term
expires in 2001 and Messrs. Nyer and Clifford and Ms. Wright's term
expires 2002. Dr. Stanley Dudrick's term expires in 2003. There is
one vacancy.
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, an employee since 1973, has over 28 years experience in the
medical supply industry and possesses substantial experience in medical
warehousing, purchasing, sales and sales management.
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.
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.
Donato Mazzola has been a director of the Company since October 2000.
Mr. Mazzola 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. Mazzola has
been vice-president of Eaton since 1990. Mr. Mazzola is a registered
pharmacist in the State of Massachusetts and received his Bachelors of
Science Degree in Pharmacy from Massachusetts College of Pharmacy in 1981.
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, Forms 3 and 4 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 shareholders, 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
unlawful dividends, stock repurchases or redemptions and expressly sets
forth a negligence standard with respect to such liability. The
liability of the Company's directors under federal or applicable state
securities laws is also unaffected. The Company carries directors'
and officers' insurance. 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, 2000, 1999 and 1998 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, 2000, 1999 and 1998. No other executive officer
received compensation exceeding $100,000 for the fiscal years ended
December 31, 2000, 1999, or 1998.
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
(a) (b) (c) (e) (g)
Name and Other Securities
principal annual underlying
position Year Salary($) compensation($) options/SARS(#)
Samuel Nyer 2000 $140,000 $4,200 0
Chief 1999 127,308 4,200 500,000
Executive 1998 125,000 4,200 (1) 0
Doyle Boatwright 1998 121,253 $7,320 0
President and
Chief executive of an
80% owned subsidiary
The Company has not paid any cash compensation to any person for
serving as a director.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
(a) (d) (e)
Number of securities underlying Value of unexercised in-the
unexercised options/SARs money options/SARs at
at fy-end fy-end($) (2)
Name exercisable / unexercisable exercisable / unexercisable
Samuel Nyer 540,000 0 $92,400 $0
(1) Car and automobile insurance allowance accrued in fiscal 1998
but $1,750 paid in 1999.
(2) Based on the difference between the $ per share of the common
stock and the option price.
Employment Agreements
The Company employs its officers and employees pursuant to oral agree-
ments, with the exception of Mr. Samuel Nyer and the 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. 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 vested October 25, 1999,
with the remaining vesting on October 25, 2000. Mr. Nyer's employment
agreement also provides for use of a car and automobile insurance at an
annual cost of $4,200.
In August of 1996, 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. In
September 2000, this was amended to a base salary for each of $104,000.
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 receives 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 $74,460 and use of an automobile, including all expenses
associated with it at an annual cost of $6,000. The Company has an oral
employment agreement with Ms. Karen L. Wright, treasurer, which provides
for an annual base salary of $58,000.
Stock Option Plan
The Company established the 1993 Stock Option Plan (the Plan) covering
1,000,000 shares of common stock. 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 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 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) deter-
mine 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.
Under the Plan, all directors automatically received a grant of non-
qualified options which vested 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. For each
year of a director's term, 4,000 options are granted. After all directors
begin serving a three year term, each director receives an initial grant of
12,000 options at the time of election, appointment or vesting of all prior
options.
In October 1999, the Company granted Mr. Sam Nyer, its president,
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 vested October
25, 1999, with the remaining vested October 25, 2000. As of the date of
this report, none of the options have been exercised.
ITEM 12. Security Ownership Of Certain Beneficial Owners And Management.
The following table sets forth information as of December 31, 2000,
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 (3) class owned
Common stock, Samuel Nyer 5,444,700 (4),(5) 68.4%
Class A c/o ADCO
preferred 1292 Hammond Street
stock, and Bangor, Maine 04401
Class B
preferred stock
Common stock Nyle International Corp. 2,781,000 35.0
and Class A 72 Center Street
preferred Brewer, Maine 04412
stock
Common stock William J. Clifford, Jr. 28,000 (6) *
1292 Hammond Street
Bangor, Maine 04401
Common stock Karen L. Wright 22,110 (7),(8) *
1292 Hammond Street
Bangor, Maine 04401
Common stock Doyle W. Boatwright 11,600 (6) *
2029 E Montebello Ave
Phoenix, AZ 85016
Common stock Stanley Dudrick, M.D. 16,000 (6) *
c/o St. Mary's Hospital
56 Franklin Street
Waterbury, CT 06706
Common stock David Dumouchel 14,000 (6) *
111 Canal Street
Salem, MA 01970
Common stock Donald C. Lewis, Jr. 23,000 (6) *
c/o Nyle International Corp.
72 Center Street
Brewer, Maine 04412
Common Stock Donato Mazzola 2,000 (6) *
264 R Washington Street
Wellesley Hills, MA 02481
Common Stock Kenneth L. Nyer, M.D 30,000 (6) *
48 Old Orchard Road
New Rochelle, New York 10804
All directors and executive officers 5,591,410 5,6,7,8
of the Company as a group (nine 70.3%
persons) * less than 1% of class
(3) Beneficial ownership has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 and includes options which
vest within 60 days. Unless otherwise noted, the Company believes that
all persons named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them.
(4) Includes shares owned by Nyle since Mr. Samuel Nyer is chairman of
that corporation.
(5) Includes 68,000 shares of common stock underlying vested options
granted pursuant to the Plan. Also includes 500,000 vested non-
qualified options granted pursuant to Mr. Samuel Nyer's employment
agreement.
(6) Consists of shares of common stock underlying vested options granted
pursuant to the Plan.
(7) Includes 21,000 shares of common stock underlying vested options
granted pursuant to the Plan.
(8) Includes 1,100 shares of common stock which is held by an ADCO
employee investment club by which Ms. Wright owns 110 shares. The
common stock held in the investment club is considered beneficially
owned by Ms. Wright as she has voting and investment power of this stock.
ITEM 13. Certain Relationships and Related Transactions.
Prior to 1991, the Company and Nyle each engaged in inter-company
loans. At December 31, 2000, the Company was owed $36,615 by Nyle, this
includes accrued interest. As of March 31, 2001, Nyle owed the Company
$36,615 (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
loan. See Notes to "Consolidated Financial Statements".
ADCO employs one relative of Mr. William Clifford, a director of the
Company and vice president and general manager of ADCO. The relative is
employed as a sales representative. ADCO also employs two 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 and the other as a data entry clerk. The Company believes that
the compensation paid to these individuals is no greater than unrelated
persons would receive.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NYER MEDICAL GROUP, INC.
Registrant
By:/s/ Samuel Nyer
Samuel Nyer, President
(Chief Executive Officer)
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
30th day of March 2001.
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/ Donald Lewis Director
Donald Lewis
/s/ Donato Mazzola Director
Donato Mazzola
/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)
10.1 Stock Exchange Agreement and Plan of Reorganization -
Eaton Apothecary(3)
23. Consent of PricewaterhouseCoopers, L.L.P.
(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:/s/ Samuel Nyer
Samuel Nyer, President