NYER MEDICAL GROUP INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2003

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _______________

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)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
1 of 109
1

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the Company's common stock held by non-affiliates,
as of December 31, 2002, was approximately $3,438,828 based upon the closing
price.

There were 3,784,962 shares of common stock outstanding as of September 26,
2003.

Documents Incorporated by Reference:

Registration Statement on Form S-18 filed on April 13, 1992. Form 10-KSB filed
April 1996. Form 10-K filed October 2002.

Each of the foregoing documents incorporated by reference are incorporated by
reference into the Exhibits section of Part IV of this Form 10-K.

2

PART I
ITEM 1. 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:

Pharmacies. 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. Three wholly owned
subsidiaries, ADCO Surgical Supply, Inc. (ADCO), ADCO South Medical Supplies,
Inc. (ADCO South) and Nyer Internet Companies, Inc. are engaged in the wholesale
and retail sale of medical and surgical equipment and supplies throughout New
England, Florida, Nevada and worldwide through the Internet sales.

Fire and 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.

Corporate. Salaries of the officers of the holding company are included in
this segment as well corporate expenses such as reporting costs, accounting and
legal fees. The corporate segment includes Nyer Nutritional Systems, Inc., (Nyer
Nutritional), which is 80% owned by the Company. It is accounted for as a
discontinued operation.

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 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 a maximum of $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 years ended June 30,
2003 and 2002, for the six months ended June 30, 2001 and the year ended
December 31, 2000, see footnote 18 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, a
13 store chain of pharmacies operating in the greater Boston area.

Each of the five minority shareholders (except in one case, the husband of
a shareholder) continue employment under a five-year extension of their original
employment contract. Their original five-year employment contract
3

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. Additionally, one member of Eaton's management occupies a seat on
our Board of Directors, which seat is currently vacant.

Eaton operates 13 pharmacies within the metro-Boston Massachusetts market
place with net sales of approximately $47.8 million in fiscal 2003. The majority
of our stores are between 2,000 and 3,000 sq. ft. with the emphasis of
operations on the pharmacy department Eaton offers free delivery service of
prescription medication to its customers. In fiscal 2003, prescription sales
accounted for 92% of total sales.

Strategy

Eaton's strategy is to move in the opposite direction from the national
chains regarding store size, merchandise mix and store locations. The market for
prescription medications is growing at an ever-increasing pace as the
baby-boomers age, direct to consumer advertising continues and new and improved
medications continue to enter the market. Eaton believes that its strategy of
focusing on the core of the business within a low fixed cost prototype has
resulted in its becoming the least cost producer within the industry. Eaton
believes that this advantage will become increasingly important as pharmacy
benefit management companies continue to squeeze margins and the state Medicaid
program continues to grapple with budget constraints and rising manufacturer
prices.

Eaton is the leading niche-market pharmacy provider in Massachusetts. It,
in conjunction with the Lynn Community Health Center, operates the only dually
licensed pharmacy in the state. It has contracts with three of the largest PACE
(Progressive All-inclusive Care for the Elderly) providers in the state as well
as the Boston HealthCare for the Homeless program. In each of the instances,
Eaton provides pharmacy services consistent with Section 340B of the Public
Health Services Act under its replenishment model. Eaton operates two
Medicine-On-time medication management systems. This licensed packaging system
caters to elderly clients who are unable to manage their medication regimens yet
who are not frail enough for nursing homes. The Medicine-On-Time system is the
preferred system of most Assisted Living Facilities. 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. In addition to growth in the assisted living and homebound sectors,
many new customers have been gained by word of mouth throughout the visiting
nurse and health center communities. Sales within these niche segments were
approximately $8 million in fiscal 2003. Eaton expects growth within its niche
categories to be the fastest growing segment of its business over the next
several years.

Eaton continues to seek acquisition opportunities within contiguous markets
to grow its business. Eaton acquires stores both with the intent of continuing
operations or effectuating consolidations with existing locations. Eaton
acquired two locations in each of the last two fiscal years; two continue to
operate and two were consolidated into existing locations.

Eaton installed a McKesson Autoscript II robot at its Dorchester location
and has committed to install automated dispensing systems at three other
4

locations in fiscal 2004. Automation within the pharmacy results in less
dispensing errors, shorter wait times for its customers and overall increased
efficiencies.

Customers and Third-Party Payors

During the year ended June 30, 2003, approximately 83 % of our pharmacy
sales were to customers covered by health plan contracts, which typically
contract with a third-party (such as an insurance company, a prescription
benefit management company, a governmental agency, a private employer, a health
maintenance organization or other managed care provider) that agrees to pay for
all or a portion of a customer's eligible prescription purchase in exchange for
reduced prescription rates. During the year ended June 30, 2003, the top five
third-party payors, which provide administrative and payment services for
multiple health plan contracts and customers, accounted for approximately 69% of
our total sales, the largest of which represented 25% of our total sales. During
the year ended June 30, 2003, Medicaid agencies accounted for approxi- mately
25% of our total sales. Any significant loss of third-party payor business could
have a material adverse effect on our business and results of operations.

Regulation

Our business is subject to various federal and state regulations. For
example, pursuant to Omnibus Budget Reconciliation Act of 1990 ("OBRA") and
Massachusetts regulations, our pharmacists are required to offer counseling,
without additional charge, to our customers about medication, dosage, delivery
systems, common side effects and other information deemed significant by the
pharmacists and may have a duty to warn customers regarding any potential
adverse effects of a prescription during if the warning could reduce or negate
such effect.

Our pharmacies and pharmacists must be licensed by the Massachusetts board
of pharmacy. Our pharmacies and distribution centers are also registered with
the Federal Drug Enforcement Administration and are subject to Federal Drug
Enforcement Agency regulations relative to our pharmacy operations, including
purchasing, storing and dispensing of controlled substances. If we were to
violate any applicable statute, rule or regulation, our licenses and registra-
tions could be suspended or revoked.

Our pharmacies are subject to patient privacy and other obligations,
including corporate pharmacy and associate responsibility imposed by the Health
Insurance Portability and Accountability Act. As a covered entity, we are
required to implement privacy standards, train our associates on the permitted
uses and disclosures of protected health information, provide a notice of
privacy practice to our pharmacy customers and permit pharmacy customers to
access and amend their records and receive an accounting of disclosures of
protected health information. Failure to properly adhere to these requirements
could result in the imposition of civil as well as criminal penalties.

In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in the state legislature that would
effect major changes in the healthcare system, either nationally or at the state
level. The legislative initiatives include prescription drug benefit proposals
for Medicare participants. Although we believe we are well
5

positioned to respond to these developments, we cannot predict the outcome or
effect of legislation resulting from these reform efforts.

Medical Products/Service

ADCO - ADCO South - Nyer Internet

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 to physician offices, clinics, health centers,
nursing homes, visiting nurse associations, individual health care consumers and
specialty equipment to hospitals.

ADCO is one of the larger independent wholesale medical distributors
located in New England (excluding national competitors), with a wholesale
customer base of over 1,125 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 derives 89% of its revenues from sales to institutional 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 and is located in West Palm Beach,
Florida. 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.

Nyer Internet began operations in May 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.

Marketing

Our sales are achieved through the services of independent sales
representatives who travel throughout New England and South Florida, through
telemarketing, catalogs and mailing campaigns for existing customers and the
Internet.

6

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.

EMT, Fire, Police Products/Services Business

Anton Investments, Inc. - Conway Associates, Inc.

Anton and Conway sell fire, police and rescue equipment and supplies that
are sold to municipal and industrial accounts throughout most of the New England
area.

We purchased an 80% interest in Anton Investments Inc. in 1993. Anton
conducts approximately 90% of its business with municipal and industrial fire
departments, while law enforcement agencies and emergency rescue units comprise
10% each.

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
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 58% in Massachusetts, 16% in New Hampshire, 1% in Vermont, 5% in
Maine, with the remainder outside of New England including 11% in New York.

Anton and Conway sell 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.

7

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.

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 extensive inventory and emphasis on service give them a slight edge
over the competition.

Both Anton's sales and Conway's sales have 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.

Nutritional Supplies

Nyer Nutritional Systems, Inc.

Nyer Nutritional is an 80% owned subsidiary started in December of 1996.
Nyer Nutritional ceased active operations in the fall of 1999.

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.

None of our Companies have significant backlogs and our businesses are not
seasonal.

Employees

The Company believes their employees represent one of our most valuable
resources. As of the date of this report, including its executive officers, we
have 126 full-time and 143 part-time employees. Eaton employs 75 full-time and
135 part-time employees, ADCO employs 34 full-time employees, ADCO South employs
5 full-time employees, Nyer Internet employs 4 full-time employees and
8

one part-time, Anton employs 2 full-time employees and 1 part-time employee,
Conway employs 5 full-time employees and 6 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 our relationship with our employees is excellent and that we have
a loyal work force.

ITEM 2. Properties.

Our executive offices, and ADCO and Nyer Internet, are located at 1292
Hammond Street, Bangor, Maine, where ADCO's warehouse and retail store are also
located. The pharmacies have 15 leases, averaging approximately 2,200 square
feet each, throughout the suburban Boston area. One of the leases is for office
space of approximately 2,000 square feet and another is for space in the process
of being constructed to replace an existing lease. Our monthly lease payments
range from $562 to $8,000. The leases have varying expiration dates with all
having renewal options.

The medical segment owns a 23,000 square foot facility located in Bangor,
Maine, which currently has a mortgage for $152,284 on its building. The
monthly costs, including mortgage payments and taxes (but excluding utilities)
is $6,800. It also leases 12,772 square feet of warehouse space in Bangor,
Maine, 2,640 square feet of warehouse and office space in Henderson, Nevada and
6,172 square feet of warehouse and office space in West Palm Beach, Florida.

The fire and police segment leases approximately 5,295 square feet of
warehouse and office space in Scarborough, Maine. The lease expires January 31,
2004. It also leased a showroom and office space in Pembroke, New Hampshire,
which the Company closed in September 2003. We also leased approximately 2,000
square feet of warehouse and office space located in Wilmington, Massachusetts.
In August 2003, the Company closed this location and moved the existing business
to Haverhill, Massachusetts. The Haverhill location leases approximately 4,000
square feet of warehouse and office space rented on a month-to-month basis.

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.

Not applicable

9

PART II

ITEM 5. Market For Registrant's 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 September 26, 2003, there were approximately 810 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:

2003 2002 2001
---- ---- ----
Closing Bids Closing Bids Closing Bids
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
First Quarter $1.25 $1.00 $2.71 $1.95 $4.25 $3.38
Second Quarter 1.44 .65 2.40 1.82 3.31 1.86
Third Quarter - - 2.08 1.55 3.19 1.35
Fourth Quarter - - 1.79 1.15 3.90 1.60

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.

10

ITEM 6: Selected Financial Data

Selected Financial Data

2003* 2002* 2001** 2000*** 1999*** 1998***
---- ---- ---- ---- ---- ----

Summary of Operations:
Sales $59,899,317 $54,100,058 $23,903,627 $41,975,445 $39,856,911 $36,936,034
Gross Margin
13,243,523 11,255,234 4,949,483 8,981,805 7,535,806 7,746,753
Operating
income (loss)
from continuing
operations
757,533 341,813 (95,383) (556,324) (1,760,010) (410,881)
Income (loss)
from continuing
operations 499,137 293,233 (129,868) (330,966) (1,428,625) 153,573
(Loss)from
discontinued
operations - (50,419) (87,893) (307,689) (744,020) (1,993,764)
Net income
(loss) $ 499,137 $ 242,814 $ (217,761) $ (638,655) $(2,172,645) $(1,840,191)

Per Share Data:
Net income (loss)
per weighted
average of common
shares from
continuing
operations $ .13 $ .07 $ (.04) $ (.09) $ (.38) $ .04
Net(loss) per weighted
average of common shares
from discontinued
operations - (.01) (.02) (.08) (.20) (.53)
Net Loss per
weighted
average of
common shares
$ .13 $ .06 $ (.06) $ (.17) $ (.58) $ (.49)

Year-End Position:
Total assets $14,300,445 $13,564,503 $12,603,077 $12,634,831 $13,173,635 $14,412,042
Net working
capital 6,855,530 6,289,838 5,841,459 5,854,127 6,831,097 8,410,421

11

Long-term debt
(including
related party
and excluding
current portion) 418,425 430,770 458,554 551,902 998,628 1,003,531
Minority
interest 1,243,533 965,758 765,552 685,468 580,312 744,357
Shareholders'
equity
$ 7,316,962 $ 6,765,549 $ 6,407,235 $ 6,612,316 $ 7,228,971 $ 9,032,866

* For the twelve months ended June 30, 2003 and 2002 ** For the six months
ended June 30, 2001 *** For the twelve months ended December 31, 2000, 1999 and
1998

No cash dividends have been declared in the periods presented.

12

ITEM 7. Management's Discussion And Analysis of Financial Condition
and Results of Operation.

Effective June 30, 2001, we changed our 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 years ended June 30, 2003 and 2002, for the year ended June 30,
2002 as compared to 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 should be read
in conjunction with the Consolidated Financial Statements and related notes
appearing elsewhere in this report.

We had three business segments for the years ended June 30, 2003, 2002 and
2001 and December 31, 2000: (1) retail pharmacy drug store chain ("pharmacies"),
(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, ("Fire and police"). Business segments are determined by the
management approach which analyzes results based on products or services offered
for sale.

Year Ended June 30, 2003 Compared to June 30, 2002.

NET SALES. Total sales for the twelve months ended June 30, 2003 increased by
10.7% from June 30, 2003 to $59,899,317 from $54,100,058 in 2002.

The following table shows sales by business segment for the years ended
June 30, 2003 and 2002:

Business Segment 2003 2002 % increase
---- ---- (decrease)

Pharmacies $47,778,600 $40,686,119 17.4
Medical and surgical
equipment and supplies 9,193,894 9,188,343 -
Fire and police 2,926,823 4,225,596 (30.7)
----------- ----------- -----
Total for business segments $59,899,317 $54,100,058 10.7
=========== =========== =====

The pharmacies segment's sales increased $7,092,481 to $47,778,600 or 17.4%
for the year ended June 30, 2003 as compared to $40,686,119 for the year ended
June 30, 2002. The increases were due to: increased sales from non-profit
organizations of $2,035,000; the acquisition of two pharmacies in March 2003 and
June 2003 resulted in an increase of $729,000; the first full year of sales from
acquisitions in year 2002 of approximately $2,153,000. The remainder was due to
continued increases in volume on prescription drugs due to increased
advertising.

The medical segment increased $5,551 in 2003 to $9,193,894 or 0% for the
year ended June 30, 2003 as compared to $9,188,343 for the year June 30,2002.
The medical segment's sales did not increase due to their discontinuing of
unprofitable items and increased competition from cut rate competitors.

13

The fire and police segment's sales decreased by $1,298,773 to $2,926,823 or
(30.7%) for the year ended June 30, 2003 as compared to $4,225,596 for the year
ended June 30, 2002. This decline is due to many factors including tighter
municipal budgets through-out the sales territories and the entire country, and
a down turn in the economy resulting in less tax revenues which results in less
available funds for the fire departments. In addition, fire departments have
partially altered the focus of their purchasing to include merchandise that
relates to biological and chemical items and homeland security products, which
this segment does not market. Another reason for this decline is increased
competition from a company owned by a minority shareholder of this segment and
who was the previous 100% owner of one of the fire and police segment. This
segment is also discontinuing the sale of unprofitable items.

GROSS PROFIT MARGINS. Our overall gross profit margins were 22.1% in 2003 as
compared to 20.8% in 2002.

The following is a table of gross profit margin percentages by business
segment for the years ended June 30, 2003 and 2002:

Business Segment 2003 2002
---- ----
Pharmacies 20.7 19.3
Medical 28.8 28.1
Fire and police 24.3 19.4
---- ----
22.1 20.8
==== ====

The pharmacies segment's gross profit margins increased 1.4% to 20.7% for
the year ended June 30, 2003 as compared to 19.3% for the year ended June 30,
2002. The increase was due to increased sales and larger discounts from their
suppliers.

The medical segment's gross profit margins had an increase of .7% to 28.8%
for the year ended June 30, 2003 as compared to 28.1% for the year ended June
30, 2002. This increase was the result of discontinuing the sale of unprofitable
items. Also, this segment increased its minimum prepaid shipping requirement.

The fire and police segment had an increase in its gross profit margins of
4.9% to 24.3% for the year ended June 30, 2003 as compared to 19.4% at June 30,
2002. This increase was the result of cessation of sales of lower profit margin
items.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general and
administrative expenses ("S,G&A") increased 14.4% in 2003 to $12,485,990 as
compared to $10,913,421 in 2002.

14

The following table shows the breakdown by business segment for the years
ended June 30, 2003 and 2002:

Business Segment 2003 2002 % Increase
---- ---- (decrease)
----------
Pharmacies $ 8,202,613 $ 6,704,030 22.4
Medical 2,688,020 2,553,515 5.3
Fire and police 910,049 1,066,465 (14.7)
Corporate 685,308 589,411 16.3
----------- ----------- -----
$12,485,990 $10,913,421 14.4
=========== =========== =====

The pharmacies increased S,G & A expenses $1,498,583 to $8,202,613 or 22.4%
for the year ended June 30, 2003 as compared to $6,704,030 for the year ended
June 30, 2002. The increase came from the additional overhead costs associated
with the acquisition and operation of two additional pharmacies of $187,225, the
first full year of expenses associated with the acquisition of two
pharmacies for the year ended June 2002 of $2,153,407, increased labor costs of
approximately $300,000 due to a shortage of available pharmacists and increased
advertising expense by approximately $198,000.

The medical segment's S,G&A expenses increased $134,505 or 5.3% to
$2,688,020 for the year June 30, 2003 as compared to $2,553,515 for the year
June 30, 2002. Advertising expense increased $174,043; an increase in warehouse
rental space and one employee due to the bulk purchase of brand name medical
products of approximately $51,000; an increase in personnel costs of
approximately $50,000; and a decrease in its accounts receivable bad debt
expense of $80,500.

The fire and police segment's S,G&A expenses decreased by $156,416 or
(14.7%) to $910,049 for the year June 30, 2003 as compared to $1,066,465 for the
year June 30, 2002. This decrease was mainly due to expenses directly related to
lower sales and associated costs.

The Corporate segment's overhead increased by $95,897 or 16.3% to $685,308
for the year June 30, 2003 as compared to $589,411 for the year June 30, 2002.
This was mainly due additional accounting, legal and stock related expenses.

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 to fiscal
2002.

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.

Nyer Nutritional incurred $0 costs in 2003, $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 included $187,096 of litigation expenses.

15

INCOME TAXES. The following table shows income taxes by segment for the years
ended June 30, 2003 and 2002. In prior years the Company has concluded it was
appropriate to establish a full valuation allowance for its net deferred tax
assets because the Company had continuing losses and loss carryforwards to
utilize. However, as a result of a review at June 30, 2003, the Company has
concluded that, because the Company has reached a level of profitability and
because the Company believes the profitability will continue and utilize the
remaining NOL, a deferred tax asset of $185,000 was recorded. Due to the
uncertainty of the utilization of the timing differences, a full valuation
allowance was provided. For more information, see footnote 12 in the Notes to
Consolidated Financial Statements.

Income taxes (benefit)
June 30 June 30
2003 2002
---- ----
Pharmacies $ 460,000 $ 331,000
Medical (20,000) 41,000
Fire and police (80,000) (97,000)
Corporate (357,200) (156,000)
----------- -----------
$ 2,800 $ 119,000
=========== ===========

Year Ended June 30, 2002 Compared to June 30, 2001.

The following information for the twelve months ended June 30, 2002 and 2001 is
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)
=========== ============
16

Basic and diluted income (loss)
per share: $.06 $(.15)
==== =====

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 segment for the years ended
June 30, 2002 and 2001:

Business Segment 2002 2001 % increase
---- ---- (decrease)
---------
Pharmacies $40,686,119 $31,999,487 27.1
Medical 9,188,343 8,417,883 9.2
Fire and police 4,225,596 5,088,337 (17.0)
----------- ----------- -----
$54,100,058 $45,505,707 17.3
=========== =========== =====

The pharmacies segment's sales increased approximately $8,700,000 to
$40,686,119 or 27.1% for the year ended June 30, 2002 as compared to $31,999,487
for the year ended June 30, 2003 due to the acquisition of two pharmacies and
continued increases in volume on prescription drugs as a result of increased
advertising.

The medical segment's sales increased $770,460 to $9,188,343 or 9.2% for the
year ended June 30, 2002 as compared to $8,417,883 for the year ended June 30,
2001, mainly due to its Internet subsidiary, Nyer Internet. The number of
products available online more than doubled. Online advertising increased by
approximately $20,000.

The fire and police segment's sales decreased by $862,741 to $4,225,596 or
17% for the year ended June 30, 2002 as compared to $5,088,337 for the year
ended June 30, 2001. The main reason was less than anticipated sales and Conway
had a change in sales management. This was due to tighter municipal budgets
through-out the sales territories and the entire country, and a down turn in the
economy resulting in less tax revenues which results in less available funds for
the fire departments. In addition, fire departments have partially altered the
focus of their purchasing to include merchandise that relates to biological and
chemical items and homeland security products, which this segment does not
market. Another reason for this decline is increased competition from a company
owned by a minority shareholder of this segment and who was the previous 100%
owner of one of the fire and police segment.

GROSS PROFIT MARGINS. Our overall gross profit margins were 20.8% in 2002 as
compared to 21.2% in 2001.

17

The following is a table of gross profit margin percentages by business
segment for the years ended June 30, 2002 and 2001:

Business Segment 2002 2001
---- ----
Pharmacies 19.3 19.1
Medical 28.1 29.2
Fire and police 19.4 21.2
---- ----

20.8 21.2
==== ====

The pharmacies segment's gross profit margins 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.

The medical segment's gross profit margins had a decreased 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. Nyer Internet had lower gross
profit margins in order to compete on the Internet. Equipment sales, which
generally have lower gross profit margins, increased by approximately $715,000.

The fire and police 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 ("S,G,&A) 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 segment 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)
Fire, police 1,066,465 1,352,352 (21.1)
Corporate 589,411 666,900 (11.6)
----------- ----------- -----

$10,913,421 $10,044,180 8.7
=========== =========== =====
The pharmacies segment's S,G&A expenses increased $1,278,177 to $6,704,030
or 23.6% for the year ended June 30, 2002 as compared to $5,425,853 for the year
ended June 30, 2001. The increase was due to additional labor costs and costs
associated with the increase in sales of approximately $625,000.
18

The medical segment's S,G&A expenses decreased $45,560 to $2,553,515 or
1.8% for the year ended June 30, 2002 as compared to $2,599,075 for the year
ended June 30, 2001. An increase in the accounts receivable reserve was offset
by the elimination of respiratory salaries and expenses due to the sale of this
division in December 2001.

The fire and police segment's S,G&A expenses decreased by $285,887 to
$1,066,465 or 21.1% for the year ended June 30, 2002 as compared to $1,352,352
for the year ended June 30, 2001. 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 decreased $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 of approximately $45,000.

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 included $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, 2003 and
June 30, 2002.

Six Months Ended June 30, 2001 Compared to June 30, 2000.

The following information for the six months ended June 30, 2001 and 2000 is
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) -
----------- ------------
19

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)
--------
Pharmacies $16,913,373 $14,018,208 20.7
Medical 4,251,242 3,919,069 8.5
Fire and police 2,739,012 2,436,089 12.4
----------- ----------- ----
$23,903,627 $20,373,366 17.3
=========== =========== ====

The pharmacies 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's sales 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 fire and police segment's sales increased by $302,923 in 2001 as
compared to 2000. Conway's sales increased of $226,678 over the same period in
2000. Conway has added more sales personnel in its New York territories.

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
---- ----
Pharmacies 19.1% 19.2%
Medical 27.2 26.4
Fire and police 20.7 21.7
---- ----
20.7% 20.9%
==== ====

20

The pharmacies segment's gross margins 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 margins increased from 26.4% in 2000 to 27.2%
in 2001. This was due to increased sales volume and better product cost
sourcing, as well as fewer equipment sales which generally have lower gross
profit margins.

The fire and police segment's gross profit margins decreased from 21.7% for
the six months ended June 30, 2000 as compared 20.7% for the six months ended
June 30, 2001. This was due to the recognition of additional inventory reserves.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general and
administrative expenses ("S,G&A") 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)
---------
Pharmacies $ 2,815,995 $ 2,504,262 12.5
Medical 1,300,122 1,177,383 10.4
Fire and police 654,237 597,659 9.5
Corporate 274,512 229,510 19.6
----------- ----------- ----
$ 5,044,866 $ 4,508,814 11.9
=========== =========== ====

The pharmacies segment's S,G &A expenses increase was due to additional
labor costs and costs associated with the increase in sales.

The medical segment's S,G&A expenses increased $122,739. Most of the
increase came from increased wages and expenses directly related to the increase
in sales.

The fire and police segment's S,G&A expenses also increased. 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. On March 27, 2001, the
agreement was terminated and the $100,000 and 15,873 shares of our common stock
were forfeited. The $100,000 was reserved at December 31, 2000 and the stock was
replaced and a stock charge of $36,190 was expensed.

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 $87,893 in costs in 2001, including
approximately $39,200 in litigation expenses. For the six months ended June
21

30, 2000, Nyer Nutritional incurred $165,287 in expenses, of which approximately
$43,350 was for litigation expenses.

We have reported the assets to be disposed (primarily patents and fixed
assets) as discontinued operations as of June 30, 2001. The Company settled
litigation regarding the patents in 2001. 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.

Liquidity and Capital Resources

Net cash provided by operating activities was $463,998 for the year ended
June 30, 2003 as compared to $616,042 for the year ended June 30, 2002, $165,207
for the year ended June 30, 2001. The primary use of cash for the year June 30,
2003 was to fund operations for our medical, fire and police and corporate
operations, as well as the pharmacies' inventory. For the year June 30, 2002 and
2001 the primary use was to fund operations for our nutritional, fire and
police, medical and corporate operations, as well as accounts receivable and
inventory.

The net cash used in investing activities was $678,928 for the year June
30, 2003 as compared $361,180 and $22,092 for the years ended June 30, 2002 and
June 30, 2001, respectively. The decrease of $678,928 was mainly due to the
acquisition of two pharmacies and property, plant and equipment. The increase
for years ended June 30, 2002 and June 30, 2001, was largely due to the proceeds
received from marketable securities. In fiscal 2002, we acquired two pharmacies
and remodeled some existing pharmacy locations.

Net cash provided by financing activities was $82,300 and $198,729 for the
years ended June 30, 2003 and 2002 and $286,299 for the year ended June 30,
2001. This was due to issuance of long-term debt of $390,000 and $369,701 for
the years June 30, 2003 and June 2002, the repayment of stock sales receivable
of $115,000 for the year June 30, 2002 and increased repayments of long-term
debt and notes to related party of $305,376 and $286,472 for the years June 30,
2003 and 2002. Net cash used in financing activities of $286,299 for the year
June 30, 2001 was mainly 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.

Our primary source of liquidity is cash provided from operations. Our
principal uses of cash are: operations and pharmacy acquisitions, capital
expenditures and repayment of debt.

Cash - At June 30, 2003, we had approximately $1.4 million in cash. We invest
excess cash in highly liquid government instruments.

Accounts receivable - At June 30, 2003, we had accounts receivable of
approximately $4.4 million as compared to approximately $4.5 million at June 30,
2002. Although our sales have increased approximately $5.8 million, our accounts
receivables have decreased $102,663. The decrease was comprised of an increase
in the pharmacies segment of $320,409, a decrease in the medical
22

segment of $226,989 and a decrease of $196,083 in the fire and police segment.
The reasons for the decrease are more timely payments and a reduction in sales
in the medical segment and an increase in sales in the pharmacies segment.

Debt - At June 30, 2003, we had $906,173 of debt as compared to $821,549 at June
30, 2002.

Our debt increased due to the acquisition of two pharmacies. We issued notes to
partially fund the acquisitions.

Forward-Looking Statements

The statements made in Item 1, relating to the anticipated development of
new web sites, 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 operates; (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

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to allowance for uncollectible receivables, inventory shrinkage,
impairment, and income taxes. We base our estimates on historical experience,
current and anticipated business conditions, the condition of the financial
markets and various other assumptions that are believed to be reasonable under
existing conditions. Actual results may differ from these estimates.

We believe that the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

Allowance for uncollectible receivables: - The majority of our sales are
made to customers that are covered by third party payors, such as insurance
companies, government agencies and employers. We carry receivables that

23

represent the amount owed to us for sales made to customers or employees of
those payors that have not yet been paid. We maintain a reserve for the amount
of these receivables deemed to be uncollectible. This reserve is calculated
based upon historical collection activity adjusted for current conditions. If
the financial condition of the payors were to deteriorate, resulting in an
inability to make payments, then an additional reserve would be required.

Inventories: - Included in our valuation of inventory are estimates of the
losses related to shrinkage, which occurs during periods between physical
inventory counts. When estimating these losses, we considered historical loss
results at specific locations as well as overall loss trends. Should actual
shrink losses differ from the estimates upon which that our reserves were based;
our operating results will be impacted.

Impairment: - We evaluate long-lived assets, excluding goodwill, for
impairment annually, or whenever events or changes in circumstances indicate
that the assets may not be recoverable. The impairment is measured by
calculating the estimated future cash flows expected to be generated by the
store, and comparing this amount to the carrying value of the assets.

Goodwill impairment: In connection with the provisions of SFAS No. 142, we
perform an annual impairment test of goodwill. Our test during the fourth
quarter of fiscal 2003 resulted in no impairment being identified. However, the
process of evaluating goodwill for impairment involves the determination of the
fair value of our companies. Inherent in such fair value determinations are
certain judgments and estimates, including the interpretation of economic
indicators and market valuations and assumptions about our strategic plans. To
the extent that our strategic plans change, or that economic and market
conditions worsen, it is possible that our conclusion regarding goodwill
impairment could change and result in a material effect on our financial
position or results of operations.

Income taxes: We currently have net operating loss ("NOL") carryforwards
that can be utilized to offset future income for federal purposes. These NOLs
generate a significant deferred tax asset. However, as a result of a review at
June 30, 2003, the Company has concluded that, because the Company has reached
level of profitability and because the Company believes the profitability will
continue and utilize the remaining NOL, a deferred tax asset of $185,000 was
recorded. Due to the uncertainty of the utilization of the timing differences,
the Company believes it is more likely than not that the timing differences will
not be utilized and a full valuation allowance was provided.

Recent Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, No. 44 and No. 64 and Amendment of SFAS No. 13." As a result
of SFAS 145, gains and losses from extinguishment 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 adopted SFAS 145 for the year beginning July 1,
2002 and it has not had any effect on the consolidated financial statements for
the year ending June 30, 2003.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses
24

financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF 94-3. SAFS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. This differs from the guidance in EITF 94-3, which
requires that a liability for costs associated with an exit plan or disposal
activity be recognized at the date of an entity's commitment to an exit plan.
SFAS No. 146 also requires all charges related to an exit activity, including
accretion of interest related to the discounting of future liability related to
that activity, to be classified in the same line item on the statement of
operations. The Company adopted the statement for the fiscal year beginning July
1, 2002 and it had no material effect during the year.

In September 2002, EITF Issue No. 2-16, "Accounting by a Reseller for Cash
Consideration Received from a Vendor" was issued. This pronouncement addressed
two issues. The first issue requires that vendor consideration received by a
reseller be characterized as a reduction of cost of sales unless the
consideration is either (i) a payment for assets or services delivered by the
vendor, in which case the consideration should be characterized as revenue or
(ii) a reimbursement of costs incurred to sell the vendor's product, in which
case, the consideration should be characterized as a reduction of that cost. The
requirements for this issue are to be applied to new arrangements, including
modifications to existing arrangements, entered into after December 31, 2002.
The second issue requires that rebates or refunds payable only if the customer
completes a specified cumulative level of purchase or remains a customer for a
specified period of time should be recognized as a reduction of the cost of
sales based on a systematic and rational allocation over the purchase period
provided the amounts are probable and reasonably estimable. This portion of the
pronouncement is to be applied to all new arrangements initiated after November
21, 2002. The adoption of this pronouncement had no impact upon the consolidated
results of operations or financial position.

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees Including
Guarantees of Indebtedness of Others". FIN No. 45 requires entities to establish
liabilities for certain types of guarantees and expands financial statement
disclosures for others. The accounting requirements of FIN No. 45 are effective
for guarantees issued or modified after December 31, 2002, and the disclosure
requirements are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of FIN No. 45 did not have any
impact on the Company's financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment to SFAS No. 123" ("SFAS
No. 148"), which provides alternative methods of transition for companies
voluntarily planning on implementing the fair value recognition provisions of
SFAS No. 123. SFAS No. 148 also revises the disclosure provisions of SFAS No.
123 to require more prominent disclosure of the method of accounting for
stock-based compensation, and requiring disclosure of pro forma net income and
earnings per share as if the fair value recognition provisions of SFAS No. 123
had been applied from the original effective date of SFAS No. 123. The Company
adopted the disclosure provisions of SFAS No. 148 for the quarters ending after
December 15, 2002.

25

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities". FIN No. 46 requires the consolidation of entities that
cannot finance their activities without the support of other parties and that
lack certain characteristics of a controlling interest, such as the ability to
make decisions about the entity's activities via voting rights or similar
rights. The entity that consolidates the variable interest entity is the primary
beneficiary of the entity's activities. FIN No. 46 applies immediately to
variable interest entities created after January 31, 2003, and must be applied
in the first period beginning after June 15, 2003 for entities in which an
enterprise holds a variable interest entity that it acquired before February 1,
2003. The Company plans to adopt this Interpretation in the first quarter of
fiscal 2004.

In January 2003, the EITF released Issue No. 00-21, ("EITF 00-21"),
"Revenue Arrangements with Multiple Deliveries", which addressed certain aspects
of the accounting by a vendor for arrangement under which it will perform
multiple revenue-generating activities. Specifically, EITF 00-21 addresses
whether an arrangement contains more than one unit of accounting and the
measurement and allocation to the separate units of accounting in the
arrangement. EITF 00-21 is effective for revenue arrangements entered into in
fiscal periods beginning after June 15, 2003. The adoption of this standard, on
July 1, 2003, will not have an impact on the Company's consolidated financial
statements.

In May 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not believe that there will be any impact on its consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how companies classify and measure certain
financial instruments with characteristics of both liabilities and equity. It
requires companies to classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003. The
standard will not impact the Company's consolidated financial statements.

26

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. We place our 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 as of June 30, 2003.

Principal Interest
Investment Securities Amount Rate
Cash and cash equivalents $1,417,744 2%

Debt: Our 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
immaterial at June 30, 2003, 2002, 2001 and December 31, 2000.

27

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

Consolidated Financial Statements:

Consolidated Balance Sheets as of June 30, 2003 and
June 30, 2002 F 2

Consolidated Statements of Operations for the years
ended June 30, 2003 and 2002, for the six months
ended June 30, 2001 and for the year ended
December 31, 2000 F 4

Consolidated Statements of Changes in Shareholders' Equity for the years ended
June 30, 2003 and 2003, for the six months ended June 30, 2001 and for the
year ended December 31, 2000 F 6

Consolidated Statements of Cash Flows for the years
ended June 30, 2003 and 2002, for the six months
ended June 30, 2001 and for the year ended
December 31, 2000 F 7

Notes to Consolidated Financial Statements F 10

Schedule II Valuation and Qualifying Accounts and Reserves F 32

28

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, 2003 and 2002 and the related consolidated statements
of operations, changes in shareholders' equity and cash flows for the years
ended June 30, 2003 and 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, 2003 and 2002 and the results of its
operations and cash flows for the years ended June 30, 2003 and 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.

As discussed in Note 6 to the consolidated financial statements, on July 1,
2002, the Company adopted the provisions of Statement of Financial Standards
Board No. 142, "Goodwill and other Intangibles Assets".

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 of Nyer
Medical Group, Inc. and consolidated subsidiaries taken as a whole.

Sweeney, Gates & Co.

Fort Lauderdale, Florida
September 12, 2003
F-1

29

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 and 2002

ASSETS

2003 2002
---- ----
Current assets:
Cash and cash equivalents $ 1,417,744 $ 1,550,374
Accounts receivable, less
allowance for doubtful
accounts of $368,352
and $469,923, respectively 4,438,842 4,541,505
Inventories, net 5,878,997 5,290,995
Deferred tax asset 185,000 -
Prepaid expenses and other
current assets 256,472 309,390
----------- -----------
Total current assets 12,177,055 11,692,264
----------- -----------
Property, plant and equipment,
net of accumulated depreciation 1,307,788 1,376,650

Goodwill, net 104,463 104,463
Other intangible assets, net 666,281 349,563
Advances due from related
companies 44,858 41,563
----------- -----------
815,602 495,589
----------- -----------
Total assets $14,300,445 $13,564,503
=========== ===========

The accompanying notes are an integral part of
the consolidated financial statements.

F-2
30

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 and 2002

LIABILITIES AND SHAREHOLDERS' EQUITY

2003 2002
Current liabilities: ---- ----
Current portion of long-
term debt $ 291,485 $ 184,669
Accounts payable 4,005,879 4,138,814
Accrued payroll and related
taxes 449,434 441,313
Accrued expenses and other
liabilities 276,711 321,520
Income taxes payable 101,753 110,000
Current portion of payable
due related party 196,263 206,110
----------- -----------
Total current liabilities 5,321,525 5,402,426
----------- -----------
Long-term debt, net of current
portion 418,425 329,367
Payable due related party,
net of current portion - 101,403
Minority interest 1,243,533 965,758

Commitments

Shareholders' equity:
Preferred stock see footnote 1 1
Common stock, par value $.0001,
authorized: 10,000,000 shares;
issued: 3,797,962 and
3,767,962, respectively 380 377
Additional paid-in capital 17,746,543 17,691,946
Treasury stock, at cost,
14,100 and 12,100,
respectively (54,573) (52,249)
Accumulated deficit (10,375,389) (10,874,526)
----------- -----------
Total shareholders'
equity 7,316,962 6,765,549
Total liabilities and ----------- -----------
shareholders' equity $14,300,445 $13,564,503
=========== ===========

The accompanying notes are an integral part of
the consolidated financial statements.

F-3
31

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2003 and 2002, FOR THE SIX MONTHS
ENDED JUNE 30, 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2000

2003 2002 2001 2000
---- ---- ---- ----
Net sales $59,899,317 $54,100,058 $23,903,627 $41,975,445
----------- ----------- ----------- -----------
Cost and expenses:
Cost of goods sold 46,655,794 42,844,824 18,954,144 33,023,640
Selling and retail 8,137,395 6,916,392 3,035,123 5,647,018
Warehouse and
delivery 1,025,549 829,905 413,466 784,742
Administrative 3,323,046 3,167,124 1,596,277 3,076,369
----------- ----------- ----------- -----------
59,141,784 53,758,245 23,999,010 42,531,769
----------- ----------- ----------- -----------
Operating income
(loss) 757,533 341,813 (95,383) (556,324)

Other income (expense):
Interest expense (51,753) (38,252) (26,640) (89,326)
Interest income 48,636 63,878 47,133 173,317
Other 25,296 245,000 45,106 266,523
----------- ----------- ---------- -----------
Total other
income 22,179 270,626 65,599 350,514
Income (loss) before ---------- ----------- ---------- -----------
minority
interest 779,712 612,439 (29,784) (205,810)
Minority interest
(expense) income, net of
income taxes (277,775) (200,206) (80,084) (105,156)
----------- ----------- ---------- -----------
Income (loss) from
continuing operations
before income
taxes 501,937 412,233 (109,868) (310,966)
Provision for
income taxes (2,800) (119,000) (20,000) (20,000)
Income (loss) from ----------- ----------- ---------- -----------
continuing operations
after income
taxes 499,137 293,233 (129,868) (330,966)
----------- ----------- ----------- -----------
Net loss from discontinued
operations - (50,419) (87,893) (307,689)
----------- ----------- ----------- -----------
Net Income (loss) $ 499,137 $ 242,814 $ (217,761) $ (638,655)
=========== =========== =========== ===========
continued
The accompanying notes are an integral part of the consolidated financial
statements. F-4
32

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
JUNE 30, 2003 and 2002, FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND FOR
THE YEAR ENDED DECEMBER 31, 2000,
continued

2003 2002 2001 2000
---- ---- ---- ----
Basic and diluted earnings (loss) per share:
Continuing operations $ .13 $ .07 $ (.04) $ (.09)
Discontinued operations - (.01) (.02) (.08)
------- ------- ------- -------

Basic and diluted
earnings (loss)
per share $ .13 $ .06 $ (.06) $ (.17)
======= ======= ======= =======
Weighted average common
shares outstanding,
basic 3,758,026 3,755,862 3,741,089 3,740,679
========= ========= ========= =========
Weighted average common
shares outstanding,
diluted 3,759,261 3,758,224 3,741,089 3,740,679
========= ========= ========= =========

The accompanying notes are an integral part of
the consolidated financial statements.
F-5

33

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2003 and 2002, FOR THE SIX MONTHS
ENDED JUNE 30, 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2000

Class A Class B
Preferred Stock Preferred Stock Common Stock Additional Treasury
Paid-in Stock Sale Stock Accumulated
Shares Amount Shares Amount Shares Amount Capital Receivable Shares Amount Deficit

Balance,
January 1, 2000 2,000 $ 1 1,000 $ - 3,747,689 $375 $17,657,268 $(115,500) (12,100) $(52,249) $(10,260,924)
Exercise of common
stock options - - - - 4,400 - 22,000 - - - -
Net loss - - - - - - - - - - (638,655)

Balance,
December 31,
2000 2,000 1 1,000 - 3,752,089 375 17,679,268 (115,500) (12,100) (52,249) (10,899,579)
Issuance of
common
stock - - - - 15,873 2 12,678 - - - -
Net loss - - - - - - - - - - (217,761)

Balance,
June 30, 2001 2,000 1 1,000 - 3,767,962 377 17,691,946 (115,500) (12,100) (52,249) (11,117,340)
Payment of stock
sale receivable - - - - - - - 115,500 - - -
Net income - - - - - - - - - - 242,814

Balance,
June 30, 2002 2,000 1 1,000 - 3,767,962 377 17,691,946 - (12,100) (52,249) (10,874,526)
Issuance of
common
stock - - - - 30,000 3 54,597 - - - -
Treasury stock - - - - - - - - ( 2,000) ( 2,324) -
Net income - - - - - - - - - - 499,137

Balance,
June 30, 2003 2,000 $ 1 1,000 $ - 3,797,962 $380 $17,746,543 $ - (14,100) $(54,573) $(10,375,389)

The accompanying notes are an integral part of the consolidated financial
statements.
F-6

34

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002, FOR THE SIX MONTHS
ENDED JUNE 30, 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2000

2003 2002 2001 2000
Cash flows from operating ---- ---- ---- ----
activities:
Net income (loss) $ 499,137 $ 242,814 $ (217,761) $ (638,655)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Impairment loss - - - 42,666
Depreciation 361,665 399,409 173,627 347,335
Amortization 73,282 108,431 40,549 97,021
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 (7,170) - - 6,279
Deferred income tax (185,000) - - -
Minority interest 277,775 200,207 80,084 105,156
Increase in deferred credit - - 200,000 -
Decrease in deferred credit - (154,420) (45,580) (63,339)
Changes in certain working
capital elements (555,691) (208,939) (396,126) (136,359)
-------- -------- -------- --------
Net cash flows provided
by (used in) operating
activities 463,998 616,042 (165,207) (239,896)
-------- -------- -------- --------
Cash flows from investing activities:
Acquisition of
pharmacies (400,000) (349,637) - -
Purchase of property, plant
and equipment (290,803) (399,521) (175,298) (186,544)
Proceeds from sale of
property, plant
and equipment 15,170 69,147 - -
Proceeds from sale of
marketable securities - 821,798 179,527 490,860
Proceeds from sales of
respiratory division - 222,689 - -
Net change in advances due
from related
companies (3,295) (3,296) (1,652) (3,023)
Increase (decrease) in
other assets, net - - 19,515 (407)
---------- ----------- ---------- -----------
Net cash provided by
(used in) investing
activities $ (678,928) $ 361,180 $ 22,092 $ 300,886
---------- ----------- ---------- -----------
continued
The accompanying notes are an integral part of the consolidated financial
statements.
continued
F-7

35

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

2003 2002 2001 2000
---- ---- ---- ----

Cash flows from financing activities:
Proceeds from loan
repayment from stock
sale receivable $ - $ 115,500 $ - $ -
Proceeds from issuance
of long-term debt 390,000 369,701 - 18,000
Payments of long-term
debt (194,126) (146,070) (251,853) (254,428)
Net (repayments)
borrowings of notes
to related party (111,250) (140,402) (47,126) (109,287)
Purchase of treasury stock (2,324)
Proceeds from exercise of
stock options - - - 22,000
Issuance of common stock - - 12,680 -
--------- -------- -------- --------
Net cash provided by
(used in) financing
activities 82,300 198,729 (286,299) (323,715)
--------- -------- -------- --------
Net increase (decrease)
in cash and cash
equivalents (132,630) 1,175,951 (429,414) (262,725)
Cash and cash equivalents
at beginning of
period 1,550,374 374,423 803,837 1,066,562
---------- ---------- ---------- ----------
Cash and cash equivalents
at end of period $1,417,744 $1,550,374 $ 374,423 $ 803,837
========== ========== ========== ==========

Changes in certain working capital elements:
Accounts receivable,
net $ 102,663 $ (34,578) $ (254,322) (491,415)
Inventories, net (588,002) (570,160) (237,387) 15,607
Prepaid expenses 63,621 (79,200) (136,353) (42,246)
Receivables from related
parties (10,703) 903 (5,866) (55)
Accounts payable (122,476) 109,393 313,428 257,157
Accrued payroll and
related taxes 8,121 135,555 28,215 42,497
Accrued expenses and
other liabilities (8,915) 229,148 (103,841) 82,096
----------- ---------- ---------- ----------
Net change $ (555,691) $ (208,939) $ (396,126) $(136,359)
=========== ========== ========== =========

continued

The accompanying notes are an integral part of the
consolidated financial statements.
F-8

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: 2003 2002 2001 2000
---- ---- ---- ----
Interest $ 43,010 $ 37,555 $ 15,543 $ 61,282
========= ========= ========= =========
Income taxes $ 197,764 $ 12,221 $ 19,120 $ 4,221
========= ========= ========= =========

Supplemental schedule of non-cash investing and financing activities:

The acquisition of pharmacies in 2003 and 2002, net of cash acquired, is
summarized as follows:
2003 2002
---- ----
Working capital, other than cash $ 390,000 $ 59,637
Property, plant and equipment 10,000 20,000
Prescription lists 390,000 270,000
Long-term debt (390,000) (349,637)
----------- ---------
Cash paid for acquisitions $ 400,000 $ -
=========== =========

2003
----
Issuance of common stock for liability $ 54,600
===========

The accompanying notes are an integral part of the consolidated
financial statements.
F-9

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:

Pharmacies. D.A.W., Inc. (Eaton), 80% owned by the Company, is a chain of
pharmacies located in the suburban Boston, Massachusetts area.

Medical. Three wholly owned subsidiaries, ADCO Surgical Supply, Inc.
(ADCO), ADCO South Medical Supplies, Inc. (ADCO South) and Nyer Internet
Companies, Inc. (NIC) are engaged in the wholesale and retail sale of surgical
and medical equipment and supplies throughout New England, Florida and worldwide
via the Internet. ADCO also has operations in the Las Vegas, Nevada area.

Fire and police. 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

Corporate. Salaries of the officers of the holding company are included in
this segment as well corporate expenses such as reporting costs, accounting and
legal fees. Included in the corporate segment is an entity that is accounted for
as a discontinued operations. Nyer Nutritional Systems, Inc., (Nyer
Nutritional), 80% owned by the Company, ceased operations in 2002.

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 inter-company
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.

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.

continued
F-10

38

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of significant accounting policies, continued

Inventories

Inventories consist primarily of pharmaceuticals, medical, fire 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 pharmacies
which use the last-in, first-out method (LIFO).

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.

Impairment accounting

The Company evaluates the recoverability of its property and equipment and
other assets in accordance with Statement of Financial Accounting Standards
Board ("FASB") No. 144, "Accounting for the impairment or Disposal of Long-
Lived Assets" ("SFAS 144"). SFAS 144 requires recognition of impairment of
long-lived 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 assets relate. When an asset exceeds its expected cash
flows, it is considered to be impaired and is written down to fair value, which
is determined based on with discounted future cash flows or appraised values. No
impairments were recognized in the periods ended June 30, 2003, 2002 and 2001.

Goodwill and other intangible assets

Goodwill represents the excess of acquisition cost over the fair value of
the net assets of acquired entities. In accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Intangible Assets", the Company no longer amortizes goodwill. The Company also
has certain finite-lived intangible assets that are amortized over their useful
lives.

Fair value of financial instruments

The carrying values of cash and cash equivalents, receivables, payables and
debt maturing within one year contained in the consolidated balance sheets
approximate fair value. The carrying values and estimated fair values for
long-term debt, based on quoted market rates of financial instruments were
approximately the same. The difference was immaterial.

Revenue recognition

For all pharmacy sales other than third party pharmacy sales and those
described below, the Company recognizes revenue from the sale of merchandise at
the time of the sale. For third party pharmacy sales, revenue is recognized at
the time the prescription is filled. The Company records third-party revenues
and related receivables, net of provisions for contractual and other
continued
F-11

39

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of significant accounting policies, continued

Revenue recognition continued,

adjustments. The Company's estimates of uncollectible amounts are based on its
historical collection experience and current economic and credit conditions.

The Company also recognizes revenue from non-cash transactions wherein the
pharmacy segment dispenses pharmaceuticals provided to non-profit organizations
through certain governmental programs treating needy patients. The Company
receives a dispensing fee, a percentage of the costs of the medication and the
replacement of the pharmaceuticals. Because the cash received is less than 25%
of the transaction, the Company accounts for these transactions as non-monetary
in accordance with Accounting Principals Board Opinion 29. The Company records
the gain on these transactions to the extent that the amount of the monetary
receipt exceeds a proportionate share of the recorded amount of the asset
surrendered.

For other than pharmacy and third party sales, 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.

Vendor Rebates and Allowances

Rebates and allowances received from vendors relate to either buying and
merchandising or promoting the product. Buying and merchandising related rebates
and allowances are recorded as a reduction of cost of goods sold as product is
sold. Buying and merchandising rebates and allowances include all types of
vendor programs such as purchase discounts, volume purchase allowances and price
reduction allowances. Product promotion related rebates and allowances,
primarily advertising, are recorded as a reduction in selling, general and
administrative expenses when the advertising commitment has been satisfied.

Shipping and handling costs

The cost of shipping and handling to customers by the Company is classified
as warehouse and delivery expenses. The costs of shipping and handling including
payments to third parties, were approximately $720,059 and $564,239 for the
years ended June 30, 2003 and 2002, $285,162 for the six months ended June 30,
2001 and $534,054 for the year ended December 31, 2000.

Advertising

Advertising costs are expensed as incurred. Advertising expenses, net of
reimbursements, for the years ended June 30, 2003 and 2002 were $507,945 and
$169,928, $54,150 for the six months ended June 30, 2001 and $120,032 for the
year ended December 31, 2000.

F-12

40

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of significant accounting policies, continued

Income taxes

The Company files a consolidated federal income tax return. The Company
utilizes 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. SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109") requires that a
valuation allowance be established when it is more likely than not that all or a
portion of a deferred tax asset will not be realized. A review of all available
positive and negative evidence needs to be considered, including a company's
current and past performance, the market environment in which the company
operates, the utilization of past tax credits, length of carryback and
carryforward periods, existing contracts or sales backlog that will result in
future profits, etc. 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
shared in the earnings of the entity.

Operating segments

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information", established standards for reporting information about operating
segments in annual financial statements and in interim financial reports issued
to shareholders. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated on a
regular basis by the chief operating decision maker, or decision making group,
in deciding how to allocate resources to an individual segment and in assessing
the performance of the segment.

Recent Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, No. 44 and No. 64 and Amendment of SFAS No. 13." As a result
of SFAS 145, gains and losses from extinguishment 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 adopted SFAS 145 for the year beginning July 1,
2002 and it has not had any effect on the consolidated financial statements for
the year ending June 30, 2003.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF 94-3. SAFS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
continued
F-13

41

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of significant accounting policies, continued

Recent Accounting Pronouncements continued,

liability is incurred. This differs from the guidance in EITF 94-3, which
requires that a liability for costs associated with an exit plan or disposal
activity be recognized at the date of an entity's commitment to an exit plan.
SFAS No. 146 also requires all charges related to an exit activity, including
accretion of interest related to the discounting of future liability related to
that activity, to be classified in the same line item on the statement of
operations. The Company adopted the statement for the fiscal year beginning July
1, 2002 and it had no material effect during the year.

In September 2002, EITF Issue No. 2-16, "Accounting by a Reseller for Cash
Consideration Received from a Vendor" was issued. This pronouncement addressed
two issues. The first issue requires that vendor consideration received by a
reseller be characterized as a reduction of cost of sales unless the
consideration is either (i) a payment for assets or services delivered by the
vendor, in which case the consideration should be characterized as revenue or
(ii) a reimbursement of costs incurred to sell the vendor's product, in which
case, the consideration should be characterized as a reduction of that cost. The
requirements for this issue are to be applied to new arrangements, including
modifications to existing arrangements, entered into after December 31, 2002.
The second issue requires that rebates or refunds payable only if the customer
completes a specified cumulative level of purchase or remains a customer for a
specified period of time should be recognized as a reduction of the cost of
sales based on a systematic and rational allocation over the purchase period
provided the amounts are probable and reasonably estimable. This portion of the
pronouncement is to be applied to all new arrangements initiated after November
21, 2002. The adoption of this pronouncement had no impact upon the consolidated
results of operations or financial position.

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees Including
Guarantees of Indebtedness of Others". FIN No. 45 requires entities to establish
liabilities for certain types of guarantees and expands financial statement
disclosures for others. The accounting requirements of FIN No. 45 are effective
for guarantees issued or modified after December 31, 2002, and the disclosure
requirements are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of FIN No. 45 did not have any
impact on the Company's financial position or results of operations.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities". FIN No. 46 requires the consolidation of entities that
cannot finance their activities without the support of other parties and that
lack certain characteristics of a controlling interest, such as the ability to
make decisions about the entity's activities via voting rights or similar
rights. The entity that consolidates the variable interest entity is the primary
beneficiary of the entity's activities. FIN No. 46 applies immediately to
variable interest entities created after January 31, 2003, and must be applied
in the first period beginning after June 15, 2003 for entities in which an
enterprise holds a variable interest entity that it acquired before February

continued
F-14

42

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of significant accounting policies, continued

Recent Accounting Pronouncements continued,

1, 2003. The Company plans to adopt this Interpretation on July 1, 2003 and does
not believe it will have a material effect on the consolidated financial
statements.

In January 2003, the EITF released Issue No. 00-21, ("EITF 00-21"), "Revenue
Arrangements with Multiple Deliveries", which addressed certain aspects of the
accounting by a vendor for arrangements under which it will perform multiple
revenue-generating activities. Specifically, EITF 00-21 addresses whether an
arrangement contains more than one unit of accounting and the measurement and
allocation to the separate units of accounting in the arrangement. EITF 00-21 is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The adoption of this standard on July 1, 2003, will not
have an impact on the Company's consolidated financial statements.

In May 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not believe that there will be any impact on its consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how companies classify and measure certain
financial instruments with characteristics of both liabilities and equity. It
requires companies to classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003. The
adoption of this standard will not impact the Company's consolidated financial
statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the year
ended June 30, 2003 presentation.

3. Change in fiscal year

Effective June 30, 2001, the Company changed its fiscal year from December
31 to June 30.

continued
F-15

43

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Inventories

Inventories consisted of the following at:

June 30, June 30,
2003 2002
---- ----
Pharmacies $5,137,934 $4,156,709
Medical 1,016,535 1,116,088
Fire and police 299,396 509,713
---------- ----------
6,453,865 5,782,510

Less LIFO reserves (574,868) (491,515)
---------- ----------
$5,878,997 $5,290,995
========== ==========

5. Property, plant and equipment

Property, plant and equipment consisted of the following at:

Estimated
June 30, June 30, useful
2003 2002 lives
---- ---- -----
Land $ 92,800 $ 92,800 -
Building 646,516 641,508 15 years
Leasehold improvements 1,045,554 928,321 10 years
Machinery and equipment 74,653 71,189 3-10 years
Transportation equipment 369,822 366,099 3-5 years
Office furniture, fixtures
and equipment 1,206,261 1,099,793 3-10 years
---------- ----------
3,435,606 3,199,710
Less accumulated
depreciation (2,127,818) (1,823,060)
---------- ----------
$1,307,788 $1,376,650
========== ==========

Depreciation expense was $361,665 and $399,409 for the years ended June 30,
2003 and June 30, 2002, $173,627 for the six months ended June 30, 2001 and
$347,335 for the year ended December 31, 2000.

6. Goodwill and other intangibles

In June of 2001, the FASB issued Statement 142, "Goodwill and Other
Intangible Assets". FASB Statement 142, among other things, requires that
goodwill not be amortized,

but should be tested for impairment at least annually. The Company adopted this
statement as of July 1, 2002 and discontinued the amortization of goodwill. In
addition, the Company was required to review its goodwill. Based on the
Company's annual review in the fourth quarter, no impairment charges have been
recorded. The following tables show the reported net income and earnings per
share for the years ended June 30, 2003 and 2002 and for the six months ended
June 30, 2001, and for the year ended December 31, 2000, reconciles them to the
adjusted net income and earnings per share had the non-amortization provisions
of Statement 142 been applied in that period and

continued
F-16

44

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Goodwill and other intangibles continued,

compares them to the years ended June 30, 2003 and 2002 and for the six months
ended June 30, 2001 and for the year ended December 31, 2000:

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ---- ----
Reported net income
(loss) $ 499,137 $ 242,814 $(217,761) $(638,655)
Plus goodwill amortization - 12,000 6,000 12,000
--------- --------- --------- ---------

As adjusted $ 499,137 $ 254,814 $(211,761) $(626,655)
========= ========= ========= =========
Reported earnings (loss)
per $ .13 $ .06 $ (.06) $ (.17)
Plus goodwill
amortization - .01 - -
--------- --------- --------- ---------

As adjusted $ .13 $ .07 $ (.06) $ (.17)
========= ========= ========= =========

The following is a summary of intangible assets:

Weighted Average
June 30, 2003 Amortization Accumulated
Period (years) Cost Amortization Net

Prescription lists 15 $ 528,000 $154,274 $373,726
Non-compete agreements 4.67 750,100 457,545 292,555
---------- -------- --------
Totals $1,278,100 $611,819 $666,281
========== ======== ========

Weighted Average
June 30, 2002 Amortization Accumulated
Period (years) Cost Amortization Net

Prescription lists 15 $378,000 $126,998 $251,002
Non-compete agreements 4.51 510,100 411,539 98,561
-------- -------- --------
Totals $888,100 $538,537 $349,563
======== ======== ========

For the year ended June 30, 2003, the Company purchased prescription lists
and non-compete agreements of $150,000 and $240,000, respectively. The
non-compete agreements are amortized over 5 years and the prescription lists
over 15 years. Amortization expense of intangible assets was approximately
$73,000 and $96,000 for the years ended June 30, 2003 and 2002.

continued
F-17

45

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Goodwill and other intangibles continued,

Based on the balance of intangible assets at June 30, 2003, the annual
amortization expense for each of the succeeding five years is estimated to be as
follows:
Year Amortization amount

2004 $126,511
2005 100,116
2006 83,449
2007 83,449
2008 71,449

7. Related party transactions

Advances due from related companies consisted of cash advances made to Nyle.
Interest is charged at 9% annually.

Payable due related party consisted of the following for the years ended
June 30, 2003 and 2002:

2003 2002
Current portion, payable due ---- ----
related party $ 196,263 $ 206,110
Long-term portion, payable due
related party - 101,403
--------- ---------
$ 196,263 $ 307,513
========= =========

The payable of $196,263 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. The Company has accrued interest of 7% annually.
Since there is an ongoing dispute at June 30, 2003, the final balance recorded
is an estimation.

8. Debt

Long-term debt at June 30, 2003 and 2002, consisted of the following:

2003 2002
---- ----
Mortgage payable in equal monthly install- ments of $4,675 including interest
at 8 1/4% collateralized by land and building, with a net book value of
$295,252, due in March 2008. This mortgage payable is personally guaranteed by
the Company's
chairman. $152,284 $208,944

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. 62,405 115,968

continued
F-18

46

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Debt continued,
2003 2002
---- ----
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. 55,556 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. 48,749 77,998

Note payable in equal monthly install- ments of $4,000 plus interest on the
unpaid balance at 5%. The note will mature in April 2008, and is collateralized
by
certain inventory. 232,000 -

Note payable in equal monthly install- ments of $4,167 plus interest on the
unpaid balance at 6%. The note will mature in June 2006, and is collateralized
by
certain inventory. 150,000 -

Notes payable due in various install-
ments at rates ranging up to 8%,
collateralized by certain equipment
and vehicles. 8,916 22,237
--------- ----------
Total debt 709,910 514,036
Less current portion 291,485 184,669
--------- ---------
$ 418,425 $ 329,367
========= =========

At June 30, 2003, the pharmacies 's inventories of approximately $4,600,000
secured the above notes payables.

At June 30, 2003, the following are the maturities of long-term debt for
each of the next five years:

2004 $ 291,485
2005 216,221
2006 114,204
2007 48,000
2008 40,000
----------
$ 709,910
==========
9. Acquisitions and divestitures

During fiscal 2003, the Company purchased the inventory, fixed assets and
prescription lists of two pharmacies. Approximately $150,000 of the purchase
price was allocated to prescription lists, which is being amortized over 15
continued
F-19

47

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Acquisitions and divestitures continued,

years. Additionally, $240,000 was allocated to non-compete agreements and is
amortized over three years. The Company purchased approximately $400,000 in
fixed assets and inventory.

During fiscal 2002, the Company purchased the inventory and prescription
lists of two pharmacies. Approximately $170,000 of the purchase price was
allocated to prescription lists, which is being amortized over 15 years.
Additionally, $100,000 was allocated to non-compete agreements and is 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 in the fiscal 2002 consolidated
financial statements.

10. Discontinued operations

On October 25, 1999, the Board of Directors approved a plan for the disposal
of its investment in Nyer Nutritional Systems, Inc. The results of Nyer
Nutritional have been reported as discontinued operations for all periods
presented.

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.

11. 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 certain matching contributions. The Company's matching
contribution to the 401(k) plan was $125,979 and $101,010 for the years ended
June 30, 2003 and 2002.

12. Income taxes

The provision for income taxes from continuing operations for the years
ended June 30, 2003 and 2002, for the six months ended June 30, 2001 and for the
year ended December 31, 2000 is as follows:

2003 2002 2001 2000
---- ---- ---- ----
Current tax expense (benefit):
Federal $ 20,000 $ - $ - $ -
State 167,800 119,000 20,000 20,000
-------- -------- -------- --------
187,800 119,000 20,000 20,000
-------- -------- -------- --------
Deferred tax (benefit):
Federal (185,000) - - -
State - - - -
-------- -------- -------- --------
$ 2,800 $119,000 $ 20,000 $ 20,000
======== ======== ======== ========
continued
F-20

48

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Income taxes continued,

A reconciliation of the statutory federal income tax rate and the effective
income tax rate is as follows:
June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ----- ----
Statutory federal income tax
rate 34% 34% (34)% (34)%
Increase (decrease) in taxes
resulting from:
State tax, net of federal
tax effect 7% 6% 11% 2%
Valuation allowance - - 38% 35%
Utilization of NOL (41)% (14)% -% -%
---- ---- ---- ----
Effective income tax rate -% 26% 15% 3%
==== ==== ==== ====
The tax effect of temporary differences that gives rise to significant
portions of deferred taxes at June 30, 2003 and 2002 consisted of:

2003 2002
Deferred tax assets: ---- ----
Net operating losses $ 185,000 $ 565,000
Accounts receivable allowances 125,000 188,000
Inventory 173,000 118,000
Depreciation 86,000 68,000
Intangibles $ 224,000 $ 315,000
---------- -----------
793,000 1,254,000

Less valuation allowance (608,000) (1,254,000)
---------- -----------
Net deferred tax assets $ 185,000 $ -
========== ===========

At June 2003, the Company had remaining net operating loss (NOL)
carryforwards of approximately $545,000 available to offset future taxable
income. The NOL carryforwards will begin expiring in 2019 to 2020.

In prior years, the Company concluded it was appropriate to establish a
full valuation allowance for its net deferred tax assets because the Company had
continuing losses and loss carryforwards to utilize. However, as a result of a
review at June 30, 2003, the Company concluded that, because the Company has
reached a level of profitability and because the Company believes the
profitability will continue and utilize the remaining NOL, a deferred tax asset
of $185,000 was recorded. Due to the uncertainty of the utilization of the
timing differences, the Company believes it is more likely than not that the
timing differences will not be utilized and a full valuation allowance was
provided.

13. Shareholders' equity

Class A preferred stock

Each share has voting rights equal to 1,000 shares of common stock. The
par value is $.0001. Total authorized and outstanding shares are 2,000.
continued
F-21

49

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Shareholders' equity continued,

Class B preferred stock

Total authorized shares are 2,500,000. The par value is $.0001. There are
1,000 outstanding shares. Each share has voting rights equal to 2,000 shares of
common stock.

Common stock

Total authorized shares are 10,000,000. The par value is $.0001. There
are 3,797,962 total outstanding shares.

In fiscal 2003, the Company issued 30,000 shares of common stock as payment
of a liability. These shares were valued at the market price of $54,600.

In fiscal 2001, the Company issued 15,873 shares of common stock as payment
of a liability. These shares were valued at the market price of $36,180, less
related expenses of $23,500.

Treasury stock

In fiscal 2003, the Company purchased 2,000 shares of its common stock for
$2,324. In 1998, the Company purchased 12,100 shares of its common stock for
$52,249. The Company currently has 14,100 shares of treasury stock.

Stock options and warrants

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 have not been exercised. These warrants expire in 2007.

In October 1999, the Company issued 150,000 stock options to a third party
in connection with consulting services provided. The consulting agreement
expired 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.

In December 2003, the 150,000 stock options were restructured to include a
ten-year term and a repricing at $1.71 per share. The fair value of the options
in December 2003 was $179,000 and did not require any additional charge to
expense because the value was less than the value of the cancelled options. The
options have customary piggy-back registration rights with respect to any shares
of common stock issuable upon exercise of options.

In October 1999, the Company granted Mr. Samuel 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.

F-22

50

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Stock options plans

The Company has two stock option plans under which employees, consultants
and directors have been granted options to purchase shares of the Company's
common stock. The 1993 Stock Option Plan was amended in fiscal 2003 to, among
other things, (a) cease grants under such plan upon the effectiveness of the
2002 Stock Option Plan of the Company and (b) increase the maximum aggregate
number of shares available for award under such plan to 1,000,000. The maximum
aggregate number of shares of common stock available for award under the 2002
plan is 3,000,000, and is subject to adjustment as set forth therein. Under the
2002 plan, automatic options vest semi-annually to all directors and certain
officers and expire in ten years from the date of grant. Except with respect to
certain incentive stock options ("ISOs"), options under the 1993 plan expire 10
years from the date of grant. Under the 1993 plan, except for ISOs, the exercise
price for options is the fair market value of the common stock of the Company at
the date of grant, as such fair market value is determined under the 1993 plan.
Under the 2002 plan, except for certain ISOs, the exercise price is not to be
less than the Market Price (as defined in the 2002 plan) of the common stock of
the Company on the date of the grant.

The Company complies with SFAS No. 123, "Accounting For Stock-Based
Compensation." This statement defines a fair value based method whereby
compensation cost is measured at the grant date based on the fair value of the
award. Under SFAS No. 123, companies are encouraged, but are not required, to
adopt the fair value method of accounting for employee stock-based
transactions. The Company accounts for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
but discloses pro forma net income (loss) as if the Company had applied the
SFAS No. 123 method of accounting. Accordingly, no compensation cost has been
recognized for options granted under the Plan.

In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". This statement provides
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based compensation. In addition, this statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures about the method of accounting for stock-based compensation and the
effect of the method used on reported interim and annual results. The Company
has elected to continue accounting for stock-based compensation in accordance
with APB Opinion No. 25. The adoption of SFAS No. 148 had no impact on the
consolidated results of operations or financial position. The Company has
adopted the disclosure requirements of SFAS No. 148. Pro forma information,
assuming the Company had accounted for its employee and director stock options
granted under the fair value method is presented below. The fair value method
for recognizing employee stock-based compensation cost ratably over the vesting
period. The fair value of each option grant is estimated on the date of each
grant using the Black-Scholes option-pricing model.

continued
F-23

51

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Stock option plans continued,

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, June 30, June 30 December 31,
2003 2002 2001 2000
---- ---- ---- ----
Net income (loss):
As reported $ 499,137 $ 242,814 $ (217,761) $ (638,655)
========= =========== =========== ===========

Pro forma $(794,340) $ (257,978) $ (665,855) $ (747,575)
========= =========== =========== ===========

Basic and diluted earnings (loss) per share:
As reported $ .13 $ .06 $ (.06) $ (.17)
========= =========== =========== ===========
Pro forma $ (.21) $ (.07) $ (.18) $ (.20)
========= =========== =========== ===========

The weighted average grant date fair market value for options granted was $1.70,
$2.70 and 4.75 for the years ended June 30, 2003 and 2002 and for the year ended
December 31, 2000. No options were granted for the six months ended June 30,
2001.

The fair value of stock options in the pro forma accounts for the years
ended June 30, 2003 and 2002 and December 31, 2000 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 assumptions:

2003 2002 2000
---- ---- ----
Risk-free interest 2.6% 4.3% 5.7%
Dividend yield 0% 0% 0%
Expected volatility 111% 110% 80%
Expected life (years) 5 5 5

The following table summarizes stock options outstanding and exercisable at
June 30, 2003:
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
----- ------ ---- ----- ------ ---- -----
$ 1.31-$1.71 770,000 9.5 $ 1.69 748,000 9.5 $ 1.70
$ 2.10-$3.38 70,000 3.9 $ 2.80 52,000 3.9 $ 2.80
$ 4.62-$6.88 693,600 7.8 $ 6.17 693,600 7.8 $ 6.19
$16.75 36,000 4.3 $16.75 36,000 4.3 $16.75

continued
F-24

52

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Stock option plans continued,

A summary of changes in common stock options for the years ended June 30,
2003 and 2002, for the six months ended June 30, 2002 and for the year ended
December 31, 2000 is as follows:

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ---- ----
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 783,600 $6.30 809,600 $6.30 819,600 $6.30 788,000 $6.36
Granted 794,000 1.69 64,000 2.70 - - 40,000 4.75
Exercised - - - - - - (4,400) 5.00
Canceled (8,000) 3.01 (90,000) 3.70 (10,000) 4.75 (4,000) 3.38
------- ----- ------- ----- ------- ----- ------- -----
Outstanding
at the
end of
the year 1,569,600 $6.30 783,600 $6.30 809,600 $6.30 819,600 $6.36
========= ===== ======= ===== ======= ===== ======= =====

15. Earnings per share

The following data show the amounts used in computing earnings per share
and the weighted average number of share of diluted potential common stock.

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ---- ----
Weighted average number of
common shares used in
basic EPS 3,758,026 3,755,862 3,741,089 3,740,679

Stock options 1,235 2,362 - -
--------- --------- --------- ---------
Weighted average number of
common shares used in
diluted EPS 3,759,261 3,758,224 3,741,089 3,740,679
========= ========= ========= =========

16. Significant concentrations

No single customer or health plan contract accounted for more that 25% of
the Company's total revenues during the years ended June 30, 2003, 2002 and
2001. The Company's pharmacy sales were primarily to customers covered by health
plan contracts, which typically contract with a third-party payor that agrees to
pay for all or a portion of a customer's eligible prescription purchases. During
fiscal 2003, the top five third-party payors accounted for approximately 69% of
the Company's total sales, the largest of which

continued
F-25

53

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Significant concentrations continued,

represented 25% of total sales. Third party payors are entities such as an
insurance company, governmental agency, health maintenance organization or other
managed care provider, and typically represent several health care contracts and
customers. Any significant loss of third-party payor business could have a
material adverse effect on the Company's business and results of operations.

During the year ended June 30, 2003, the pharmacies purchased inventory
from a single supplier, McKesson, amounting to $31.5 million or 80% of total
inventory purchased, under a contract expiring February 2007. With limited
exceptions, the Company has contracted to purchase all of its branded
pharmaceutical products from McKesson. If the Company's relationship with
McKesson was disrupted, the Company could have difficulty filling

prescriptions, which would negatively impact the business.

During the year ended June 30, 2002, the pharmacies purchased inventory
from a single supplier amounting to $15.4 million or 37% of total inventory
purchased. The Company changed from multiple suppliers in the year ended June
30, 2002 to McKesson as its major supplier.

During the year ended June 30, 2001, the pharmacies purchased inventory
from a single supplier amounting to $12.2 million or 65% of total inventory
purchased.

During the year ended June 30, 2003, the Company maintained cash balances
in excess of the Federally insured limits. The funds are with a major money
center bank. Consequently, the Company does not believe that there is a
significant risk in having these balances in one financial institution. The cash
balance at June 30, 2003 was $1,158,634.

17. Commitments

Pharmacies

In August of 1996, the Company and the shareholders of D.A.W. entered into
a stock exchange Agreement and plan of reorganization whereby the Company
acquired by exchange with the sellers 80% of the issued and outstanding stock of
D.A.W. The Board of Directors of DAW is comprised of five members, four from the
20% owners and one from the Company.

As part of this agreement, Nyer and the 20% owners shall not vote any of their
shares in favor of, or consent to any merger of DAW with another entity or any
sale of all or substantially all of the assets of DAW unless 80% if the Board of
Directors vote in favor of the transaction.

Additionally, at such time that Nyer has caused any or all of the 20%
shareholders of D.A.W. to be no longer employed by D.A.W., the employee or
employees shall have the right to require Nyer to purchase all or any portion of
such employee's shares of D.A.W., and visa-versa, according to certain terms and
conditions.

continued
F-26

54

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Commitments continued,

Employment agreements

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.

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 was $968,264 and $806,557 for the years ended
June 30, 2003 and 2002, $358,850 for the six months ended June 30, 2001 and
$764,431 for the year ended December 31, 2000.

Future minimum lease payments at June 30, 2003 are as follows:

2004 $ 723,344
2005 580,144
2006 538,309
2007 386,951
2008 264,265
Thereafter 359,643
----------
$2,852,656
==========
Purchase commitment

As of June 30, 2003, the pharmacies had a purchase commitment with McKesson
which expires February 2007. With limited exceptions, the pharmacies have
contracted to purchase all of its branded pharmaceutical products from McKesson.
If the Company's relationship with McKesson was disrupted, the Company could
have difficulty filling prescriptions, which would negatively impact the
business.

18. Business segments

The Company had three business segments for year ended June 30, 2003 and
2002, and for the six months ended June 30, 2001, and for the year ended
December 31, 2000: (1) pharmacies (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 ("Fire and police"). 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.
continued
F-27

55

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Business segments continued,

Summary data for the years ended June 30, 2003 and 2002, six months ended
June 30, 2001 and for the year ended December 31, 2000:

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Net Sales ---- ---- ---- ----

Pharmacies $47,778,600 $40,686,119 $16,913,373 $29,104,320
Medical 9,193,894 9,188,343 4,251,242 8,085,710
Fire and police 2,926,823 4,225,596 2,739,012 4,785,415
----------- ----------- ----------- -----------
$59,899,317 $54,100,058 $23,903,627 $41,975,445
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Operating income (loss) ---- ---- ---- ----

Pharmacies $ 1,684,680 $ 1,148,305 $ 409,301 $ 460,194
Medical (42,439) 31,523 (142,427) (138,939)
Fire and police (199,400) (248,604) (87,745) (255,689)
Corporate (685,308) (589,411) (274,512) (621,890)
----------- ----------- ----------- -----------
$ 757,533 $ 341,813 $ (95,383) $ (556,324)
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Income taxes (benefit) ---- ---- ---- ----

Pharmacies $ 460,000 $ 331,000 $ 203,000 $ 226,000
Medical (20,000) 41,000 (51,000) (50,000)
Fire and police (80,000) (97,000) (42,000) (58,000)
Corporate (357,200) (156,000) (90,000) (95,559)
----------- ----------- ----------- -----------
$ 2,800 $ 119,000 $ 20,000 $ 22,441
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Identifiable assets ---- ---- ---- ----

Pharmacies $10,484,581 $ 8,288,119 $ 6,794,607 $ 6,054,423
Medical 2,534,109 2,926,644 2,964,263 2,921,379
Fire and police 545,255 1,110,584 1,754,287 1,681,280
Corporate 736,500 1,239,156 1,089,920 1,977,749
----------- ----------- ----------- -----------
$14,300,445 $13,564,503 $12,603,077 $12,634,831
=========== =========== =========== ===========

continued
F-28

56

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Business segments continued,

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Capital expenditures ---- ---- ---- -----

Pharmacies $ 247,684 $ 287,916 $ 131,302 $ 90,776
Medical 41,221 66,449 22,153 93,469
Fire and police - 18,466 53,950 400
Corporate 1,898 525 - 1,899
----------- ----------- ----------- -----------
$ 290,803 $ 373,356 $ 207,405 $ 186,544
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ---- ----
Depreciation and Amortization

Pharmacies $ 327,661 $ 296,650 $ 101,088 $ 229,969
Medical 77,635 150,182 68,107 149,261
Fire and police 28,232 56,876 42,974 60,704
Corporate 1,419 4,132 2,007 4,422
----------- ----------- ----------- -----------
$ 434,947 $ 507,840 $ 214,176 $ 444,356
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
---- ---- ---- ----
Interest expense

Pharmacies $ 17,362 $ 15,591 $ 237 $ 24,970
Medical 23,902 21,321 12,963 30,905
Fire and police 10,489 1,340 13,440 33,451
Corporate - - - -
----------- ----------- ----------- -----------
$ 51,753 $ 38,252 $ 26,640 $ 89,326
=========== =========== =========== ===========

June 30, June 30, June 30, December 31,
2003 2002 2001 2000
Interest income ---- ---- ---- ----
Pharmacies $ 18,487 $ 24,306 $ 5,978 $ 16,124
Medical 23,282 21,014 6,928 14,624
Fire and police - - - -
Corporate 6,867 18,558 34,227 142,569
----------- ----------- ------------ ------------
$ 48,636 $ 63,878 $ 47,133 $ 173,317
=========== =========== ============ ============

continued
F-29

57

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Selected quarterly data (unaudited):

2003 First Second Third Fourth
---- Quarter Quarter Quarter Quarter
------- ------- ------- -------
Net sales $14,512,850 $15,027,092 $14,609,781 $15,749,594
----------- ----------- ----------- -----------
Gross profit $ 3,079,195 $ 3,266,528 $ 3,131,672 $ 3,766,128
=========== =========== =========== ===========
Net income (loss) from
operations $ 165,668 $ 83,350 $ (65,069) $ 315,188
=========== =========== =========== ===========
Basic and diluted income
(loss) per share: Net income (loss) per
share $ .04 $ .02 $ (.02) $ .09
=========== =========== =========== ===========

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 $ (162,781)
=========== =========== =========== ===========
Basic and diluted income (loss) per share:
Continuing operations $ .06 $ .04 $ .02 $ (.05)
----------- ----------- ----------- -----------
Discontinued operations (.01) .00 .00 .00
----------- ----------- ----------- -----------
Net income (loss)
per share $ .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 per share $ (.04) $ (.02)
=========== ===========
continued
F-30

58

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. 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 per share $ (.06) $ (.02) $ (.05) $ (.04)
========== =========== =========== ===========

continued
F-31

59

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 Write-offs Period

Year ended June 30
2003:

Allowance for
doubtful
accounts $ 469,923 $ 91,745 $ - $(193,316) $ 368,352
========== ========= ======= ========= ==========
Allowance for
inventory
obsolescence$ 295,000 $ 23,000 $ - $ - $ 318,000
========== ========= ======= ========= ==========

Year ended June 30
2002:

Allowance for
doubtful
accounts $ 348,339 $ 157,135 $ - $ (35,551) $ 469,923
========== ========= ======= ========= ==========
Allowance for
inventory
obsolescence$ 420,000 $ - $ - $(125,000) $ 295,000
========== ========= ======= ========= ==========

Period ended June
30, 2001:

Allowance for
doubtful
accounts $ 237,757 $ 113,737 $ - $ (3,155) $ 348,339
========== ========= ======= ========= ==========
Allowance for
inventory
obsolescence$ 419,305 $ 695 $ - $ $ 420,000
========== ========= ======= ========= ==========

Year ended December
31, 2000:

Allowance for
doubtful
accounts $ 177,739 $ 60,018 $ - $ - $ 237,757
========== ========= ======= ========= ==========
Allowance for
inventory
obsolescence$ 556,013 $ 24,864 $ - $(161,572) $ 419,305
========== ========= ======= ========= ==========

The FASB 109 Valuation Allowance has been omitted because such information is
disclosed in Note 9 to the Consolidated Financial Statements.

F-32

60

ITEM 9. Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure.

There were no disagreements with the Accountants.

ITEM 9A. Controls and Procedures.

The Company's management evaluated, with the participation of its principal
executive officer and principal financial officer, the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered
by this report. Based on such evaluation, the principal executive officer and
the principal financial officer of the Company concluded that its disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and regulations of the Securities
and Exchange Commission and is operating in an effective manner.

No change in the Company's internal control over financial reporting (as
defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of
1934) occurred during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.

61

PART III

ITEM 10. Directors and Executive Officers of the Registrant.

Present directors and executive officers of the Company, their ages and
positions held are as follows:

Name Age Position

Samuel Nyer 78 Chairman of the Board,
President, Secretary,
and Director

Karen L. Wright 41 Treasurer, Vice-
President-Finance,
Vice-President-
Operations, and
Assistant Secretary

Stanley Dudrick, M.D. 68 Director

Donald C. Lewis, Jr. 65 Director

John Milledge 41 Director

Kenneth L. Nyer, M.D. 45 Director

M. Randolph Prince 61 Director

James Schweiger 68 Director

Mr. William Clifford, Jr. resigned from the Board of Directors effective
October 2002 for reasons unrelated to the Company. Mr. Clifford also resigned as
Vice-President of Sales. Mr. Clifford had been a board member since December
1991.

The minority shareholders have not filled their vacancy on the Board 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 and
Nyer's term expires in 2005. 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

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, 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.

62

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 is also a member of the Audit Committee. 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.

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.

63

Delinquent Filings

No person who, during the fiscal year ended June 30, 2003, 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
except the following persons: (a) Samuel Nyer failed to file an amendment to a
Form 4 filing; (b) William Clifford, Jr. failed to file an amendment to a Form 4
filing; and (c) James Schweiger failed to file two Form 4 filings. 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.

64

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 years ended June 30, 2003 and 2002, six months ended June 30, 2001
and for the year ended December 31, 2000. No other executive officer received
compensation exceeding $100,000 during the years ended June 30, 2003 and 2002,
for the six months ended June 30, 2001 and for the year ended December 31, 2000.

Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
(a) (b) (c) (d) (e) (g) Name and Other Securities principal annual underlying
position Year Salary($) Bonus($) compensation($) options/SARS(#) Samuel Nyer CEO
2003 $140,000 $4,200 0
2002 140,000 4,200 0
2001 70,000 2,100 (1) 0
2000 140,000 4,200 0

Michael Curry 2003 120,000 $28,000 6,000 0
Michael Curry 2002 120,000 13,219 6,000 0
Vice President
and 20% owner of
Eaton

David Dumouchel 2003 120,000 28,000 6,000 0
David Dumouchel 2002 120,000 13,219 6,000 0
Vice President
and 20% owner of
Eaton

Mark Dumouchel 2003 120,000 28,000 6,000 0
Mark Dumouchel 2002 120,000 13,219 6,000 0
President and
20% owner of
Eaton

Wayne Gunter 2003 120,000 28,000 6,000 0
Wayne Gunter 2002 120,000 13,219 6,000 0
Vice President
and 20% owner of
Eaton

Donato Mazzola 2003 120,000 28,000 6,000 0
Donato Mazzola 2002 120,000 13,219 6,000 0
Vice President
and 20% owner of
Eaton
(1) This is for six months ended June 30, 2001

In the above table, we have not presented (f) Restricted stock awards ($), (h)
LTIP payouts ($) and (i) All other compensation ($) as they are not applicable.

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.

65

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($)(2)
Name exercisable / unexercisable exercisable / unexercisable
---- ----------- ------------- ----------- -------------
Samuel Nyer 500,000 0 $0 $0

(2) based on the difference between the $ per share of the common stock and the
option price.

In the above table, we have not presented (b) Shares acquired on exercise and
(c) Value realized ($)as they are not applicable.

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.

The Company has an oral employment agreement with its 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 its 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.

66

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.

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. This was approved at the annual
meeting in December 2002 by the shareholders of the Company.

The 2002 Stock Option Plan provides for all directors, whether or not they
are employees or officers, to receive automatic grants upon election or
appointment to the Board of Non-Qualified Options ("Automatic Stock Options").
The Automatic Stock Options expire ten years after the date of grant. The number
of Automatic Stock Options granted shall be 12,000 for a three-year term board
member, 8,000 for a two-year-term board member or 4,000 for a one -year-term
board member, with 2,000 of such Non-Qualified Options vesting semi-annually
each June 30th and December 31st provided the optionee is still serving as a
director on that date. A similar provision is in place within the 2002 Stock
Option Plan for a certain officer of the Company who is not a director. After
vesting, and upon reelection to the Board, each director will receive a new
automatic grant of non-qualified options on the same terms as above. Except with
respect to certain ISOs, as provided for in the 2002 Stock Option Plan, the
exercise price of the options shall not be less than the Market Price (as
defined in the 2002 Stock Option Plan) of the Company's common stock on the day
of the grant.

67

ITEM 12. Security Ownership Of Certain Beneficial Owners And Management.

The following table sets forth information as of September 26, 2003, based
on information obtained from the persons named below, with respect to the
beneficial ownership of shares of common stock by (i) each person known by the
Company to be the owner of more than five percent of the outstanding shares of
common stock, (ii) each director, and (iii) all executive officers and directors
as a group. The table includes the Class A preferred stock which has 2,000,000
votes and Class B preferred stock which has 2,000,000 votes.
Amount and nature
Name and address of of beneficial Percentage of
Class beneficial owner ownership (3) class owned

Common stock, Samuel Nyer 5,958,400 4'5,7 63.9%
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 29.9
and Class A 72 Center Street
preferred Brewer, Maine 04412
stock

Common stock Karen L. Wright 67,220 6,7 *
1292 Hammond Street
Bangor, Maine 04401

Common stock Stanley Dudrick, M.D. 52,000 7 *
c/o St. Mary's Hospital
56 Franklin Street
Waterbury, CT 06706

Common stock Donald C. Lewis, Jr. 62,000 7 *
c/o Nyle International Corp.
72 Center Street
Brewer, Maine 04412

Common Stock Kenneth L. Nyer, M.D. 84,000 7 *
48 Old Orchard Road
New Rochelle, New York 10804

Common Stock M. Randolph Prince 18,000 7 *
185 Serral Drive
Greeneville, TN 37745

Common Stock James Schweiger 25,000 7,8 *
8052 Aspencrest Court
Orlando, FL 32835

Common Stock John Milledge 12,000 7 *
110 S East 6th Street
Ft. Lauderdale, FL 33301

Common Stock Alliance Capital
Resources, Inc. 217,000 9 5.5

All directors and executive officers 6,298,620 4,5,6,7,8
of the Company as a group (eight 67.5%
persons)

* less than 1% of class

68

3)Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934 and includes any options which vest within
60 days. Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them.

4)Includes shares owned by Nyle since Mr. Samuel Nyer controls that corporation.

5)Includes 576,000 shares of common stock underlying vested options granted
pursuant to the Plans. Also includes 500,000 vested non-qualified options
granted pursuant to Mr. Nyer's employment agreement.

6)Includes 1,100 shares of common stock which is held by an ADCO employee
investment club by which Ms. Wright owns 220 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.

7) Consists of shares of common stock underlying vested options granted pursuant
to the Plans.

8) Consists of 7,000 shares of common stock owned by Mr. Schweiger.

9) Consists of 67,000 shares of common stock and 150,000 common stock options.

69

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) 1,069,600 $2.87 2,646,800

Equity compensation
plans not approved
by security holders (2) 650,000 5.35 0
--------- ----- ---------
Total 1,719,600 $3.81 2,646,800
========= ===== =========

(1) Represents stock options granted under Nyer Medical Group, Inc.'s 1993 Stock
Option Plan and 2002 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., as amended by each of (i) the Addendum to
the Business Development Consulting Agreement, dated October 1, 2000, between
the parties to the original document and (ii) the Stock Option Agreement, dated
as of December 6, 2002, between the same such parties (collectively, the
"Business Development Consulting Agreement"), and (b) Employment Agreement,
dated as of October 25, 1999, between Nyer Medical Group, Inc. and Samuel Nyer,
as amended by the Stock Option Agreement, dated as of December 6, 2002, between
the parties to the original document (collectively, the "Employment Agreement of
Samuel Nyer").

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 an exercise price of $1.71 per share. The term of each
such option is ten years and the agreement also provides the consultant with
best effort registration rights with respect to any shares of common stock
issuable upon the exercise of the options.

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 $44,858 by Nyle, this includes accrued
interest. As of the date of this Report, Nyle owed the Company $44,858 (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.

70

Mr. Samuel Nyer, president of the Company, is a guarantor of ADCO's loan.
See Item 9. Debt, Notes to "Consolidated Financial Statements".

ADCO 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.

71

Part IV

ITEM 15. Exhibits, Financial Statement Schedules 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)
3.4 Third Amendment to Articles of Incorporation of Nyer Medical
Group, Inc. (3)
3.5 Bylaws of Nyer Medical Group, Inc.(1)
3.6 Amendment to Bylaws (1993)(3)
3.7 Amendment to Bylaws (1997)(3)
3.8 Amendment to Bylaws (2002)(3)

10.1 1993 Stock Option Plan(2)
10.2 Amendment to 1993 Stock Option Plan(3)
10.3 Second Amendment to 1993 Stock Option Plan (3)
10.4 Business Development Consulting Agreement, dated October 1, 1999,
between Nyer Medical Group, Inc. and Alliance Capital Resources,
Inc. (3)
10.5 Addendum to the Business Development Consulting Agreement, dated
October 1, 2000, between Nyer Medical Group, Inc. and Alliance
Capital Resources, Inc. (3)
10.6 Employment Agreement, dated as of October 25, 1999, between Nyer
Medical Group, Inc. and Mr. Samuel Nyer (3)
10.7 Third Amendment to 1993 Stock Option Plan
10.8 2002 Stock Option Plan
10.9 Stock Option Agreement between Nyer Medical Group, Inc. and Mr.
Samuel Nyer
10.10 Stock Option Agreement between Nyer Medical Group, Inc. and
Alliance Capital Resources, Inc.

21 Subsidiaries

23.1 Consent of Independent Certified Public Accountants

31.1 Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934 and Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934 and Section 302 of the
Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer
32.2 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.

(3) Contained in Form 10-K filed October 2002.

(b) Financial Statement Schedules - See Schedule II Valuation and Qualifying
Accounts and Reserves - Page F-30.

(c) Reports on Form 8-K None.

72

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

73

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 29th day of September
2003.

Signature Title

/s/ Samuel Nyer Chairman of the Board, President,
Samuel Nyer Principal Executive Officer,
Director and Secretary

/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

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

74

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2003 Annual Report on Form 10-K

Exhibit 10.7

Third Amendment to the
NYER MEDICAL GROUP 1993 STOCK OPTION PLAN

Whereas, the Nyer Medical Group, Inc. (the "Company) adopted the 1993
Stock Option Plan, effective July 21, 1993 (the "1993 Plan");

Whereas, the Company desires to amend certain provisions of
the 1993 Plan, with retroactive effect to the effective date of the plan;

Whereas, the Company desires to no longer grant options under
the 1993 Plan as of the date of the effectiveness of the 2002 Stock Option Plan.

The 1993 Plan is therefore amended as follows: 1. Paragraph
1(c) is amended to read: "directors of the Company with the opportunities to
purchase stock in the Company pursuant to options granted hereunder
("Non-Discretionary Options")."

2. The second sentence of Paragraph 4 is amended to read: "The aggregate number
of shares of Common Stock which may be issued pursuant to the Plan is 1,000,000,
subject to adjustment as provided in Paragraph 13."

3. The first sentence of Paragraph 5 shall be amended to read: "Options may be
granted under the Plan at any time during the period commencing July 21, 1993
and ending on the date of the effectiveness of the 2002 Stock Option Plan."

4. Except as amended hereby, the 1993 Plan shall continue in effect in
accordance with its terms.

75

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2003 Annual Report on Form 10-K

Exhibit 10.8

NYER MEDICAL GROUP, INC. 2002 STOCK OPTION PLAN

TABLE OF CONTENTS

ARTICLE 1 ESTABLISHMENT AND PURPOSES 1
1.1 Establishment and Effective Date 1
1.2 Purposes 1
1.3 References to Law 1

ARTICLE 2 AWARDS 1
2.1 Form of Awards 1
2.2 Maximum Shares Available; Maximum Annual Awards 1
2.3 Return of Prior Awards 1

ARTICLE 3 ADMINISTRATION 1
3.1 Committee 1
3.2 Powers of the Committee 2
3.3 Delegation 2
3.4 Interpretations 2
3.5 Liability; Indemnification 2

ARTICLE 4 ELIGIBILITY 2

ARTICLE 5 STOCK OPTIONS 2
5.1 Grant of Options, Option Term 2
5.2 Designation as Non-Qualified Stock Option or
Incentive Stock Option 2
5.3 Automatic Stock Options 3
5.4 Exercise Price 3
5.5 Exercise and Payment 3
5.6 Vesting 3
5.7 No Rights as a Stockholder 3
5.8 Incentive Stock Options 4
5.9 Notice to Company of ISO Disqualifying Disposition 4
5.10 Conversion of Incentive Stock Options 4

ARTICLE 6 NONTRANSFERABILITY OF OPTIONS 4

ARTICLE 7 EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT OR
DEATH 4
7.1 General Rule 4
7.2 Disability or Retirement 5
7.3 Death 5
7.4 Termination of Automatic Stock Options 5
7.5 Termination of Unvested Options 5

ARTICLE 8 ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. 5
8.1 Adjustments 5
8.2 Stock-Dividends and Stock Splits 5
8.3 Consolidation, Acquisition or Merger 5
8.4 Recapitalization or Reorganization 6
8.5 Dissolution or Liquidation 6
8.6 Modification of ISO's 6
8.7 Issuances of Securities 6
8.8 Adjustments 6
8.9 Lock-Up Agreement 6

76

ARTICLE 9 TERM; AMENDMENT AND TERMINATION 6

ARTICLE 10 WRITTEN AGREEMENT 7

ARTICLE 11 MISCELLANEOUS PROVISIONS 7
11.1 Tax Withholding 7
11.2 Securities Laws 7
11.3 Compliance with Section 16(b) 7
11.4 Successors 7
11.5 General Creditor Status 7
11.6 No Right to Employment 7
11.7 Notices 8
11.8 Severability 8
11.9 Governing Law 8

ARTICLE 1 ESTABLISHMENT AND PURPOSES

1.1 Establishment and Effective Date

Nyer Medical Group, Inc., a Florida corporation (the
"Corporation"), hereby establishes a stock option plan to be known as the
"Nyer Medical Group, Inc. 2002 Stock Option Plan" (the "Plan"). The Plan shall
become effective as of , 2002, subject to the approval of the stockholders of
the Corporation within twelve (12) months from such effective date. Upon
approval of the Plan by the Board of Directors of the Corporation (the
"Board"), awards may be made through the agency of the committee appointed by
the Board under Article 3 of the Plan (the "Committee"). In the event that such
stockholder approval is not obtained within such 12-month period, any awards
made hereunder shall be canceled and all rights of optionees hereunder
("Optionees") with respect to such awards shall thereupon automatically cease .

1.2 Purposes
The purposes of the Plan are (i) to encourage and enable
employees, consultants and directors (subject to such requirements as may be
prescribed by the Committee) of the Corporation, its subsidiaries and its
affiliates to acquire a proprietary interest in the growth and performance of
the Corporation, (ii) to generate an increased incentive for key employees,
consultants and directors to contribute to the Corporation's future success and
prosperity (as well as the success and prosperity of its subsidiaries and
affiliates), thus enhancing the value of the Corporation for the benefit of its
stockholders, and (iii) to enhance the ability of the Corporation, its
subsidiaries and its affiliates to attract and retain key employees, consultants
and directors who are essential to the progress, growth and profitability of the
Corporation, its subsidiaries and its affiliates, in each case through the
ownership of the Corporation's common stock ("Common Stock"), and rights
relating to the Common Stock.

1.3 References to Law

References to specific provisions of law shall be deemed to
include references to amendments or supplements thereto or subsequent provisions
of law of similar import.

ARTICLE 2 AWARDS

2.1 Form of Awards

Awards under the Plan may be granted any combination of the
following forms: (i) incentive stock options ("Incentive Stock Options") meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the terms of Article 4 and Sections 5.4 and 5.8 of this Plan;
(ii) non-qualified stock options ("Non-Qualified Stock Options"), and (iii)
Non-Qualified Stock Options that are automatic stock options "Automatic Stock
Options") (unless otherwise indicated, references in the Plan to "Options" shall
include Incentive Stock Options, Non-Qualified Stock Options, and Automatic
Stock Options).

2.2 Maximum Shares Available; Maximum Annual Awards

The maximum aggregate number of shares of Common Stock
available for award under the Plan (pursuant to the granting of Options) is
3,000,000 subject to adjustment pursuant to Article 8 hereof. The maximum
aggregate number of shares of Common Stock that may be awarded under the Plan

77

(pursuant to the granting of Options) to any individual during any calendar year
is 1,000,000 shares, subject to the limitations of Section 5.7 as to Incentive
Stock Options and also subject to adjustment pursuant to Article 8 hereof.
Shares of Common Stock issued under the Plan (pursuant to the granting of
Options) may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that any Option granted under the
Plan expires unexercised or is terminated, surrendered or canceled without being
exercised in whole or in part for any reason, then the shares underlying such
unexercised Option shall be available for subsequent awards under the Plan upon
such terms and conditions as the Committee may determine.

2.3 Return of Prior Awards

As a condition to any subsequent award to an Optionee under
the Plan, the Committee shall have the right, in its sole discretion, to require
the Optionee to return to the Corporation awards previously granted under the
Plan. Subject to the provisions of the Plan, such new award shall be upon such
terms and conditions as are specified by the Committee at the time the new award
is granted.

ARTICLE 3 ADMINISTRATION

3.1 Committee

Awards of Options shall be determined, and the Plan shall be
administered by, the Committee established hereunder. The Committee shall be
appointed from time to time by the Board and shall serve at the pleasure of the
Board. So long as the Corporation has outstanding a class of equity securities
required to be registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), the Corporation shall endeavor to grant,
designate and amend any Options hereunder only through a Committee consisting
solely of two or more persons each of whom shall qualify as (i) a "Non-Employee
Director", as that term is defined in subparagraph (b)(3)(i) of Rule 16b-3("Rule
16b-3") promulgated under the 1934 Act and (ii) an "Outside Director", within
the meaning of Section 162(m) of the Code; provided, however, that any actions
taken by the Committee in circumstances in which the members of the Committee do
not qualify as Non-Employee Directors and Outside Directors shall nonetheless
constitute valid actions by such Committee, and provided, further, however, that
if at any time a Committee shall not have been appointed or shall have fewer
than two members, the powers of the Committee shall be exercised by the full
Board. In order to comply with the provisions of Rule 16b-3, the full Board may
ratify and approve any actions taken by the Committee in such circumstances as
the Board shall deem appropriate.

3.2 Powers of the Committee

Subject to the express provisions of the Plan, the Committee
shall have the power and authority: (i) to grant Options and to determine the
exercise price of the shares of Common Stock covered by each Option, the term of
each Option, the number of shares of Common Stock to be covered by each Option,
the time or times at which each Option shall become exercisable and the duration
of the exercise period applicable to each Option; (ii) to designate Options as
Incentive Stock Options or Non-Qualified Stock Options; (iii) to determine the
employees, consultants and directors to whom, and the time or times at which,
Options shall be granted or made, and (iv) to take all other actions
contemplated to be taken by the Committee under the Plan, including, but not
limited to, interpreting the Plan and authorizing any written agreement to relay
an award made hereunder, as well as any amendment
to such written agreement.

3.3 Delegation

The Committee may delegate to one or more of its respective
members or to any other person or persons such ministerial duties hereunder as
it may deem advisable; provided, however, that the Committee may not delegate
any of its responsibilities hereunder to any person who is not both a
"Non-Employee Director", as that term is defined in subparagraph (b)(3)(i) of
Rule 16b-3, and an "Outside Director", within the meaning of Section 162(m) of
the Code. The Committee may also employ attorneys, consultants, accountants or
other professional advisors and shall be entitled reasonably to rely upon the
advice opinions or valuations of any such advisors.

78

3.4 Interpretations

The Committee shall have discretionary authority to interpret
the terms of the Plan, to adopt and revise rules, regulations and policies to
administer the Plan and to make any other factual determinations, which it
believes to be necessary or advisable for the administration of the Plan. All
actions taken and interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Corporation, all Optionees and
all other interested persons.

3.5 Liability; Indemnification

No member of the Board or the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Plan or awards
made thereunder.

In addition to such other rights of indemnification as he or she
may have as a member of the Board, and with respect to administration of the
Plan and the granting of Options under it, each member of the Board and of the
Committee shall be entitled without further act on his or her part to
advancement of expenses and indemnification from the Corporation pursuant to
Florida law, including to the full extent provided by Section 607.0850 of the
Florida Business Corporation Act (the "FBCA").

The foregoing right of indemnification shall inure to the
benefit of the heirs, executors or administrators of each such member of the
Board or the Committee and shall be in addition to all other rights to which
such member of the Board or the Committee would be entitled to as a matter of
law, contract or otherwise.

ARTICLE 4 ELIGIBILITY

Awards may be made to any employee, consultant or director of
the Corporation or any of its subsidiaries or affiliates (subject to such
requirements as may be prescribed by the Committee). In determining the
employees, consultants and directors to whom awards shall be granted and the
number of shares of Common Stock to be covered by each award, the Committee
shall take into account the nature of the services rendered by such employees,
consultants and directors, their present and potential contributions to the
success of the Corporation, its subsidiaries and its affiliates, and such other
factors as the Committee in its sole discretion shall deem relevant
Notwithstanding the foregoing, only employees of the Corporation and any
Subsidiary Corporation" of the Corporation (as such term is defined in Section
424(f) of the Code) shall be eligible to receive Incentive Stock Options.

ARTICLE 5 STOCK OPTIONS

5.1 Grant of Options, Option Term

Options may be granted under the Plan for the purchase of shares of
Common Stock. Options shall be granted in such form and upon such terms and
conditions, including the satisfaction of corporate or individual performance
objectives as the Committee shall from time to time determine and any vesting
standards established pursuant to Section 5.6. The Options shall be exercisable
for a period of no more 10 years from the date of grant, except where a shorter
period is required for Incentive Stock Options or in the written Option
Agreement required pursuant to Article 10 hereof , subject in any event to
earlier termination as provided in Article 7.

5.2 Designation as Non-Qualified Stock Option or Incentive Stock Option

In connection with any grant of Options, the Committee shall
designate in the written agreement required pursuant to Article 10 hereof
whether the Options granted shall be Incentive Stock Options or Non-Qualified
Stock Options, and the number of shares of Common Stock of each. In the absence
of such designation, any Option granted hereunder shall be a Non-Qualified Stock
Option.

5.3 Automatic Stock Options

All directors of the Corporation shall automatically receive
grants of (i) 4,000 Automatic Stock Options upon election or appointment to the
Board for a one year term; (ii) 8,000 Automatic Stock Options upon election or

79

appointment to the Board for a two year term; and (iii) 12,000 Automatic Stock
Options upon election or appointment to the Board for a three year term. The
Corporation's Chief Financial Officer (if not a director of the Corporation)
shall receive a grant of 12,000 Automatic Stock Options on October 1, 2004, and
shall receive an additional 12,000 Automatic Stock Options upon (i) the vesting
in full of such grant and (ii) the vesting in full of each such subsequent
grant. All Automatic Stock Options shall vest as provided in Section 5.6 hereof.

5.4 Exercise Price

The exercise price per share of Common Stock under each
Incentive Stock Option and Automatic Stock Option shall be not less than the
Market Price (as hereinafter defined) of the Common Stock on the date such
Option is granted. The Committee shall determine the exercise price per share of
Common Stock under each Non-Qualified Stock Option. In the case of an Incentive
Stock Option granted to an Optionee owning (actually or constructively under
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the exercise price shall not be less than 110% of the Market
Price of the Common Stock on the date of grant. "Market Price" shall mean the
per share value of the Common Stock and shall be determined as follows: (i) if
the Common Stock is listed on a national securities exchange or quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market (collectively, "Nasdaq")
the Market Price on any day shall be, in the sole discretion of the Committee,
either (x) the average of the high and low reported consolidated trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the consolidated trading listing for such day or
(y) the closing price reported on the consolidated trading listing for such day;
(ii) if the Common Stock is quoted on the OTC Bulletin Board, the Market Price
on any day shall be the average of the representative bid and asked prices at
the close of business for such day; (iii) if the Common Stock is not listed on a
national stock exchange or quoted on Nasdaq or listed on the OTC Bulletin Board,
the Market Price on any day shall be the average of the high bid and low asked
prices reported by the National Quotation Bureau, LLC (the "NQB") for such day;
or (iv) if the Common Stock is not listed on a national stock exchange, quoted
on Nasdaq, quoted on the OTC Bulletin Board or reported on by the NQB, the
Market Price on any day shall be the fair market value of one share of Common
Stock on such day as determined by the Committee. In no event shall the Market
Price of a share of Common Stock subject to an Incentive Stock Option be less
than the fair market value as determined for purposes of Section 422(b)(4) of
the Code.

5.5 Exercise and Payment

Options may be exercised in whole or in part (but not for any
fractional shares of Common Stock). Shares of Common Stock purchased upon the
exercise of Options shall be paid for at the time of purchase. Such payment may
be made as follows (or by any combination of the following), in the sole
discretion of the Committee: (i) in United States currency by delivery of a
certified check, bank draft or postal or express money order payable to the
order of the Corporation, (ii) by surrender of a number of Mature Shares (as
defined below) of Common Stock held by the Optionee exercising the Option equal
to the quotient obtained by dividing (A) the aggregate exercise price payable
with respect to the Options then being exercised by (B) the Market Price on the
date of exercise, (iii) if the Corporation has established a program for the
cashless exercise of Options through a broker or other similar arrangements or
programs, then in accordance with the terms and conditions of such programs and
arrangements, (iv) other property acceptable to the Committee or (v) a loan of
money to an Optionee, the proceeds of which shall be used by the Optionee to
exercise all or a portion of the Options granted hereunder. If a loan is made by
the Corporation to the Optionee as contemplated in (v) above, the Optionee shall
execute a promissory note evidencing such loan and such note shall (I) provide
for full recourse to the maker, (II) bear interest at a rate no less than the
applicable Federal rate (within the meaning of Section 1274 of the Code), and
(III) contain such other terms as the Committee in its sole discretion shall
determine, including securing the loan by a pledge of the shares of Common Stock
issued upon exercise of the Option. Upon receipt of a notice of exercise and
payment in accordance with the procedures set forth above, the Corporation or
its agent shall deliver to the persons exercising the Option(s) (or his or her
designee) a certificate for such Shares. "Mature Shares" means shares of Common
Stock owned by the Optionee for a period of at least six consecutive months
prior to the exercise of the Option(s) in question.

80

5.6 Vesting

Except for Automatic Stock Options, the time or times at which
Options granted to Optionees shall vest shall be set forth in the Agreement
provided for in Section 10 hereof. Automatic Stock Options granted to any
optionee under Section 5.3 hereof shall vest and become exercisable as to 2,000
shares on June 30 and December 31 of each year following the grant of the
Automatic Stock Option, provided that the Optionee is still serving as a
director or officer of the Company on such date.

5.7 No Rights as a Stockholder

A recipient of Options shall have no rights as a stockholder
with respect to any shares issuable or transferable upon exercise thereof until
the date a stock certificate representing such shares is issued to such
recipient. Except as otherwise expressly provided in the Plan or by the
Committee, no adjustment shall be made for cash dividends or other rights for
which the record date shall be prior to the date such stock certificate is
issued.

5.8 Incentive Stock Options

The terms of any Incentive Stock Option granted under the Plan
shall comply in all respects with the provisions of Section 422 of the Code, or
any successor provision thereto, and any regulations promulgated thereunder and
the Plan shall be interpreted accordingly. The aggregate Market Price
(determined at the time of grant of the Incentive Stock Option) of the Common
Stock with respect to which the Incentive Stock Options become exercisable for
the first time by an Optionee in any calendar year (under all plans of the
Corporation and its subsidiaries (as defined in Section 424(f) of the Code)
shall not exceed $100,000. Any Options grants that exceed such amount shall be
treated as Non-Qualified Options. No grant of an Incentive Stock Option shall be
made under the Plan more than ten (10) years after the effective date of the
Plan, nor shall any Incentive Stock Option be exercisable after the expiration
of ten (10) years from the date such Option is granted, or 5 years from the date
the Option is granted in the case of a 10% Stockholder (as defined in Section
5.4).

5.9 Notice to Company of ISO Disqualifying Disposition

A condition of receiving an Incentive Stock Option any
Employee who receives an Incentive Stock Option shall agree to notify the
Company in writing immediately upon making a Disqualifying Disposition of any
Common Stock acquired pursuant to the exercise of an Incentive Stock Option. A
"Disqualifying Disposition" is any disposition (including any sale) of such
Common Stock before the later of (i) two years after the date the Employee was
granted the Incentive Stock Option or (ii) one year after the date the Employee
acquired Common Stock by exercising the Incentive Stock Option. No notification
of a Disqualifying Disposition shall be required after the death of an Optionee.

5.10 Conversion of Incentive Stock Options

The Committee, at the written request of any Optionee, may, in
its discretion, take such actions as may be necessary to convert such Optionee's
Incentive Stock Options (or any portions thereof) that have not been exercised
on the date of conversion into Non-Qualified Stock Options at any time prior to
the expiration of such Incentive Stock Options. At the time of such conversion,
the Committee may impose such conditions on the exercise of the resulting
Non-Qualified Stock Options, consistent with this Plan, as the Committee in its
discretion may determine. Nothing in the Plan shall be deemed to give any
Optionee the right to have such Optionee's Incentive Stock Options converted
into Non-Qualified Stock Options.

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ARTICLE 6 NONTRANSFERABILITY OF OPTIONS

No Option may be transferred, assigned, pledged or
hypothecated (whether by operation of law or otherwise), except as provided
herein or by will or the applicable laws of descent and distribution, and no
Option shall be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of an
Option not specifically permitted herein shall be null and void and without
effect. The Committee may, in its sole discretion, cause the written agreement
relating to any Non-Qualified Stock Options granted hereunder to provide that
the recipient of such Non-Qualified Stock Options may transfer any of such
Non-Qualified Stock Options other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause the
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the 1934
Act or which would cause any recipient of awards hereunder to fail to be
entitled to the benefits Rule 16b-3 or other exemptive Rules under Section 16
of the 1934 Act or be subject to liability thereunder.

ARTICLE 7 EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT OR DEATH

7.1 General Rule

Except as to Automatic Stock Options as provided in Section
7.4 below, or as may be expressly provided in a written agreement relating to
any Option, in an employment agreement between the Corporation and the Optionee
or as otherwise expressly determined by the Committee in its sole discretion, in
the event an Optionee ceases to be an employee or consultant of the Corporation
or its subsidiaries (a "Terminated Person") for any reason other than
Disability, Retirement (as hereinafter defined) or death, any Options held by
such Terminated Person on the date on which he or she ceased to be an employee
or consultant (the "Termination Date") that were otherwise exercisable on such
date shall terminate unless exercised within 180 days following the Termination
Date in the case of Non-Qualified Options or within three (3) months following
the Termination Date in the case of Incentive Stock Options, but in no event
after the expiration of the exercise period of such Options. Except as expressly
provided in any written agreement relating to the Options or employment
agreement with the Corporation and the Optionee, the Committee may cause any
Options to be forfeited upon an Optionee's termination of employment, consultant
or director status if the Optionee was terminated or removed for "Cause." Except
as otherwise expressly provided in any written agreement relating to the Options
or employment agreement with the Corporation (in which case the definition of
"Cause" set forth therein shall supersede the definition set forth below), for
purposes of this Section 7.1, the term "Cause" shall mean any one (or more) of
the following: (i) the Optionee's commission of any fraud or misappropriation or
any misconduct which causes demonstrable injury to the Corporation or a
subsidiary or affiliate; or (ii) an act of dishonesty by the Optionee resulting
or intended to result, directly or indirectly, in gain or personal enrichment at
the expense of the Corporation or a subsidiary or affiliate. Except in the case
of the termination of employment of an Optionee who has entered into a written
agreement relating to the Options or employment agreement with the Corporation
(in which case the determination shall be made in accordance with the terms of
such written agreement), it shall be within the sole discretion of the Committee
to determine whether an Optionee's termination of employment was for one of the
foregoing reasons, and its decision shall be final and conclusive.

7.2 Disability or Retirement

Except as may be expressly provided otherwise in a written
agreement relating to any Options granted under the Plan, in an employment
agreement between the Corporation and the Optionee, or as otherwise determined
by the Committee in its sole discretion, in the event of a termination of
employment or other service arrangement of a Terminated Person due to the
Disability (as defined below) or Retirement (as defined below) of such Person,
any Options held by such Person on the Termination Date that were otherwise
exercisable on such date shall expire unless exercised within the period of 365
days following such date, but in no event after the expiration date of the
exercise period of such Options; provided, however, that any Incentive Stock
Option of such Terminated Person shall no longer be treated as an Incentive
Stock Option unless exercised within three (3) months of the Termination Date
(or within one (1) year of the Termination Date, in the case of an employee
whose termination of employment occurs by reason of a Disability). "Disability"
shall have the meaning set forth in Section 22(e)(3) of the Code. "Retirement"
shall mean a termination of employment arrangement with the Corporation or a
subsidiary or affiliate with the written consent of the Committee in its sole
discretion. The decision of the Committee shall be final, binding and
conclusive.

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7.3 Death

Except as may be expressly provided in a written agreement
relating to the Options, in an employment agreement between the Corporation and
an Optionee, or as otherwise expressly determined by the Committee in its sole
discretion, in the event of the death of a recipient of Options, any Options
held by such Terminated Person at the date of death that were otherwise
exercisable on such date shall be exercisable by the beneficiary designated by
the Optionee for such purpose (the "Designated Beneficiary") or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall predecease
the Optionee, by the Optionee's personal representatives, heirs or legatees for
a period of two (2) years from the date of death, but in no event later than the
expiration date of the exercise period of such Options, at which time such
Options shall expire.

7.4 Termination of Automatic Stock Options

Except as may be expressly provided in a written agreement
relating to any Automatic Stock Option, in any written agreement between the
Corporation and the Optionee, or as otherwise expressly determined by the
Committee in its sole discretion, in the event an Optionee who holds an
Automatic Stock Option ceases to serve as a director of the Corporation or to
hold the office that entitled him or her to receive Automatic Stock Options
under Section 5.3 hereof: (i) all Automatic Stock Options held by such person
that are vested and exercisable on the date such person ceases to serve as an
officer or director shall terminate unless exercised within two (2) years
following the such date, but in no event after the expiration of the exercise
period of such Automatic Stock Options; and (ii) all Automatic Stock Options
that are not vested and exercisable on the date such person ceases to serve as
an officer or director shall terminate as of such date.

7.5 Termination of Unvested Options

All Options, which were not vested and exercisable by a
Terminated Person as of the Termination Date of such Terminated Person shall
terminate as of such date, except as expressly provided in the written agreement
relating to the Options or as otherwise expressly determined by the Committee in
its sole discretion. Options shall not be affected by any change of employment
so long as the recipient continues to be employed by either the Corporation or a
subsidiary or affiliate.

ARTICLE 8 ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.

8.1 Adjustments

Upon the occurrence of any of the events described in Article
8, an Optionee's rights with respect to Options shall be adjusted as and to the
extent provided hereafter in Article 8, unless otherwise specifically provided
in the written agreement between the Optionee and the Corporation relating to
such Option.

8.2 Stock-Dividends and Stock Splits

If the shares of Common Stock shall be subdivided or combined
into a greater or smaller number of shares or if the Corporation shall issue any
shares of Common Stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of Options shall
be appropriately increased or decreased proportionately and appropriate
adjustments shall be made in the exercise price per share to reflect such
subdivision, combination or stock dividend.

8.3 Consolidation, Acquisition or Merger

If the Corporation is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the
Corporation's assets or otherwise (an "Acquisition"), the Committee or the board
of directors of any entity assuming the obligations of the Corporation hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substitution on an
equitable basis for the shares then subject to such Options for the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition; (ii) upon written notice to the Optionees,
provide that all Options must be exercised, to the extent then exercisable (or
in the discretion of the Committee or the Successor Board, also provide that all
unvested options shall be, or become at the time which the Committee shall
determine, either immediately exercisable or immediately terminate), within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment or other consideration equal to the excess of the fair market value
of the shares of Common Stock subject to such Options (to the extent then
exercisable, or in the discretion of the Committee or the Successor Board,
whether or not then exercisable) over the exercise price thereof.

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8.4 Recapitalization or Reorganization

In the event of a recapitalization or reorganization of the
Corporation (other than a transaction described in subparagraph 8.3 above)
pursuant to which securities of the Corporation or of another corporation are
issued with respect to the outstanding shares of Stock, an Optionee upon
exercising an Option shall be entitled to receive for the purchase price paid
upon such exercise, the securities he would have received if he had exercised
his Option immediately prior to such recapitalization or reorganization.

8.5 Dissolution or Liquidation

In the event of the proposed dissolution or liquidation of the
Corporation (other than in connection with a transaction described in
subparagraph 8.3 above), each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.

8.6 Modification of ISO's

If the Committee determines that any adjustments made pursuant to
with respect to any Incentive Stock Options granted hereunder would constitute a
modification of such Incentive Stock Options, (as that term is defined in
Section 424 of the Code) it may refrain from making such adjustments.

8.7 Issuances of Securities

Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.

8.8 Adjustments

Upon the happening of any of the events described in
subparagraphs 8.2, 8.3 or 8.4 above, the class and aggregate number of shares
set forth in Section 2.2 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs. If
changes in the capitalization of the Corporation shall occur other than those
referred to above in this Section 8, the Committee shall make such adjustments,
if any, in the number of shares covered by each Option and in the per share
purchase price as the Committee in its discretion may consider appropriate. The
Committee or, if applicable, the Successor Board, shall determine the specific
adjustments to be made under this Section 8 and its determination shall be
conclusive.

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8.9 Lock-Up Agreement

The Optionee, if so requested by the Committee and an
underwriter of Common Stock or other securities of the Corporation, shall not
sell, grant any option or right to buy or sell, or otherwise transfer or dispose
of in any manner, whether in privately-negotiated or open-market transactions,
any Common Stock or other securities of the Corporation held by him or her or
which he or she has the right to acquire during the 180-day period following the
effective date of a registration statement of the Corporation filed with the
Securities and Exchange Commission in connection with such offering or such
shorter period as such underwriter shall have advised the Corporation in writing
is adequate to permit the successful and orderly distribution of such Common
Stock or other securities; provided, however, that such "lock-up" agreement
shall be in writing and in form and substance satisfactory to the Committee and
such underwriter. The Corporation may impose stop-transfer instructions with
respect to the shares subject to the foregoing restrictions until the end of
said period.

ARTICLE 9 TERM; AMENDMENT AND TERMINATION

No Option shall be granted under the Plan after the earlier of (i) ten
(10) years from the effective date of the Plan, or (ii) the termination of the
Plan pursuant to this Article 9. However, unless otherwise expressly provided in
the Plan or in an applicable written agreement required pursuant to Article 10,
any Option theretofore granted may extend beyond such date, and any authority of
the Committee to amend, alter, suspend, discontinue or terminate any such
Option, or to waive any conditions or rights under any such Option and the
authority of the Board to amend the Plan, shall extend beyond such date. The
Board may suspend, terminate, modify or amend the Plan, provided that any
amendment that would (i) materially increase the aggregate number of shares
which may be issued under the Plan, (ii) materially increase the benefits
accruing to Optionees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan shall be subject to
the approval of the Corporation's stockholders, except that any such increase or
modification that may result from adjustments authorized by Article 8 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the Optionee
to whom an award shall theretofore have been granted, adversely affect the
rights of such Optionee under such award, and provided further that if any
amendment would require stockholder approval to satisfy the requirements of Rule
16b-3 under the 1934 Act, then such amendment shall be presented to stockholders
for approval, provided however that failure to obtain such approval shall not
affect the validity of this Plan or the options granted hereunder.

ARTICLE 10 WRITTEN AGREEMENT

Each award of Options shall be evidenced by a written
agreement containing such restrictions, terms and conditions, if any, as the
Committee may require. In the event of any conflict between a written agreement
and the Plan, the terms of the Plan shall govern.

ARTICLE 11 MISCELLANEOUS PROVISIONS

Tax Withholding
The Corporation shall have the right to require Optionees or
their beneficiaries or legal representatives to remit to the Corporation an
amount sufficient to satisfy Federal, state and local withholding tax
requirements, or to deduct from all payments under the Plan amounts sufficient
to satisfy all withholding tax requirements. Whenever payments under the Plan
are to be made to an Optionee in cash, such payments shall be net of any amounts
sufficient to satisfy all Federal, state and local withholding tax requirements.
The Committee may, in its sole discretion, permit an Optionee to satisfy his or
her tax withholding obligations either by (i) surrendering of
Common Stock owned by the Optionee or (ii) having the Corporation withhold from
shares of Common Stock, or other compensation, otherwise deliverable or payable
to the Optionee. Shares of Common Stock surrendered or withheld shall be valued
at their Market Price as of the date on which income is required to be
recognized for income tax purposes.

11.2 Securities Laws

Each Option granted under the Plan shall be subject to the
requirement that, if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of the shares of
Common Stock issuable or transferable upon exercise thereof upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issue, transfer, or purchase
of the shares of Common Stock thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board. The Committee may, in connection with the granting of
any Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Corporation stating that as a condition precedent to
each exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation, represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Committee may prescribe.

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11.3 Compliance with Section 16(b)

In the case of Optionees who are or may be subject to Section 16
of the 1934 Act, it is the intent of the Corporation that the Plan and any award
granted hereunder satisfy and be interpreted in a manner that satisfies the
applicable requirements of Rule 16b-3 so that such persons will be entitled to
the benefits of Rule 16b-3 or other exemptive Rules under Section 16 of the 1934
Act and will not be subjected to liability thereunder. If any provision of the
Plan or any award would otherwise conflict with the intent expressed herein,
that provision, to the extent possible, shall be interpreted and deemed amended
so as to avoid such conflict. To the extent of any remaining irreconcilable
conflict with such intent, such provision shall be deemed void as applicable to
Optionees who are or may be subject to Section 16 of the 1934 Act.

11.4 Successors

The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, in its discretion prior to the consummation of the
transaction and subject to Article 9 hereof, cancel, offer to purchase exchange,
adjust or modify any outstanding awards, at such time and in such manner as the
Committee deems appropriate and in accordance with applicable law.

11.5 General Creditor Status

Optionees shall have no right, title or interest whatsoever in or
to any investments which the Corporation may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Corporation and any Optionee,
beneficiary or legal representative of such Optionee. To the extent that any
person acquires a right to receive payments from the Corporation under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Corporation. All payments to be made hereunder shall be paid from the
general funds of the Corporation and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan .

11.6 No Right to Employment

Nothing in the Plan or in any written agreement entered into
pursuant to Article 10 hereof, nor the grant of any Option, shall confer upon
any Optionee any right to continue in the employ of the Corporation or a
subsidiary or affiliate or to be entitled to any remuneration or benefits not
set forth in the Plan or such written agreement or interfere with or limit the
right of the Corporation or a subsidiary or affiliate to modify the terms of or
terminate such Optionee's employment at any time.

11.7 Notices

Notices required or permitted to be given under the Plan shall be
sufficiently given if in writing and personally delivered to the Optionee or
sent by regular mail addressed (i) to the Optionee at the Optionee's address as
set forth in the books and records of the Corporation or its subsidiaries or
affiliates, or (ii) to the Corporation or the Committee at the principal office
of the Corporation clearly marked "Attention: Compensation Committee."

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11.8 Severability

In the event that any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

11.9 Governing Law

To the extent not preempted by Federal law, the Plan, and all agreements
hereunder, shall be construed in accordance with and governed by the laws of the
state of Florida.

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NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2003 Annual Report on Form 10-K

Exhibit 10.9

STOCK OPTION AGREEMENT - Samuel Nyer

STOCK OPTION AGREEMENT

This Stock Option Agreement (this "Agreement") is effective as of December
6, 2002, between Nyer Medical Group, Inc. a Florida corporation (the
"Corporation"), and Samuel Nyer (the "Optionee").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, in October, 1999, the Corporation entered into an employment
agreement with the Optionee which agreement included a provision (the
"Provision") for granting the Optionee an option for 500,000 shares of common
stock of the Corporation (the "Option");

WHEREAS, in November, 2002, the Board of Directors of the Corporation (the
"Board") agreed to amend and restate the Provision to provide certain other
provisions, including, without limitation, provisions for termination of the
Option upon the happening of certain events;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that the Provision is hereby amended and
restated as follows:

1. Grant of Option.

Pursuant to the Provision, in October, 1999, the Corporation
granted to the Optionee an option to purchase an aggregate of 500,000 shares
(the "Shares") of common stock, .0001(cent) par value, of the Corporation (the
"Common Stock") at a price of $6.437 per Share. The Corporation hereby confirms
and ratifies such grant. This Option was not and is not intended to qualify as
an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and shall be construed accordingly.

2. Right to Exercise.

Fifty (50%) percent of the Shares subject to the Option vested and
became exercisable in October, 1999 and fifty (50%) percent of the Shares
subject to the Option vested and became exercisable in October, 2000.

3. No Transfer.

This Option may not be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except by will or the applicable
laws of descent and distribution. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option not specifically permitted
herein shall be null and void and without effect.

4. Exercise Procedures.

a) Notice of Exercise. The Optionee or the Optionee's representative may
exercise this Option by giving written notice as set forth in Section 9j) hereof
in a manner substantially in the form annexed hereto as Exhibit A. The notice
shall specify the election to exercise this Option, the number of Shares with
respect to which this Option is being exercised and the form of payment (if more
than one form is available). The notice shall be signed by the person exercising
this Option. In the event that this Option is being exercised by the
representative of the Optionee, the notice shall be accompanied by proof
(satisfactory to the Committee (as defined below)) of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Corporation at the time of giving the notice, payment in a form
provided under Section 5 for the full amount of the exercise price applicable to
that portion of this Option being exercised. "Committee" means the committee
(comprised of at least two (2) members of the Board) appointed by the Board to
administer this Agreement, or, in the case that no such committee has been
appointed, the term "Committee" shall mean the Board.

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b) Issuance of Shares. After receiving a proper notice of exercise, the
Corporation shall cause to be issued a certificate or certificates for the
Shares as to which this Option has been exercised, registered in the name of the
person exercising this Option and bearing such legends as may be appropriate.

The Corporation shall cause such certificate or certificates to be delivered to
or upon the order of the person exercising this Option.

c) Withholding Taxes. In the event that the Committee determines that the
Corporation is required to withhold foreign, federal, state or local tax as a
result of the exercise of this Option, the Optionee, as a condition to the
exercise of this Option, shall make arrangements satisfactory to the Committee
to enable the Corporation to satisfy all withholding requirements. Any Shares
purchased by exercising this Option shall also be issued subject to condition
that the Optionee shall make the arrangements satisfactory to the Committee to
enable the Corporation to satisfy any withholding requirements that may arise in
connection with the disposition of such Shares.

5. Payment for Stock.

Options may be exercised in whole or in part (but not for any
fractional shares of Common Stock). Shares of Common Stock purchased upon the
exercise of the Option shall be paid for at the time of purchase. Such payment
may be made as follows (or by any combination of the following), in the sole
discretion of the Committee: (i) in United States currency by delivery of a
certified check, bank draft or postal or express money order payable to the
order of the Corporation, (ii) by surrender of a number of Mature Shares (as
defined below) of Common Stock held by the Optionee exercising the Option equal
to the quotient obtained by dividing (A) the aggregate exercise price payable
with respect to the Option then being exercised by (B) the Market Price (as
defined below) on the date of exercise, (iii) if the Corporation has established
a program for the cashless exercise of Options through a broker or other similar
arrangements or programs, then in accordance with the terms and conditions of
such programs and arrangements, (iv) other property acceptable to the Committee
or (v) a loan of money to an Optionee, the proceeds of which shall be used by
the Optionee to exercise all or a portion of the Option ranted hereunder. If a
loan is made by the Corporation to the Optionee as contemplated in (v) above,
the Optionee shall execute a promissory note evidencing such loan and such note
shall (I) provide for full recourse to the maker, (II) bear interest at a rate
no less than the applicable Federal rate (within the meaning of Section 1274 of
the Code), and (III) contain such other terms as the Committee in its sole
discretion shall determine, including securing the loan by a pledge of the
shares of Common Stock issued upon exercise of the Option. Upon receipt of a
notice of exercise and payment in accordance with the procedures set forth
above, the Corporation or its agent shall deliver to the persons exercising the
Option (or his or her designee) a certificate for such Shares. "Mature Shares"
means shares of Common Stock owned by the Optionee for a period of at least six
consecutive months prior to the exercise of the Option in question. "Market
Price" means the per share value of the Common Stock and shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted on the Nasdaq National Market or the Nasdaq SmallCap Market
(collectively, "Nasdaq") the Market Price on any day shall be, in the sole
discretion of the Committee, either (x) the average of the high and low reported
consolidated trading sales prices, or if no such sale is made on such day, the
average of the closing bid and asked prices reported on the consolidated trading
listing for such day or (y) the closing price reported on the consolidated
trading listing for such day; (ii) if the Common Stock is quoted on the OTC
Bulletin Board, the Market Price on any day shall be the average of the
representative bid and asked prices at the close of business for such day; (iii)
if the Common Stock is not listed on a national stock exchange or quoted on
Nasdaq or listed on the OTC Bulletin Board, the Market Price on any day shall be
the average of the high bid and low asked prices reported by the National
Quotation Bureau, LLC (the "NQB") for such day; or (iv) if the Common Stock is
not listed on a national stock exchange, quoted on Nasdaq, quoted on the OTC
Bulletin Board or reported on by the NQB, the Market Price on any day shall be
the fair market value of one share of Common Stock on such day as determined by
the Committee.

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6. Term and Expiration.

a) Term of Option. This Option shall expire on the day before the tenth
anniversary of the date hereof, unless sooner terminated as provided herein, and
may be exercised during such term only in accordance with this Agreement
b) Termination due to Cessation of Relationship, Disability or Death. Upon the
cessation of Optionee's employment by, consultancy for or emeritus (or similar)
status with the Corporation, upon the Optionee's death or upon the Optionee's
Disability (as defined below), this Option, which is otherwise exercisable,
shall be exercisable by, as appropriate, the Optionee, the Designated
Beneficiary (as defined below) or personal representative, heirs or legatees of
the Optionee for a period of four (4) years from the date of such cessation,
death or Disability, as appropriate, but in no event after the expiration of the
exercise period of the Option. "Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code. "Designated Beneficiary" means the beneficiary
designated by the Optionee to exercise its options upon the death of the
Optionee, if such Designated Person exists and has not predeceased the Optionee.
If a Designated Beneficiary does not exist or has predeceased the Optionee, the
appropriate personal representative, heir(s) or legatee(s) of the Optionee shall
exercise the Option.

7. Registration Rights.

a) Subject to the terms of this Agreement, the Corporation shall use its best
efforts to register the Common Stock underlying the Option (the "New Stock") for
issuance and resale under the Securities Act of 1933, as amended (the
"Securities Act"), on Form S-8 or any other Securities and Exchange Commission
("SEC") form, if available, which the Corporation deems appropriate (a
"Registration Statement").

b) The Corporation will notify the Optionee at any time when a prospectus
relating to the New Stock covered by a Registration Statement of the Corporation
is required to be delivered under the Securities Act, of the

happening of any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Corporation will
use its best efforts to promptly amend or supplement the Registration Statement
to correct any such untrue statement or omission.

c) The Optionee hereby agrees to cooperate with the Corporation in connection
with the preparation and filing of any Registration Statement by the Corporation
with respect to the New Stock. In addition, the Optionee agrees that, upon
receipt of any notice from the Corporation of the happening of any event of the
kind described in Section 7b), the Optionee will immediately discontinue
disposition of the New Stock pursuant to the Registration Statement covering the
New Stock until the Optionee's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 7b) and, if so desired by the
Corporation, the Optionee shall deliver to the Corporation (at the expense of
the Corporation) or destroy (and deliver to the Corporation a certificate of
such destruction) all copies, other than the permanent file copies then in the
Optionee's possession, of the prospectus covering such New Stock current at the
time of receipt of such notice.

d) The Optionee hereby represents and warrants to the Corporation as follows:

i) The Optionee has been furnished with all materials relating to the
Corporation and its proposed activities which the Optionee has requested and has
been afforded the opportunity to obtain any additional information necessary
with respect to the New Stock.

ii) The Corporation has answered all inquiries made by the Optionee
concerning the Corporation and its proposed activities, or any other matters
relating to the Registration Statement and the proposed operations of the
Corporation.

iii) The Optionee is an "accredited investor" as such term is defined in the
Federal securities laws. By reason of the Optionee's business or financial
experience, the Optionee is capable of evaluating the merits and risks of an
investment in the New Stock and of protecting its own interests in connection
with the transaction involving the Option and the New Stock. The Optionee has
sufficient available financial resources to provide adequately for his current
needs, including possible personal contingencies, and can bear the economic risk
of a complete loss of the New Stock without materially affecting his financial
condition.

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iv) The Optionee has not been furnished any offering literature other than any
materials and/or information made available to the Optionee by the Corporation
as described in Section 7d)i) and the Optionee has relied only on such materials
and/or information. Furthermore, other than as set forth in this Agreement, no
representations or warranties have been made to the Optionee by the Corporation,
or by its directors or officers or employees or other agents with respect to the
intended business of the Corporation, the financial condition, prospects,
profitability, operations and/or potential of the Corporation, and/or the
economic or any other aspects of the consequences of an investment in the New
Stock, and the Optionee has not relied upon any information concerning the
offering, written or oral, other than information contained in this Agreement or
provided by the Corporation to the Optionee.

v) The Optionee is acquiring the Option and, upon the exercise of the Option,
will be acquiring the New Stock, for his own account, as principal, for
investment and not with a view to the resale or distribution of all or any part
of the Option or the New Stock.

8. Securities Law and Other Restrictions.

Regardless of whether the offering and sale of Shares under this Agreement
have been registered under the Securities Act or have been registered or
qualified under the securities laws of any state, the Committee at its
discretion, may impose restrictions upon the sale, pledge or other transfer of
such Shares (including, without limitation, the placement of appropriate legends
on stock certificates or a "lock-up agreement") if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with any agreement to which the Corporation is a
party, the Securities Act, the securities laws of any state or any other law or
with restrictions imposed on the Corporation by its underwriters, or otherwise.

9. Adjustment Upon Changes in Capitalization, Etc.

a) Certain Adjustments. Upon the occurrence of any of the events described in
this Section 9, the Optionee's rights with respect to the Option shall be
adjusted as and to the extent provided hereafter in this Section 9, unless
otherwise specifically provided in the written agreement between the Optionee
and the Corporation relating to such Option.

b) Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of the Option shall be appropriately increased or decreased
proportionately and appropriate adjustments shall be made in the exercise price
per share to reflect such subdivision, combination or stock dividend.

c) Consolidation, Acquisition or Merger. If the Corporation is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Corporation's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the obligations
of the Corporation hereunder (the "Successor Board"), shall, as to the
outstanding Option, either (i) make appropriate provision for the continuation
of such Option by substitution on an equitable basis for the shares then subject
to such Option for the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition; (ii) upon written
notice to the Optionee, provide that the Option must be exercised, to the extent
then exercisable (or in the discretion of the Committee or the Successor Board,
also provide that all unvested portion of the Option, if any, shall be, or
become at the time which the Committee shall determine, either immediately
exercisable or immediately terminate), within a specified number of days of the
date of such notice, at the end of which period the Option shall terminate; or
(iii) terminate the Option in exchange for a cash payment or other consideration
equal to the excess of the fair market value of the shares of Common Stock
subject to such Option (to the extent then exercisable, or in the discretion of
the Committee or the Successor Board, whether or not then exercisable) over the
exercise price thereof.

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d) Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Corporation (other than a transaction described in
subsection 9c) above) pursuant to which securities of the Corporation or of
another corporation are issued with respect to the outstanding shares of Common
Stock, the Optionee upon exercising the Option shall be entitled to receive for
the purchase price paid upon such exercise, the securities he would have
received if he had exercised his Option immediately prior to such
recapitalization or reorganization.

e) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Corporation (other than in connection with a transaction
described in subsection 9c) above), each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Committee.

f) Issuances of Securities. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to the Option. No adjustments shall be made for dividends paid in cash
or in property other than securities of the Corporation.

g) Other Adjustments. If changes in the capitalization of the Corporation
shall occur other than those referred to above in this Section 9, the Committee
shall make such adjustments, if any, in the number of shares covered by the
Option and in the per share purchase price as the Committee in its discretion
may consider appropriate. The Committee or, if applicable, the Successor Board,
shall determine the specific adjustments to be made under this Section 9 and its
determination shall be conclusive.

10. Miscellaneous Provisions.

a) Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof.
This Agreement may not be amended except by a written instrument signed by both
parties hereto.

b) Choice of Law. To the extent not preempted by Federal law, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Florida.

c) Interpretations. The Committee shall have discretionary authority to
interpret the terms of this Agreement, to adopt and revise rules, regulations
and policies to administer this Agreement and to make any other factual
determinations, which it believes to be necessary or advisable for the
administration of this Agreement. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, the Optionee and all other interested persons.

d) Liability; Indemnification.

i) No member of the Board or the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to this Agreement.

ii) In addition to such other rights of indemnification as he or she may
have as a member of the Board, and with respect to administration of this
Agreement, each member of the Board and of the Committee shall be entitled
without further act on his or her part to advancement of expenses and
indemnification from the Corporation pursuant to Florida law, including to the
full extent provided by Section 607.0850 of the Florida Business Corporation Act
(the "FBCA").The foregoing right of indemnification shall inure to the benefit
of the heirs, executors or administrators of each such member of the

Board or the Committee and shall be in addition to all other rights to which
such member of the Board or the Committee would be entitled to as a matter of
law, contract or otherwise.

92

e) Tax Withholding. The Corporation shall have the right to require the
Optionee or its beneficiary or legal representative to remit to the Corporation
an amount sufficient to satisfy Federal, state and local withholding tax
requirements, or to deduct from all payments under this Agreement amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
this Agreement are to be made to an Optionee in cash, if any, such payments
shall be net of any amounts sufficient to satisfy all Federal, state and local
withholding tax requirements. The Committee may, in its sole discretion, permit
the Optionee to satisfy its tax withholding obligations either by (i)
surrendering of Common Stock owned by the Optionee or (ii) having the
Corporation withhold from shares of Common Stock, or other compensation,
otherwise deliverable or payable to the Optionee. Shares of Common Stock
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for income tax purpose

f) Compliance with Section 16(b). In the case the Optionee is or may be
subject to Section 16 of the Securities Exchange Act of 1934 Act, as amended
(the "1934 Act"), it is the intent of the Corporation that this Agreement and
any award granted hereunder satisfy and be interpreted in a manner that
satisfies the applicable requirements of Rule 16b-3 so that the Optionee will be
entitled to the benefits of Rule 16b-3 or other exemptive Rules under Section 16
of the 1934 Act and will not be subjected to liability thereunder. If any
provision of this Agreement or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to the Optionee if the Optionee is or may be subject
to Section 16 of the 1934 Act. Neither this provision of the Agreement nor any
other provision of this Agreement shall be construed as to insure that the
Optionee has satisfied or will satisfy all the requirements of Section 16 of the
1934 Act and/or the Rules promulgated thereunder with respect to this Option or
the Common Stock underlying this Option.

g) Successors. The obligations of the Corporation under this Agreement
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation.

h) General Creditor Status. The Optionee shall have no right, title or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under this Agreement. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship between
the Corporation and the Optionee, or the beneficiary or legal representative of
the Optionee. To the extent that any person acquires a right to receive payments
from the Corporation under this Agreement, such right shall be no greater than
the right of an unsecured general creditor of the Corporation. All payments to
be made hereunder shall be paid from the general funds of the Corporation and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts except as expressly set forth in this
Agreement.

i) No Right to Employment or Independent Contractor Status. Nothing
in this Agreement, nor the grant of the Option, shall confer upon the Optionee
any right to continue in the employ or as an independent contractor of the
Corporation or a subsidiary or affiliate or to be entitled to any remuneration
or benefits not set forth in this Agreement or interfere with or limit the right
of the Corporation or a subsidiary or affiliate to modify the terms of or
terminate the Optionee's employment or independent contractor status at any
time.

j) Notices. Notices required or permitted to be given under this
Agreement shall be sufficiently given if in writing and personally delivered to
the Optionee or sent by regular mail addressed (i) to the Optionee at the
Optionee's address as set forth in the books and records of the Corporation or
its subsidiaries or affiliates, or (ii) to the Corporation or the Committee at

93

the principal office of the Corporation clearly marked "Attention:
Compensation Committee."

k) Severability. In the event that any provision of this Agreement
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of this Agreement, and this Agreement shall
be construed and enforced as if the illegal or invalid provision had not been
included.

[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has personally
executed this Agreement.

Nyer Medical Group, Inc.

______________________________ By:___________________________________

SAMUEL NYER Karen Wright, Chief Financial Officer
Optionee's Address:
c/o Nyer Medical Group, Inc.
1292 Hammond Street
Bangor, Maine 04401

EXHIBIT A

[Date of Exercise]

[Corporation] [Address] [Address]
Attention: Compensation Committee

Re: Stock Option

Dear Sir:

I am the holder of a stock option granted to me by Nyer Medical Group,
Inc. (the "Corporation"), pursuant to a Stock Option Agreement dated as of
_________, to purchase ______________ shares of Common Stock of the
Corporation ("Shares"). I hereby exercise such option with respect to
___________ Shares, the total purchase price for which is $__________, and [I
enclose a certified, bank cashier's or other acceptable check payable to the
order of the Corporation in the amount of $_______, representing the total
purchase price for the Shares] [I hereby elect to pay the purchase price by
delivering to the Corporation _____ shares of Common Stock of the Corporation
having a fair market value equal to $___________ from the Shares I am
purchasing pursuant to the exercise of such option] [I hereby elect to pay the
purchase price by delivering to the Corporation [ ], having a fair market
value equal to $___________, as determined by the Committee.] [I enclose an
irrevocable direction to a securities broker to deliver sales or loan proceeds
to the Corporation in the amount of $_______, representing the total purchase
price for the Shares]. [I enclose the necessary promissory note, pledge
agreement and related documents pursuant to my loan from the Corporation in
the amount of $_____representing the total purchase price for the Shares]. The
certificate or certificates representing the Shares should be registered in my
name and should be forwarded to me at ________________________.

Please acknowledge receipt of the exercise of my stock option on the
attached copy of this letter.

Very truly yours,

[OPTIONEE]

RECEIPT ACKNOWLEDGED:

[CORPORATION]

By: __________________

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NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
2003 Annual Report on Form 10-K

Exhibit 10.10

STOCK OPTION AGREEMENT - Alliance Capital Resources, Inc.

STOCK OPTION AGREEMENT

This Stock Option Agreement (this "Agreement") is effective as of
December 6, 2002, between Nyer Medical Group, Inc. a Florida corporation (the
"Corporation"), and Alliance Capital Resources, Inc., a California corporation
(the "Optionee").

W I T N E S S E T H:

WHEREAS, in October, 1999, the Corporation entered into a business
development consulting agreement (the "Consulting Agreement") with the Optionee
which agreement included a provision (the "Provision") for granting the Optionee
an option for 150,000 shares of common stock of the Corporation (the "Option");

WHEREAS, in October, 2000, the Consulting Agreement was amended with
respect to its term and certain monetary compensation;

WHEREAS, in October, 2002, the Board of Directors of the Corporation (the
"Board") agreed to amend and restate the Provision to, among other things, amend
the exercise price with respect to the Option and certain provisions which are
customary to option agreements;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that the Provision is hereby amended and
restated as follows:

1. Grant of Option.

Pursuant to the Provision, in October, 1999, the Corporation granted to
the Optionee an option to purchase an aggregate of 150,000 shares (the "Shares")
of common stock, .0001(cent) par value, of the Corporation (the "Common Stock")
at a price $8.00 per Share with respect to 50,000 of the Shares, $9.00 per share
with respect to 50,000 of the Shares and $11.00 per share with respect to 50,000
of the Shares. The Corporation hereby confirms and ratifies such grant and also
hereby agrees that the exercise price with respect to each of the 150,000 Shares
subject to the Option is hereby amended to be $1.71 per Share. This Option was
not and is not intended to qualify as an "incentive stock option" under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.

2. Right to Exercise.

One Hundred (100%) percent of the Shares subject to the Option vested and
became exercisable in October, 1999.

3. No Transfer.

This Option may not be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except to a successor by operation
of law. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option not specifically permitted herein shall be null and
void and without effect.

4. Exercise Procedures.

a) Notice of Exercise. The Optionee or the Optionee's representative may
exercise this Option by giving written notice as set forth in Section 9j) hereof
in a manner substantially in the form annexed hereto as Exhibit A. The notice
shall specify the election to exercise this Option, the number of Shares with
respect to which this Option is being exercised and the form of payment (if more
than one form is available). The notice shall be signed by the person exercising
this Option. In the event that this Option is being exercised by the
representative of the Optionee, the notice shall be accompanied by proof
(satisfactory to the Committee (as defined below)) of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Corporation at the time of giving the notice, payment in a form
provided under Section 5 for the full amount of the exercise price applicable to
that portion of this Option being exercised. "Committee" means the committee
(comprised of at least two (2) members of the Board) appointed by the Board to
administer this Agreement, or, in the case that no such committee has been
appointed, the term "Committee" shall mean the Board.

96

b) Issuance of Shares. After receiving a proper notice of exercise, the
Corporation shall cause to be issued a certificate or certificates for the
Shares as to which this Option has been exercised, registered in the name of the
person exercising this Option and bearing such legends as may be appropriate.
The Corporation shall cause such certificate or certificates to be delivered to
or upon the order of the person exercising this Option.

c) Withholding Taxes. In the event that the Committee determines that the
Corporation is required to withhold foreign, federal, state or local tax as a
result of the exercise of this Option, the Optionee, as a condition to the
exercise of this Option, shall make arrangements satisfactory to the Committee
to enable the Corporation to satisfy all withholding requirements. Any Shares
purchased by exercising this Option shall also be issued subject to condition
that the Optionee shall make the arrangements satisfactory to the Committee to
enable the Corporation to satisfy any withholding requirements that may arise in
connection with the disposition of such Shares.

5. Payment for Stock.

Options may be exercised in whole or in part (but not for any fractional
shares of Common Stock). Shares of Common Stock purchased upon the exercise of
the Option shall be paid for at the time of purchase. Such payment may be made
as follows (or by any combination of the following), in the sole discretion of
the Optionee: (i) in United States currency by delivery of a certified check,
bank draft or postal or express money order payable to the order of the
Corporation, (ii) by surrender of a number of Mature Shares (as defined below)
of Common Stock held by the Optionee exercising the Option equal to the quotient
obtained by dividing (A) the aggregate exercise price payable with respect to
the Option then being exercised by (B) the Market Price (as defined below) on
the date of exercise, (iii) if the Corporation has established a program for the
cashless exercise of Options through a broker or other similar arrangements or
programs, then in accordance with the terms and conditions of such programs and
arrangements, (iv) other property acceptable to the Committee or (v) a loan of
money to an Optionee, the proceeds of which shall be used by the Optionee to
exercise all or a portion of the Option granted hereunder. If a loan is made by
the Corporation to the Optionee as contemplated in (v) above, the Optionee shall
execute a promissory note evidencing such loan and such note shall (I) provide
for full recourse to the maker, (II) bear interest at a rate no less than the
applicable Federal rate (within the meaning of Section 1274 of the Code), and
(III) contain other reasonable terms; provided, however, that the Optionee shall
not be permitted to choose a method of payment for the Shares which may violate
applicable law Upon receipt of a notice of exercise and payment in accordance
with the procedures set forth above, the Corporation or its agent shall deliver
to the persons exercising the Option (or his or her designee) a certificate for
such Shares. "Mature Shares" means shares of Common Stock owned by the Optionee
for a period of at least six consecutive months prior to the exercise of the
Option in question. "Market Price" means the per share value of the Common Stock
and shall be determined as follows: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or the
Nasdaq SmallCap Market (collectively, "Nasdaq") the Market Price on any day
shall be, in the sole discretion of the Committee, either (x) the average of the
high and low reported consolidated trading sales prices, or if no such sale is
made on such day, the average of the closing bid and asked prices reported on
the consolidated trading listing for such day or (y) the closing price reported
on the consolidated trading listing for such day; (ii) if the Common Stock is
quoted on the OTC Bulletin Board, the Market Price on any day shall be the
average of the representative bid and asked prices at the close of business for
such day; (iii) if the Common Stock is not listed on a national stock exchange

97

or quoted on Nasdaq or listed on the OTC Bulletin Board, the Market Price on any
day shall be the average of the high bid and low asked prices reported by the
National Quotation Bureau, LLC (the "NQB") for such day; or (iv) if the Common
Stock is not listed on a national stock exchange, quoted on Nasdaq, quoted on
the OTC Bulletin Board or reported on by the NQB, the Market Price on any day
shall be the fair market value of one share of Common Stock on such day as
determined by the Committee.

6. Term and Expiration.

a) Term of Option. This Option shall expire on the day before the tenth
anniversary of the date hereof, unless sooner terminated as provided herein, and
may be exercised during such term only in accordance with this Agreement.

b) Termination due to Cessation of Relationship. Upon the cessation of
Optionee's employment by, consultancy for or emeritus (or similar) status with
the Corporation, this Option, which is otherwise exercisable, shall be
exercisable by, as appropriate, the Optionee, or its personal representative,
for a period of two (2) years from the date of such cessation, but in no event
after the expiration of the exercise period of the Option.

7. Registration Rights.

a) Subject to the terms of this Agreement, the Corporation shall use its
best efforts to register the Common Stock underlying the Option (the "New
Stock") for issuance and resale under the Securities Act of 1933, as amended
(the "Securities Act"), on Form S-8 or any other Securities and Exchange
Commission ("SEC") form, if available, which the Corporation deems appropriate
(a "Registration Statement").

b) The Corporation will notify the Optionee at any time when a prospectus
relating to the New Stock covered by a Registration Statement of the Corporation
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Corporation will use its best
efforts to promptly amend or supplement the Registration Statement to correct
any such untrue statement or omission.

c) The Optionee hereby agrees to cooperate with the Corporation in connection
with the preparation and filing of any Registration Statement by the Corporation
with respect to the New Stock. In addition, the Optionee agrees that, upon
receipt of any notice from the Corporation of the happening of any event of the
kind described in Section 7b), the Optionee will immediately discontinue
disposition of the New Stock pursuant to the Registration Statement covering the
New Stock until the Optionee's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 7b) and, if so desired by the
Corporation, the Optionee shall deliver to the Corporation (at the expense of
the Corporation) or destroy (and deliver to the Corporation a certificate of
such destruction) all copies, other than the permanent file copies then in the
Optionee's possession, of the prospectus covering such New Stock current at the
time of receipt of such notice.

d) The Optionee hereby represents and warrants to the Corporation as follows:

i) The Optionee has been furnished with all materials relating to the
Corporation and its proposed activities which the Optionee has requested and
has been afforded the opportunity to obtain any additional information
necessary with respect to the New Stock.

ii) The Corporation has answered all inquiries made by the Optionee
concerning the Corporation and its proposed activities, or any other
matters relating to the Registration Statement and the proposed
operations of the Corporation.

iii) By reason of the Optionee's business or financial experience, the
Optionee is capable of evaluating the merits and risks of an investment
in the New Stock and of protecting its own interests in connection with
the transaction involving the Option and the New Stock. The Optionee has
sufficient available financial resources to provide adequately for his
current needs, including possible personal contingencies, and can bear
the economic risk of a complete loss of the New Stock without materially
affecting his financial condition.

98

iv) The Optionee has not been furnished any offering literature
other than any materials and/or information made available to the
Optionee by the Corporation as described in Section 7d)i) and the
Optionee has relied only on such materials and/or information.
Furthermore, other than as set forth in this Agreement, no
representations or warranties have been made to the Optionee by the
Corporation, or by its directors or officers or employees or other
agents with respect to the intended business of the Corporation, the
financial condition, prospects, profitability, operations and/or
potential of the Corporation, and/or the economic or any other aspects
of the consequences of an investment in the New Stock, and the
Optionee has not relied upon any information concerning the offering,
written or oral, other than information contained in this Agreement or
provided by the Corporation to the Optionee.

v) The Optionee is acquiring the Option and, upon the exercise of the
Option, will be acquiring the New Stock, for his own account, as
principal, for investment and not with a view to the resale or
distribution of all or any part of the Option or the New Stock.

8. Securities Law and Other Restrictions.

Regardless of whether the offering and sale of Shares under this Agreement
have been registered under the Securities Act or have been registered or
qualified under the securities laws of any state, the Committee at its
discretion, may impose restrictions upon the sale, pledge or other transfer of
such Shares (including, without limitation, the placement of appropriate legends
on stock certificates or a "lock-up agreement") if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with any agreement to which the Corporation is a
party, the Securities Act, the securities laws of any state or any other law or
with restrictions imposed on the Corporation by its underwriters, or otherwise.

9. Adjustment Upon Changes in Capitalization, Etc.

a) Certain Adjustments. Upon the occurrence of any of the events
described in this Section 9, the Optionee's rights with respect to the Option
shall be adjusted as and to the extent provided hereafter in this Section 9,
unless otherwise specifically provided in the written agreement between the
Optionee and the Corporation relating to such Option.

b) Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of the Option shall be appropriately increased or decreased
proportionately and appropriate adjustments shall be made in the exercise price
per share to reflect such subdivision, combination or stock dividend.
c) Consolidation, Acquisition or Merger. If the Corporation is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Corporation's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the obligations
of the Corporation hereunder (the "Successor Board"), shall, as to the
outstanding Option, either (i) make appropriate provision for the continuation
of such Option by substitution on an equitable basis for the shares then subject
to such Option for the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition; (ii) upon written
notice to the Optionee, provide that the Option must be exercised, to the extent
then exercisable (or in the discretion of the Committee or the Successor Board,
also provide that all unvested portion of the Option, if any, shall be, or
become at the time which the Committee shall determine, either immediately
exercisable or immediately terminate), within a specified number of days of the
date of such notice, at the end of which period the Option shall terminate; or
(iii) terminate the Option in exchange for a cash payment or other consideration
equal to the excess of the fair market value of the shares of Common Stock
subject to such Option (to the extent then exercisable, or in the discretion of
the Committee or the Successor Board, whether or not then exercisable) over the
exercise price thereof.

99

d) Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Corporation (other than a transaction described in
subsection 9c) above) pursuant to which securities of the Corporation or of
another corporation are issued with respect to the outstanding shares of Common
Stock, the Optionee upon exercising the Option shall be entitled to receive for
the purchase price paid upon such exercise, the securities he would have
received if he had exercised his Option immediately prior to such
recapitalization or reorganization.

e) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Corporation (other than in connection with a transaction
described in subsection 9c) above), each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Committee.

f) Issuances of Securities. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to the Option. No adjustments shall be made for dividends paid in cash
or in property other than securities of the Corporation.

g) Other Adjustments. If changes in the capitalization of the Corporation
shall occur other than those referred to above in this Section 9, the Committee
shall make such adjustments, if any, in the number of shares covered by the
Option and in the per share purchase price as the Committee in its discretion
may consider appropriate. The Committee or, if applicable, the Successor Board,
shall determine the specific adjustments to be made under this Section 9 and its
determination shall be conclusive.

10. Miscellaneous Provisions.

a) Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof.
This Agreement may not be amended except by a written instrument signed by both
parties hereto.

b) Choice of Law. To the extent not preempted by Federal law, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Florida.

c) Interpretations. The Committee shall have discretionary authority to
interpret the terms of this Agreement, to adopt and revise rules, regulations
and policies to administer this Agreement and to make any other factual
determinations, which it believes to be necessary or advisable for the
administration of this Agreement. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, the Optionee and all other interested persons.

d) Liability; Indemnification.

i) No member of the Board or the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to this Agreement.

ii) In addition to such other rights of indemnification as he or she may have
as a member of the Board, and with respect to administration of this Agreement,
each member of the Board and of the Committee shall be entitled without further
act on his or her part to advancement of expenses and indemnification from the
Corporation pursuant to Florida law, including to the full extent provided by
Section 607.0850 of the Florida Business Corporation Act (the "FBCA").The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Board or the Committee
and shall be in addition to all other rights to which such member of the Board
or the Committee would be entitled to as a matter of law, contract or otherwise.

100

e) Tax Withholding. The Corporation shall have the right to require the
Optionee or its beneficiary or legal representative to remit to the Corporation
an amount sufficient to satisfy Federal, state and local withholding tax
requirements, or to deduct from all payments under this Agreement amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
this Agreement are to be made to an Optionee in cash, if any, such payments
shall be net of any amounts sufficient to satisfy all Federal, state and local
withholding tax requirements. The Committee may, in its sole discretion, permit
the Optionee to satisfy its tax withholding obligations either by (i)
surrendering of Common Stock owned by the Optionee or (ii) having the
Corporation withhold from shares of Common Stock, or other compensation,
otherwise deliverable or payable to the Optionee. Shares of Common Stock
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for income tax purpose

f) Compliance with Section 16(b). In the case the Optionee is or may be
subject to Section 16 of the Securities Exchange Act of 1934 Act, as amended
(the "1934 Act"), it is the intent of the Corporation that this Agreement and
any award granted hereunder satisfy and be interpreted in a manner that
satisfies the applicable requirements of Rule 16b-3 so that the Optionee will be
entitled to the benefits of Rule 16b-3 or other exemptive Rules under Section 16
of the 1934 Act and will not be subjected to liability thereunder. If any
provision of this Agreement or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to the Optionee if the Optionee is or may be subject
to Section 16 of the 1934 Act. Neither this provision of the Agreement nor any
other provision of this Agreement shall be construed as to insure that the
Optionee has satisfied or will satisfy all the requirements of Section 16 of the
1934 Act and/or the Rules promulgated thereunder with respect to this Option or
the Common Stock underlying this Option.

g) Successors. The obligations of the Corporation under this Agreement
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation.

h) General Creditor Status. The Optionee shall have no right, title or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under this Agreement. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship between
the Corporation and the Optionee, or the beneficiary or legal representative of
the Optionee. To the extent that any person acquires a right to receive payments
from the Corporation under this Agreement, such right shall be no greater than
the right of an unsecured general creditor of the Corporation. All payments to
be made hereunder shall be paid from the general funds of the Corporation and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts except as expressly set forth in this
Agreement.

101

i) No Right to Employment or Independent Contractor Status. Nothing in this
Agreement, nor the grant of the Option, shall confer upon the Optionee any right
to continue in the employ or as an independent contractor of the Corporation or
a subsidiary or affiliate or to be entitled to any remuneration or benefits not
set forth in this Agreement or interfere with or limit the right of the
Corporation or a subsidiary or affiliate to modify the terms of or terminate the
Optionee's employment or independent contractor status at any time.

j) Notices. Notices required or permitted to be given under this Agreement
shall be sufficiently given if in writing and personally delivered to the
Optionee or sent by regular mail addressed (i) to the Optionee at the Optionee's
address as set forth in the books and records of the Corporation or its
subsidiaries or affiliates, or (ii) to the Corporation or the Committee at the
principal office of the Corporation clearly marked "Attention: Compensation
Committee."

k) Severability. In the event that any provision of this Agreement shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.

[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

102

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Optionee has
personally executed this Agreement.

Alliance Capital Resources, Inc. Nyer Medical Group, Inc.

By:_________________________ By:______________________________

John B. Sutton, Jr., President Karen Wright, Chief Financial Officer

Optionee's Address:
3027 S. Peck Avenue #5
San Pedro, California 90731

EXHIBIT A

[Date of Exercise]

[Corporation] [Address] [Address]
Attention: Compensation Committee

Re: Stock Option

Dear Sir:

I am the holder of a stock option granted to me by Nyer Medical Group,
Inc. the "Corporation"), pursuant to a Stock Option Agreement dated as of
_________, to purchase ______________ shares of Common Stock of the
Corporation ("Shares"). I hereby exercise such option with respect to
___________ Shares, the total purchase price for which is $__________, and [I
enclose a certified, bank cashier's or other acceptable check payable to the
order of the Corporation in the amount of $_______, representing the total
purchase price for the Shares] [I hereby elect to pay the purchase price by
delivering to the Corporation _____ shares of Common Stock of the Corporation
having a fair market value equal to $___________ from the Shares I am
purchasing pursuant to the exercise of such option] [I hereby elect to pay the
purchase price by delivering to the Corporation [ ], having a fair market
value equal to $___________, as determined by the Committee.] [I enclose an
irrevocable direction to a securities broker to deliver sales or loan proceeds
to the Corporation in the amount of $_______, representing the total purchase
price for the Shares]. [I enclose the necessary promissory note, pledge
agreement and related documents pursuant to my loan from the Corporation in
the amount of $_____representing the total purchase price for the Shares]. The
certificate or certificates representing the Shares should be registered in my
name and should be forwarded to me at ________________________.

Please acknowledge receipt of the exercise of my stock option on the
attached copy of this letter.

Very truly yours,

[OPTIONEE]

RECEIPT ACKNOWLEDGED:

[CORPORATION]

By: ________________________________

103

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES

2003 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%

104

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES

2003 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) and the
Registration Statement of Nyer Medical Group, Inc. (Form S-3 No. 333-106075)
of our report dated September 12, 2003 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, 2003.

/s/ Sweeney, Gates & Co.

Fort Lauderdale, Florida
September 29, 2003

105

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-
OXLEY ACT OF 2002

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 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 report;

3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: September 29, 2003

/s/ Samuel Nyer

Samuel Nyer

President
(Principal Executive Officer)

106

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-
OXLEY ACT OF 2002

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 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 report;

3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.

Date: September 29, 2003

/s/ Karen L. Wright

Karen L. Wright

Vice President - Finance
(Principal Financial and Accounting Officer)

107

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES

2003 Annual Report on Form 10-K

Exhibit 32.1

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, 2003, 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
September 29, 2003

108

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES

2003 Annual Report on Form 10-K

Exhibit 32.2

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, 2003, 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
September 29, 2003

109