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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2004
Commission File Number 000-2017
NYER MEDICAL GROUP, INC.
(Exact name of registrant as specified 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)
(207) 942-5273
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Exchange
Title of Each Class on which registered
None None
Check whether the registrant has (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past twelve
months (or for such shorter periods 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 .
------
As of November 15, 2004 there were 3,784,962 shares of common stock
outstanding, par value $.0001 per share.
1
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
INDEX
Page No.
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets, September 30, 2004
and June 30, 2004 4
Consolidated Statements of Operations, Three Months
Ended September 30, 2004 and September 30, 2003 6
Consolidated Statements of Cash Flows, Three Months
Ended September 30, 2004 and September 30, 2003 7
Selected Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
Item 4. Controls and Procedures 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 20
Item 3. Defaults upon Senior Securities 21
Item 4. Submissions of Matters to Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22
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 by Principal Executive Officer and
Principal Financial and Accounting Officer 23
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 by
President, Chief Executive Officer and Chief Financial Officer 24
2
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
Certain statements contained in this report are forward-looking in nature.
These statements are generally identified by the inclusion of phrases such as
"we expect", "we anticipate", "we believe", "we estimate" and other phrases of
similar meaning. Whether such statements ultimately prove to be accurate
depends upon a variety of factors that may affect our business and operations.
Many of these factors are described in our most recent Annual Report on Form
10-K as filed with Securities and Exchange Commission.
We make available on our internet website free of charge our annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to such reports as soon as practicable after we electronically file
such reports with the SEC. Our website address is www.nyermedicalgroup.com.
The information contained in our website is not incorporated by reference in
this Report.
3
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
PART I - Financial Information
Item 1. Financial Statements:
NYER MEDICAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
2004 2004
---- ----
(Unaudited)
Current assets:
Cash $ 1,988,194 $ 1,270,082
Accounts receivable, less allowance
for doubtful accounts of $488,000
at September 30, 2004 and $461,000
at June 30, 2004 3,868,271 4,228,977
Inventories 5,706,782 5,674,550
Prepaid expenses and other current
assets 207,007 349,379
Deferred tax asset 100,000 151,000
Assets to be disposed of from
discontinued operations 112,471 160,634
----------- -----------
Total current assets 11,982,725 11,834,622
----------- -----------
Property, plant and equipment, net
of accumulated depreciation 1,451,818 1,364,776
----------- -----------
Goodwill 104,463 104,463
Other intangible assets 519,771 549,073
----------- -----------
624,234 653,536
----------- -----------
Total assets $14,058,777 $13,852,934
=========== ===========
See accompanying notes to consolidated financial statements.
4
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, June 30,
2004 2004
---- ----
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 203,446 $ 213,523
Accounts payable 4,184,720 3,819,088
Accrued payroll and related taxes 383,552 424,115
Accrued expenses and other liabilities 181,850 306,214
Liabilities to be disposed of from
discontinued operations 505,173 555,556
----------- -----------
Total current liabilities 5,458,741 5,318,496
----------- -----------
Long-term debt, net of current
portion 173,848 210,119
----------- -----------
Minority interest 1,470,395 1,432,576
----------- -----------
Shareholders' equity:
Preferred stock 1 1
Common stock 379 379
Additional paid-in capital 17,691,972 17,691,972
Accumulated deficit (10,736,559) (10,800,609)
----------- -----------
Total shareholders'
equity 6,955,793 6,891,743
----------- -----------
Total liabilities and
shareholders' equity $14,058,777 $13,852,934
=========== ===========
See accompanying notes to consolidated financial statements.
5
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months ended
September 30, September 30,
2004 2003
---- ----
Net sales $15,188,611 $15,241,923
Cost and expenses:
Cost of goods sold 11,936,940 11,851,428
Selling and retail 2,321,357 1,993,916
Warehouse and delivery 248,612 235,088
Administrative 512,331 726,346
----------- -----------
15,019,240 14,806,778
----------- -----------
Operating income 169,371 435,145
Other income (expense):
Interest expense (6,262) (11,054)
Interest income 10,813 12,443
Other (4,053) (3,639)
----------- -----------
Total other income (loss) 498 (2,250)
----------- -----------
Income from continuing operations
before income taxes 169,869 432,895
Provision for income taxes (68,000) (170,000)
Minority interest, net of
income taxes expense (37,819) (42,973)
----------- -----------
Income from continuing
operations 64,050 219,922
Discontinued operations - (37,461)
----------- -----------
Net income $ 64,050 $ 182,461
=========== ===========
Basic and diluted (loss)
income per share:
Continuing operations $ .02 $ .06
Discontinued operations - (.01)
----------- -----------
Basic and diluted income
per share $ .02 $ .05
=========== ===========
Weighted average common
shares outstanding, basic 3,784,962 3,783,862
=========== ===========
Weighted average common
shares outstanding, diluted 3,826,862 3,792,674
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
6
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (unaudited)
For the three months ended
September 30, September 30,
2004 2003
---- ----
Cash flows from operating activities:
Net income from continuing operations $ 64,050 $ 219,922
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 105,833 88,113
Amortization 29,302 29,302
Deferred income tax 51,000 185,000
Minority interest 37,819 42,973
Changes in working capital 671,551 181,180
------------ ------------
Net cash flows provided by operating
activities from continuing operations 959,555 746,490
Net cash flows used in discontinued
activities (2,220) (783,521)
------------ ------------
Net cash flows provided by (used in)
operating activities 957,335 (37,031)
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and
equipment, net (192,875) (47,343)
------------ ------------
Net cash flows used in investing
activities (192,875) (47,343)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 17,075 -
Payments on long-term debt (63,423) (70,705)
------------ ------------
Net cash flows used in financing
activities (46,348) (70,705)
------------ ------------
Net increase (decrease) in cash 718,112 (155,079)
Cash at beginning of period 1,270,082 1,417,744
------------ ------------
Cash at end of period $ 1,988,194 $ 1,262,665
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
continued
7
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (unaudited), continued
For the three months ended
September 30, September 30,
2004 2003
---- ----
Changes in working capital:
Accounts receivable $ 360,706 $ (117,189)
Inventories (32,232) (80,878)
Prepaid expenses and other current
assets 142,372 (66,544)
Accounts payable 365,632 10,162
Accrued payroll and related taxes (40,563) (136,158)
Accrued expenses and other liabilities (124,364) 571,787
------------ ------------
Net change $ 671,551 $ 181,180
============ ============
Supplemental disclosures of cash flow information:
For the three months ended
September 30, September 30,
2004 2003
---- ----
Cash paid during the period for:
Interest $ 7,436 $ 8,152
============ ============
Income taxes $ 50,000 $ 105,250
============ ============
8
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of Presentation: The consolidated financial statements included
herein have been prepared by the Company, without audit, in accordance with
accounting principals generally accepted in the United States of America
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principals
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not to be
misleading. In the opinion of management, the amounts shown reflect all
adjustments necessary to present fairly the financial position and results of
operations for the periods presented. All such adjustments are of a normal
recurring nature.
It is suggested that the financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K for the year ended June 30, 2004.
2. Going Concern and Management's Plans: The Company has guaranteed certain
obligations from its discontinued operations, and the Company had a loss in
its medical and corporate segments in recent years and has a cash flow
deficiency in the segments. The continued existence of the Company and
specifically, the medical and corporate segments, is dependent upon the medical
segment obtaining profitability, up streaming funds from its Pharmacy segment
or raising capital. The Company's Pharmacy subsidiary has an operating
agreement with the Parent which includes cash management. The minority
shareholders have declined to provide the Parent with sufficient cash to
sustain its present operations and fund the medical segment, if necessary.
These factors raise substantial doubt about the Company's ability to continue
as a going concern.
In order to increase working capital in the medical and corporate
segments, a Company subsidiary obtained a $300,000 line of credit in October
2004. The line of credit is collateralized by property owned by the subsidiary
and is guaranteed by the Company. The Company cannot draw on the line without
approval from a committee of the board established for this purpose. As of the
date of this report, the line of credit has not been used.
Management's plan to return to profitability includes: 1) revamping
management at the corporate and medical segments, 2) instituting cost cutting
measures to reduce and control general and administrative costs; and 3)
consolidating certain entities to reduce costs.
There is no assurance that management's business plan will be successful
or that the Company will achieve profitability. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
9
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Goodwill and Other Intangible Assets:
Following is a summary of the Company's amortizable intangible assets
relating to the Pharmacy segment at:
September 30, 2004 Amortization Accumulated
Period (years) Cost Amortization Net
------------- ---- ------------ ---
Prescription lists 15 $ 528,000 $197,744 $330,256
Non-compete agreements 3-5 750,100 560,585 189,515
---------- -------- --------
Totals $1,278,100 $758,329 $519,771
========== ======== ========
June 30, 2004 Amortization Accumulated
Period (years) Cost Amortization Net
------------- ---- ------------ ---
Prescription lists 15 $ 528,000 $189,050 $338,950
Non-compete agreements 3-5 750,100 539,977 210,123
---------- -------- --------
Totals $1,278,100 $729,027 $549,073
========== ======== ========
Aggregate amortization expense for the three months ended September 30,
2004 was $29,302.
Based on the balance of intangible assets at September 30, 2004, the
annual amortization expense for each of the succeeding five years is estimated
to be as follows:
Year Amortization amount
---- -------------------
2005 $100,000
2006 83,000
2007 83,000
2008 71,000
2009 35,000
4. Discontinued operations:
The following table shows assets and liabilities of discontinued
operations (fire and police segment) at September 30:
2004 2003
---- ----
Accounts receivable $ - $153,403
Inventory 37,293 305,677
Prepaid expenses and other
current assets 75,178 6,471
Property, plant and equipment,
net of accumulated depreciation - 32,769
-------- --------
Total assets $112,471 $498,320
======== ========
10
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. Discontinued operations: continued,
2004 2003
---- ----
Note payable to related party $157,543 $172,263
Accounts payable 278,021 380,715
Accrued expenses and other
liabilities 69,609 20,185
-------- --------
Total liabilities $505,173 $573,163
======== ========
The note payable to related party relates to the purchase of a
discontinued subsidiary's inventory. There is a continuing dispute with
the note holder as to the amount owed. The above balance is the Company's
estimate which includes unpaid principal and interest at 7% and payments
made on behalf of the note holder. The note holder has demanded payment
of $233,157, plus accrued interest. The Company intends to attempt settlement
or litigate this matter.
5. Options and Warrants:
Pro forma information, assuming the Company had accounted for its employee
and director stock options granted under the fair value method prescribed by
SFAS No. 123 is presented below. The fair value of each option grant is
estimated on the date of each grant using the Black-Scholes option-pricing model
and amortized ratably over the option's vesting periods. There were no stock
options granted for the three months ended September 30, 2004 and 2003.
Three months ended
September
2004 2003
---- ----
Net income, as reported: $ 64,050 $ 182,461
Add: Total stock-based
compensation expense determined
under fair value based method
for all awards, net of taxes (4,496) (11,415)
--------- ---------
Pro forma net income $ 59,554 $ 171,046
========= =========
Basic and diluted income
per share:
As reported $ .02 $ .05
===== =====
Pro forma $ .02 $ .05
===== =====
11
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
6. 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
at September 30:
2004 2003
---- ----
Weighted average number of common
shares used in basic EPS 3,784,962 3,783,862
Stock options 41,900 8,812
--------- ---------
Weighted average number of common
shares used in diluted EPS 3,826,862 3,792,674
========= =========
Certain options were not included in the computation of diluted earnings
per share because the exercise prices of these options were greater than the
average market price of the common shares and the options were therefore
anti-dilutive.
7. Contingencies:
Legal proceedings
The Company and its subsidiaries are subject to various legal proceedings
and threatened legal proceedings from time to time as part of their businesses.
Currently, the Company and certain subsidiaries have been threatened with
legal proceedings. The Company believes an adverse outcome of any proceedings,
individually or in the aggregate, could have a material effect on the
businesses, financial condition and results of operations. Any potential
litigation, regardless of its merits, could result in costs to the Company
and its subsidiaries and divert management's attention from operations.
8. Business Segments:
The Company had two business segments for three months ended September
30, 2004 and 2003: (1) pharmacies and (2) wholesale and retail sales of
surgical, medical equipment and supplies ("medical"). 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.
2004 2003
---- ----
Net Sales
Pharmacies $12,989,359 $13,089,377
Medical 2,199,252 2,152,546
----------- -----------
$15,188,611 $15,241,923
=========== ===========
12
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Business Segments: continued,
2004 2003
---- ----
Operating income (loss)
Pharmacies $ 290,517 $ 388,307
Medical (25,643) 147,873
Corporate (95,503) (101,035)
----------- -----------
$ 169,371 $ 435,145
=========== ===========
2004 2003
---- ----
Identifiable assets
Pharmacies $11,810,014 $10,590,447
Medical 1,858,797 2,530,451
Corporate 389,966 732,036
----------- -----------
$14,058,777 $13,852,934
=========== ===========
2004 2003
---- ----
Capital expenditures
Pharmacies $ 173,296 $ 59,010
Medical 26,808 3,285
----------- -----------
$ 200,104 $ 62,295
=========== ===========
2004 2003
---- ----
Depreciation and Amortization
Pharmacies $ 112,115 $ 96,384
Medical 21,908 20,829
Corporate 1,112 202
----------- -----------
$ 135,135 $ 117,415
=========== ===========
2004 2003
---- ----
Interest expense
Pharmacies $ 4,264 $ 7,693
Medical 1,998 3,361
----------- -----------
$ 6,262 $ 11,054
=========== ===========
2004 2003
---- ----
Interest income
Pharmacies $ 4,966 $ 6,838
Medical 5,847 4,710
Corporate - 895
----------- -----------
$ 10,813 $ 12,443
=========== ===========
13
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations:
The following discussion provides information with respect to our results
of operations, liquidity, and capital resources on a comparative basis for the
three months ended September 30, 2004 and 2003.
Net Sales. Total sales for the three months ended September 30, 2004 decreased
by $53,312 to $15,188,611 from $15,241,923 for the three months ended September
30, 2003.
The following table shows sales by business segment for the three months
ended September 30:
Business Segment 2004 2003 % increase
(decrease)
Pharmacies $12,989,359 $13,089,377 (1.0)
Medical 2,199,252 2,152,546 2.2
----------- -----------
Total for business segments $15,188,611 $15,241,923 -
=========== ===========
The pharmacies segment's sales decreased $100,018 to $12,989,359 or 1.0%
for the three months ended September 30, 2004 as compared to $13,089,377 for
the three months ended September 30, 2003. The main reason for the decrease
of approximately $500,000 was due to a conversion of a contract with a
federally qualified health center from sales of the pharmacy's inventory and
receipt of a dispensing fee to sales of the health center's inventory and
receipt of a dispensing fee. Management does not expect this trend to continue
as the population is aging, increased Medicare prescription benefits and more
prescription drugs are coming to market point to increasing the prescription
drug market.
The medical segment's sales increased $46,706 for the three months ended
September 30, 2004 to $2,199,252 or 2.2% as compared to $2,152,546 for the
three months ended September 30, 2003. The increase was due to the Internet's
increase of approximately $221,000. The medical supply companies' sales
decreased $181,000 for the same period in 2003. $96,500 of this amount was
for a one time bulk inventory sale. Additionally, the Florida company's sales
declined approximately $39,000 in September of 2004 due to unusual weather
conditions in Florida. The segment continues to experience increased pressure
from larger competitors who can offer lower prices.
Gross Profit Margins. The overall gross profit margins were 21.4% for the
three months ended September 30, 2004 as compared to 22.2% for the same
period in 2003.
14
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued,
Results of Operations: continued,
Gross Profit Margins: continued,
The following is a table of gross profit margin percentages by business
segment for the three months ended September 30:
Business Segment 2004 2003
---- ----
Pharmacies 20.4 20.0
Medical 27.6 36.1
The pharmacies segment's gross profit margins increased .4% to 20.4% for
the three months ended September 30, 2004 as compared to 20.0% for the three
months ended September 30, 2003. The increase was due to larger volume
discounts from suppliers.
The medical segment's gross profit margins decreased 8.5% to 27.6%
for the three months ended September 30, 2004 as compared to 36.1% for the
same period in 2003. This decrease was the result of a $96,500 sale for bulk
inventory recorded at no cost at September 30, 2003. The impact on the gross
profit margin of this sale was approximately 5%. The cost of the merchandise
was allocated to previously sold inventory. This segment continues to
experience pressure on its gross profit margins as described in the net sales
section above.
Selling, General and Administrative Expenses. Consolidated selling, general
and administrative expenses increased 4.3% for the three months ended September
30, 2004 to $3,082,300 as compared to $2,955,350 for the three months ended
September 30, 2003.
The following table shows the breakdown by business segment for the three
months ended September 30:
Business Segment 2004 2003 % Increase
(decrease)
Pharmacies $ 2,354,199 $ 2,225,324 5.8
Medical 632,598 628,992 1.0
Corporate 95,503 101,034 (5.5)
----------- -----------
$ 3,082,300 $ 2,955,350 4.3
=========== ===========
The pharmacies' selling, general and administrative expenses increased
$128,875 to $2,354,199 or 5.8% for the three months ended September 30, 2004
as compared to $2,225,324 for the three months ended September 30, 2003. The
increases came from increased labor costs of approximately $139,000, increased
rent of $15,300, decreased advertising by approximately $76,500, increased
depreciation of $15,700 and normal increases in overhead expenses.
15
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued,
Results of Operations: continued,
Selling, General and Administrative Expenses: continued,
The medical segment had a slight increase in its selling, general and
administrative expenses of $3,606 or 1.0% to $632,598 for the three months
ended September 30, 2004 as compared to $628,992 for the three months ended
September 30, 2003.
The Corporate segment's overhead decreased by $5,531 or 5.5% to $95,503
for the three months ended September 30, 2004 as compared to $101,034 for the
three months ended September 30, 2003. This was mainly due to a decrease in
public relation fees.
Interest Income. Interest income decreased by $1,630 or 13.1% to $10,813 for
the three months ended September 30, 2004 as compared to $12,443 for the three
months ended September 30, 2003.
The following table shows the breakdown of interest income by business
segment for the three months ended September 30:
Business Segment 2004 2003 % Decrease
---- ---- ----------
Pharmacies $ 4,966 $ 6,838 (27.4)
Medical 5,847 4,710 24.1
Corporate - 895 (100.0)
----------- -----------
$ 10,813 $ 12,443 (13.1)
=========== ===========
The pharmacies' interest income decreased by $1,872 or 27.4% to $4,966 for
the three months ended September 30, 2004 as compared to $6,838 for the three
months ended September 30, 2003, due to decreased accounts receivable interest.
The medical segment's interest income increased by $1,094 or 24.1% to
$5,847 for the three months ended September 30, 2004 as compared to $4,710 for
the three months ended September 30, 2003, due to increased accounts receivable
interest.
Corporate interest income decreased by $895 or 100% to $0 for the three
months ended September 30, 2004 as compared to $895 for the three months ended
September 30, 2003 due to a lower cash balances.
Interest Expense. Interest expense decreased by $4,792 or 43.4% to $6,262 for
the three months ended September 30, 2004 as compared to $11,054 for the three
months ended September 30, 2003.
16
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued,
Results of Operations: continued,
Interest Expense: continued,
The following table shows the breakdown of interest expense by business
segment for the three months ended September 30:
Business Segment 2004 2003 % Decrease
---- ---- ----------
Pharmacies $ 4,264 $ 7,693 (44.6)
Medical 1,998 3,361 (40.6)
----------- -----------
$ 6,262 $ 11,054 (43.4)
=========== ===========
The pharmacies' interest expense decreased by $3,429 or 44.6% to $4,264
for the three months ended September 30, 2004 as compared to $7,693 for the
three months ended September 30, 2003 due to pay down on its debt.
The medical segment's interest expense decreased by $1,363 or 40.6% to
$1,998 for the three months ended September 30, 2004 as compared to $3,361 for
the three months ended September 30, 2003 due to pay down on its building
mortgage.
Minority Interest. Minority interest for the pharmacy segment decreased by
$5,154 or 12.0% to $37,819 for the three months ended September 30, 2004 as
compared to $42,973 for the three months ended September 30, 2003.
Income Tax Expense. Income tax expense decreased by $102,000 or 60.0% to
$68,000 for the three months ended September 30, 2004 as compared to $170,000
for the three months ended September 30, 2003.
The following table shows the breakdown of income tax expense by business
segment for the three months ended September 30:
Business Segment 2004 2003 % Decrease
---- ---- ----------
Pharmacies $ 68,000 $ 138,000 (50.7)
Medical - 32,000 (100.0)
----------- -----------
$ 68,000 $ 170,000 (60.0)
=========== ===========
Liquidity and Capital Resources
Net cash flows provided by operating activities was $957,335 for the three
months ended September 30, 2004 as compared to net cash flows used in operating
activities of $37,031 for the three months ended September 30, 2003. The
primary uses of cash were to fund operations for our medical and corporate
operations and the pharmacies' inventory.
17
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued,
Results of Operations: continued,
Liquidity and Capital Resources: continued,
Net cash flows used in investing activities was $192,875 for the three
months ended September 30, 2004 as compared $47,343 for the three months ended
September 30, 2003.
Net cash flows used in financing activities was $46,348 for three months
ended September 30, 2004 as compared to $70,705 for the three months ended
September 30, 2003.
At September 30, 2004, cash on a consolidated basis was $1,988,194 as
compared to $1,270,082 at June 30, 2004. Approximately $93,900 was held by the
parent company and approximately $1,794,000 was held by the pharmacies.
Because the pharmacies are not a wholly-owned subsidiary of the Company and the
Company does not have operating control, it cannot unilaterally cause the
pharmacies to loan funds to the Company if the Company should require a loan.
Approximately $342,000 is owed to the Company by the pharmacies. The
Company has structured a repayment schedule.
Our primary source of liquidity is cash provided from operations. Our
principal uses of cash are: operations, capital expenditures and repayment of
debt.
In order to increase working capital in the medical and corporate
segments, a Company subsidiary obtained a $300,000 line of credit in October
2004. The line of credit is collateralized by property owned by the subsidiary
and is guaranteed by the Company. The Company cannot draw on the line without
approval from a committee of the board established for this purpose. As of the
date of this report, the line of credit has not been used.
Management's plan to return to profitability includes: 1) revamping manage-
ment at the corporate and medical segments, 2) instituting cost cutting measures
to reduce and control general and administrative costs; and 3) consolidating
certain entities to reduce costs. There is no assurance that management's
business plan will be successful or that the Company will achieve profitability.
Management believes that with implementation of the above cost cutting
measures will provide the Company with adequate cash resources to fund its
current operating needs for the next 12 months.
At September 30, 2004, accounts receivable was $3,868,271 as compared to
$4,228,977 at June 30, 2004. Accounts receivable has decreased due an
increased allowance for doubtful accounts of $27,000, and the pharmacies'
revenue recognition of approximately $500,000 in sales.
At September 30, 2004, debt was $377,294 as compared to $423,642 at June
30, 2004. Our debt has decreased due to pay down on existing debt. The
Company purchased a delivery vehicle for $17,075.
18
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk.
Cash: Our cash is either in checking accounts or money market accounts.
Investment Securities:
Cash as of September 30, 2004 was $1,988,194.
** - The Company had approximately $55,000 in a money market account at
September 30, 2004. The interest yield rate was less than 1%.
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 September 30, 2004.
We do not have any material risk with respect to changes in foreign
currency exchange rates, commodities prices or interest rates. We do not
believe that we have any other relevant market risk with respect to the
categories intended to be discussed in this item of this report.
Item 4. 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 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 are 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.
19
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
PART II - Other Information
Item 1. Legal Proceedings
We are not a party to any material litigation.
However, recently, the Company, Eaton, Anton and Conway have had
litigation threatened against them with respect to separate matters (i.e.,
the Company: a contract claim; Eaton: primarily statutory claims; Anton and
Conway: contract claims). Such entities have not yet determined the
likelihood of success of these potential litigation matters against the Company
and/or its subsidiaries. With respect to the threatened litigation against
Eaton, the potential dollar amount of damages is not readily determinable. The
Company does not believe that the dollar amount of possible damages with
respect to any one of the litigation matters threatened against the Company,
Anton and Conway would exceed ten percent of the current assets of the Company
and its subsidiaries on a consolidated basis. If any of these threatened
litigation matters were decided in a manner adverse to the Company or its
subsidiaries, the result would likely be materially adverse to the Company and
its subsidiaries. For further information with respect to this paragraph,
please see Item 7 (Contingencies) in the Selected Notes to Consolidated
Financial Statements.
It should be noted that the immediately preceding paragraph describes
litigation which has been threatened but for which no complaint has been
filed against the Company or any of its subsidiaries. It is possible that
no suit will be filed with respect to these matters.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The foregoing equity repurchases by the Company during the fiscal quarter
ended September 30, 2004 have been reflected as follows:
ISSUER PURCHASES OF EQUITY SHARES
(d)Maximum Number
(or) Approximate
c) Total Number of Dollar Value)of
Shares Purchased as Shares that May
Part of Publicly Yet Be Purchased
(a)Total Number of (b)Average Price Announced Plans or Under the Plans or
Shares Purchased Paid Per Share Programs Programs
July 1 - 31 0 $ - 0 148,000
August 1 - 31 0 $ - 0 148,000
September 1 - 30 0 $ - 0 148,000
On May 12, 2003, the Company announced that the Board of Directors of the
Company had authorized the repurchase of up to 150,000 shares of the Company's
outstanding common stock from time-to-time in open market transactions at
prevailing market prices. There was no expiration date established for this
repurchase plan. As of the date of this report, the plan has not been
terminated.
20
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
PART II
Item 3. Defaults upon Senior Securities None
Item 4. Submissions of Matters to Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits
Exhibit 3.1 Fourth Amendment to Articles of Incorporation of Nyer
Medical Group, Inc. (contained in Form 10-K filed
October 2004).
Exhibit 10.1 Agreement, dated September 7, 2004, between KeyBank, NA
and ADCO Surgical Supply, Inc. (contained in Form 10-K
filed October 2004).
Exhibit 10.2 2004 Addendum to Agreement between Alliance Capital
Resources, Inc. and Nyer Medical Group, Inc. (not
written) (contained in Form 10-K filed October 2004).
Exhibit 10.3 Employment Agreement between Samuel Nyer and Nyer
Medical Group, Inc. (not written) (contained in Form
10-K filed October 2004).
Exhibit 10.4 Employment Agreement between Karen Wright and Nyer
Medical Group, Inc. (not written) (contained in Form
10-K filed October 2004).
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 by Principal Executive
Officer and Principal Financial and Accounting Officer.
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 by President, Chief Executive Officer and
Chief Financial Officer.
21
FORM 10-Q NYER MEDICAL GROUP, INC. 000-20175 SEPTEMBER 30, 2004
NYER MEDICAL GROUP, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NYER MEDICAL GROUP, INC.
Registrant
Date: November 15, 2004 By:/s/ Karen L. Wright
Karen L. Wright, President,
Principal Executive Officer,
Chief Executive Officer,
Principal Financial and Accounting
Officer and Chief Financial
Officer
22
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, Karen L. Wright, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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: November 15, 2004
/s/ Karen L. Wright
Karen L. Wright
President
(Principal Executive Officer)
Vice President - Finance
(Principal Financial and Accounting Officer)
23
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 Quarterly Report of Nyer Medical Group, Inc. (the
"Company") on Form 10-Q for the quarter ended September 30, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Karen L. Wright, President, Chief Executive Officer and 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.
Date: November 15, 2004
/s/ Karen L. Wright
Karen L. Wright,
President, Chief Executive Officer
and Chief Financial Officer
24