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 June 30, 2001
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 71
State issuer's revenues for its most recent fiscal year (six
months) $23,903,627
The aggregate market value of the Company's voting stock held
by non-affiliates, as of October 10, 2001, was approximately
$5,435,379 based upon the closing price. There were 3,758,062
shares of common stock outstanding as of October 10, 2001.
Documents Incorporated by Reference: None
Transitional Business Disclosure Format:
Yes _ No X
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 the corporate segment are two
entities, both are accounted for as discontinued operations.
Nyer Nutritional Systems, Inc., (Nyer Nutritional), 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 19.5%
interest.
We are a subsidiary of Nyle International Corp. (Nyle).
We have a policy requiring less than wholly-owned subsidiaries
to reimburse us for its costs in providing management services to
Anton, Conway and SCBA which total $46,800 annually. 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.
The subsidiaries are also required to reimburse the Company for
any additional legal, auditing and accounting fees.
For additional industry segment information for the six months
ended June 30, 2001 and three years ended December 31, 2000, 1999
and 1998, see footnote 14 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. 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.
Among the various products supplied by our retail division
are motorized rehabilitative equipment such as stair glides, chair
lifts, scooters, wheelchairs and hospital beds, various kinds of
rehabilitative aids, 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 are increasing. Currently, this division has 310
patients as compared to 285 patients for the same period in 2000.
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 1,437
active customers.
ADCO and ADCO South provide over 5,000 stocked items in their
respective warehouses. Additionally they can purchase items they
do not stock from existing as well as other 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 (primarily nursing homes and physician offices), while
the balance comes from its retail and home health customers. ADCO
maintains a 23,000 square foot facility containing a 3,000 square
foot retail showroom located.
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'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, with the advantage 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
telemarketing, catalogs and mailing campaigns for existing
customers. ADCO South's selling efforts are assisted by 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, we 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
continues to develop multiple web sites. These sites are used to
aid in directing 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.
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 ceased active operations in the fall of 1999. We
have invested $2,008,450 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. Therefore, we have
reported Nyer Nutritional as a discontinued operation in our
financial statements in 2001, 2000 and 1999. Nyer Nutritional did
not have any sales in 2001.
In December 2000, Nyer Nutritional filed a lawsuit in federal
court in Maine against the proposed buyer which was settled in
August 2001 (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
Prior to our purchase of an 80% interest in Anton Investments
Inc. in 1993, 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 in Maine, New Hampshire and
Massachusetts. 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 acquired 80% 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 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,5% in Vermont, 5% in Maine,
with the remainder outside of New England including 28% in New
York.
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.
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, the founders and 20% share-
holders of Anton)resigned from Anton in October and November 1999,
respectively. In March 2001, they opened a business similar to Anton's
business. See Competition.
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
a slight edge over the competition.
Anton's sales had been declining since 1997 due to increased
competition as competitors opened new locations in Anton's
territories, however, for the first six months of 2001 they have
seen an increase in sales. In March 2001, Michael and Paula Anton
opened a business similar to Anton's business located in the same
area. We have not seen a decline in sales since they opened in
March 2001.
Backlog/Seasonality
Anton and Conway do not have significant backlog 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), an 11 store chain of pharmacies operating in
the greater Boston area. Each of the five minority shareholders
(except in one case, the husband of a shareholder) continue
employment under an oral agreement. Their five year employment
contract with Eaton which commenced in August 1996 expired August
5, 2001. Control of the Board of Directors of Eaton is split
between representatives from Nyer and the minority shareholders.
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
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 prescrip-
tion 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 its clientele. This customer
benefit gives Eaton an important competitive advantage in
inclement weather and with the shut-in customer. Eaton operates
eight 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 previously "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.
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. We believe our investment is impaired due to:
Vectors has ceased filing reports with the Securities and Exchange
Commission; our stock has a restrictive legend that Vectors'
counsel declined to remove because it had not been paid by
Vectors; and the market for its stock is the pink sheets which
provide quotations for stocks with very limited liquidity. 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 118 full-time and 87 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 57 full-time
and 84 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 $244,195 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 $2,485. 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 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 ware-
house 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 $538 to $7,504. 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
In December 2000, Nyer Nutritional, filed a Complaint in the
United States District Court for the District of Maine against
two 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.
In August 2001, the litigation was settled whereby each party
dismissed its case against the other and one of the defendants
will pay Nyer Nutritional $25,000 per quarter, commencing
September 2001, for six or seven quarters, depending upon certain
circumstances. In addition, certain royalty payments may be made
to Nyer Nutritional depending on certain future sales by that that
defendant.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable
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 October 10, 2001, there were approximately 957 holders
of our shares of common stock. The high and low bid prices for
our common shares for each quarterly period are as follows:
2001 2000 1999
Closing Bids Closing Bids Closing Bids
HIGH LOW HIGH LOW HIGH LOW
First Quarter $4.25 $3.38 $7.00 $5.13 $4.81 $3.00
Second Quarter 3.31 1.86 6.00 3.13 5.13 4.06
Third Quarter 3.19 1.35 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 our ability to pay
dividends, to date we have not declared any cash dividends on any
class of security nor do we anticipate doing so in the
foreseeable future.
ITEM 6: Selected Financial Data
Selected Financial Data
2001 2000 1999
Summary of Operations:
Sales and other revenues $23,903,627 $41,975,445 $39,856,911
Gross Margin 4,949,483 8,981,805 7,535,806
Operating loss (income)
from continuing
operations (95,383) (556,324) (1,760,010)
(Loss) income from
continuing operations (129,868) (330,966) (1,428,625)
(Loss from discontinued
operations (87,893) (307,689) (744,020)
Net loss $ (217,761) $ (638,655) $(2,172,645)
Per Share Data:
Net(loss) income per weighted
average of common shares
from continuing operations $ (.04) $ (.09) $ (.38)
Net(loss) per weighted average
of common shares from
discontinued operations (.02) (.08) (.20)
Net Loss per weighted average
of common shares $ (.06) $ (.17) $ (.58)
Year-End Position:
Total assets $12,603,077 $12,634,831 $13,173,635
Net working capital 5,841,459 5,854,127 6,831,097
Long-term debt(including
related party and excluding
current portion) 458,554 551,902 998,628
Minority interest 765,551 685,468 580,312
Shareholders' equity 6,407,235 6,612,316 7,228,971
No cash dividends have been declared in the periods presented
*All periods are for the 12 months ended December 31, except 2001
which is for the six months ended June 30.
ITEM 6: Selected Financial Data, continued
Selected Financial Data
1998 1997 1996
Summary of Operations:
Sales and other revenues $36,936,034 $33,877,419 $21,093,488
Gross Margin 7,746,753 7,474,945 4,258,776
Operating loss (income)
from continuing
operations (410,881) 127,423 (182,680)
(Loss) income from
continuing operations 153,573 315,950 (25,385)
(Loss from discontinued
operations (1,993,764) (1,250,352) (393,426)
Net loss $(1,840,191) $ (934,402) $ (418,811)
Per Share Data:
Net(loss) income per weighted
average of common shares
from continuing operations $ .04 $ .08 $ (.01)
Net(loss) per weighted average
of common shares from
discontinued operations (.53) (.33) (.12)
Net Loss per weighted average
of common shares $ (.49) $ (.25) $ (.13)
Year-End Position:
Total assets $14,412,042 $16,108,040 $17,141,829
Net working capital 8,410,421 8,071,514 9,057,883
Long-term debt(including
related party and excluding
current portion) 1,003,531 533,991 1,246,843
Minority interest 744,357 674,095 648,003
Shareholders' equity 9,032,866 11,024,056 11,935,387
All periods are for the 12 months ended December 31, except 2001
which is for the six months ended June 30.
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 Company has changed its fiscal year end from December 31
to June 30, accordingly, the following discussion provides
information with respect to our results of operations, liquidity,
and capital resources on a comparative basis for the six months
ended June 30, 2001 as compared to six months ended June 30, 2000
and 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 June 30, 2001 Compared to June 30, 2000.
NET SALES. Total sales for the six months ended June 30, 2001
increased by 17.3% from June 30, 2000 to $23,903,627 from
$20,373,366 in 2000. The Company had three active business
segments for the six months ended June 30, 2001 and June 30,
2000: 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 by
the management approach which analyzes results based on products
or services offered for sale. The following table shows sales by
business segments for the six months ended June 30, 2001 as
compared to the same period in 2000:
Business Segment 2001 2000 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 4,251,242 $ 3,919,069 8.5
EMT, fire, police
equipment and
supplies 2,739,012 2,436,089 12.4
Pharmacy chain 16,913,373 14,018,208 20.7
Total for business
segments $23,903,627 $20,373,366 17.3
The diabetic, medical and surgical supplies segment increased
$332,173 in 2001, as compared to 2000, mainly due to increased
sales at Nyer Internet. We have increased the number of products
available on line which has aided the increase in sales.
The EMT, fire, police equipment and supplies segment had an
increase of $302,923 in 2001 as compared to 2000 sales. The main
reason for this increase was that Conway had an increase of
$226,678 in sales over the same period in 2000. Conway has added
more sales personnel in its New York territories, thereby adding
to this growth.
The pharmacy chain segment's sales increase was due to
continued increases in volume on prescription drugs as a result
of a marketing campaign focused on assisted-living and home-based
sectors.
GROSS PROFIT MARGINS. Our overall gross margins were 20.7% in
2001 as compared 20.9% in 2000.
The following is a table of gross margin percentages by business
segments for the years ended June 30, 2001 and 2000:
Business Segment 2001 2000
Diabetic, medical and
surgical supplies 27.2 26.4
EMT, fire, police
equipment and
supplies 20.7 21.7
Pharmacy chain 19.1 19.2
Total for business
segments 20.7 20.9
The diabetic, medical and surgical supplies segment's gross
margin increased from 26.4% in 2000 to 27.2% in 2001. This
increase is due to increased sales volume and better product
cost sourcing, as well as fewer equipment sales which generally
have a lower gross profit margin.
The EMT, fire, police equipment and supplies segment saw a
decrease in their margins from 21.7% in 2000 as compared 20.7% for
the six months ended June 30, 2001. The decrease in margin was
due to the recognition of additional inventory reserves.
The pharmacy chain's gross margin remained approximately the
same. We believe the decline in margins has stabilized due to
increased sales volume and better product sourcing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated
selling, general and administrative expenses increased 11.9% in
2001 to approximately $5,044,866 as compared to $4,508,814 in
2000.
The following table shows the breakdown by business segments
for the six months ended 2001 and 2000:
Business Segment 2001 2000 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 1,300,122 $ 1,177,383 10.4
EMT, fire, police
equipment and
supplies 654,237 597,659 9.5
Pharmacy chain 2,815,995 2,504,262 12.5
Corporate 274,512 229,510 19.6
Total for business
segments $ 5,044,866 $ 4,508,814 11.9
The diabetic, medical and surgical supplies segment's
selling, general and administrative (S,G & A) expenses increased
$122,739. Most of the increase came from increased wages and
expenses directly related to the increase in sales.
The EMT, fire, police equipment and supplies segment also saw
an increase in their S,G & A expenses as did the Pharmacy chain.
Their increases also came mainly from increased wages and
expenses directly related to sales.
The pharmacy chain's increase was due to increased labor
costs and costs associated with the increase in sales.
Corporate overhead increased due mainly to a stock guarantee
expense in connection with an anticipated acquisition. In June
2000, we signed an agreement to acquire the official website,
worldhealth.net, the World Health Network and all of the web
site's contents. In June 2000, we escrowed $100,000 and 15,873
shares of the Company's common stock to complete the transaction.
The stock was borrowed from the Company's public relations firm
with a guarantee of replacement if forfeited. On March 27, 2001,
the agreement was terminated and the $100,000 and stock was
forfeited. The $100,000 was reserved at December 31, 2000 and the
stock charge of $36,190 was expensed in the six months ended June
30, 2001.
CONTINUING OPERATIONS. We sustained a loss from continuing
operations of $129,868 in 2001 as compared to a loss of $143,554
in 2001.
The following table shows the break down by business segments for
the six months ended June 30, 2001 and 2000:
Business Segment 2001 2000
Diabetic, medical and
surgical supplies $ (148,461) $ (150,020)
EMT, fire, police
equipment and
supplies (124,640) (76,599)
Pharmacy chain 320,118 149 188
Corporate (176,885) (66,123)
Total for business
segments $ (129,868) $ (143,554)
The diabetic, medical and surgical supplies segment's loss
decreased by $1,559. This segment increased their gross profit
margins by .8%. One division of this segment recorded a $75,000
bad debt expense due to very slow collections on its Medicare,
Medicaid and insurance reimbursements. The company is working to
rectify this situation.
The EMT, fire, police equipment and supplies segment's loss
was due to a decline in its margins, increased wages and expenses
directly related to increased sales.
The Pharmacy chain had an increase in profits of $170,930
over the same period last year due to increased sales volume and
receipt of $75,000 from an insurance carrier for under reimburse-
ment on prescriptions.
Corporate overhead increased due mainly to a stock guarantee
expense in connection with an unconsummated acquisition. See
selling, general and administrative expenses for details.
DISCONTINUED OPERATIONS. On October 25, 1999, the Board of
Directors approved a plan for the disposal of its investment in
Nyer Nutritional. Its results have been reported as discontinued
operations for all periods presented. See ITEM 3. Legal
Proceedings, for details of subsequent events.
Nyer Nutritional incurred $87,893 in costs in 2001, including
approximately $39,200 in litigation expenses. For the six months
ended June 30, 2000, Nyer Nutritional incurred $165,287 in
expenses, of which approximately $43,350 was for litigation
expenses.
We have reported the assets to be disposed (primarily patents
and fixed assets) as discontinued operations as of June 30, 2001.
All equipment is being listed for sale on our website subsequent
to year end. The Company settled litigation regarding the
patents. The settlement approximates the net book value of the
patents.
Sales for Nyer Nutritional were $0 for the six months ended
June 30, 2001 and June 30, 2000 and $0,$0 and $268,431 for the
years ended December 31, 2000, 1999 and 1998.
Year Ended December 31, 2000 Compared to Year Ended December 31,
1999.
NET SALES. Total sales for 2000 increased by 5.3% from 1999 to
$41,975,445 from $39,856,911 in 1999. The following table shows
sales by business segments for the years 2000 and 1999:
Business Segment 2000 1999 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 8,085,710 $ 7,543,642 7.2
EMT, fire, police
equipment and
supplies 4,785,415 7,045,266 (32.1)
Pharmacy chain 29,104,320 25,268,003 15.2
Total for business
segments $41,975,445 $39,856,911 5.3
The diabetic, medical and surgical supplies segment's
increase resulted from continued growth of its Nevada division,
the continuing growth of its respiratory division, a continuing
focus on marketing to the nursing home and physician markets and
growth in Internet sales.
The EMT, fire, police equipment and supplies segment had a
decrease of $2,259,851 in 2000 as compared to 1999 sales. This
decrease was a result of one division whose sales decreased
$637,048, losing sales to competitors that are taking more share
of the market. This division is working to offset this with a move
to a new location and increased advertising. Another division had
a decrease of $1,607,211. The main reason was the Company's
decision to focus more on fire equipment and supplies and less on
fire truck sales which have lower profit margins. Fire truck
sales in 1999 were approximately $2.1 million as compared to $0 in
2000.
The Pharmacy chain segment had an increase of $3,836,317.
This increase in sales is 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.
GROSS PROFIT MARGINS. Our overall gross margins were 21.3% in
2000 as compared 18.9% in 1999.
The following is a table of gross margin percentages by business
segments for the years 2000 and 1999:
Business Segment 2000 1999
Diabetic, medical and
surgical supplies 28.9 25.3
EMT, fire, police
equipment and supplies 21.7 15.7
Pharmacy chain 19.2 17.9
Total for business
segments 21.3 18.9
The diabetic, medical and surgical supplies segment's gross
margin increased 3.6% 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.
The EMT, fire, police equipment and supplies segment's gross
margin increased by 6%. One division of this segment actually had
a decline is trying to offset this decline with a move to a new
location and increased advertising and marketing. Another
division had an increase of 14.9% in their gross margins over 1999
due to $0 in fire truck sales in 2000 as compared to $2,152,000 in
1999. They have decided to focus more on fire equipment and
supplies and less on fire truck sales which have lower margins.
The Pharmacy chain segment's gross margin increased in 2000
to 19.2% as compared to 17.9% in 1999 because of increased sales
volume and better product sourcing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated
selling, general and administrative expenses increased 5% in 2000
to $9,465,463 as compared to $9,015,371 in 1999.
The following table shows the break down by business segments
for the years 2000 and 1999:
Business Segment 2000 1999 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 2,476,336 $ 1,994,583 24.2
EMT, fire, police
equipment and
supplies 1,253,110 1,410,013 (11.1)
Pharmacy chain 5,114,120 4,845,938 5.5
Corporate 621,897 764,837 (18.7)
Total for business
segments $ 9,465,463 $ 9,015,371 5.0
The diabetic, medical and surgical supplies segment's
increases were primarily due to higher labor costs and increased
sales volume.
The EMT, fire, police equipment and supplies segment had a
decrease in its selling, general and administrative costs which
can be attributed to decreased sales and expenses attributed to
those sales and decreased wages.
The Pharmacy chain segment had an increase which was the
result of higher labor costs and increased sales volume.
The Corporate segment's 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 communications with the investment community as well
as with its shareholders and potential shareholders.
CONTINUING OPERATIONS. We sustained a loss from continuing
operations of $330,966 in 2000 as compared to a loss of $1,428,625
in 1999.
The following table shows the break down by business segments
for the years ended 2000 and 1999:
Business Segment 2000 1999
Diabetic, medical and
surgical supplies $ (148,122) $ (112,586)
EMT, fire, police
equipment and
supplies (319,849) (572,562)
Pharmacy chain 485,586 (253 496)
Corporate (348,581) (489,981)
Total for business
segments $ (330,966) $(1,428,625)
The diabetic, medical and surgical supplies segment's loss
was mainly from its Internet division with a 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. The Internet division
is concentrating on increasing sales and margins to offset its
overhead.
The EMT, fire, police equipment and supplies segment had a
division in which its sales decreased $637,048 and its gross
margin declined 3.9% due to increased competition in its market
place. As a result of continuing and increasing operating losses,
it recorded an impairment charge of $42,666 to write off its
remaining goodwill. This division is trying to offset this with
a move to a new location and increased advertising and marketing.
Another division of this segment had a reduction in its net loss
of $419,865 as compared to 1999 due to an impairment charge of
$280,445 in 1999 to write off the remaining goodwill and its
gross margin increased from 10.4% in 1999 to 25.3% in 2000.
The Pharmacy chain segment had a net income of $485,606 in
2000 as compared to a net loss of $253,496 in 1999. The increase
in performance was due to increased sales volume and better
product sourcing. It also received a settlement in the third
quarter of 2000 of approximately $89,000 for manufacturer
overcharges.
The Corporate segment had a reduction in their net loss of
$157,730 as compared to 1999.
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
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
receivable from a lawsuit judgment and patents in 2000 as
current and non current assets of discontinued operations.
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.
Year Ended December 31, 1999 Compared to Year Ended December 31,
1998.
NET SALES. Total sales for 1999 increased by 7.9% from 1998 to
$39,856,911 from $36,936,034 in 1998. The following table
shows sales by business segments for the years 1999 and 1998:
Business Segment 1999 1998 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 7,543,642 $ 6,664,840 13.2
EMT, fire, police
equipment and
supplies 7,045,266 7,419,487 (05.0)
Pharmacy chain 25,268,003 22,851,707 10.6
Total for business
segments $39,856,911 $36,936,034 7.9
The diabetic, medical and surgical supplies segment's sales
increased $878,802 from 1998 to 1999. One division had an
increase of $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. Its diabetic
division's revenues increased primarily due to increased radio and
TV advertising.
The EMT, fire, police equipment and supplies segment sales
decreased by $374,221. One division'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 this division's sales to decline in the short
term with expected increases in gross margin.
The Pharmacy chain segment's sales increased $2,416,296. The
reason for this increase in sales is increased volume on prescrip-
tion 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.
GROSS PROFIT MARGINS. Our overall gross margin percentages were
18.9% in 1999 as compared 21.0% in 1998.
The following is a table of gross margin percentages by business
segments for the years 1999 and 1998:
Business Segment 1999 1998
Diabetic, medical and
surgical supplies 25.3 24.7
EMT, fire, police
equipment and
supplies 15.7 19.8
Pharmacy chain 17.9 20.3
Total for business
segments 18.9 21.0
The diabetic, medical and surgical supplies segment's gross
margin had a slight increase of .6% in their margins.
The EMT, fire, police equipment and supplies segment was due
to a division having 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.
The Pharmacy chain segment's gross margin continues to
decline due to lower reimbursements from managed care organiza-
tions. Management believes they can off set this decline by
increased sales volumes and better product sourcing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated
selling, general and administrative expenses increased 10.5% in
1999 to $9,015,371 from $8,157,634 in 1998:
The following table shows the break down by business segments
for the years 1999 and 1998:
Business Segment 1999 1998 % increase
(decrease)
Diabetic, medical and
surgical supplies $ 1,994,583 $ 1,715,990 16.2
EMT, fire, police
equipment and
supplies 1,410,013 1,573,936 (10.4)
Pharmacy chain 4,845,938 4,418,141 9.7
Corporate 764,837 449,567 (70.1)
Total for business
segments $ 9,015,371 $ 8,157,634 10.5
The diabetic, medical and surgical supplies segment's
Internet division had $69,408 in start up and web site development
costs. The diabetic division had increased costs due primarily to
increased radio and TV advertising and personnel costs.
The EMT, fire, police equipment and supplies segment decrease
was due to a reduction of administration overhead and the closing
of its service department in Massachusetts.
The Pharmacy chain segment's costs increased because of
higher labor costs and cost directly associated with increased
sales volume.
The Corporate business segment's 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.
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 shows the break down by business segments
for the years ended 1999 and 1998:
Business Segment 1999 1998
Diabetic, medical and
surgical supplies $ (112,586) $ (104,583)
EMT, fire, police
equipment and
supplies (572,562) (132,909)
Pharmacy chain (253,496 413,956
Corporate (489,981) (22,891)
Total for business
segments $(1,428,625) $ 153,373
The diabetic, medical and surgical supplies segment's loss
increased due to start up and web site development cost. The
diabetic division had increased costs due to increased radio and
TV advertising and personnel costs.
The EMT, fire, police equipment and supplies segment's
continuing margin declined and 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 one
of our divisions.
The Pharmacy chain segment's decrease in income from
continuing operations was largely due to the declining profit
margins in the pharmacy business. In addition, the Company
benefited from the sale of pharmacies which resulted in a gain
of $365,000 in 1998.
The Corporate business segment recorded an expense of
$368,750 for the issuance of warrants to its public relations
consulting firm. As a result of having less cash on hand, we
earned less interest income in 1999 as compared to 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.
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. See the discussion under Item
1."Description of Business". The write off of our investment in
Vectors resulted in a net charge to discontinued operations of
$908,138 in 1998.
Liquidity and Capital Resources
Net cash used in operating activities was $165,207 for the
year ended June 30, 2001 as compared to $502,544 for the
same period ended June 30, 2000. The primary use of cash from
operations in 2001 was to fund operations for our nutritional,
fire, police and rescue equipment and supplies, medical equipment
and supplies, Internet and corporate operations. We partially
offset the net loss by increases in accounts payable.
In 2001 and 2000, the net cash provided by (used in)
investing activities was $22,092 and $(46,861), respectively. The
increase was largely due to the proceeds received from marketable
securities of $179,527.
Net cash used in financing activities was $286,299 for 2001
as compared to $132,603 in 2000. The increase is due to increased
repayments of long term debt and notes to related party.
In June 2000, we signed an agreement to acquire
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. The $100,000 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, our development
of new web sites, our ability through NDC to compete with larger
national distributors, Eaton's ability to reach new employment
agreements with its five minority shareholders (and thereby avoid
their ability to compete), Eaton's ability to reduce and control
costs and Eaton's opportunity to serve assisted living facilities
and compete within its market, are forward-looking statements
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) 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 state of
the economy in the local communities in New England where the
Company does business; (3) the general state of the economy in the
United States and elsewhere; (4) the failure of suppliers to
timely deliver products; (5) factors which increase costs in the
health care industry; (6) the loss of any single large customer;
and (7) future governmental regulation of pharmaceutical pricing;
(8) ADCO's ability to continue to efficiently serve its
respiratory therapy customers: and (9) the impact of competition
from Michael Anton on Anton's business.
Recent Accounting Pronouncements
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"), which
establishes standards for reporting business combinations entered
into after June 30, 2001 and supercedes APB Opinion 16, "Business
Combinations" and FASB 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises". SFAS requires that all
business combinations be accounted for as purchase transactions.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets"
("FASB 142"), which establishes standards for financial
accounting and reporting for intangible assets acquired
individually or with a group of other assets and for the
reporting of goodwill and other intangible assets acquired in
a business acquisition subsequent to initial accounting under
FASB 141. FASB 142 supercedes APB Opinion 17, "Intangible
Assets" and related interpretations. FASB 142 is effective
for fiscal years beginning after December 15, 2001. The
Company will adopt FASB 142 for its fiscal year commencing
July, 2002, and the Company has not concluded the effect,
if any, FASB 142 will have on its financial statements.
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 June 30, 2001,
December 31, 2000 and 1999 F 3-4
Consolidated Statements of Operations for the
six months ended June 30, 2001 and for the years
ended December 31, 2000, 1999 and 1998 F 5-6
Consolidated Statements of Changes in Shareholders'
Equity for the six months ended June 30, 2001 and
for the years ended December 31, 2000, 1999 and 1998 F 7
Consolidated Statements of Cash Flows for the six
months ended June 30, 2001 and for the years ended
December 31, 2000, 1999 and 1998 F 8-10
Notes to Consolidated Financial Statements F 11-29
Schedule to Consolidated Financial Statements F 30
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 June 30, 2001 and December 31,
2000 and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the six
months ended June 30, 2001 and 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 audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audits 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 audits provide 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
June 30, 2001 and December 31, 2000 and the results of its
operations and cash flows for the six months ended June 30,
2001 and for the year ended December 31, 2000, in conformity
with accounting principals generally accepted in the United
States of America.
Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule
listed in the Index to Consolidated Financial Statements and
Schedule is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of
the basic financial statements and in our opinion, fairly states
in all material respects the financial data required to be set
forth therein in relation to the basic financial statements
taken as a whole.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
October 3, 2001
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Nyer Medical Group, Inc. and Subsidiaries:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Nyer Medical Group, Inc. and its
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.
In addition, in our opinion, the financial statement schedule
list in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements and financial statement schedule 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
April 07, 2000
F-2
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001, DECEMBER 31, 2000 AND 1999
ASSETS
2001 2000 1999
Current assets:
Cash and cash equivalents $ 374,423 $ 803,837 $ 1,066,562
Investment in marketable
securities 821,798 1,001,325 1,492,185
Accounts receivable, less
allowance for doubtful
accounts of $348,339 at
June 30, 2001, $237,757
and $177,739 at December
31, 2000 and 1999,
respectively 4,447,290 3,825,440 3,704,025
Inventories, net 4,720,835 4,483,448 4,289,055
Prepaid expenses 284,631 148,278 104,923
Receivables from related
parties 9,798 3,932 3,877
Current assets of discon-
tinued operation - 373,012 472,855
Total current assets 10,658,775 10,639,272 11,133,482
Property, plant and equipment,
at cost:
Land 92,800 92,800 92,800
Building 641,508 641,508 641,508
Leasehold improvements 743,619 646,839 543,807
Machinery and equipment 175,952 161,614 125,263
Transportation equipment 335,059 352,953 338,971
Office furniture, fixtures,
and equipment 1,006,113 924,039 865,310
2,995,051 2,819,753 2,607,659
Less accumulated deprecia-
tion and amortization (1,569,366) (1,401,223) (1,073,393)
1,425,685 1,418,530 1,534,266
Goodwill and other deferred
assets, net of accumulated
amortization of $583,723
in June 30, 2001, $543,174
and $412,687 at December
31, 2000 and 1999,
respectively 292,457 333,006 472,295
Advances due from related
companies 38,267 36,615 33,592
Non-current assets of dis-
continued operation 187,893 207,408 -
518,617 577,029 505,887
Total assets $12,603,077 $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
JUNE 30, 2001, DECEMBER 31, 2000 AND 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
2001 2000 1999
Current liabilities:
Current portion of notes
payable due related
party $ 206,110 $ 193,419 $ 161,508
Current portion of
long-term debt 73,656 291,978 222,879
Accounts payable 4,029,420 3,715,992 3,458,835
Accrued payroll and
related taxes 305,758 277,543 235,046
Accrued expenses and other
liabilities 202,372 306,213 224,117
Total current
liabilities 4,817,316 4,785,145 4,302,385
Notes payable due related
party, net of current
portion 241,805 301,622 442,820
Long-term debt, net of
current portion 216,749 250,280 555,808
Minority interest 765,552 685,468 580,312
Deferred credit 154,420 - 63,339
Commitments (Notes 6 and 10)
Shareholders' equity:
Class A preferred stock, par
value $.0001, authorized,
issued and outstanding:
2,000 shares 1 1 1
Class B preferred stock, series
1, par value $.0001, authorized:
2,500,000; issued and outstanding:
1,000 shares at June 30, 2001,
December 31, 2000 and 1999
Common stock, par value $.0001
authorized: 10,000,000 shares;
issued: 3,769,062 at June 30,
2001, 3,753,189 at December 31,
2000 and 3,748,789 at December
31, 1999 377 375 375
Additional paid-in capital 17,691,946 17,679,268 17,657,268
Stock sale receivable (115,500) (115,500) (115,500)
Treasury stock at cost
(11,000 shares at June 30,
2001, December 31, 2000
and 1999) (52,249) (52,249) (52,249)
Accumulated deficit (11,117,340)(10,899,579)(10,260,924)
Total shareholders'
equity 6,407,235 6,612,316 7,228,971
Total liabilities and
shareholders' equity $12,603,077 $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 SIX MONTHS ENDED JUNE 30, 2001 AND FOR THE YEARS ENDED
DECEMBER 31, 2000, 1999, AND 1998
2001 2000 1999 1998
Net sales $23,903,627 $41,975,445 $39,856,911 $36,936,034
Cost and expenses:
Cost of goods sold 18,954,144 33,023,640 32,321,105 29,189,281
Selling and retail 3,035,123 5,647,018 5,387,487 4,743,353
Warehouse and delivery 413,466 784,742 681,957 578,755
Administrative 1,596,277 3,033,703 2,945,927 2,835,526
Impairment loss (Note 3) - 42,666 280,445 -
23,999,010 42,531,769 41,616,921 37,346,915
Operating loss (95,383) (556,324) (1,760,010) (410,881)
Other income (expense):
Interest expense (26,640) (89,326) (102,850) (122,397)
Interest income 47,133 173,317 146,821 269,258
Other (Note 6) 45,106 266,523 123,369 543,602
Total other income 65,599 350,514 167,340 690,463
(Loss) income before
minority interest (29,784) (205,810) (1,592,670) 279,582
Minority interest income
(expense) (80,084) (105,156) 164,045 (70,262)
(Loss) income from
continuing
operations before
income taxes (109,868) (310,966) (1,428,625) 209,320
Income taxes 20,000 20,000 - 55,747
(Loss) income from
continuing operations
after income taxes (129,868) (330,966) (1,428,625) 153,573
F-5
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 2001 AND FOR THE YEARS ENDED
DECEMBER 31, 2000, 1999, AND 1998, continued
2001 2000 1999 1998
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 (87,893) (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 dis-
continued
operations (87,893) (307,689) (744,020) (1,993,764)
Net Loss $ (217,761)$ (638,655) $(2,172,645) $(1,840,191)
Basic and diluted loss
per share:
Continuing operations $ (.04) $ (.09) $ (.38) $ .04
Discontinued operations (.02) (.08) (.20) (.53)
Basic and diluted loss
per share $ (.06) $ (.17) $ (.58) $ (.49)
Weighted average common
shares outstanding 3,753,189 3,752,779 3,748,789 3,742,085
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 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 consideration
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
Issuance of
common stock - - - - 15,873 2
Net loss - - - - - -
Balance,
June 30, 2001 2,000 $ 1 1,000 - 3,769,062 $377
The accompanying notes are an integral part of the
consolidated financial statements.
F-7-1
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND FOR THE YEARS
ENDED DECEMBER 31, 2000, 1999 and 1998, continued
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
Issuance of
common stock 12,678 - - - - 12,680
Net loss - - - - (217,761) (217,761)
Balance,
June 30,
2001 $17,691,946 $(115,500) (11,000)$(52,249)$(11,117,340)$6,407,235
The accompanying notes are an integral part of the
consolidated financial statements.
F-7-2
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2001 AND FOR
THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2001 2000 1999 1998
Cash flows from operating
activities:
Net loss $ (217,761) $ (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 173,627 347,335 291,623 272,935
Amortization 40,549 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 80,084 105,156 (164,045) 70,262
Increase in deferred credit 200,000 - - -
Decrease in deferred credit (45,580) (63,339) (54,770) (55,224)
Changes in certain working
capital elements (396,126) (136,359) 383,040 (98,731)
Net cash flows used in
operating activities (165,207) (239,896) (693,037) (375,460)
Cash flows from investing
activities:
Acquisition of stores - - (273,729) (100,000)
Purchase of property, plant
and equipment (175,298) (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 179,527 490,860 - -
Proceeds from sale of Genetic
Vectors' stock - - - 410,210
Proceeds from sale of other
equity securities - - - 151,694
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
2001 2000 1999 1998
Proceeds from sale of
pharmacies - - 50,800 385,000
Net change in advances due
from related companies (1,652) (3,023) 896 3,011
Increase (decrease) in
other assets, net 19,515 (407) 104 14,411
Net cash provided by
(used in) investing
activities 22,092 300,886 (2,130,162) 330,095
Cash flows from financing
activities:
Proceeds from issuance
of long-term debt - 18,000 37,677 27,256
Payments of long-term debt (251,853) (254,428) (246,412) (273,708)
Net (repayments) borrowings
of notes to related
party (47,126) (109,287) (38,492) (15,956)
Payments for purchase of
treasury stock - - - (52,249)
Proceeds from exercise of
stock options - 22,000 - -
Issuance of common stock 12,680 - - -
Net cash used in
financing activities (286,299) (323,715) (247,227) (314,657)
Net decrease in cash and
cash equivalents (429,414) (262,725) (3,070,426) (360,022)
Cash and cash equivalents
at beginning of
period 803,837 1,066,562 4,136,988 4,497,010
Cash and cash equivalents
at end of period $ 374,423 $ 803,837 $1,066,562 $ 4,136,988
Changes in certain working
capital elements:
Accounts receivable, net $ (254,322) $ (491,415) $ (143,648) $ (384,822)
Inventories, net (237,387) 15,607 (278,075) 81,042
Prepaid expenses (136,353) (42,246) (987) 13,514
Receivables from related
parties (5,866) (55) 44,262 (29,963)
Accounts payable 313,428 257,157 831,543 210,113
Accrued payroll and related
taxes 28,215 42,497 28,581 147,370
Accrued expenses and other
liabilities (103,841) 82,096 (98,636) (135,985)
Net change $ (396,126) $ (136,359) $ 383,040 $ (98,731)
The accompanying notes are an integral part of
the consolidated financial statements.
F-9
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
Supplemental disclosures of cash flow information:
Cash paid during
the year for: 2001 2000 1999 1998
Interest $ 15,543 $ 61,282 $ 100,495 $ 117,466
Income taxes $ 19,120 $ 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
Non-cash transactions:
In June 2001, we issued 15,873 shares of the Company's common stock
as payment of a liability in connection with an acquisition which
did not occur. The stock was valued at the market value of $36,190.
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-10
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,
was formed to franchise retail pharmacies.
Corporate. Included in the corporate segment are two entities that are
accounted for as discontinued operations. Nyer Nutritional Systems, Inc.,
(Nyer Nutritional), 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 19.5% 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
continued
F-11
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
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.
The Company recognizes pharmacy revenues at the time the merchandise
is sold. Return activity is immaterial to revenues and results of
operations in all periods presented.
Vendor Rebates and Allowances
Rebates and allowances received from vendors that are based on future
purchases are initially deferred and are recognized as other income
when the related inventory is sold. Rebates and allowances not tied
directly to purchases are recognized as a reduction of selling, general
and administrative expense on a straight-line basis over the related
contract term.
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 June 30, 2001, market-
able securities consisted of federal government agency notes which mature
through October 15, 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, 73% are on the LIFO method. The replacement costs of
inventory exceeded LIFO cost by $354,357 for six months ended June 30,
2001, $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
continued
F-12
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Property, plant and equipment continued,
operations as incurred. When assets are retired or disposed of, the cost
and accumulated depreciation thereon are removed from the accounts, and
any gains or losses are included in operations. Leasehold improvements
are amortized using the straight-line method over the lease term.
For financial reporting purposes, depreciation 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 $214,176 for six months ended June 30,
2001 and $444,356, $426,864 and $416,145 for the years ended December 31,
2000, 1999 and 1998, respectively.
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.
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 is 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 5 for
discussion of impairment charges recorded during 2000 and 1999.
continued
F-13
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Advertising
Advertising costs are expensed as incurred. Advertising expenses, net
of reimbursements, for the six months ended June 30, 2001, and for the
years ended December 31, 2000, 1999 and 1998, were $54,150, 120,032,
162,810 and 109,752, respectively.
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 approximates their fair value as of June 30,
2001, and December 31, 2000 and 1999,based upon the borrowing rates
currently available to the Company for loans with similar terms and
maturities.
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.
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. Stock options granted during the year were not included
in the computation of net loss per share because the effect of
inclusion would be anti-dilutive due to the Company's net loss. The
diluted weighted average number of common shares outstanding equaled
basic for the six months ended June 30, 2001, and for the years ended
December 31, 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 11).
continued
F-14
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Reclassifications
Certain amounts in 1998 have been reclassified to conform to the 2000
and 1999 presentation.
Recent Accounting Pronouncements
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"), which
establishes standards for reporting business combinations entered
into after June 30, 2001 and supercedes APB Opinion 16, "Business
Combinations" and FASB 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises". SFAS requires that all
business combinations be accounted for as purchase transactions.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets"
("FASB 142"), which establishes standards for financial accounting
and reporting for intangible assets acquired individually or with
a group of other assets and for the reporting of goodwill and other
intangible assets acquired in a business acquisition subsequent to
initial accounting under FASB 141. FASB 142 supercedes APB Opinion
17, "Intangible Assets" and related interpretations. FASB 142 is
effective for fiscal years beginning after December 15, 2001. The
Company will adopt FASB 142 for its fiscal year commencing July, 2002,
and the Company has not concluded the effect, if any, FASB 142 will
have on its financial statements.
3. Change in fiscal year:
The Company changed its fiscal year from December 31 to June 30. The
unaudited information for the prior comparable period for the six months
ended June 30, 2000 is as follows:
Net sales $ 20,373,366
Costs and expenses (20,631,561)
Operating loss (258,195)
Other income 133,892
Loss before minority
interest (124,303)
Minority interest expense (19,251)
Loss from continuing
operations (143,554)
Discontinued operations (165,287)
Net loss $ (308,841)
Basic and diluted loss
per share: $(.08)
continued
F-15
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued operations:
Genetic Vectors, Inc.
The Company currently owns 19.5% 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,
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 pink sheets 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
as of June 30, 2001 and December 31, 2000 and 1999.
The most recent reported financial position and results of Vectors were
unavailable as of the date of this Report. The last reported information
was for nine months ended September 30, 2000 and as of and for the
year ended December 31, 1999.
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. 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 two 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.
In August 2001, the litigation was settled whereby each party dismissed
continued
F-16
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued operations: continued,
its case against the other and one defendant will pay Nyer Nutritional
$25,000 per quarter commencing September 2001 for six or seven quarters,
depending upon certain circumstances. In addition, certain royalty
payments may be made to Nyer Nutritional depending on certain future sales
by that Company.
The Company reported the assets to be disposed of (primarily patents
and fixed assets) as discontinued operations at June 30, 2001. All
equipment is being listed for sale on the Company's website.
Subsequent to year end, the Company settled litigation regarding the
patents. The settlement approximates the net book value of the patents.
Revenues for Nyer Nutritional were $0 for the six months ended June
30, 2001 and $0, $0 and $268,431 for the years ended 2000, 1999 and 1998.
5. 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.
6. Related party transactions:
Receivables from related parties consisted of the following for six months
at June 30, 2001 and at December 31, 2000 and 1999:
2001 2000 1999
Receivables from related party $ 9,798 $ 3,932 $ 3,877
Advances due from related companies,
non-current $ 38,267 $ 36,615 $ 33,592
A portion of the receivable from related party in the amount of $6,218 is
for products sold to a company which is owned by an officer and director of
the Company. Total sales were $2,908 for six months ended June 30, 2001
and $515, $4,475 and $15,968 for the years ended December 31, 2000, 1999
and 1998, respectively. The remaining balance of $3,580 is interest due
on a loan to the Company's Chief Executive Officer.
continued
F-17
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Related party transactions: continued,
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) was
$447,915 for the six months ended June 30, 2001 and was $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 $12,691 as of June 30, 2001 and $31,911 and
$41,508 at December 31, 2000 and 1999, respectively.
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. The Company has agreed to
extend the note to August of 2002. This receivable is included in
shareholders' equity section of the balance sheet. As of June 30, 2001,
interest was due in the amount of $3,580.
7. 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. was formed to franchise 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.
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 was recorded in other
income.
continued
F-18
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Acquisitions and divestitures: continued,
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 was 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.
8. Debt:
Long-term debt at June 30, 2001, December 31, 2000 and 1999, consisted of
the following:
2001 2000 1999
ADCO Surgical Supply, Inc:
Mortgage payable in equal monthly
installments of $4,675 including
interest at 8 1/4% collateralized
by land and building, due in
March 2008. $261,078 $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 install-
ments 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-19
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Debt: continued,
Note 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 (6.75% at
June 30, 2001, 8.50% at December
31, 2000 and December 1999) and
is collateralized by certain assets
of Eaton. The note was converted
to a purchase commitment bonus.
(see Note 10 Commitments) - 200,000 200,000
Other subsidiaries
Notes payable due in various
installments at rates ranging up to
8%, collateralized by certain
equipment and vehicles. 29,327 41,817 49,556
Total debt 290,405 542,258 778,687
Less current portion 73,656 291,978 222,879
$ 216,749 $ 250,280 $ 555,808
At June 30, 2001, the following are the maturities of long-term debt
for each of the next five years:
2002 $ 73,656
2003 60,056
2004 56,400
2005 58,800
2006 41,493
$ 290,405
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.
9. Income taxes:
At June 30, 2001, the Company had remaining net operating loss (NOL)
carryforwards of approximately $2,187,000 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
continued
F-20
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income taxes: continued,
certain provisions of the Internal Revenue Code. In addition, certain
provisions dealing with consolidated returns may limit the utilization
of NOL carryforwards by certain members of the consolidated group.
The tax effect of temporary differences that give rise to significant
portions of deferred taxes at June 30, 2001, December 31, 2000 and
1999 consisted of:
2001 2000 1999
Deferred tax assets(liabilities):
Depreciation $ 38,000 $ 58,000 $ 22,000
Reserves not recognized for tax
purposes 271,000 370,000 388,000
2001 2000 1999
Net operating loss carryforwards 875,000 1,094,000 869,000
Total net deferred tax assets
before valuation reserve 1,184,000 1,522,000 1,279,000
Valuation reserve 1,184,000 (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.
10. 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 six months ended June 30, 2001 was
$358,850 and $764,431, $784,874 and $707,388 for the years ended December
31, 2000, 1999 and 1998, respectively.
Future minimum lease payments at June 30, 2001 are as follows:
2002 $ 597,806
2003 488,881
2004 438,312
2005 371,826
2006 309,320
Thereafter 434,047
$2,640,192
Purchase commitment
A subsidiary of the Company had an agreement with a supplier to purchase
$2,600,000 of inventory each quarter through the year 2001 or a total
continued
F-21
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Commitments: continued,
purchase commitment of $52,000,000. The subsidiary received $200,000
from the supplier upon signing of the agreement, which was 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. In 2001, the
line of credit was converted to a signing bonus due to a new purchase
agreement. This new agreement has the same terms as the previous
agreement. This is classified on the balance sheet under deferred
credit as of June 30, 2001.
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 per year ending December 31, 1998, $50,000
per year ending December 31, 1999, $75,000 per year ending December 31,
2000 and $100,000 per 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 4).
11. 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.
In fiscal 2001, the Company issued 15,873 shares of common stock as
payment of a liability in connection with an acquisition, which did not
occur. These shares were valued at the market price of $36,190,
less related expenses of $23,500.
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
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
continued
F-22
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Shareholders' equity: continued,
$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 were 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 thereafter. 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 is currently on a month to month consulting agreement. 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-Scholes options pricing model, assuming
5.9% risk-free interest, 0% dividend yield, 60% volatility, and three year
expected life.
12. 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 Company 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 June 30, 2001:
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 54,000 4.9 $ 2.36
$ 4.62-$6.88 717,600 8.8 $ 6.14 683,600 8.8 $ 5.91
$16.75 36,000 5.3 $16.75 36,000 5.3 $16.75
continued
F-23
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Employees, directors and consultants stock options and incentive plan:
continued,
A summary of changes in common stock options during the six months ended
June 30, 2001 and December 31, 2000, 1999 and 1998 are:
2001 2000 1999 1998
Weighted Weighted Weighted Weighted
average average average average
exercise exercise exercise exercise
Shares price Shares price Shares price Shares price
Outstanding
at the
beginning
of the
year 819,600 $6.30 788,000 $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 (10,000) 4.75 (4,000) 3.38 - - (10,000) 16.75
Outstanding
at the
end of
the year 809,600 $6.30 819,600 $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 the years ended December 31, 2000, 1999 and 1998 for options granted.
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 calculation was not presented for the six months ended June 30, 2001,
because no options were granted for the period.
continued
F-24
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Employees, directors and consultants stock options and incentive plan:
continued,
The fair value of stock options in the pro forma accounts for the years
ended December 31, 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
13. Business segments:
The Company had three active business segments for six months ended
June 30, 2001 and for the years ended 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 by the
management approach which analyses segments based on products or services
offered for sale. Corporate assets include assets of discontinued operations.
Summary data for the six months ended June 30, 2001:
Diabetic, EMT, Fire,
Medical, and Police Equip Pharmacy
Surgical Supplies and Supplies Chain Corporate Consolidated
Net Sales $4,251,242 $2,739,012 $16,913,373 $ - $23,903,627
Operating
(loss)income (142,427) (87,745) 409,301 (274,512) (95,383)
Total assets 2,964,263 1,754,287 6,794,607 1,089,920 12,603,077
Capital
Expenditures 22,153 53,950 131,302 - 207,405
Depreciation
and
amortization 68,107 42,974 101,088 2,007 214,176
Interest income (6,928) - (5,978) (34,227) (47,133)
Interest
expense 12,963 13,440 237 - 26,640
continued
F-25
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Business segments: continued,
Summary data for the year ended December 31, 2000:
Diabetic, EMT, Fire,
Medical, and Police Equip Pharmacy
Surgical Supplies 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:
Diabetic, EMT, Fire,
Medical, and Police Equip Pharmacy
Surgical Supplies 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-26
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Business segments: continued,
Summary data for the year ended December 31, 1998:
Diabetic, EMT, Fire,
Medical, and Police Equip Pharmacy
Surgical Supplies 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-27
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Selected quarterly data (unaudited):
2001
First Second
Quarter Quarter
Net sales $11,210,448 $12,693,179
Gross profit $ 2,236,112 $ 2,713,371
(Loss) income from
continuing operations $ (136,587) $ 6,719
Net loss from discon-
tinued operations $ (22,154) $ (65,739)
Net loss $ (158,741) $ (59,020)
Basic and diluted
loss per share:
Continuing
operations $ (.03) $ (.01)
Discontinued
operations (.01) (.01)
Net loss $ (.04) $ (.02)
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)
continued
F-28
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Selected quarterly data (unaudited): continued,
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)
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)
continued
F-29
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions Additions
Balance at Charged to Charged to Deductions Balance at
Beginning of Costs and Other for payments End of
Period Expenses Accounts or Writeoffs Period
Year ended December
31, 1998:
Allowance for
doubtful accounts
deducted from
accounts receivable $159,023 $ 29,053 $ - $ - $ 188,076
Allowance for
obsolescence
(deducted from
inventory) 370,000 241,750 - - 611,750
$529,023 $270,803 $ - $ - $ 799,826
Year ended December
31, 1999:
Allowance for
doubtful accounts
deducted from
accounts receivable $188,076 $ 17,616 $ - $ (27,953)$ 177,739
Allowance for
obsolescence
(deducted from
inventory) 611,750 142,261 - - 754,011
$799,826 $159,877 $ - $ (27,953)$ 931,750
Year ended December
31, 2000:
Allowance for
doubtful accounts
deducted from
accounts receivable $177,739 $ 60,018 $ - $ - $ 237,757
Allowance for
obsolescence
(deducted from
inventory) 754,011 24,864 - (91,013) 687,862
$931,750 $ 84,882 $ - $ (91,013)$ 925,619
Period ended June
30, 2001:
Allowance for
doubtful accounts
deducted from
accounts receivable $237,757 $113,737 $ - $ (3,155)$ 348,339
Allowance for
obsolescence
(deducted from
inventory) 687,862 86,495 - - 774,357
$925,619 $200,232 $ - $ (3,155)$1,122,696
The FASB 109 Valuation Allowance has been omitted because such information
is disclosed in Note 9 to the Consolidated Financial Statements.
F-30
ITEM 9. Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure.
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 76 Chairman of the Board,
President, Secretary,
and Director
William J. Clifford, Jr. 51 Vice-President-Sales
and Director
Karen L. Wright 39 Treasurer, Vice-
President-Finance,
Assistant Secretary,
and Director
Stanley Dudrick, M.D. 66 Director
Donato Mazzola 42 Director
Donald C. Lewis, Jr. 63 Director
Kenneth L. Nyer, M.D. 43 Director
The Company's Board of Directors is divided into three classes of
directors. Messrs. Lewis and Mazzola and Dr. Nyer's term expires in 2001
and Messrs. Nyer and Clifford and Ms. Wright's term expires in 2002. Ms.
Wright resigned as a director in September 2001. Dr. Stanley Dudrick's
term expires in 2003. There are three vacancies.
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 served on the Board from April 1997 to September
2001. She has been a director of Nyle since 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.
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, except Mr. Mazzola has failed to file one Form 4.
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 are 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 six months ended June 30, 2001 and for fiscal years
ended December 31, 2000, 1999 and 1998 to the Company's chief executive
officer. A subsidiary's former president and chief executive officer
received compensation exceeding $100,000 for the fiscal year ended
December 31, 1998. No other executive officer received compensation
exceeding $100,000 during the six months ended or for the fiscal years
ended December 31, 2000, 1999, or 1998.
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
(a) (b) (c) (e) (g)
Name and Other Securities
principal annual underlying
position Year Salary($) compensation($) options/SARS(#)
Samuel Nyer 2001 $ 70,000 $2,100 0
Chief 2000 140,000 $4,200 0
Executive 1999 127,308 4,200 500,000
Officer 1998 125,000 4,2001 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
Employment Agreements
The Company employs its officers and employees pursuant to oral
agreements except as disclosed in the next paragraph.
The Company entered into a two-year written employment agreement
with Mr. Samuel Nyer at a base annual salary of $140,000 on 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 five minority shareholders currently have an oral employment
agreement with a base salary for each of $104,000. Each are also
provided full insurance coverage on the employee's personal vehicle and
a vehicle allowance with an annual cost of $3,600 and 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 employment agreements of the five minority shareholders contained
written non-compete provisions which expire in February 2002. We intend
to negotiate new written employment agreements within the next month.
There can be no assurance that the five minority shareholders will
will enter into new employment agreements with the Company.
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 $71,053.
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) determine the exercise price of shares subject to options; (iv)
determine whether options granted shall be ISOs or Non-Qualified Options;
(v) determine the time or times when the options shall become exercisable,
the duration of the exercise period and when the options shall vest; (vi)
determine whether restrictions such as repurchase options are to be
imposed on shares subject to options and the nature of such restrictions,
if any, and (vii) interpret the Plan and promulgate and rescind rules and
regulations relating to it.
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 September 30, 2001,
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 ownership3 class owned
Common stock, Samuel Nyer 5,446,700 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. 30,000 6 *
1292 Hammond Street
Bangor, Maine 04401
Common stock Karen L. Wright 24,110 7,8 *
1292 Hammond Street
Bangor, Maine 04401
Common stock Stanley Dudrick, M.D. 18,000 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. 25,000 6 *
c/o Nyle International Corp.
72 Center Street
Brewer, Maine 04412
Common Stock Donato Mazzola 4,000 6 *
264 R Washington Street
Wellesley Hills, MA 02481
Common Stock Kenneth L. Nyer, M.D 32,000 6 *
48 Old Orchard Road
New Rochelle, New York 10804
All directors and executive officers 5,593,810 5,6,7,8,
of the Company as a group (eight 70.3%
persons) * less than 1% of class
ITEM 13. Certain Relationships and Related Transactions.
Prior to 1991, the Company and Nyle each engaged in inter-company
loans. At June 30, 2001, the Company was owed $38,267 by Nyle, this
includes accrued interest. As of October 5, 2001, Nyle owed the Company
$38,267 (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.
For information concerning sums owed by Mr. Samuel Nyer to the Company,
see Item 10. "Directors, etc - Stock Option Plan".
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
12th day of October 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 and Assistant
Secretary
/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)
(1) Contained in Registration Statement on Form S-18 filed on
April 13, 1992.
(2) Contained in Form 10-KSB filed April 1996.
(3) Contained in Form 8-K filed August 1996.
(4) Contained in Form 10-KSB filed April 1997.
THIRD AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
NYER MEDICAL GROUP, INC.
Pursuant to Sections 607.0602 and 607.1002, Florida Statutes, the undersigned
hereby certifies that the following Third Amendment to the Articles of
Incorporation of Nyer Medical Group, Inc. has been adopted:
1. The name of the corporation is Nyer Medical Group, Inc.
2. Article IV is amended by adding a new Section A which reads:
(1) 1,000 shares of Series 1 Class B Preferred Stock (the "Series 1 Stock")
may be issued.
(2) The Series 1 Stock is not convertible into common stock but carries the
right to 2,000 votes per share on all matters requiring a vote of the
common shareholders and preferred shareholders.
(3) In all other respects, the Series 1 Stock shall be treated like common
stock except where otherwise provided by the Florida Statutes.
3. The amendment was adopted on September 30, 1996, subject to filing the
Second Amendment to the Articles of Incorporation.
4. This amendment was adopted by the board of directors.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Articles of Incorporation this 29 day of January 1997.
(CORPORATE SEAL) NYER MEDICAL GROUP, INC.
By:// Samuel Nyer
Samuel Nyer, President
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 exercise price.
3 Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934 and includes any 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 70,000 shares of common stock underlying vested options
granted pursuant to the Plan. Also includes 500,000 vested
non-qualified options granted pursuant to Mr. Nyer's employment
agreement.
6 Consists of shares of common stock underlying vested options granted
pursuant to the Plan.
7 Includes 23,000 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.