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, 2002
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 95
State issuer's revenues for its most recent fiscal year: $54,100,058.
The aggregate market value of the Company's voting stock held by
non-affiliates, as of October 11, 2002, was approximately $4,783,452 based upon
the closing price. There were 3,756,962 shares of common stock outstanding as of
October 11, 2002
Documents Incorporated by Reference: None
Transitional Business Disclosure Format:
Yes _ No X
2
PART I
ITEM 1. Description Of Business.
General
Nyer Medical Group, Inc. (Company or Nyer), a Florida corporation
incorporated in 1991, is a holding company with operations in the following
segments:
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.
Medical and surgical equipment and supplies. 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 medical and surgical
equipment and supplies throughout New England and Florida. ADCO also has
operations in the Las Vegas, Nevada area.
Nyer Internet Companies, Inc. (NIC), which is also a wholly-owned
subsidiary, is involved in Internet sales of medical and surgical 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.
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 $45,000 annually. Eaton has a service agreement with us wherein 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 was increased in 2002 from $80,000
to $120,000, annually. The subsidiaries are also required to reimburse the
Company for any additional legal, auditing and accounting fees.
For additional business segment information for the year ended June 30, 2002
and for the six months ended June 30, 2001 and the two years ended December 31,
2000 and 1999, see footnote 14 in the Notes to Consolidated Financial
Statements.
Retail Pharmacies Business - Pharmacy chain
Eaton Apothecary
In August 1996, we acquired 80% of D.A.W., Inc. d/b/a Eaton Apothecary,
(Eaton), a 12 store chain of pharmacies operating in the greater Boston area.
3
Each of the five minority shareholders (except in one case, the husband of
a shareholder) continue employment under a five-year extension of their original
employment contract. Their original five-year employment contract, with Eaton,
commenced in August 1996 and expired August 5, 2001. Control of the Board of
Directors of Eaton is split between representatives from Nyer and the minority
shareholders. Presently, only one representative of Nyer is on the Board of
Eaton. Nyer has nominated a representative and is waiting for Eaton's Board
approval. Additionally, one member of Eaton's management occupies a seat on our
Board of Directors, which is currently vacant.
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 2,200 square feet with
high volume prescription departments in neighborhood locations has fared well
over the past several years. Virtually all of Eaton's stores compete
head-to-head with CVS and Walgreen stores. Pharmacies in supermarkets and deep
discount stores, such as Wal-Mart, 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
2,200 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 ten 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.
Eaton has contracted with four federally qualified health centers
("FQHC's") to provide pharmacy services under a replenishment model consistent
with Section 340B of the Public Health Services Act. Eaton anticipates
significant growth to come through added contracts with FQHC's due to
significant pricing differentials inherent in the Act.
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.
4
Eaton expects sales growth to continue to be strong in its core business,
but expects pressures on margins to further intensify. Budgetary deficits in
Massachusetts have resulted in the Executive Office of Human Services Division
of Health Care Finance and Policy reducing the reimbursement paid to pharmacies
for dispensing Medicaid prescriptions by approximately 4%. Eaton expects other
third party payors to follow suit.
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 as well as motorized
rehabilitative equipment such as stair glides, chair lifts, scooters,
wheelchairs and hospital beds, various kinds of rehabilitative aids, diagnostic
kits, incontinence supplies, and medical equipment (both disposable and
reusable).
ADCO is one of the larger independent wholesale medical distributors
located in New England (excluding national competitors), with a wholesale
customer base of over 1,400 active customers.
ADCO and ADCO South provide over 5,000 stocked items in their respective
warehouses. Additionally, we can purchase items we 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 is 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/ADCO South are members of the National Distribution and Contracts
(NDC), a coalition of three dealer associations; ABCO, Starline, and CIDA. This
is a nationwide group of over 220 wholesale distributors who join together for
private label branded products and price concessions from industry suppliers.
ADCO/ADCO South enjoy 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 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 Bangor,
Maine.
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.
5
Marketing
ADCO/ADCO South continue to market 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, the Company believes we
have certain competitive advantages which enable us to compete favorably with
larger competitors because of our ability to be flexible and creative for their
customers.
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 businesses 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 two active web sites that have interactive and
secure on-line transactions; medicalmailorder.com and physicanEquipment.com. The
synergies from our medical distribution business with our on-line business has
enabled us to grow this subsidiary.
6
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 44% in Massachusetts, 18% in New Hampshire,5% in Vermont, 5% in
Maine, with the remainder outside of New England including 24% 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
7
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% shareholders 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. In March 2001, Michael
and Paula Anton opened a business similar to Anton's business located in the
same area.
Backlog/Seasonality
Anton and Conway do not have significant backlog at any time during the
year.
The operations of Anton and Conway are generally not seasonal.
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 $2,220,259 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 2002, 2001, and 2000. Nyer Nutritional did not have any
sales in 2002.
In December 2000, Nyer Nutritional filed a lawsuit in federal court in
Maine against the proposed buyer. This was settled in August 2001.
8
In May 2002, the Company assigned all of its rights, licenses and interest
in all patents to Nyer Nutritional's minority shareholder. In return, the
minority shareholder released the Company from any and all obligations,
including, without limitation, all royalty payments guaranteed from the 1996
license agreement.
Biotechnology Business
Genetic Vectors, Inc.
In December 1998, the Company wrote off its investment in Genetic Vectors,
Inc. ("Vectors"). As of the date of this Report, we own 737,216 shares of
Vectors' common stock. The Company believes the 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
last reported information was for the nine months ended September 30, 2000 and
as of and for the year ended December 31, 1999.
Employees
The Company believes their employees represent one of their most valuable
resources. As of the date of this Report, including its executive officers, we
have 122 full-time and 103 part-time employees. Eaton employs 62 full-time and
92 part-time employees, ADCO employs 33 full-time and 2 part-time employees,
ADCO South employs 6 full-time employees, Nyer Internet employs 4 full-time
employees, Anton employs 10 full-time employees and 1 part-time employee, Conway
employs 6 full-time employees and 8 part-time salesmen, SCBA uses Conway's
personnel, and the Company directly employs one full-time person. None of 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 located at
1292 Hammond Street, Bangor, Maine, where ADCO's warehouse and retail store are
also located.
Eaton currently leases 12 stores, averaging approximately 2,200 square feet
each, throughout the suburban Boston area. Our monthly lease payments
range from $538 to $7,464. Eaton also leases office space of approximately 2,000
square feet, in the Boston area, with a monthly rental of $2,000 per month. The
leases have varying expiration dates with all having renewal options.
ADCO owns a 23,000 square foot facility located in Bangor, Maine, which
currently has a mortgage for $208,944 on its building. The monthly costs,
including mortgage payments and taxes (but excluding utilities) is $6,800. ADCO
also leases approximately 14,000 square feet of warehouse space in Bangor, Maine
to store inventory it purchased from a large wholesaler which was discontinuing
one of its divisions. The monthly rental is $5,000. This space is rented on a
month-to-month basis. 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.
9
ADCO South leases approximately 6,172 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 warehouse and office
space located in Wilmington, Massachusetts. The monthly rental is $1,500. Sewer
fees, water and electric bills are paid separately by Anton. The lease expired
February 1998 and the space is rented on a month-to-month basis.
Conway leases approximately 4,000 square feet of warehouse and office space
located in Haverhill, Massachusetts. The monthly rental is $2,380. Sewer fees,
water and electric bills are paid separately by Conway. Their lease expires
November 2002.
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.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Annual Shareholders' Meeting was held on November 26, 2001, at 9:00
a.m., at the Corporate Headquarters located at 1292 Hammond Street, Bangor,
Maine 04401. A total of 7,758,062 shares were eligible to vote.
Robert Barrett, III, Donato Mazzola and Dr. Ken Nyer, M.D. were elected to
serve on the board of directors of the Company for a three-year term, until the
annual meeting of shareholders in the year 2004. Donald C. Lewis, Jr. was
elected to serve on our board of directors for a one-year term, until the
annual meeting of shareholders in the year 2002.
An affirmative vote for the election of directors was 5,115,800, with
210,000 votes abstaining.
Sweeney, Gates & Co. was ratified as our independent auditors
for the fiscal year ended June 30, 2002. An affirmative vote for Sweeney,
Gates & Co. was 5,115,800, with 210,000 votes abstaining.
10
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, 2002, there were approximately 957 holders of our shares
of common stock. The high and low bid prices for our common shares for the
calendar quarterly periods are as follows:
2002 2001 2000
Closing Bids Closing Bids Closing Bids
HIGH LOW HIGH LOW HIGH LOW
First Quarter $2.71 $1.95 $4.25 $3.38 $7.00 $5.13
Second Quarter 2.40 1.82 3.31 1.86 6.00 3.13
Third Quarter 2.08 1.55 3.19 1.35 5.00 3.00
Fourth Quarter - - 3.90 1.60 4.75 3.38
Such prices reflect inter-dealer prices and do not reflect retail mark-ups,
markdowns, 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.
It should be noted that, on October 4, 2002, the board of directors of the
Company approved an amendment to the Articles of Incorporation of the Company to
(a) increase the number of authorized shares of common stock of the Company from
10,000,000 to 25,000,000, (b) increase the number of authorized shares of
preferred stock from 2,502,000 to 2,505,000, (c) increase the number of shares
of preferred stock designated as Class A Preferred Stock from 2,000 to 5,000 and
(d) increase the number of shares of preferred stock designated as Series 1
Class B Preferred Stock from 1,000 to 2,500. This amendment has not been
presented to the shareholders of the Company for their approval as of yet, and,
therefore, this amendment is not yet effective.
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ITEM 6: Selected Financial Data
Selected Financial Data
2002* 2001** 2000 1999 1998 1997
Summary of Operations:
Sales $54,100,058 $23,903,627 $41,975,445 $39,856,911 $36,936,034 $33,877,419
Gross Margin 11,255,234 4,949,483 8,981,805 7,535,806 7,746,753 7,474,945
Operating income (loss)
from continuing
operations 341,813 (95,383) (556,324) (1,760,010) (410,881) 127,423
Income (loss) from
continuing operations 293,233 (129,868) (330,966) (1,428,625) 153,573 315,950
(Loss)from discontinued
operations (50,419) (87,893) (307,689) (744,020) (1,993,764) (1,250,352)
Net income (loss) $ 242,814 $ (217,761) $ (638,655) $(2,172,645) $(1,840,191) $ (934,402)
Per Share Data:
Net income (loss) per weighted
average of common shares
from continuing operations $ .07 $ (.04) $ (.09) $ (.38) $ .04 $ .08
Net(loss) per weighted average
of common shares from
discontinued operations (.01) (.02) (.08) (.20) (.53) (.33)
Net Loss per weighted average
of common shares $ .06 $ (.06) $ (.17) $ (.58) $ (.49) $ (.25)
Year-End Position:
Total assets $13,564,503 $12,603,077 $12,634,831 $13,173,635 $14,412,042 $16,108,040
Net working capital 6,289,838 5,841,459 5,854,127 6,831,097 8,410,421 8,071,514
Long-term debt(including
related party and excluding
current portion) 430,770 458,554 551,902 998,628 1,003,531 533,991
Minority interest 965,758 765,552 685,468 580,312 744,357 674,095
Shareholders' equity $ 6,765,549 $ 6,407,235 $ 6,612,316 $ 7,228,971 $ 9,032,866 $11,024,056
*For the twelve months ended June 30, 2002 ** For the six months ended June 30,
2001, all other periods are for the twelve months ended December 31.
No cash dividends have been declared in the periods presented
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ITEM 7. Management's Discussion And Analysis of Financial Condition
and Results of Operations.
Effective June 30, 2001, the Company 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 year ended June 30, 2002 as compared
the year ended June 30, 2001 and 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 should be read in conjunction with the Consolidated Financial
Statements and related notes appearing elsewhere in this report.
The Company had three active business segments for the years ended June 30,
2002 June 30, 2001, December 31, 2000 and December 31, 1999: (1) retail pharmacy
drug store chain ("pharmacy chain"), (2) wholesale and retail sales of surgical,
medical equipment and supplies ("medical"), and (3) wholesale and retail
distribution of equipment, supplies, and novelty items to emergency medical
service, fire departments, and police departments, ("EMT, fire, police equipment
and supplies"). Business segments are determined by the management approach
which analyzes results based on products or services offered for sale.
The following information for the twelve months ended June 30, 2002 and 2001 are
presented for comparable purposes.
Unaudited
Twelve months Twelve months
ended ended
June 30, 2002 June 30, 2001
Net sales $54,100,058 $ 45,505,707
Costs and expenses 53,758,245 (45,899,219)
Operating income (loss) 341,813 (393,512)
Other income 270,626 282,221
Income (loss) before minority interest 612,439 (111,291)
Minority interest expense, net of
income taxes (200,206) (165,989)
Income (loss) from continuing operations
before income taxes 412,233 (277,280)
Provision for income taxes (119,000) (40,000)
Loss from continuing operations
after income taxes 293,233 (317,280)
Loss from discontinued operations (50,419) (230,295)
Net Income (loss) $ 242,814 $ (547,575)
Basic and diluted income (loss) per share: $.06 $(.15)
13
Year Ended June 30, 2002 Compared to June 30, 2001.
NET SALES. Total sales for the twelve months ended June 30, 2002 increased by
18.9% from June 30, 2001 to $54,100,058 from $45,505,707 in 2001.
The following table shows sales by business segments for the years ended
June 30, 2002 and 2001:
Business Segment 2002 2001 % increase
(decrease)
Pharmacy chain $40,686,119 $31,999,487 27.1
Medical and surgical
equipment and supplies 9,188,343 8,417,883 9.2
EMT, fire, police
equipment and supplies 4,225,596 5,088,337 (17.0)
Total for business segments $54,100,058 $45,505,707 17.3
The pharmacy chain segment's sales increased approximately $8,700,000 due to
the acquisition of two pharmacies and continued increases in volume on
prescription drugs as a result of a continuing marketing campaign focused on
assisted-living and home-based sectors, increased advertising and home delivery
service.
The medical segment increased $770,460 in 2002 as compared to 2001, mainly
due to increased sales in its Internet subsidiary, Nyer Internet. The number of
products available online has more than doubled, which has aided the increased
sales and online advertising has been increased.
The EMT, fire, police equipment and supplies segment had a decrease in sales
of $862,741 in 2002 as compared to 2001 sales. The main reason for this decrease
was less than anticipated sales and Conway had a change in sales management. A
replacement has been hired and the Company believes this is a short-term
decline.
GROSS PROFIT MARGINS. Our overall gross profit margins were 20.8% in 2002 as
Compared 21.2% in 2001.
The following is a table of gross profit margin percentages by business
Segments for the years ended June 30, 2002 and 2001:
Business Segment 2002 2001
Pharmacy chain 19.3 19.1
Medical and surgical
equipment and supplies 28.1 29.2
EMT, fire, police
equipment and supplies 19.4 21.2
Total for business segments 20.8 21.2
The pharmacy chain segment's gross profit margin remained approximately the
same. Eaton expects sales growth to continue to be strong in its core business,
but expects pressures on margins to further intensify. Budgetary deficits in
Massachusetts have resulted in the Executive Office of Human Services Division
of Health Care Finance and Policy reducing the reimbursement paid to pharmacies
for dispensing Medicaid prescriptions by approximately 4%. Eaton expects other
third party payors to follow. The increased sales volume and a decrease in costs
from the company's major supplier which will help offset lower insurance
reimbursements on prescription drugs.
14
The medical segment's gross profit margin had a decrease 1.1%, from 29.2%
in 2001 to 28.1% in 2002. This decrease was due increased sales volume in the
Company's Internet subsidiary, Nyer Internet. This subsidiary has lower margins
due to the volume of competitors on line and they experienced an increase in its
equipment sales which generally have a lower gross profit margin.
The EMT, fire, police equipment and supplies segment had a decrease in its
gross profit margins from 21.2% in 2001 as compared 19.4% in 2002. The decrease
was due to less than anticipated sales with a low gross profit margin. Anton
experienced a decline of 2.8% due to increased competition.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general
and administrative expenses increased 8.7% in 2002 to $10,913,421 as compared
to $10,044,180 in 2001.
The following table shows the breakdown by business segments for the years
ended June 30, 2002 and 2001:
Business Segment 2002 2001 % increase
(decrease)
Pharmacy chain $ 6,704,030 $ 5,425,853 23.6
Medical and surgical
equipment and supplies 2,553,515 2,599,075 (1.8)
EMT, fire, police
equipment and supplies 1,066,465 1,352,352 (21.1)
Corporate 589,411 666,900 (11.6)
Total for business segments $10,913,421 $10,044,180 8.7
The pharmacy chain segment's increase was due to increased labor costs and
costs associated with the increase in sales.
The medical segment's selling, general and administrative (S,G&A) expenses
decreased $45,560. ADCO had an increase in its accounts receivable reserve which
was offset by the elimination of respiratory salaries and expenses due to the
sale of this division in December 2001. This was the main reason for the
decrease in S,G&A expenses.
The EMT, fire, police equipment and supplies segment also saw a decrease in
its S,G&A expenses. This decrease was mainly due to expenses directly related to
sales and a write-down of goodwill of $42,666 in 2001.
The Corporate segment's overhead had a decrease of $77,489 due mainly to a
stock guarantee expense in connection with an anticipated acquisition in
December 2001 of $100,000 and a stock charge of $36,190 which was expensed in
the six months ended June 30, 2001. The Company experienced an increase in labor
cost and accounting and legal expenses.
CONTINUING OPERATIONS. The Company had net income from continuing operations
of $293,233 in 2002 as compared to a loss of $317,280 in 2001.
The following table shows the breakdown by business segments for the years
ended June 30, 2002 and 2001:
Business Segment 2002 2001 % increase
(decrease)
Pharmacy chain $ 801,641 $ 656,536 22.1
Medical and surgical
equipment and supplies 191,266 (146,563) 230.5
EMT, fire, police
equipment and supplies (293,102) (384,239) (23.7)
Corporate (406,572) (443,014) (08.2)
Total for business segments $ 293,233 $ (317,280) 191.8
15
The Pharmacy chain segment had an increase in profits of $145,105 over the
same period last year due to increased sales volume and a decrease in costs from
the company's major supplier which helps offset lower insurance reimbursements
on prescription drugs.
The medical segment showed a profit of $191,266 as compared to a loss of
$146,563 for the same period in 2001. The main reason for this increase was due
to the sale of ADCO's respiratory division which resulted in a gain of $159,353.
ADCO also had an increase in sales and an increase in its gross profit margin of
approximately 1%. ADCO also recorded a bad debt expense of $160,000 due to very
slow collections on its Medicare, Medicaid and insurance reimbursements. The
company continues to work to rectify this situation.
The EMT, fire, police equipment and supplies segment's loss was due to ad
decline its sales and gross profit margins. The Company has increased marketing
efforts to new and existing accounts to help offset this decline in sales.
The Corporate segment's overhead increased mainly due 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.
Nyer Nutritional incurred $50,419 in costs in 2002, including $7,054 in
litigation expenses as compared to $230,295 in costs for the same period in
2001, which includes $187,096 of litigation expenses.
In May 2002, the Company assigned all of its rights, licenses and interest
In patents to Nyer Nutritional's minority shareholder. In return, the minority
shareholder released the Company from any and all obligations.
Sales for Nyer Nutritional were $0 for the years ended June 30, 2002 and
June 30, 2001 and $0 for the years ended December 31, 2000 and 1999.
16
Six Months Ended June 30, 2001 Compared to June 30, 2000.
The following information for the six months ended June 30, 2001 and 2000 are
presented for comparable purposes.
Unaudited
Six months Six months
ended ended
June 30, 2001 June 30, 2000
Net sales $23,903,627 $ 20,373,366
Costs and expenses 23,999,010 (20,631,561)
Operating loss (95,383) (258,195)
Other income 65,599 133,892
Loss before minority interest (29,784) (124,303)
Minority interest expense, net of
income taxes (80,084) (19,251)
Loss from continuing operations
before income taxes (109,868) (143,554)
Provision for income taxes (20,000) -
Loss from continuing operations
after income taxes (129,868) (143,554)
Loss from discontinued operations (87,893) (165,287)
Net Loss $ (217,761) $ (308,841)
Basic and diluted loss per share: $(.06) $(.08)
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 following table shows sales by business segments for the six months
Ended June 30, 2001 and 2000:
Business Segment 2001 2000 % increase
(decrease)
Pharmacy chain $16,913,373 $14,018,208 20.7
Medical and surgical
equipment and supplies 4,251,242 3,919,069 8.5
EMT, fire, police
equipment and supplies 2,739,012 2,436,089 12.4
Total for business
segments $23,903,627 $20,373,366 17.3
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.
The medical 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.
17
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 six months ended June 30, 2001 and 2000:
Business Segment 2001 2000
Pharmacy chain 19.1% 19.2%
Medical and surgical
equipment and supplies 27.2 26.4
EMT, fire, police
equipment and
supplies 20.7 21.7
Total for business
segments 20.7% 20.9%
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.
The medical 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 experienced a decrease
in its gross profit margins from 21.7% for the six months ended June 30, 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.
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 June 30, 2001 and 2000:
Business Segment 2001 2000 % increase
(decrease)
Pharmacy chain $ 2,815,995 $ 2,504,262 12.5
Medical and surgical
equipment and supplies 1,300,122 1,177,383 10.4
EMT, fire, police
equipment and supplies 654,237 597,659 9.5
Corporate 274,512 229,510 19.6
Total for business
segments $ 5,044,866 $ 4,508,814 11.9
The pharmacy chain segment's increase was due to increased labor costs and
costs associated with the increase in sales.
The medical 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.
18
The EMT, fire, police equipment and supplies segment also experienced an
increase in its S,G&A expenses as did the Pharmacy chain. The increases were
mainly from increased wages and expenses directly related to sales.
The Corporate segment's overhead increased mainly due 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 was replaced and a 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 2000.
The following table shows the break down by business segments for the six
months ended June 30, 2001 and 2000:
Business Segment 2001 2000
Pharmacy chain $ 320,118 $ 149,188
Medical and surgical
equipment and supplies (148,461) (150,020)
EMT, fire, police
equipment and supplies (124,640) (76,599)
Corporate (176,885) (66,123)
Total for business
segments $ (129,868) $ (143,554)
The Pharmacy chain segment 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 reimbursement on prescriptions.
The medical segment's loss decreased by $1,559. This segment increased its
gross profit margins by .8%. One entity of this segment, recorded a $75,000 bad
debt expense due to very slow collections on its Medicare, Medicaid and
insurance reimbursements.
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 Corporate segment's overhead increased mainly due 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.
19
We have reported the assets to be disposed (primarily patents and fixed
assets) as discontinued operations as of June 30, 2001. 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 ended
December 31, 2000 and 1999:
Business Segment 2000 1999 % increase
(decrease)
Pharmacy chain $29,104,320 $25,268,003 15.2
Medical and surgical
equipment and supplies 8,085,710 7,543,642 7.2
EMT, fire, police
equipment and supplies 4,785,415 7,045,266 (32.1)
Total for business
segments $41,975,445 $39,856,911 5.3
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.
The medical 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
entity 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.
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 ended December 31, 2000 and 1999:
Business Segment 2000 1999
Pharmacy chain 19.2% 17.9%
Medical and surgical
equipment and supplies 28.9 25.3
EMT, fire, police
equipment and supplies 21.7 15.7
Total for business
segments 21.3% 18.9%
20
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.
The medical 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 its gross margin as compared to the same period in 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.
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
ended December 31, 2000 and 1999:
Business Segment 2000 1999 % increase
(decrease)
Pharmacy chain $ 5,114,120 $ 4,845,938 5.5
Medical and surgical
equipment and supplies 2,476,336 1,994,583 24.2
EMT, fire, police
equipment and supplies 1,253,110 1,410,013 (11.1)
Corporate 621,897 764,837 (18.7)
Total for business
segments $ 9,465,463 $ 9,015,371 5.0
The Pharmacy chain segment had an increase of $268,182 which was the result
of higher labor costs and costs associated with increased sales volume.
The medical 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 Corporate segment's overhead decreased due to a charge in 1999 for
issuance of options 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.
21
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 December 31, 2000 and 1999:
Business Segment 2000 1999
Pharmacy chain $ 485,586 $ (253,496)
Medical and surgical
equipment and supplies (148,122) (112,586)
EMT, fire, police
equipment and supplies (319,849) (572,562)
Corporate (348,581) (489,981)
Total for business
segments $ (330,966) $(1,428,625)
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 medical 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 an entity 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 entity is trying to offset this with a move to a new
location and increased advertising and marketing. Another entity in 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 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 for the years ended 2000 and 1999.
22
Liquidity and Capital Resources
Net cash provided by operating activities was $616,042 for the year ended
June 30, 2002 as compared to net cash used in operating activities of $129,600
for the year ended June 30, 2001 and $239,896 for the year ended December 31,
2000. The primary use of cash from operations in each of the years was to fund
operations for our nutritional, fire, police and rescue equipment and supplies,
Internet and corporate operations, as well as accounts receivable and inventory.
The net cash provided by investing activities was $361,180, $578,982 and
$300,886, for the years ended June 30, 2002, June 30, 2001 and December 31,
2000, respectively. The increase was largely due to the proceeds received from
marketable securities. In fiscal 2002, we acquired two pharmacies and remodeled
some of our existing pharmacy locations.
Net cash provided by (used in) financing activities was $198,729,
($459,513) and ($323,715) for the years ended June 30, 2002, June 30, 2001 and
December 31, 2000, respectively. The increase is due to increased repayments of
long-term debt and notes to related party.
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 development of
new web sites, our ability through NDC to compete with larger national
distributors, 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) recent
and future governmental regulation of pharmaceutical pricing; and (8) the impact
of competition from Michael Anton on Anton's business.
Critical Accounting Policies
Nyer Medical Group, Inc.'s accounting policies are fully described in Note
2 of the Notes to the Consolidated Financial Statements. As discussed in Note 2,
the preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions about future events that affect the amounts reported in the
financial statements and accompanying notes. Future events and their effects
cannot be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results inevitably will
differ from those estimates, and such difference may be material to the
financial statements.
The most significant accounting estimates inherent in the preparation of
our financial statements include estimates as to the recovery of accounts
receivable and an allowance for inventory obsolescence. Various assumptions and
other factors underlie the determination of these significant estimates. The
process of determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected economic
conditions. Nyer Medical Group, Inc. reevaluates these significant factors as
facts and circumstances change. Historically, actual results have not differed
significantly from our estimates.
23
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
on July 1, 2002, and the Company believes the effect of adopting this statement
will not have a material impact on its financial position, results of
operations, or cash flows.
In June 2001, Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations" ("SFAS 143") was issued, which establishes
standards for reporting the obligations associated with the retirement of
tangible long-lived assets and associated asset retirement costs. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company will adopt SFAS 143 on July 1, 2002, and the Company has
not concluded the effect, if any, SFAS 143 will have on its consolidated
financial statements.
In August 2001, Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") was issued,
which addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of. SFAS 144
supercedes in part FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and APB Opinion
No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal
of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." Further, it amends ARB No. 51, "Consolidated Financial
Statements." The Company will adopt SFAS 144 on July 1, 2002, and the Company
has not concluded the effect, if any, SFAS 144 will have on its consolidated
financial statements.
In April of 2002, Statement of Financial Accounting Standards No. 145 ("SFAS
145") was issued, which rescinded SFAS Statements No. 4, 44 and 64, amended No.
13 and contained technical corrections. As a result of SFAS 145, gains and
losses from extinguishments of debt should be classified as extraordinary items
only if they meet the criteria in APB Opinion No. 30, that they are unusual and
infrequent and not part of an entity's recurring operations. The Company will
adopt the remainder of SFAS 145 on July 1, 2002, and the Company has not
concluded the effect, if any, SFAS 145 will have on its consolidated financial
statements.
24
In June of 2002, Statement of Financial Accounting Standards No. 146 ("SFAS
146"), "Accounting for Costs Associated with Exit or Disposal Activities" was
issued to address these costs and to nullify Emerging Issues Task Force Issue
No. 94-3. This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized and measured initially at fair value
only when the liability is incurred. The provisions of SFAS 146 are effective
for exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The Company will adopt SFAS 146 on July 1, 2002.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk.
Cash and cash equivalents. Our investment portfolio is subject to market
risk due to changes in interest rates. The Company places their investments with
high credit quality issuers. We are adverse to principal loss and seek to
preserve our invested funds by limiting default risk , market risk and
reinvestment risk.
Table of Investment Securities: The table below presents Cash and cash
equivalents for our investment portfolio as of June 30, 2002.
Principal Interest
Investment Securities Amount Rate
Cash and cash equivalents $1,550,374 1.16%
Debt: The Company's debt is not subject to market risk and fluctuations
because all of the debt has fixed maturity dates and fixed interest
rates. The difference between the Company's carrying amount and fair
value of its long-term debt was not material at June 30, 2002, and 2001
and December 31, 2000.
25
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, 2002,
June 30, 2001, and December 31, 2000 F 3
Consolidated Statements of Operations for the year ended June 30, 2002, for
the six months ended June 30, 2001 and for the years ended December 31, 2000
and 1999 F 5
Consolidated Statements of Changes in Shareholders'
Equity for the year ended June 30, 2002, for the
six months ended June 30, 2001 and for the years
ended December 31, 2000 and 1999 F 7
Consolidated Statements of Cash Flows for the year ended June 30, 2002, for
the six months ended June 30, 2001 and for the years ended December 31, 2000
and 1999 F 8
Notes to Consolidated Financial Statements F 11
Schedule II Valuation and Qualifying Accounts and Reserves F 29
26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Nyer Medical Group, Inc.
We have audited the consolidated balance sheets of Nyer Medical Group, Inc. and
subsidiaries at June 30, 2002, June 30, 2001 and December 31, 2000 and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the year ended June 30, 2002, 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, 2002, June 30, 2001 and December 31, 2000
and the results of its operations and cash flows for the year ended June 30,
2002, 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 Table of
Contents to the Consolidated Financial Statements 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
September 6, 2002
F-1
27
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 results of their operations,
changes in shareholders' equity and cash flows of Nyer Medical Group, Inc. and
Subsidiaries for the year 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 audit. We conducted our audit 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 audit provides a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
April 07, 2000
F-2
28
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002, 2001 AND DECEMBER 31, 2000
ASSETS
2002 2001 2000
Current assets:
Cash and cash equivalents $ 1,550,374 $ 374,423 $ 803,837
Investment in marketable
securities - 821,798 1,001,325
Accounts receivable, less
allowance for doubtful
accounts of $469,923 and
$348,339 at June 30, 2002
and 2001 and $237,757 at
December 31, 2000 4,541,505 4,447,290 3,825,440
Inventories, net 5,290,995 4,720,835 4,483,448
Prepaid expenses 300,495 284,631 148,278
Receivables from related
parties 8,895 9,798 3,932
Current assets of discontinued
operation - - 373,012
Total current assets 11,692,264 10,658,775 10,639,272
Property, plant and equipment, at cost:
Land 92,800 92,800 92,800
Building 641,508 641,508 641,508
Leasehold improvements 928,321 743,619 646,839
Machinery and equipment 71,189 175,952 161,614
Transportation equipment 366,099 335,059 352,953
Office furniture, fixtures,
and equipment 1,099,793 1,006,113 924,039
3,199,710 2,995,051 2,819,753
Less accumulated depreciation
and amortization (1,823,060) (1,569,366) (1,401,223)
1,376,650 1,425,685 1,418,530
Goodwill and other deferred assets, net of accumulated amortization of $692,154
and $583,723, at June 30, 2002 and 2001, respectively and $543,174
at December 31, 2000 454,026 292,457 333,006
Advances due from related
companies 41,563 38,267 36,615
Non-current assets of dis-
continued operation - 187,893 207,408
495,589 518,617 577,029
Total assets $13,564,503 $12,603,077 $12,634,831
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
29
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND 2001, AND DECEMBER 31, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
2002 2001 2000
Current liabilities:
Current portion of long-
term debt $ 184,669 $ 73,656 $ 291,978
Accounts payable 4,138,814 4,029,420 3,715,992
Accrued payroll and related
taxes 441,313 305,758 277,543
Accrued expenses and other
liabilities 431,520 202,372 306,213
Current portion of payable
due related party 206,110 206,110 193,419
Total current liabilities 5,402,426 4,817,316 4,785,145
Long-term debt, net of current
portion 329,367 216,749 250,280
Payable due related party,
net of current portion 101,403 241,805 301,622
Minority interest 965,758 765,552 685,468
Deferred credit - 154,420 -
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, 2002 and
2001, and December 31, 2000
Common stock, par value $.0001,
authorized: 10,000,000 shares;
issued: 3,769,062 at June 30,
2002, and June 30, 2001, and
3,753,189 at December 31, 2000 377 377 375
Additional paid-in capital 17,691,946 17,691,946 17,679,268
Stock sale receivable - (115,500) (115,500)
Treasury stock at cost 12,100 shares at June 30, 2002, June 30, 2001, and
December 31,
2000 (52,249) (52,249) (52,249)
Accumulated deficit (10,874,526) (11,117,340) (10,899,579)
Total shareholders'
equity 6,765,549 6,407,235 6,612,316
Total liabilities and
shareholders' equity $13,564,503 $12,603,077 $12,634,831
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
30
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2002, FOR THE SIX MONTHS ENDED JUNE 30, 2001,
AND FOR THE YEARS ENDED DECEMBER 31, 2000, AND 1999
2002 2001 2000 1999
Net sales $54,100,058 $23,903,627 $41,975,445 $39,856,911
Cost and expenses:
Cost of goods sold 42,844,824 18,954,144 33,023,640 32,321,105
Selling and retail 6,916,392 3,035,123 5,647,018 5,387,487
Warehouse and delivery 829,905 413,466 784,742 681,957
Administrative 3,167,124 1,596,277 3,033,703 2,945,927
Impairment loss (Note 5) - - 42,666 280,445
53,758,245 23,999,010 42,531,769 41,616,921
Operating income (loss) 341,813 (95,383) (556,324) (1,760,010)
Other income (expense):
Interest expense (38,252) (26,640) (89,326) (102,850)
Interest income 63,878 47,133 173,317 146,821
Other (Note 7) 245,000 45,106 266,523 123,369
Total other income 270,626 65,599 350,514 167,340
Income (loss) before
minority interest 612,439 (29,784) (205,810) (1,592,670)
Minority interest (expense)
income, net of
income taxes (200,206) (80,084) (105,156) 164,045
Income (loss) from
continuing operations
before income taxes 412,233 (109,868) (310,966) (1,428,625)
Provision for
income taxes 119,000 20,000 20,000 -
Income (loss) from
continuing operations
after income taxes 293,233 (129,868) (330,966) (1,428,625)
Discontinued operations:
(Note 4)
Loss from discontinued
operations
Operations of Nyer Nutritional-
October 25, 1999 - - - (537,020)
Loss from disposal of Nyer
Nutritional including
operating losses during
the phase out period (50,419) (87,893) (307,689) (207,000)
Net loss from
discontinued
operations (50,419) (87,893) (307,689) (744,020)
Net Income (loss) $ 242,814 $ (217,761) $ (638,655) $(2,172,645)
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
31
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2002, FOR THE SIX MONTHS ENDED JUNE 30, 2001,
AND FOR THE YEARS ENDED DECEMBER 31, 2000, AND 1999, continued
2002 2001 2000 1999
Basic and diluted earnings (loss) per share:
Continuing operations $ .07 $ (.04) $ (.09) $ (.38)
Discontinued operations (.01) (.02) (.08) (.20)
Basic and diluted earnings
(loss) per share $ .06 $ (.06) $ (.17) $ (.58)
Weighted average common
shares outstanding,
basic 3,769,062 3,753,189 3,752,779 3,748,789
Weighted average common
shares outstanding,
diluted 3,771,431 3,753,189 3,752,779 3,748,789
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
32
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 2002, FOR THE SIX MONTHS ENDED JUNE 30, 2001,
AND FOR THE YEARS ENDED DECEMBER 31, 2000, AND 1999
Class A Class B
Preferred Stock Preferred Stock Common Stock Additional Treasury
Paid-in Stock Sale Stock
Shares Amount Shares Amount Shares Amount Capital Receivable Shares Amount
Balance,
January 1, 1999 2,000 $ 1 1,000 $ - 3,407,093 $341 $15,238,376 $(115,500) (11,000)$ (52,249)
Issuance of common
Stock options - - - - - - 368,750 - - -
Issuance of common
stock 10% stock
dividend - - - - 340,596 34 2,050,142 - (1,100) -
Net loss - - - - - - - - - -
Balance,
December 31, 1999 2,000 1 1,000 - 3,747,689 375 17,657,268 (115,500) (12,100) (52,249)
Exercise of common
stock options - - - - 4,400 - 22,000 - - -
Net loss - - - - - - - - - -
Balance,
December 31, 2000 2,000 1 1,000 - 3,752,089 375 17,679,268 (115,500) (12,100) (52,249)
Issuance of common
stock - - - - 15,873 2 12,678 - - -
Net loss - - - - - - - - - -
Balance,
June 30, 2001 2,000 1 1,000 - 3,767,962 377 17,691,946 (115,500) (12,100) (52,249)
Payment of stock
sale receivable - - - - - - - 115,500 - -
Net income - - - - - - - - - -
Balance,
June 30, 2002 2,000 $ 1 1,000 $ - 3,767,962 $377 $17,691,946 $ - (12,100) $(52,249)
The accompanying notes are an integral part of the consolidated financial
statements. F-7-1
33
FOR THE YEAR ENDED JUNE 30, 2002, FOR THE SIX MONTHS ENDED JUNE
30, 2001, AND FOR THE YEARS ENDED DECEMBER 31, 2000, AND 1999
continued
Total
Accumulated Shareholders'
Deficit Equity
Balance,
January 1, 1999 $ (6,038,103) $ 9,032,866
Issuance of common
Stock options - 368,750
Issuance of common
stock 10% stock
dividend (2,050,176) -
Net loss (2,172,645) (2,172,645)
Balance,
December 31, 1999 (10,260,924) 7,228,971
Exercise of common
stock options - 22,000
Net loss (638,655) (638,655)
Balance,
December 31, 2000 (10,899,579) 6,612,316
Issuance of common
stock - 12,680
Net loss (217,761) (217,761)
Balance,
June 30, 2001 (11,117,340) 6,407,235
Payment of stock
sale receivable - 115,500
Net income 242,814 242,814
Balance,
June 30, 2002 $(10,874,526) $ 6,765,549
The accompanying notes are an integral part of the consolidated financial
statements. F-7-2
34
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEAR ENDED JUNE 30, 2002, FOR THE SIX MONTHS ENDED
JUNE 30, 2001 AND FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2002 2001 2000 1999
Cash flows from operating activities:
Net income (loss) $ 242,814 $ (217,761) $ (638,655) $(2,172,645)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Impairment loss - - 42,666 280,445
Depreciation 399,409 173,627 347,335 291,623
Amortization 108,431 40,549 97,021 135,241
Gain on sale of
respiratory division (159,353) - - -
Assets disposed of from
settlement of NNS
litigation 187,893 - - -
(Gain) Loss on disposal
of property, plant,
and equipment - - 6,279 (5,718)
Compensation expense in
connection with common
stock option exercise - - - 368,750
Gain on sale of pharmacies - - - (25,000)
Increase in notes payable to
suppliers for material
purchases - - - 270,042
Minority interest 200,207 80,084 105,156 (164,045)
Increase in deferred credit - 200,000 - -
Decrease in deferred credit(154,420) (45,580) (63,339) (54,770)
Changes in certain working
capital elements (208,939) (396,126) (136,359) 383,040
Net cash flows provided
by (used in) operating
activities 616,042 (165,207) (239,896) (693,037)
Cash flows from investing activities:
Acquisition of stores (349,637) - - (273,729)
Purchase of property, plant
and equipment (399,521) (175,298) (186,544) (416,048)
Proceeds from sale of
property, plant
and equipment 69,147 - - -
Purchase of marketable
securities - - - (1,492,185)
Proceeds from sale of
marketable securities 821,798 179,527 490,860 -
Proceeds from sales of
respiratory division 222,689 - - -
Proceeds from sale of
pharmacies $ - $ - $ - $ 50,800
The accompanying notes are an integral part of the consolidated financial
statements. F-8
35
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
2002 2001 2000 1999
Net change in advances due
from related
companies $ (3,296) $ (1,652) $ (3,023) $ 896
Increase (decrease) in
other assets, net - 19,515 (407) 104
Net cash provided by
(used in) investing
activities 361,180 22,092 300,886 (2,130,162)
Cash flows from financing
activities:
Proceeds from loan
repayment from stock
sale receivable 115,500 - - -
Proceeds from issuance
of long-term debt 369,701 - 18,000 37,677
Payments of long-term debt (146,070) (251,853) (254,428) (246,412)
Net (repayments)
borrowings of notes
to related party (140,402) (47,126) (109,287) (38,492)
Proceeds from exercise of
stock options - - 22,000 -
Issuance of common stock - 12,680 - -
Net cash provided by
(used in) financing
activities 198,729 (286,299) (323,715) (247,227)
Net increase (decrease)
in cash and cash
equivalents 1,175,951 (429,414) (262,725) (3,070,426)
Cash and cash equivalents
at beginning of
period 374,423 803,837 1,066,562 4,136,988
Cash and cash equivalents
at end of period $1,550,374 $ 374,423 $ 803,837 $ 1,066,562
Changes in certain working
capital elements:
Accounts receivable, net $ (34,578) $ (254,322) $ (491,415) $ (143,648)
Inventories, net (570,160) (237,387) 15,607 (278,075)
Prepaid expenses (79,200) (136,353) (42,246) (987)
Receivables from related
parties 903 (5,866) (55) 44,262
Accounts payable 109,393 313,428 257,157 831,543
Accrued payroll and
related taxes 135,555 28,215 42,497 28,581
Accrued expenses and
other liabilities 229,148 (103,841) 82,096 (98,636)
Net change $ (208,939) $ (396,126) $ (136,359) $ 383,040
The accompanying notes are an integral part of the consolidated
financial statements.
F-9
36
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
Supplemental disclosures of cash flow information:
Cash paid during
the year for: 2002 2001 2000 1999
Interest $ 37,555 $ 15,543 $ 61,282 $ 100,495
Income taxes $ 12,221 $ 19,120 $ 4,221 $ 8,000
Non-cash transactions:
The acquisition of pharmacies in 2002 and 1999, net of cash acquired, is
summarized as follows:
2002 1999
Working capital, other than cash $ 59,637 $ 173,729
Property, plant and equipment 20,000 -
Goodwill and prescription lists 270,000 100,000
Long-term debt (349,637) -
Cash paid for acquisitions $ - $ 273,729
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
37
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:
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.
Medical and surgical supplies. 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. Nyer Internet Companies, 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.
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 amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
continued
F-11
38
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Revenue recognition
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. 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 also recognizes revenue from non-cash transactions wherein the
pharmacy division dispenses pharmaceuticals provided by the government to
non-profit organizations treating needy patients. The Company receives a
dispensing fee, a percentage of the cost of the medication and replacement of
the drugs. The Company accounts for these transactions in accordance with
Accounting Principals Board "APB" 29 and complies with the guidance in EITF
86-29, which states that the cost of a non-monetary asset acquired in exchange
for another non-monetary asset is the fair value of the asset surrendered to
obtain it.
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.
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, marketable
securities consisted of federal government agency notes which matured through
October 15, 2001.
Inventories
Inventories consist primarily of pharmaceuticals, medical, fire, EMT, and police
equipment and supplies. 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, 68% are on the LIFO method. The replacement costs of inventory
exceeded LIFO cost by $491,515 at June 30, 2002, $354,357 at June 30, 2001, and
$268,862 at December 31, 2000.
continued
F-12
39
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Property, plant and equipment
Property, plant, and equipment are recorded at cost. Leasehold improvements are
capitalized, while repair and maintenance costs are charged to operations as
incurred. When assets are retired or disposed of, the cost and accumulated
depreciation 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 $507,840 for the year ended June 30, 2002,
$214,176 for the six months ended June 30, 2001, and $444,356 and $426,864 for
the years ended December 31, 2000 and 1999, 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
40
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 year ended June 30, 2002 was $169,928, $54,150 for the
six months ended June 30, 2001, $120,032 for the year ended December 31, 2000
and $162,810 for the year ended December 31, 1999.
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, 2002, June 30, 2001 and
December 31, 2000, 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.
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.
continued
F-14
41
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Recent Accounting Pronouncements, continued,
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
on July 1, 2002, and the Company believes the effect of adopting this statement
will not have a material impact on its financial position, results of
operations, or cash flows.
In June 2001, Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations" ("SFAS 143") was issued, which establishes
standards for reporting the obligations associated with the retirement of
tangible long-lived assets and associated asset retirement costs. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company will adopt SFAS 143 on July 1, 2002, and the Company has
not concluded the effect, if any, SFAS 143 will have on its consolidated
financial statements.
In August 2001, Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") was issued,
which addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of. SFAS 144
supercedes in part FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and APB Opinion
No. 30, "Reporting the Results of Operations-Reporting the effects of Disposal
of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." Further, it amends ARB No. 51, "Consolidated Financial
Statements." The Company will adopt SFAS 144 on July 1, 2002, and the Company
has not concluded the effect, if any, SFAS 144 will have on its consolidated
financial statements.
In April of 2002, Statement of Financial Accounting Standards No. 145 ("SFAS
145") was issued, which rescinded SFAS Statements No. 4, 44 and 64, amended No.
13 and contained technical corrections. As a result of SFAS 145, gains and
losses from extinguishments of debt should be classified as extraordinary items
only if they meet the criteria in APB Opinion No. 30, that they are unusual and
infrequent and not part of an entity's recurring operations. The Company will
adopt SFAS 145 on July 1, 2002, and the Company has not concluded the effect, if
any, SFAS 145 will have on its consolidated financial statements.
In June of 2002, Statement of Financial Accounting Standards No. 146 ("SFAS
146"), "Accounting for Costs Associated with Exit or Disposal Activities" was
issued to address these costs and to nullify Emerging Issues Task Force Issue
continued
F-15
42
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of significant accounting policies: continued,
Recent Accounting Pronouncements, continued,
No. 94-3. This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized and measured initially at fair value
only when the liability is incurred. The provisions of SFAS 146 are effective
for exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The Company will adopt SFAS on July 1, 2002.
3. Change in fiscal year:
Effective June 30, 2001, the Company changed its fiscal year from December 31 to
June 30.
4. Discontinued operations:
Genetic Vectors, Inc.
The Company owns 737,216 shares of restricted common stock of Genetic Vectors,
Inc. In 1998, the Company wrote off its investment due to significant
uncertainties regarding the Company's ability to recover its investment.
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. 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 its case against the
other and one defendant has paid Nyer Nutritional $25,000 per quarter commencing
September 2001 for six quarters. In addition, certain royalty payments may be
made to Nyer Nutritional depending on certain future sales by that Company.
continued
F-16
43
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued operations: continued,
Nyer Nutritional Systems, Inc., continued,
In May 2002, the Company assigned all of its rights, licenses and interest in
patents to Nyer Nutritional's minority shareholder. In return, the minority
shareholder released the Company from any and all obligations.
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) was 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) was 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 the year ended,
June 30, 2002, for the six months ended June 30, 2001 and for the year ended
December 31, 2000:
2002 2001 2000
Receivables from related party $ 8,895 $ 9,798 $ 3,932
Advances due from related companies,
non-current $ 41,563 $ 38,267 $ 36,615
The receivable from related party in the amount of $8,895 is for products sold
to a company which is operated by an officer and director of the Company. Total
sales were $8,895 for the year ended June 30, 2002, $2,908 for six months ended
June 30, 2001, and $515 for the year ended December 31, 2000. The remaining
balance of $3,580 for the six months ended June 30, 2001 was for interest due on
a loan to the Company's Chief Executive Officer. This was paid December 2001.
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.
The payable of $307,513 relates to the purchase of a subsidiary's inventory and
is an oral agreement. The Company has paid principal payments of $10,000 per
month since 1998. In the past, the Company has accrued interest of 7% annually.
continued
F-17
44
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Related party transactions: continued,
In fiscal year 2002, the Company discontinued accruing interest because of a
dispute regarding the amount of obsolete inventory purchased at the time of the
transaction. Interest expense related to this note was $12,691 for the six
months ended June 30, 2001, and $31,911 for the year ended December 31, 2000,
and $41,508 for the year ended December 31, 1999. The payable was $307,513 for
the year ended June 30, 2002, $447,915 for the six months ended June 30, 2001
and $495,041 for the year ended December 31, 2000.
In 1996, a stock sale receivable for the exercise of 50,000 stock options was
due from an 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 2002. This note was paid in full (including accrued interest), in
December 2001.
7. Acquisitions and divestitures:
During fiscal 2002, the Company purchased the inventory and prescription lists
of two pharmacies. Approximately $170,000 of the purchase price was allocated to
goodwill and prescription lists and are being amortized over 15 years.
Additionally, $100,000 was allocated to non-compete agreements and are amortized
over three years.
In December 2001, the Company sold its respiratory division for a gain of
$159,353. The gain is reflected in other income.
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 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.
8. Debt:
Long-term debt at June 30, 2002, June 30, 2001 and December 31, 2000,
consisted of the following:
2002 2001 2000
ADCO Surgical Supply, Inc:
Mortgage payable in equal monthly install-
ments of $4,675 including interest at
8 1/4% collateralized by land and building,
due in March 2008. This mortgage payable
is personally guaranteed by the Company's
chairman. $208,944 $261,078 $285,589
continued
F-18
45
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Debt: continued,
2002 2001 2000
Eaton:
Note payable in equal monthly install- ments of $4,999, including interest
at 7%. The note will mature in July 2004,
collateralized by certain inventory. 115,968 - -
Note payable in equal monthly install- ments of $2,778 plus interest on the
unpaid balance at 6%. The note will mature in February 2005, and is
collateralized by certain inventory. 88,889 - -
Note payable in equal monthly install- ments of $2,437 plus interest on the
unpaid balance at 6%. The note will mature in February 2005, and is
collateralized by certain inventory. 77,998 - -
Note payable in equal monthly install-
ments of $3,023 including interest at 7%.
The note matured in May 2001 and was
collateralized by certain pharmacy assets. - - 14,852
Line of credit with a balloon payment due in July 2001. The interest rate
was prime (8.50% at December 31, 2000) and was collateralized by certain
assets of Eaton. The note was converted to a purchase commitment bonus.
(see Note 10 Commitments) - - 200,000
Other subsidiaries
Notes payable due in various install-
ments at rates ranging up to 8%,
collateralized by certain equipment
and vehicles. 22,237 29,237 41,817
Total debt 514,036 290,405 542,258
Less current portion 184,669 73,656 291,978
$ 329,367 $ 216,749 $250,280
continued
F-19
46
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Debt: continued,
At June 30, 2002, the following are the maturities of long-term debt for each of
the next five years:
2003 $ 184,669
2004 184,195
2005 109,281
2006 35,891
2007 -
$ 514,036
9. Income taxes:
At June 30, 2002, the Company had remaining net operating loss (NOL)
carryforwards of approximately $1,200,000 available to offset future taxable
income. The NOL carryforwards will begin expiring in 2011 to 2020. The income
tax provision of $119,000 is for state income taxes of continuing operating
subsidiaries. In the event of a change in ownership of the Company, the
utilization of the NOL carryforwards may be subject to limitation under certain
provisions of the Internal Revenue Code. In addition, certain provisions dealing
with consolidated returns may limit the utilization of 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, 2002, June 30, 2001, and December 31, 2000
consisted of:
2002 2001 2000
Deferred tax assets(liabilities):
Depreciation $ 30,000 $ 38,000 $ 58,000
Reserves not recognized for tax
purposes 306,000 271,000 370,000
Net operating loss carryforwards 480,000 875,000 1,094,000
Total net deferred tax assets
before valuation reserve 816,000 1,184,000 1,522,000
Valuation reserve (816,000) (1,184,000) (1,522,000)
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. Employee Benefit Plan:
Effective July 1, 2001, the Company established a savings plan that qualifies as
a deferred salary arrangement under Section 401(k) (the "Employee Plan") of the
Internal Revenue. Pursuant to the Employee Plan, participants may elect to
contribute up to 20% of their eligible compensation, as defined. Also, the
Company will make a matching contribution is equal to 100% of the first 3% of
continued
F-20
47
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Employee Benefit Plan: continued,
each employee's elected contribution of each employee's eligible compensation
and 50% of the next 2% of each employee's eligible compensation. The Company's
matching contribution to the 401(k) plan was $101,010 for the year ended June
30, 2002.
11. Commitments:
Operating leases:
The Company rents office and warehouse space with varying lease expiration dates
through May of 2010. Generally, the leases have options to extend the lease
terms. Total rent expense for the year ended June 30, 2002 was $806,557,
$358,850 for the six months ended June 30, 2001 and $764,431 and $784,874 for
the years ended December 31, 2000, and 1999, respectively.
Future minimum lease payments at June 30, 2002 are as follows:
2003 $ 670,272
2004 584,585
2005 490,253
2006 453,185
2007 262,281
Thereafter 309,698
$2,770,274
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 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 agreement had the same terms as the
previous agreement. The subsidiary reached the purchase commitment in the fourth
quarter of 2002. This is classified on the June 30, 2001 balance sheet under
deferred credit.
As of June 30, 2002, there is no purchase commitment in effect.
continued
F-21
48
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. 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. As part of the Company's 10%
stock dividend (described below), an additional 1,100 shares of common stock is
included as treasury stock. The Company currently has 12,100 shares of treasury
stock.
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 $36,180, less related expenses of $23,500.
During 1999, the Company approved a 10% stock dividend of 340,596 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 $14.75 and are
only exercisable if the stock price exceeds 120% of the exercise price. These
warrants were not exercised during 2002, 2001, 2000 or 1999.
In October 1999, the Company issued 150,000 stock options to a third party in
connection with consulting services provided. The stock options vested
immediately. The options were priced in three 50,000 option 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 options will be in force for as long as the consulting services are
continued by the Company and for two years thereafter. The options 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 options 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.
13. 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
continued
F-22
49
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Employees, directors and consultants stock options and incentive plan:
continued,
all 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, 2002:
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
$ 2.10-$3.38 78,000 4.9 $ 2.82 34,000 4.9 $ 3.07
$ 4.62-$6.88 669,600 8.8 $ 6.09 661,600 8.8 $ 6.10
$16.75 36,000 5.3 $16.75 36,000 5.3 $16.75
A summary of changes in common stock options for the year ended June 30, 2002,
for the six months ended June 30, 2001 and for the years ended December 31,
2000, and 1999 are:
June 30, June 30, December 31, December 31,
2002 2001 2000 1999
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 809,600 $6.30 819,600 $6.30 788,000 $6.36 248,000 $ 6.30
Granted 64,000 2.70 - - 40,000 4.75 540,000 6.44
Exercised - - - - (4,400) 5.00 - -
Canceled (90,000) 3.70 (10,000) 4.75 (4,000) 3.38 -
Outstanding
at the
end of
the year783,600 $6.30 809,600 $6.30 819,600 $6.30 788,000 $ 6.36
The weighted average grant date fair market value for options granted was $2.70,
$4.75 and $3.70 for the year ended June 30, 2002, and for the years ended
December 31, 2000 and 1999.
continued
F-23
50
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Employees, directors and consultants stock options and incentive plan:
continued,
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 income or (loss) and net income or (loss) per
share would have been charged to the pro forma amounts indicated below:
June 30, December 31, December 31,
2002 2000 1999
Net income (loss):
As reported $ 242,814 $ (638,655) $(2,172,645)
Pro forma $ 104,107 $ (747,575) $(3,397,152)
Income (loss) per share:
As reported $ .06 $ (.17) $ (.58)
Pro forma $ .03 $ (.20) $ (.91)
The calculation was not presented for the six months ended June 30, 2001,
because no options were granted for the period.
The fair value of stock options in the pro forma accounts for the years ended
June 30, 2002, December 31, 2000 and 1999 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:
2002 2000 1999
Risk-free interest 4.3% 5.7% 6.4%
Dividend yield 0% 0% 0%
Expected volatility 110% 80% 60%
Expected life (years) 5 5 5
The calculation was not presented for the six months ended June 30, 2001,
because no options were granted for the period.
continued
F-24
51
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Business segments:
The Company had three active business segments for year ended June 30, 2002, for
the six months ended June 30, 2001, and for the years ended December 31, 2000
and 1999:
(1) retail pharmacy drug store chain (2) wholesale and retail sales of
surgical, medical equipment and supplies, (3) wholesale and retail distribution
of equipment, supplies, and novelty items to emergency medical service, fire
departments, and police departments. 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 year ended June 30, 2002:
Medical and EMT, Fire,
Pharmacy Surgical and Police Equip.
Chain Supplies and Supplies Corporate Consolidated
Net Sales $40,686,119 $ 9,188,343 $ 4,225,596 $ - $54,100,058
Operating
income (loss) 1,148,305 31,523 (248,604) (589,411) 341,813
Total assets 8,288,119 2,926,644 1,110,584 1,239,156 13,564,503
Capital
expenditures 287,916 66,449 18,466 525 373,356
Depreciation
and
amortization 296,650 150,182 56,876 4,132 507,840
Interest income (24,306) (21,014) - (18,558) (63,878)
Interest expense 15,591 $ 21,321 $ 1,340 $ - $ 38,252
Summary data for the six months ended June 30, 2001:
Medical and EMT, Fire,
Pharmacy Surgical Police Equip.
Chain Supplies and Supplies Corporate Consolidated
Net Sales $16,913,373 $ 4,251,242 $ 2,739,012 $ - $23,903,627
Operating
(loss)income 409,301 (142,427) (87,745) (274,512) (95,383)
Total assets 6,794,607 2,964,263 1,754,287 1,089,920 12,603,077
Capital
Expenditures 131,302 22,153 53,950 - 207,405
Depreciation
and
amortization 101,088 68,107 42,974 2,007 214,176
Interest income (5,978) (6,928) - (34,227) (47,133)
Interest
expense $ 237 $ 12,963 $ 13,440 $ - $ 26,640
continued
F-25
52
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Business segments: continued,
Summary data for the year ended December 31, 2000:
Medical and EMT, Fire,
Pharmacy Surgical Police Equip.
Chain Supplies and Supplies Corporate Consolidated
Net Sales $29,104,320 $ 8,085,710 $ 4,785,415 $ - $41,975,445
Operating
(loss)income 460,194 (138,939) (255,689) (621,890) (556,324)
Total assets 6,054,423 2,921,379 1,681,280 1,977,749 12,634,831
Capital
Expenditures 90,776 93,469 400 1,899 186,544
Depreciation
and
amortization 229,969 149,261 60,704 4,422 444,356
Interest income (16,124) (14,624) - (142,569) (173,317)
Interest
expense $ 24,970 $ 30,905 $ 33,451 $ - $ 89,326
Summary data for the year ended December 31, 1999:
Medical and EMT, Fire,
Pharmacy Surgical Police Equip.
Chain Supplies and Supplies Corporate Consolidated
Net Sales $25,268,003 $ 7,543,642 $ 7,045,266 $ - $39,856,911
Operating
(loss) (325,054) (84,507) (585,612) (764,837) (1,760,010)
Total assets 5,568,424 2,964,787 2,005,722 2,634,702 13,173,635
Capital
Expenditures 142,626 85,053 184,773 3,596 416,048
Depreciation
and
amortization 233,096 104,190 84,570 5,008 426,864
Interest income (9,175) (8,981) - (128,665) (146,821)
Interest
expense $ 26,838 $ 33,894 $ 42,118 $ - $ 102,850
continued
F-26
53
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Selected quarterly data (unaudited):
2002
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $12,580,646 $13,217,216 $13,463,572 $14,838,624
Gross profit $ 2,660,692 $ 2,676,652 $ 2,723,240 $ 3,194,650
Income (loss) from
continuing operations $ 214,109 $ 158,193 $ 83,386 $ (162,455)
Net loss from discontinued
operations $ (10,674) $ (10,724) $ (28,695) $ (326)
Net income (loss) $ 203,435 $ 147,469 $ 54,691 $ (162,455)
Basic and diluted income (loss) per share:
Continuing operations $ .06 $ .04 $ .02 $ (.05)
Discontinued operations (.01) .00 .00 .00
Net income (loss) $ .05 $ .04 $ .02 $ (.05)
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 discontinued
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)
continued
F-27
54
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Selected quarterly data (unaudited): continued,
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 discontinued
operations $ (78,475) $ (86,812) $ (118,162) $ (24,240)
Net loss $ (218,389) $ (90,452) $ (184,042) $ (145,772)
Basic and diluted loss per share:
Continuing operations $ (.04) $ .00 $ (.02) $ (.03)
Discontinued
operations (.02) (.02) (.03) (.01)
Net loss $ (.06) $ (.02) $ (.05) $ (.04)
1999
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $9,454,434 $ 9,504,138 $ 9,897,925 $11,000,414
Gross profit $1,826,263 $ 1,779,468 $ 1,931,564 $ 1,998,511
Loss from continuing
operations $ (141,788) $ (182,544) $ (93,750) $(1,010,543)
Net loss from discontinued
operations $ (84,588) $ (145,327) $ (213,997) $ (300,108)
Net loss $ (226,376) $ (327,871) $ (307,747) $(1,310,651)
Basic and diluted loss
per share:
Continuing
operations $ (.04) $ (.05) $ (.02) $ (.27)
Discontinued
operations (.02) (.04) (.06) (.08)
Net loss $ (.06) $ (.09) $ (.08) $ (.35)
continued
F-28
55
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, 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
Year ended June
30, 2002:
Allowance for
doubtful accounts
(deducted from
accounts
receivable) $ 348,339 $ 157,135 $ - $ (35,551) $ 469,923
Allowance for
obsolescence
(deducted from
inventory) 774,357 157,158 - (145,000) 786,515
$1,122,696 $ 314,293 $ - $(180,551) $1,256,438
The FASB 109 Valuation Allowance has been omitted because such information is
disclosed in Note 9 to the Consolidated Financial Statements.
F-29
56
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 77 Chairman of the Board,
President, Secretary,
and Director
William J. Clifford, Jr. 52 Vice-President-Sales
and Director
Karen L. Wright 40 Treasurer, Vice-
President-Finance,
Vice-President-Operations,
and Assistant Secretary
Stanley Dudrick, M.D. 67 Director
Donald C. Lewis, Jr. 63 Director
John Milledge 40 Director
Kenneth L. Nyer, M.D. 44 Director
M. Randolph Prince 60 Director
James Schweiger 67 Director
Mr. Robert Barrett, III resigned from the Board of Directors effective
August 2002 for reasons unrelated to the Company. Mr. Barrett also
resigned as the Audit Committee's chairman. Mr. Barrett had been a board
member since November 2001. Mr. Donato Mazzola resigned from the Board of
Directors in May 2002 for reasons unrelated to the Company. Mr. Mazzola
was the representative for the minority shareholders of the pharmacy chain.
The minority shareholders have not filled their vacancy as of the date of
this Report.
The Company's Board of Directors is divided into three classes of
directors. Messrs. Milledge and Dr. Nyer's term expires in 2004, Messrs.
Prince, Schweiger and Dr. Stanley Dudrick's term expires in 2003, and Messrs.
Lewis, Nyer and Clifford's term expires in 2002. There is one vacancy.
Samuel Nyer has been chairman of the board, president and secretary
of the Company since December 1991. 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.
57
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. From 1973 to 1988, Mr.
Clifford was general sales manager of ADCO. Mr. Clifford, an employee since
1973, has over 29 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 and
vice-president of operations since 2001. 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 September 2002, Dr. Dudrick has been Program Director of Surgery,
at St. Mary's Hospital, located in Waterbury, Connecticut. From January 2000
until August 2002, Dr. Dudrick was Chairman for the Department of Surgery at
Bridgeport Hospital/Yale-New Haven Health Systems, from, 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, 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.
John Milledge has been a director of the Company since October 2002.
Mr. Milledge practices law in Florida concentrating in local government law,
including land use, contracts, procurement, personnel, public finance
(including TRIM proceedings) and litigation. Mr. Milledge is a member
of the Florida Bar and the U.S. District Court, Southern District of Florida.
Mr. Milledge graduated from Emory University, Atlanta, Georgia, with a B.A.,
with honors, and the University of Florida, College of Law, Gainesville,
Florida, with a J.D.
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 from
1987-1993. Currently, Dr. Nyer is assistant clinical professor of medicine
at Albert Einstein College of Medicine. Dr. Nyer is the son of Mr. Samuel Nyer.
M. Randolph Prince has been a director of the Company since January 2002. Mr.
Prince is also a member of the Audit Committee. Mr. Prince has been
self-employed since 1991 as an Attorney/Certified Public Accountant (CPA)
advising high wealth individuals on tax and financial planning matters in the
States of Florida and Tennessee. He is also a consultant for a CPA firm in tax
and financial planning for high wealth businesses and owners. Mr. Prince has
over 35 years experience as an Attorney and CPA in tax and financial matters
and in the practice of tax law. His experience extends into multiple
industries, both privately owned and SEC registrants. Mr. Prince has been an
Attorney since 1966, currently admitted to practice in the State of Florida,
U.S. District Court in the District of Columbia, and United States Court of
Appeals for the Federal Circuit in the District of Columbia. He has been a CPA
since 1970 and is currently licensed in the State of Tennessee. Mr. Prince
graduated from the University of Illinois in 1963 with a degree in Accounting
and from George Washington University Law School, Washington, D.C. in 1966.
58
James J. Schweiger has been a director since January 2002. Mr. Schweiger is
also chairman of the Audit Committee. Mr. Schweiger is currently President and
CEO of James J. Schweiger Financial Consultants, Orlando Florida. From 1969 to
1986, Mr. Schweiger was a Managing Partner in the firm of KMG Main Hurdman in
charge of the Ft. Lauderdale/Miami Florida office, Northeastern Regional
Managing Partner and later served as the Southern Area Director. From 1980 to
1985 he served on the Company's Policy Board and Management Committee. He was
previously a Board member of AICPA on accounting for real estate transactions.
From 1989 to 1992 Mr. Schweiger served as Treasurer/Director on the EASE
Foundation Board (a charitable foundation in Davie Florida). Mr. Schweiger
graduated from Duquesne University, Pittsburgh, Pa in 1961 with a BS degree in
Business Administration.
Delinquent Filings
No person who, during the fiscal year ended June 30, 2002, was a director,
officer or beneficial owner of more than ten percent of any class of equity
securities of the Company registered under Section 12 of the Securities Exchange
Act of 1934 (the "Exchange Act"), failed to file on a timely basis reports
required by Section 16 of the Exchange Act during the most recent fiscal year or
prior fiscal years except the following persons: (a) Robert Barrett, III has not
filed a Form 3 or a Form 5 with respect to the fiscal year ended June 30, 2002;
(b) William J. Clifford, Jr. has not filed a Form 5 for each of the fiscal years
ended December 31, 1993, December 31, 1996 and December 31, 1999; (c) Stanley
Dudrick, M.D. has not filed a Form 5 for each of the fiscal years ended December
31, 1997 and December 31, 2000; (d) Donald C. Lewis, Jr. has not filed a Form 4
for activity in 1997 and has not filed a Form 5 for each of the fiscal years
ended December 31, 1993, December 31, 1996 and December 31, 1999; (e) Donato
Mazzola has not filed a Form 3 or a Form 5 for the fiscal year ended December
31, 2000; (f) Kenneth L. Nyer, M.D. has not filed a Form 5 for each of the
fiscal years ended December 31, 1993 and December 31, 1998; (g) Samuel Nyer has
not filed a Form 5 for each of the fiscal years ended December 31, 1993,
December 31, 1996 and December 31, 1999; (h) M. Randolph Prince has not filed a
Form 3 or a Form 5 with respect to the fiscal year ended June 30, 2002; (i)
James Schweiger has not filed a Form 3; and (j) Karen L. Wright has not filed a
Form 5 for each of the fiscal years ended December 31, 1997 and December 31,
1999. The Company is in the process of bringing the filings up to date.
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.
59
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
year ended June 30, 2002, six months ended June 30, 2001 and for fiscal years
ended December 31, 2000 and 1999 to the Company's chief executive officer. No
other executive officer received compensation exceeding $100,000 during the year
ended June 30, 2002, for the six months ended June 30, 2001 and for the fiscal
years ended December 31, 2000 and 1999.
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
(a) (b) (c) (e) (g)
Name and Other Securities
principal annual underlying
position Year Salary($) compensation($) options/SARS(#)
Samuel Nyer 2002 $140,000 $4,200 0
Chief 2001 70,000 2,100 0
Executive 2000 140,000 4,200 0
Officer 1999 127,308 4,200 500,000
Michael Curry 2002 133,219 6,000 0
David Dumouchel 2002 133,219 6,000 0
Mark Dumouchel 2002 133,219 6,000 0
Wayne Gunter 2002 133,219 6,000 0
Donato Mazzola 2002 133,219 6,000 0
Messrs. Curry, David Dumouchel, Mark Dumouchel, Gunter, and Mazzola
are minority shareholders of the pharmacy chain (with the exception of
Mr. Curry, whose wife is the minority shareholder). They are all
registered pharmacists and work within the pharmacy chain.
The Company has not paid any cash compensation to any person for serving as a
director. The Company's Audit Committee receives $600 per meeting.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
(a) (d) (e)
Number of securities underlying Value of unexercised in-the
unexercised options/SARs money options/SARs at
at fy-end fy-end($)1
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.
In August of 1996, Eaton entered into a five-year employment agreement, with a
one-year non-compete, with four of the five minority shareholders of Eaton and
the husband of the fifth minority shareholder. The agreement has been extended
for an additional five years with a base annual salary of $120,000, for four of
the minority shareholders and the husband of the fifth minority shareholder,
effective January 2002. Each are also provided full insurance coverage on the
employee's vehicle and a vehicle allowance with an annual cost of $6,000 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 current employment
agreements contain no written non-compete provisions.
60
The Company has an oral employment agreement with Mr. Samuel Nyer, the Company's
Chief Executive Officer, Chairman of the Board and director, which provides for
an annual base salary of $140,000 and $4,200 for the use of an automobile. 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 $80,454 and
the use of an automobile, including all expenses associated with it at an annual
cost of $10,900. The Company has an oral employment agreement with Ms. Karen L.
Wright, vice president and treasurer, which provides for an annual base salary
of $80,000.
Stock Option Plan
The Company established the 1993 Stock Option Plan (the "Plan"). 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). Also, under the Plan, all directors have
automatically received a grant of non-qualified options which vest semi-annually
each June 30th and December 31st over a three-year period. The exercise price of
such options, as provided for in the Plan, is the closing price of the Company's
common stock on the last business day prior to the grant of options. 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.
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.
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 in October 1999, with
the remaining having vested in October 2000. As of the date of this Report, none
of the options have been exercised.
It should be noted that, on October 4, 2002, the board of directors of the
Company approved (a) an amendment to the 1993 Stock Option Plan to (i) increase
the aggregate number of shares which may be issued under such plan to 1,000,000
and (ii) cease further grants of options under such plan upon the effectiveness
of a new stock option plan of the Company; (b) a new stock option plan entitled
"2002 Stock Option Plan", under which plan 3,000,000 shares of common stock of
the Company will be available for award, and (c) the grant of options pursuant
to the 2002 Stock Option Plan to all existing directors and an officer of the
Company equal to the Number of options currently granted to such persons (and in
effect) under the 1993 Stock Option Plan or otherwise, each of which options
shall vest immediately (subject to shareholder approval), has a term of ten
years, and an exercise price equal to the "Market Price" (as such term is
defined in the 2002 Stock Option Plan) on the date of the grant. None of these
actions of the board of directors of the Company have been presented to the
shareholders of the Company for approval as of yet.
61
ITEM 12. Security Ownership Of Certain Beneficial Owners And Management.
The following table sets forth information as of October 10, 2002, 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 ownership2 class owned
Common stock, Samuel Nyer 5,404,400 3,4 63.6%
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 32.7
and Class A 72 Center Street
preferred Brewer, Maine 04412
stock
Common stock William J. Clifford, Jr. 22,000 5 *
1292 Hammond Street
Bangor, Maine 04401
Common stock Karen L. Wright 28,110 6,7 *
1292 Hammond Street
Bangor, Maine 04401
Common stock Stanley Dudrick, M.D. 22,000 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. 29,000 6 *
c/o Nyle International Corp.
72 Center Street
Brewer, Maine 04412
Common Stock Donato Mazzola 6,000 6 *
264 R Washington Street
Wellesley Hills, MA 02481
Common Stock Kenneth L. Nyer, M.D. 36,000 6 *
48 Old Orchard Road
New Rochelle, New York 10804
Common Stock M. Randolph Prince 2,000 *
185 Serral Drive
Greeneville, TN 37745
Common Stock James Schweiger 2,000 *
8052 Aspencrest Court
Orlando, FL 32835
All directors and executive officers 5,565,510 5,6,7,8,
of the Company as a group (ten 65.5%
persons) * less than 1% of class
1 Based on the difference between the $ per share of the common stock and the
option exercise price.
2 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.
3 Includes shares owned by Nyle since Mr. Samuel Nyer is chairman of that
corporation.
4 Includes 34,000 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.
5 Consists of shares of common stock underlying vested options granted pursuant
to the Plan.
6 Includes 27,000 shares of common stock underlying vested options granted
pursuant to the Plan.
7 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.
62
Equity Compensation Plan Information.
Number of securities to Weighted average Number of Securities be
issued upon exercise exercise price of remaining available of
outstanding options, outstanding for future issuance
Plan Category warrants and rights options, warrants under equity
and rights compensation
plans (excluding
securities reflected
in first column)
Equity compensation
plans approved by
security holders (1)(3) 283,600 $6.18 0(4)
Equity compensation
plans not approved
by security holders (2) (3) 650,000 7.11 0
Total 933,600 $6.83 0
(1) Represents stock options granted under Nyer Medical Group, Inc.'s 1993
Stock Option Plan.
(2) Represents stock options granted under each of the (a) Business
Development Consulting agreement, dated October 1, 1999, between Nyer Medical
Group, Inc. and Alliance Capital Resources, Inc. and (b) Employment Agreement,
dated as of October 25, 1999, between Nyer Medical Group, Inc. and Samuel Nyer.
(3) It should be noted that, on October 4, 2002, the board of directors of the
Company approved (a) an amendment to the 1993 Stock Option Plan to (i) increase
the aggregate number of shares which may be issued under such plan to 1,000,000
and (ii) cease further grants of options under such plan upon the effectiveness
of a new stock option plan of the Company; (b) a new stock option plan entitled
"2002 Stock Option Plan", under which plan 3,000,000 shares of common stock of
the Company will be available for award, (c) the grant of options pursuant to
the 2002 Stock Option Plan to all existing directors and an officer of the
Company equal to the number of options currently granted to such persons (and in
effect) under the 1993 Stock Option Plan or otherwise, each of which options
shall vest immediately (subject to shareholder approval), has a term of ten
years, and an exercise price equal to the "Market Price" (as such term is
defined in the 2002 Stock Option Plan) on the date of the grant and (d) a
restructuring of options granted to Alliance Capital Resources, Inc. pursuant to
the Business Development Consulting Agreement, dated October 1, 1999, between
the Company and Alliance Capital Resources, Inc., which restructuring would
involve creating a ten year term for each of such options, the existence of
options which can be exercised for the same number of shares as previously
existed under the Business Development Consulting Agreement, vesting of such
options without the further passing of time and repricing such options at the
"Market Price" (using the same definition as in the 2002 Stock Option Plan) on
the date of approval by the board. None of these actions of the board of
directors of the Company have been presented to the shareholders of the Company
as of yet.
(4) Based upon the possibility that there is a deficiency in the number of
securities remaining available for future issuances under the 1993 Stock Option
Plan, the board of directors of the Company has approved an increase in the
aggregate number of shares which may be issued under such plan to 1,000,000.
Such increase is subject to shareholder approval and would provide 716,400
shares of common stock of the Company available for future issuances under such
plan.
63
Business Development Consulting Agreement
With respect to equity compensation, this agreement provides the Company's
business and public relations consultant, Alliance Capital Resources, Inc., with
150,000 options, for shares of common stock of the Company, which vested on
October 1, 1999, with exercise prices of: $8.00 for 50,000 options; $9.00 for
50,000 options and $11.00 for the remaining 50,000 options. The term of each
such option is for as long as the consultant is retained by the Company and for
two years thereafter. The agreement also provides the consultant with customary
piggy-back registration rights with respect to any shares of common stock
issuable upon the exercise of the options. As noted above in footnote number 3,
under Equity Compensation Information, the restructuring of this agreement with
respect to equity compensation has been approved by the board of directors of
the Company.
Employment Agreement of Samuel Nyer
With respect to equity compensation, the Employment Agreement of Mr. Samuel
Nyer, president of the Company, granted Mr. Nyer 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 in October 1999, with the remaining having vested
in October 2000. As of the date of this Report, none of the options have been
exercised.
ITEM 13. Certain Relationships and Related Transactions.
Prior to 1991, the Company and Nyle each engaged in inter-company loans. At June
30, 2002, the Company was owed $41,563 by Nyle, this includes accrued interest.
As of October 11, 2002, Nyle owed the Company $41,563 (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.
William Clifford, Jr., an officer and a director of the Company, through
Clifford Company, a company which he helped to establish and which is owned by
his three children, two of whom are minors, buys goods from a subsidiary of the
Company, at favored pricing, and sells to a customer once a year. As of the date
of this Report, the Company is owed $8,895 from November 2001, which is the
dollar amount of the transactions between the subsidiary of the Company and
Clifford Company for the last fiscal year. It is anticipated the practice
described in this paragraph will continue during the current fiscal year for
approximately the same dollar amounts. These transactions have been occurring
since the 1980's. The sales amounts, with respect to transactions between
Clifford Company and the subsidiary of the Company, which are reported in
footnote 6 on the Company's consolidated financial statements in related party
transactions, are as follows: $8,895 for the year ended June 30, 2002, $2,908
for six months ended June 30, 2001, and $515 for the year ended December 31,
2000.
Mr. Samuel Nyer, president of the Company, is a guarantor of ADCO's loan. See
Item 8. Debt, Notes to "Consolidated Financial Statements".
ADCO employs two relatives of Mr. William Clifford, a director of the Company
and vice president and general manager of ADCO. One relative is employed as a
sales representative and one is employed part-time in customer service. ADCO
also employs two relatives of Ms. Karen Wright, the Company's treasurer,
principal accounting and chief financial officer and chief operating 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 6. Related party transactions, Notes to "Consolidated Financial
Statements".
ITEM 14. Controls and Procedures.
There have been no significant changes in Nyer Medical Group, Inc.'s internal
controls or procedures that could significantly affect those controls since the
date of management's last evaluation of its internal controls, and there have
been no corrective actions with regard to significant deficiencies and material
weaknesses in such controls.
64
ITEM 15. Exhibits and Reports on Form 8-K.
EXHIBIT INDEX
Sequential
Exhibit No.
(a). Exhibits
3.1 Articles of Incorporation of Nyer Medical Group, Inc., (1)
3.2 Amendment to Articles of Incorporation of Nyer Medical Group, Inc.(1)
3.3 Second Amendment to Articles of Incorporation of Nyer Medical Group, Inc.
3.4 Third Amendment to Articles of Incorporation of Nyer Medical Group, Inc.
3.5 Bylaws of Nyer Medical Group, Inc.(1)
3.6 Amendment to Bylaws (1993)
3.7 Amendment to Bylaws (1997)
3.8 Amendment to Bylaws (2002)
10.1 1993 Stock Option Plan(2)
10.2 Amendment to 1993 Stock Option Plan
10.3 Second Amendment to 1993 Stock Option Plan
10.4 Business Development Consulting Agreement, dated October 1, 1999, between
Nyer Medical Group, Inc. and Alliance Capital Resources, Inc.
10.5 Addendum to the Business Development Consulting Agreement, dated October 1,
2000, between Nyer Medical Group, Inc. and Alliance Capital Resources, Inc.
10.6 Employment Agreement, dated as of October 25, 1999, between Nyer Medical
Group Inc. and Mr. Samuel Nyer
21 Subsidiaries
23.1 Consent of Independent Certified Public Accountants
23.2 Consent of Independent Accountants
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
(1) Contained in Registration Statement on Form S-18 filed on April 13, 1992.
(2) Contained in Form 10-KSB filed April 1996.
65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has 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,
Principal Executive Officer and
Chief Executive Officer
66
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 11th day of October 2002.
Signature Title
/s/ Samuel Nyer Chairman of the Board, President,
Samuel Nyer Principal Executive Officer,
Director
and Secretary
/s/ William Clifford, Jr. Vice President of Sales,
William Clifford, Jr. Director
/s/ Karen L. Wright Treasurer, Vice President of
Karen L. Wright Finance, Vice President of
Operations, Principal
Financial Officer, Principal
Accounting Officer and Assistant
Secretary
/s/ Stanley Dudrick, M.D. Director
Stanley Dudrick, M.D.
/s/ Donald Lewis Director
Donald Lewis
/s/ John Milledge Director
John Milledge
/s/ Kenneth Nyer, M.D. Director
Kenneth Nyer, M.D.
/s/ M. Randolph Prince Director
M. Randolph Prince
/s/ James Schweiger Director
James Schweiger
67
CERTIFICATIONS
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Samuel Nyer, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Nyer Medical Group,
Inc.;
(2) Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual Report.
Date: October 11, 2002
/s/ Samuel Nyer
Samuel Nyer,
President, Chief
Executive Officer and
Principal Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Karen L. Wright, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Nyer Medical Group,
Inc.;
(2) Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual Report.
Date: October 11, 2002
/s/ Karen L. Wright
Karen L. Wright,
Chief Financial Officer and
Principal Financial Officer
68
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.3
SECOND AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
NYER MEDICAL GROUP, INC.
The undersigned hereby certifies that the following Second Amendment to the
Articles of Incorporation, as amended, was approved by the board of directors
(the 'Board') and approved by a vote of the majority of holders of the
outstanding voting power of capital stock of Nyer Medical Group, Inc. (the
"Company"), present in person or by proxy and entitled to vote at the annual
meeting of shareholders held on the 30th day of September, 1996.
A. Article IV is repealed, the currently existing 300,000 shares of Class B
Preferred Stock held in treasury are cancelled and Article IV will now read as
follows:
Article IV - Capital Stock
The Company is authorized to issue 10,000,000 shares of common stock, $.0001 par
value.
The Company is authorized to issue 2,502,000 shares of preferred stock, $.001
par value (the "Preferred Stock").
Of these shares of Preferred Stock, 2,000 shall be designated as Class A
Preferred Stock, each share of which shall have 1,000 votes on all matters at
which shares of common stock are entitled to vote. Class A Preferred Stock shall
have no other rights different than common stock.
The remaining 2,500,000 shares of Preferred Stock shall be designated as Class B
Preferred Stock. All Class B Preferred Stock is subject to issuance by the Board
in one or more series and through the filing a certificate pursuant to the
applicable law of the State of Florida.
Except as expressly limited by Chapter 607, Florida Statutes, as amended from
time to time, or its successor legislation, as amended from time to time, the
authority of the Board with respect to each series shall include, but not be
limited to, determination of the following:
(a) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and if so, the terms of such voting rights;
(b) The number of shares constituting that series and the distinctive
designation of that series;
(c) The dividend rate on the shares of that series, whether dividends shall be
cumulative, and if so, from which date or dates, and the relative rights of
priority, if any, are paid on dividends on shares of that series;
(d) Whether that series shall have conversion privileges, and if so, the terms
and conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board shall determine;
(e) Whether or not the shares of that series shall be redeemable, and if so, the
terms and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or purchase
of shares of that series, and if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
69
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.3, continued
SECOND AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
NYER MEDICAL GROUP, INC.
(h) Any other relative rights, preferences and limitations of that series.
B. Article VI is hereby repealed and Article VI will now read as follows:
Article VI - Provision for Classified Board; Removal of Directors For Cause
(a) The Board shall be divided into three classes, designated Class A, Class B
and Class C, as nearly equal in numbers as the then total number of directors
constituting the entire Board permits with the term of the office of one class
expiring each year. Commencing with the 1996 Annual Meeting of Shareholders, the
initial term of Class A directors will extend to the 1999 Annual Meeting of
Shareholders, that of Class B directors shall extend to the 1998 Annual Meeting,
and that of Class C directors shall extend to the 1997 Annual Meeting. As the
one and two-year terms expire, new directors shall be elected for three-year
terms. The number of directors to be elected at each Annual Meeting shall be
equal to the number of directors of the class whose terms are expiring and those
directors elected at such meeting shall hold office until the third succeeding
Annual Meeting of Shareholders. At each Annual Meeting of the shareholders after
each class has been elected for a three-year term, the successors to the class
of directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting.
(b) Any vacancies in the Board for any reason, and any Board seats resulting
from an increase in the number of directors, may be filled by the Board, acting
by the majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual election of
the class for which such directors have been chosen and until their successors
shall be elected and qualified.
(c) The Company shall nominate persons to serve as members of the Board upon the
expiration of the term of each class of directors, which nominations shall be
submitted to the shareholders at the annual meeting of shareholders for
approval.
(d) Notwithstanding any other provision of the Articles of Incorporation, as
amended, or the By-laws of the Company, it shall require the affirmative vote of
either (i) 75% of the voting power of each class entitled to vote present in
person or by proxy assuming a quorum to remove one or all of the directors and
then only "with cause" or (ii) 66-2/3% of the voting power of each class
entitled to vote present in person or by proxy assuming a quorum cast at a
meeting of the shareholders called for that purpose and a majority of the
"disinterested directors" to remove one or all of the directors only "with
cause". "Cause" is defined as (1) a conviction of a felony regardless of whether
it relates to the Company or its securities; (ii) declaration of incompetency or
unsound mind by court order; or (iii) commission of an action which constitutes
intentional misconduct or a knowing violation of law. "Disinterested Director"
is defined for purposes of this provision to be any director not having an
interest or role, direct or indirect, in the transaction or incident which is
the basis for claiming removal of a director "with cause".
70
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.4
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
71
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.6
AMENDMENT TO BYLAWS
OF
NYER MEDICAL GROUP, INC.
Dated: September 15, 1993
Article II, Section 6 of the Bylaws of Nyer Medical Group, Inc. shall be
amended as follows:
Article II. Directors
Section 6. Number. The number of members of the board of directors of this
Corporation shall be as established by resolution of the board of directors at
the annual meeting or at a special meeting called for such purpose and may be
increased or decreased from time to time by resolution of the board of
directors, but no decrease shall have the effect of shortening the terms of any
incumbent director.
72
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.7
AMENDMENT TO BYLAWS
OF
NYER MEDICAL GROUP, INC.
As Adopted on
February 1997
I. ARTICLE II
Section 6. Number. This Corporation Shall have no less than three and no more
than 11 directors, the exact number of which shall be established by resolution
of the Board of Directors. The number of directors may be established from time
to time by resolution of the Board of Directors, but no decrease shall have the
effect of shortening the terms of any incumbent director.
II. ARTICLE VI
Section 2. Duties. The officers of this Corporation shall have the following
duties and such other duties as delegated by the president.
The president shall be the chief executive officer of the Corporation, shall
have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors and shall
preside at all meetings of the Board of Directors and shareholders.
The vice presidents shall perform such duties as may be prescribed by these
bylaws, by the Board of Directors or by the president. The Board of Directors
shall appoint one vice president to act whenever the president shall be
unavailable.
The vice president of finance shall be the chief financial officer of the
Corporation and shall be responsible for maintaining policies and procedures
with regard to the Corporation's finances, establishing and maintaining a system
of internal controls sufficient to meet all requirements of the Securities
Exchange Act of 1934 and requirements imposed or recommended by the
corporation's independent auditors and shall be generally responsible for
overseeing the finances of the Corporation. She shall furnish at meetings of the
Board of Directors, or whenever requested, a statement of the financial
condition of the Corporation and shall perform such other duties as the bylaws
provide or the Board of Directors may prescribe.
The secretary shall have custody of and maintain all of the corporate records
except the financial records, shall record the minutes of all meetings of the
stockholders and whenever else required by the Board of Directors or the
president, and shall perform such other duties as may be prescribed by the Board
of Directors.
The treasurer shall be the chief accounting officer. She shall keep correct and
complete records of account, showing accurately at all times the financial
condition of the corporation. She shall be the legal custodian of all monies,
notes, securities and other valuables that may from time to time come into the
possession of the Corporation. She shall immediately deposit all funds of the
Corporation coming into her hands in some reliable bank or other depositary to
be designated by the Board of Directors and shall keep this bank account in the
name of the Corporation.
73
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 3.8
AMENDMENT TO BYLAWS
OF
NYER MEDICAL GROUP, INC.
Dated: October 4, 2002
Article I, Section 1 of the Bylaws of Nyer Medical Group, Inc. (the
"Corporation") shall be deleted in its entirety and replaced by the following:
Section 1. Annual Meeting. The annual meeting of the shareholders of
this Corporation shall be held on the third Wednesday in November at 10:00 a.m.
at the offices of the Corporation in Bangor, Maine, or at such other date, time
and place designated by the Board of Directors of the Corporation. The annual
meeting shall be held for the purpose of electing directors of the Corporation
and for the transaction of any proper business.
Article I, Section 2 of the Bylaws of the Corporation shall be amended
for the purpose of deleting the title thereof and replacing such title with the
following: "Section 2. Special Meetings."
74
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.2
AMENDMENT TO THE 1993 STOCK OPTION PLAN
OF NYER MEDICAL GROUP, INC.
Paragraph 4 is hereby deleted and replaced with the following:
4. Stock. The stock subject to Options, shall be authorized but unissued shares
of Common Stock or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares of Common Stock which may be issued
pursuant to the Plan is 275,000, subject to adjustment as provided in Paragraph
13. Any such shares may be issued as ISOs, Non-Qualified Options or
Non-Discretionary Options, so long as the number of shares so issued does exceed
such number, as adjusted. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, or if the Company shall
reacquire any unvested shares issued pursuant to evidence of Options, such
shares shall again be available for grants of Options under the Plan.
75
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.3
EXHIBIT A
SECOND AMENDMENT TO THE 1993 STOCK OPTION PLAN
OF NYER MEDICAL GROUP, INC.
Paragraph 3b. is hereby deleted and replaced with the following:
3. Eligible Employees and Others.
b. All directors of the Company shall automatically receive grants of 4,000
Non-Discretionary Options if elected or appointed by the Board to a one year
term;
(ii) 8,000 Non-Discretionary Options upon election or appointment to the Board
for a two year term; and (iii) 12,000 Non-Discretionary Options upon election or
appointment to the Board for a three year term subject to vesting of all
Non-Discretionary Options previously granted. Provided, however, if at the time
of appointment or election a director holds unvested Options, the grant shall be
deferred until the date of final vesting.
(1)The exercise price of the Options shall be the fair market value on the
date of grant as defined by Paragraph 6.
(2) The Options shall vest in equal increments of 2,000 Options per director on
June 30 and December 31 of each year, provided that the director is still
serving as a director of the Company. To the extent that any Options which have
not been exercised do not vest, the Options shall lapse and no longer be
exercisable.
76
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
THIS BUSINESS DEVELOPMENT CONSULTING AGREEMENT (Agreement) is made and
entered into this 1st day of October 1999 (the Effective Date) by and between
Nyer Medical Group, Inc., a Florida Corporation (Company) and Alliance Capital
Resources, Inc., a California Corporation (Consultant).
RECITALS
Company desires to engage Consultant to perform certain consulting
services for it, and Consultant desires, subject to terms and conditions of this
Agreement, to perform strategic growth and business development consulting
services for the Company.
NOW, THEREFORE, OF MUTUAL PROMISES AND UNDERTAKING HEREIN CONTAINED AND FOR
OTHER GOOD AND VALUABLE CONSIDERATION THE RECEIPT AND SUFFICIENCY OF WHICH IS
HEREBY
ACKNOWLEDGED THE PARTIES AGREE AS FOLLOWS:
1. Engagement Of Consultant: Company hereby engages Consultant and Consultant
hereby agrees to bold itself available to render, and to render at the request
of the Company, independent advisory and consulting services for the Company to
the best of its ability, upon the terms and conditions hereinafter set forth.
Such consulting services shall include but not limited to other companies as
potential partners for technology development, business strategies, compensation
policies, assist in corporate image advertising and press releases, identifying
acquisition targets and the building of strategic alliances. In addition,
consultant will focus on building a strong link with the Company's existing and
future shareholder base and provide a high level of communications. It is
understood that Consultant's ability to relate information regarding the
Company's activities is dependent upon the
information provided by the Company to Consultant.
2. Term: The term of this Agreement shall begin as of the Effective Date and
terminate twelve (12) months thereafter, subject to earlier termination by
either party upon thirty (30) days prior written notice.
3. Compensation: As compensation for all services rendered by Consultant
pursuant to this Agreement, Company shall compensate Consultant as follows:
3.1 Company shall pay Consultant the sum of five thousand five ($5,000)
dollars per month.
3.2 Consultant shall be reimbursed upon invoice for any pre-approved monthly
expenses, all postage expenses including overnight delivery service (e.g. Post
Office Express, FedEx and Airborne Express, in addition, Consultant shall not be
responsible for the cost of providing compensation to third party venders,
copywriters, staff writers, art and graphic personnel, printing, etc.
4. Options: The Company agrees to issue to Consultant three options (the
"Options") for a total of 150,000 shares of Common Stock of the Company as set
forth below:
77
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4, continued
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
(i) One option ("Option I") for 50,000 shares of Common Stock of the Company
equal to its closing bid price in the NASDAQ quotation system at an exercise
price of $8.00 per share, which option shall vest immediately;
(ii) One option ("Option II") for 50,000 shares of Common Stock of the
Company at an exercise price of $9.00 per share, which option shall vest
immediately;
(iii) One option ("Option III") for 50,000 shares of Common Stock of the
Company at an exercise price of $11.00 per share, which option shall vest
immediately.
The Options will be in force for as long as Consultant is retained by the
company and for two (2) years thereafter. The Consultant shall have customary
piggy-back registration rights with respect to any shares of common stock
issuable upon exercise of the options.
5. Billings And Payments: Payments for all compensation shall be paid in
advance on the 1st day of each month (3.3.1). Billings for all expenses shall
be reimbursed bi-monthly (3.3.2).
6. Limitations Of Service: Consultant shall not release any financial or other
information or data about the Company without the written consent and approval
of at least one (1) officer of the Company.
6.1 Consultant shall not conduct any meetings with financial analysts
without informing the Company in advance of the proposed meetings and the format
or agenda of such meeting and the Company may elect to have a representative of
the Company attend any such meetings.
6.2 Consultant shall not release any information or data about the Company
to any selected or limited person (s), entity, or group if Consultant is aware
that such information or data has not been generally released or promulgated.
6.3 Consultant shall not release or use for any other purpose, data on the
Company's investors or potential investors without the written commission of the
Company.
6.4 After notice by the Company of a filing for a proposed public offering
of securities of the Company, and during any period of restriction on publicity,
Consultant shall not engage in any business development efforts not in the
normal course without approval of counsel for the Company and of counsel for the
underwriter (s), if any.
7. Duties Of Company: Company shall supply Consultant on a regular and timely
basis with all approved data and information about the Company, its management,
its products, and its operations and Company shall be responsible for advising
Consultant of any facts which would affect the accuracy of any prior data and
information previously supplied to Consultant so that Consultant my take
corrective action. The parties further acknowledge that Consultant takes no
responsibility for the accuracy of any statements to be made by management
contained in press releases or other communications.
78
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4, continued
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
7.1 Company shall promptly supply Consultant with full and complete copies
of all filings with federal and state securities agencies; with full and
complete copies of all shareholders reports and communications whether or not
prepared with Consultants assistance; with all data supplied to any analyst,
Broker-dealer, market maker, or other member of the financial community; and
with all product/services brochures, sales material, etc.,
7.2 Company shall promptly notify Consultant of the filing of any
registration statement for the sale of securities and of any other event which
triggers any restrictions on publicity.
7.3 Company shall contemporaneously notify Consultant if any information or
data being supplied to Consultant has not been generally released or
promulgated.
7.4 It is agreed that the Consultants services will not included any services
that constitute the rendering of legal opinions or performance of work that is
in the ordinary purview of a Certified Public Accountant or any work that is the
ordinary purview of a registered Broker/Dealer.
8. Representation and Indemnification: The Company shall be deemed to make a
continuing representation of the accuracy of any and all material facts,
material information, and data which it supplies to Consultant and the Company
acknowledges its awareness that Consultant will rely on such continuing
representation in disseminating such information and otherwise performing its
business development functions.
9. Relationship of Parties: Consultant is an independent contractor, responsible
for compensation of its agents, employees and representatives, as well as all
applicable withholding therefrom and taxes thereon (including unemployment
compensation) and all workers compensation insurance. This agreement does not
establish any partnership, joint venture, or other business entity or
association between the parties and neither party is intended to have any
interest in the business or property of the other.
10. Assignment: This Agreement is a personal one being entered into in reliance
upon and in consideration of the singular personal skill and qualification of
Consultant. Consultant shall therefore not voluntarily or by operation of law
assign or otherwise transfer the obligation incurred on its pare pursuant to the
terms of this Agreement without prior written consent of the Company. Any
attempt at assignment to transfer by Consultant of its obligation without such
consent shall be wholly void.
11. Attorney Fees: Should either party default in the terms or conditions of the
Agreement and suit filed as result of such default, the prevailing party shall
be entitled to recover all cost incurred as a result of such default including
all cost and reasonable attorney fees, expenses and court costs through trial
and appeal.
12. Waiver Of Breach: The waiver of either party of a breach of any provision
of this Agreement by the party shall not operate or be construed as a waiver of
any subsequent breach by the other Party.
79
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4, continued
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
13. Notice: Any notices required or permitted to be given under this Agreement
shall be sufficient if in writing, and if sent by certified mail, returned
receipt requested, to the principal office of the party being notified as
follows:
PARTY ADDRESS
Company Nyer Medical Group, Inc.
1292 Hammond Street
Bangor, ME 04401
Consultant Alliance Capital Resources, Inc.
23 Corporate Plaza, Suite 215
Newport Beach, CA 92660
14. Binding: This Agreement shall be binding upon and inure to the benefit of
the successors-in-interest assignees and personal representatives of the
respective parties.
15. Unenforceable Terms: Any provision hereof prohibited by law or unenforceable
under the laws of any jurisdiction in which such provision is applicable shall
as to such jurisdiction only be ineffective without affecting any other
provision of this Agreement. To the full extent, however, that such applicable
law may be waived to the end that this Agreement be deemed to be valid and
binding agreement enforceable in accordance with its terms, the parties hereto
hereby waive such applicable law knowingly and understanding the effect of such
waiver.
16. Execution In Counterparts: This Agreement may be executed in several
counterparts and when so executed shall constitute one agreement binding on
each of the parties notwithstanding that each of the parties is not signatory
to the original and same counterpart.
17. Further Assurance: From time to time each party will execute and deliver
such further instruments and will take such other action as any other party may
reasonable request in order to discharge and perform their obligations and
agreements hereunder and to give effect to the intentions expressed in this
Agreement.
18. Incorporated By Reference: All exhibits referred to in this Agreement are
incorporated herein in their entirety by such reference.
19. Miscellaneous Provision: The various headings and numbers herein and the
grouping of provisions of this Agreement into separate articles and paragraphs
are for the purpose of convenience only and shall not be considered a part
hereof. The language in all parts of this Agreement shall in all cases be
construed in accordance with its fair meanings as if prepared by both parties to
the Agreement and not strictly for or against either of the parties.
20. Complete Agreement: This Agreement supersedes any and all of the other
agreements, either oral or in writing, between the parties with respect to such
subject matters outlined in this Agreement. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements, oral
or otherwise, have been made by any party, or anyone herein, and that no other
Agreements, statement or promise not contained in this Agreement may be changed
80
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4, continued
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
or amended only by an amendment in writing signed by both of the parties or
their respective successors-in-interest. This Agreement shall be governed for
all purposes by the laws of the State of California. If any provision of this
Agreement is declared void, such provision shall be deemed severed from this
Agreement, which shall otherwise remain in full force and effect.
21. Termination: This Agreement may be subject to earlier termination by
either party upon thirty (30) days prior written notice and payment for all
services and expenses through the date of termination.
81
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.4, continued
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY CONSULTANT
Nyer Medical Group, Inc. Alliance Capital Resources, Inc.
A Florida Corporation A California Corporation
By:/s/ Samuel Nyer By: /s/ Thomas J. Raack
Samuel Nyer, Thomas J. Raack,
President President
By: /s/ John B. Sutton, Jr.
John B. Sutton, Jr.
Secretary / Treasurer
82
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.5
ADDENDUM
TO
BUSINESS DEVELOPMENT CONSULTING AGREEMENT
THIS BUSINESS DEVELOPMENT CONSULTING AGREEMENT (Agreement) is made and entered
into this 1st day of October 2000 (the Effective Date) by and between Nyer
Medical Group, Inc., a Florida Corporation (Company) and Alliance Capital
Resources, Inc., a California Corporation (Consultant).
RECITALS
Company desires to extend the existing Agreement (dated October 1, 1999) with
Consultant to perform certain consultant services for it, and Consultant desires
to continue existing Agreement, subject to the amendment of paragraph (2.Terms)
and paragraph (3.& subparagraph 3.1 Compensation) leaving all other remaining
terms and conditions of the existing Agreement in force and unchanged, to
perform strategic growth and business development consulting services for the
Company.
NOW, THEREFORE, OF MUTUAL PROMISES AND UNDERTAKING HEREIN CONTAINED AND FOR
OTHER GOOD AND VALUABLE CONSIDERATION THE RECEIPT AND SUFFICIENCY OF WHICH
HEREBY ACKNOWLEDGED THE PARTIES AGREE AS FOLLOWS:
2. Term: The term of this agreement shall begin as of the Effective Date and
terminate twelve (12) months thereafter, subject to earlier termination by
either party upon thirty (30) days prior written notice.
3. Compensation: As compensation for all services rendered by Consultant
pursuant to this Agreement, Company shall compensate Consultant as follows:
3.1 Company shall pay Consultant the sum of seven thousand five hundred ($7,500)
dollars per month.
This Agreement is valid only when used in conjunction with, and attached to the
original Business Development Consulting Agreement dated and executed October 1,
1999.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COMPANY CONSULTANT
Nyer Medical Group, Inc. Alliance Capital Resources, Inc.
A Florida Corporation A California Corporation
By: /s/ Samuel Nyer By: /s/ Thomas J. Raack
Samuel Nyer Thomas J. Raack
President President
By: /s/ John B. Sutton, Jr.
John B. Sutton Jr.
Secretary / Treasurer
83
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT entered into as of this 25th day of October
1999, between Nyer Medical Group, Inc. (the "Company") and Samuel Nyer (the
"Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. Term of Employment.
(a) Term. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, for a period commencing on October 1, 1999
and ending two years thereafter.
(b) Continuing Effect. Notwithstanding any termination of this Agreement except
for termination under Section 5(c), at the end of the Term or otherwise, the
provisions of Sections 6 and 7 shall remain in full force and effect and the
provisions of Section 7 shall be binding upon the legal representatives,
successors and assigns of the Executive.
2. Duties.
(a) General Duties. The Executive shall serve as president and secretary of the
Company, with duties and responsibilities that are consistent with the
Executive's duties and responsibilities as of the date of this Agreement. The
Executive shall also perform services for such subsidiaries as may be necessary.
The Executive shall use his best efforts to perform his duties and discharge his
responsibilities pursuant to this Agreement competently, carefully and
faithfully. In determining whether or not the Executive has used his best
efforts hereunder, the Executive's and the Company's delegation of authority and
all surrounding circumstances shall be taken into account and the best efforts
of the Executive shall not be judged solely on the Company's earnings or other
results of the Executive's performance.
(b) Devotion of Time. Subject to the last sentence of this Section 2(b), the
Executive shall devote all of his time, attention and energies during normal
business hours (exclusive of periods of sickness and disability and of such
normal holiday and vacation periods as have been established by the Company) to
the affairs of the Company. The Executive shall not enter the employ of or serve
as a consultant to, or in any way perform any services for compensation to, any
other persons, business or organization without the prior consent of the board
of directors of the Company; provided, that the Executive shall be permitted to
devote a limited amount of his time, (i) without compensation, to professional,
charitable or similar organizations, and (ii) supervising businesses in which he
has an ownership interest including Nyle International Corp.
3. Compensation and Expenses.
(a) Salary. For the services of the Executive to be rendered under this
Agreement, the Company shall pay the Executive an annual salary of $140,000
subject to increase for cost of living increases based upon the Consumer Price
Index calculated upon the commencement of each year of the Agreement using the
prior month as the measuring month published by the Bureau of Labor Statistics
(or similar successor index). Such increase shall operate as follows: Commencing
with the one year anniversary of this Agreement and at the beginning of each
year thereafter during the term of this Agreement, the Executive's annual salary
shall be adjusted in accordance with the Consumer Price Index, all Urban
Consumers issued by the Bureau of Labor Statistics of the U.S. Department of
Labor using the years 1982-84 as a Price Index,
84
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
all Urban Consumers issued by the Bureau of Labor Statistics of the U.S.
Department of Labor using the years 1982-84 as a base of 100 (the "Index"). At
the commencement of the second year, and of each year thereafter, the
Executive's salary shall be multiplied each year by a fraction, the numerator of
which shall be the published Index number for the month preceding the
commencement of the new year, i.e. September, and the denominator of which shall
be the published Index number for the month of September 1996. The resulting
increase to the Executive's annual salary, if any, shall be added to the prior
year's annual salary and become a part thereof for the succeeding year.
In the event that the Index ceases to be published during the term of this
Agreement, or if a substantial change is made in the method of establishing such
Index, then the determination of the adjustment in the Executive's compensation
shall be made with the use of such conversion factor, formula or table as may be
published by the Bureau of Labor Statistics, or if none is available, the
parties shall accept comparable statistics on the cost of living in the United
States as shall then be computed and published by an agency of the United
States, or if not by a respected financial periodical selected by the Executive.
(b) Expenses. In addition to any compensation received pursuant to Section 3(a)
and (c), the Company will reimburse or advance funds to the Executive for all
reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of his duties under this Agreement, provided
that the Executive properly accounts for such expenses to the Company in
accordance with the Company's practices. Such reimbursement or advances will be
made in accordance with policies and procedures of the Company in effect from
time to time relating to reimbursement of or advances to executive officers.
(c) Management Bonus. During the term of this Agreement, the Board of Directors
(the "Board") shall annually, as soon as practicable after the filing of the
annual report on Form 10-KSB (or Form 10-K), review the Executive's performance
and have the discretion to grant to Executive a management bonus based on any
criteria or factors the Board deems appropriate.
(d) Preferred Options. As additional compensation, the Company grants to the
Executive 500,000 non-qualified options to purchase the Company's Common Stock
(the "Options") at an exercise price of $6.437 per share, that being the fair
market value of the Company's stock on the day prior to approval of this grant
by the Company's board of directors. The Options shall vest in two equal
installments of 250,000 Options each on October 25, 1999 and October 25, 2000.
Notwithstanding the above, in the event of Death Disability or Special
Termination of the Executive provided for in Sections 5(b) and (c) herein, all
Options shall immediately vest.
4. Benefits.
(a) Vacation. For each 12-month period during the Term, the Executive will be
entitled to four weeks of vacation without loss of compensation or other
benefits to which he is entitled under this Agreement, to be taken at such times
as the Executive may select and the affairs of the Company may permit. Any
unused vacation will be paid for by the Company in addition to regular salary at
the annual rate in effect during 12 month period.
(b) Employee Benefit Programs. The Executive is entitled to participate in any
pension, 401(k), insurance or other employee benefit plan that is maintained by
the Company for its executive officers, including programs of life and medical
insurance and reimbursement of membership fees in civic, social and professional
organizations.
(c) Insurance. The Company shall provide to Executive and pay premiums on the
Company's medical insurance policy covering Executive and Executive's
dependents.
(d) Car Allowance. The Executive shall receive an automobile allowance of
$4,200 annually. All expenses associated with the use of such automobile
including insurance, gas, oil and repairs shall be paid by the Executive.
85
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
5. Termination.
(a) Termination for Cause. The Company may terminate the Executive's employment
pursuant to the terms of this Agreement at any time for cause by giving written
notice of termination. Such termination will become effective upon the giving of
such notice. Upon any such termination for cause, the Executive shall have no
right to compensation, bonus, or reimbursement under Section 3, or to
participate in any employee benefit programs under Section 4, except as provided
by law, for any period subsequent to the effective date of termination.
For purposes of this Section 5(a), "cause" shall mean: (i) the Executive is
convicted of a felony which is directly related to the Executive's employment or
the business of the Company; (ii) the Executive, in carrying out his duties
hereunder, has been found in a civil action to have committed gross negligence
or intentional misconduct resulting in either case in direct material harm to
the Company; (iii) the Executive is found in a civil action to have breached his
fiduciary duty to the Company resulting in direct profit to him; or (iv) the
Executive is found in a civil action to have materially breached any provision
of Section 6 or Section 7. The terms "convicted of a felony" and "found in a
civil action" shall not apply until all appeals permissible under the applicable
rules of procedure or statute have been determined and no further appeals are
permissible.
(b) Death or Disability. Except as otherwise provided in this Agreement, it
shall terminate upon the death or disability of the Executive. For purposes of
this Section 5(b), "disability" shall mean that for a period of six consecutive
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease. In the event of
the Executive's death, his estate shall be paid compensation, benefits and bonus
up to a total of 18 months or the remainder of the term of this Agreement,
whichever period is greater and all unvested Options shall immediately vest. In
the event of Executive's disability, the Executive shall be paid compensation,
benefits and bonus which may accrue during the period of disability up to a
total of 18 months, or for the remainder of the term of this Agreement,
whichever time is greater, and all unvested Options shall immediately vest.
(c) Special Termination. In the event that (i) the Executive, with or without
change in title or formal corporate action, shall no longer exercise all of the
duties and responsibilities and shall no longer possess substantially all the
authority set forth in Section 2; or (ii) the Company materially breaches this
Agreement or the performance of its duties and obligations hereunder; or (iii)
the Executive is involuntarily not re-elected to the Company's Board of
Directors upon expiration of his term; or (iv) any entity or person not now an
executive officer of the Company becomes either individually or as part of a
group the beneficial owner of 35% or more of the voting power of the Company's
capital stock, in any such event the Executive, by written notice to the
Company, may elect to deem the Executive's employment hereunder to have been
terminated by the Company without cause, in which event the Executive shall be
entitled to the compensation (including options which shall all immediately
vest), reimbursement and benefits payable pursuant to Sections 3 and 4 herein
for the remaining term of this Agreement. In such event, the Executive, by
written notice to the Company, may elect to refuse all further obligations of
the Company under Sections 3 and 4 and to release the Company with respect
thereto, in which event the Company shall release the Executive from the
provisions of Sections 6 and 7 hereof.
(d) Continuing Effect. Notwithstanding any termination of the Executive's
employment as provided in this Section 5 or otherwise, the provisions of
Sections 6 and 7 shall remain in full force and effect, except as otherwise
provided in Section 5(c).
86
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
6. Non-competition Agreement.
(a) Competition with the Company. Until termination of his employment and for a
period of 24 months commencing on the date of termination for cause or voluntary
termination of employment, the Executive, directly or indirectly, in association
with or as a shareholder, director, officer, consultant, employee, partner,
joint venturer, member or otherwise of or through any person, firm, corporation,
partnership, association or other entity, will not compete with the Company or
any of its affiliates in the offer, sale or marketing of products or services
that are competitive with any of the products or services offered by the
Company, within any metropolitan area in the United States or elsewhere in which
the Company is then engaged in the offer and sale of competitive products or
services; provided, however, the foregoing shall not prevent Executive from
accepting employment with an enterprise engaged in two or more lines of
business, one of which is the same or similar to a portion of the Company's
business (the "Prohibited Business") if Executive's employment is totally
unrelated to the Prohibited Business; provided, further, the foregoing shall not
prohibit Executive from owning up to 5% of the securities of any publicly-traded
enterprise provided Executive is not an employee, director, officer, consultant
to such enterprise or otherwise reimbursed for services rendered to such
enterprise.
(b) Solicitation of Customers. During the periods in which the provisions of
Section 6(a) shall be in effect, the Executive, directly or indirectly, will not
seek Prohibited Business from any Customer (as defined below) on behalf of any
enterprise or business other than the Company, refer Prohibited Business from
any Customer to any enterprise or business other than the Company or receive
commissions based on sales or otherwise relating to the Prohibited Business from
any Customer, or any enterprise or business other than the Company. For purposes
of this Section 6(b), the term "Customer" means any person, firm, corporation,
partnership, association or other entity to which the Company or any of its
affiliates sold or provided goods or services during the 24-month period prior
to the time at which any determination is required to be made as to whether any
such person, firm, corporation, partnership, association or other entity is a
Customer.
(c) No Payment. The Executive acknowledges and agrees that no separate or
additional payment will be required to be made to him in consideration of his
undertakings in this Section 6.
7. Nondisclosure of Confidential Information. The Executive acknowledges that
during his employment he will learn and will have access to confidential
information regarding the Company and its affiliates, including without
limitation (i) confidential or secret plans, programs, documents, agreements or
other material relating to the business, services or activities of the Company
and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). The Executive acknowledges that such Confidential
Information as is acquired and used by the Company or its affiliates is a
special, valuable and unique asset. All records, files, materials and
Confidential Information obtained by the Executive in the course of his
employment with the Company are confidential and proprietary and shall remain
the exclusive property of the Company or its affiliates, as the case may be. The
Executive will not, except in connection with and as required by his performance
of his duties under this Agreement, for any reason use for his own benefit or
the benefit of any person or entity with which he may be associated or disclose
any such Confidential Information to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever without the prior written
consent of the Board unless such Confidential Information previously shall have
become public knowledge through no action by or omission of the Executive.
87
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
8. Equitable Relief.
(a) The Company and the Executive recognize that the services to be rendered
under this Agreement by the Executive are special, unique and of extraordinary
character, and that in the event of the breach by the Executive of the terms and
conditions of this Agreement or if the Executive, without the prior consent of
the Board shall leave his employment for any reason and take any action in
violation of Section 6 or Section 7, the Company will be entitled to institute
and prosecute proceedings in any court of competent jurisdiction referred to in
Section 8(b) below, to enjoin the Executive from breaching the provisions of
Section 6 or Section 7. In such action, the Company will not be required to
plead or prove irreparable harm or lack of an adequate remedy at law.
(b) Any proceeding or action must be commenced in Bangor, Maine where the
Company maintains its principal offices. The Executive and the Company
irrevocably and unconditionally submit to the exclusive jurisdiction of such
courts and agree to take any and all future action necessary to submit to the
jurisdiction of such courts. The Executive and the Company irrevocably waive any
objection that they now have or hereafter irrevocably waive any objection that
they now have or hereafter may have to the laying of venue of any suit, action
or proceeding brought in any such court and further irrevocably waive any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment against the Executive or the
Company in any such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any liability of the
Executive or the Company therein described, or by appropriate proceedings under
any applicable law or otherwise.
9. Assignability. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Company, provided that such successor or assign shall acquire all or
substantially all of the securities or assets of the Company. The Executive's
obligations hereunder may not be assigned or alienated and any attempt to do so
by the Executive will be void.
10. Severability.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by a court of competent jurisdiction
that the character, duration or geographical scope of such provisions is
unreasonable, then it is the intention and the agreement of the Executive and
the Company that this Agreement shall be construed by the court in such a manner
as to impose only those restrictions on the Executive's conduct that are
reasonable in the light of the circumstances and as are necessary to assure to
the Company the benefits of this Agreement. If, in any judicial proceeding, a
court shall refuse to enforce all of the separate covenants deemed included
herein because taken together they are more extensive than necessary to assure
to the Company the intended benefits of this Agreement, it is expressly
understood and agreed by the parties hereto that the provisions of this
Agreement that, if eliminated, would permit the remaining separate provisions to
be enforced in such proceeding shall be deemed eliminated, for the purposes of
such proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be invalid or
unenforceable or is prohibited by the laws of the state or jurisdiction where it
is to be performed, this Agreement shall be considered divisible as to such
provision and such provision shall be inoperative in such state or jurisdiction
and shall not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid and binding
and of like effect as though such provision were not included.
88
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
11. Notices and Addresses. All notices, offers, acceptance and any other acts
under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To the Company: Nyer Medical Group, Inc.
1292 Hammond Street
Bangor, ME 04401
Facsimile (207) 941-9392
With a Copy to: Michael D. Harris, Esq.
Michael Harris, P.A.
1645 Palm Beach Lakes Boulevard,
Suite 550
West Palm Beach, FL 33401
To the Executive: Mr. Samuel Nyer
1292 Hammond Street
Bangor, ME 04401
Facsimile (207) 941-9392
or to such other address as either of them, by notice to the other may designate
from time to time. Time shall be counted to, or from, as the case may be, the
date of delivery.
12. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature.
13. Attorney's Fees. In the event that there is any controversy or claim arising
out of or relating to this Agreement, or to the interpretation, breach or
enforcement thereof, and any action or proceeding is commenced to enforce the
provisions of this Agreement, the prevailing party shall be entitled to a
reasonable attorney's fee, costs and expenses.
14. Governing Law. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
15. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties and supersedes all prior oral and written agreements between the
parties hereto with respect to the subject matter hereof. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated
orally, except by a statement in writing signed by the party or parties against
which enforcement or the change, waiver discharge or termination is sought.
16. Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
89
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 10.6, continued
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement on the 25th day of October 1999.
NYER MEDICAL GROUP, INC.
By:/s/ William Clifford
William Clifford, Vice President
EXECUTIVE
By: /s/ Samuel Nyer
Samuel Nyer
90
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Doing Business State or Country Percentage Voting
Subsidiary As(DBA) of Incorporation Stock/Interests Owned
D.A.W., Inc. Eaton Apothecary Massachusetts 80%
ADCO Surgical
Supply, Inc. ADCO Maine 100%
ADCO South
Medical
Supplies, Inc. ADCO South Florida 100%
Nyer Internet
Companies, Inc. Nyer Internet Delaware 100%
PhysicianEquipment.com
Medicalmailorder.com
Anton
Investments, Inc. Anton Enterprises,
Inc. Florida 80%
Conway Associates,
Inc. Massachusetts 80%
SCBA, Inc. Massachusetts 80%
Nyer Nutritional
Systems, Inc. Delaware 80%
91
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Nyer Medical Group, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement of Nyer Medical Group, Inc. (Form S-3 No. 333-66554) of our report
dated September 6, 2002 relating to the consolidated financial statements and
schedules of Nyer Medical Group, Inc. included in the Annual Report (Form 10-K)
for the year ended June 30, 2002, filed with the Securities and Exchange
Commission.
/s/ Sweeney, Gates & Co.
Fort Lauderdale, Florida
October 14, 2002
92
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-66554) of Nyer Medical Group, Inc. of our report
dated April 7, 2000 relating to the financial statements and financial statement
schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
October 14, 2002
93
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Nyer Medical Group, Inc. (the
"Company") on Form 10-K for the fiscal year ended June 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Samuel Nyer, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Samuel Nyer
Samuel Nyer
Chief Executive Officer
October 11, 2002
94
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2002 Annual Report on Form 10-K
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Nyer Medical Group, Inc. (the
"Company") on Form 10-K for the fiscal year ended June 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Karen L. Wright, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Karen L. Wright
Karen L. Wright
Chief Financial Officer
October 11, 2002
95