Nyer Medical Group Inc. (NYER) filed Quarterly Report for the period ended 2009-09-30.
NYER MED GROUP is a holding company with various interests in the medical products business. Through their ADCO Surgical Supply, Inc. and ADCO South Medical Supplies, Inc. subsidiaries, they act as a distributor of home health, medical, surgical and laboratory supplies and equipment. Through their Anton Investments,Inc. and Conway Associates, Inc. subsidiaries, they act as a distributor offire, police and rescue equipment and supplies in the New England area. In addition, they operate the Eaton Apothecary chain of pharmacies operating inthe greater Boston area. Nyer Medical Group Inc. has a market cap of $7.24 million; its shares were traded at around $1.82 with and P/S ratio of 0.1.
Highlight of Business Operations:
The parties have agreed to indemnify each other against certain losses, including losses for breaches of representations, warranties, and covenants. Each of DAW s and Nyer s indemnification obligations begin at an aggregate of $50,000 and are limited to a total of $1,200,000 or, with respect to the inaccuracy of certain fundamental representations, $4,000,000. Further, DAW s and Nyer s indemnification obligations terminate 90 days following the closing date, with certain exceptions, including an extension of the indemnification period for up to 12 months for claims related to certain representations and three years for claims related to noncompetition covenants. Walgreens agrees to indemnify DAW and Nyer for its breach of the WAG Agreement for a period of 12 months, except in certain circumstances set forth in the WAG Agreement; and its indemnification obligations are for an unlimited amount. DAW, Nyer, and Walgreens can terminate the WAG Agreement in certain specified instances, as provided in the WAG Agreement. If the closing does not occur and Nyer or DAW enters into an alternative transaction under certain conditions specified in the WAG Agreement, DAW would owe to Walgreens a breakup fee in the amount of $300,000 and reimbursement of actual out-of-pocket expenses in an amount up to $200,000.
Cost of sales increased $710,215 to $13,684,255 or 5.5% for the three months ended September 30, 2009, as compared to $12,974,040 for the three months ended September 30, 2008, due to increased sales. Cost of goods sold includes the following: the cost of inventory sold during the period, net of related vendor rebates, allowances and purchase discounts, costs incurred to return merchandise to vendors, inventory shrinkage costs, and inbound freight charges.
SG&A increased $1,161,766 to $5, 534,771 or 26.6% for the three months ended September 30, 2009, as compared to $4,373,005 for the three months ended September 30, 2008. The increase was primarily due to increases in payroll costs of approximately $822,000 and increases in professional fees of approximately $324,000. The increase in payroll costs was primarily due to approximately $440,000 of salaries related to the newly opened locations plus approximately $382,000 at stores open more than one year and is predominately the result of market pressures on salary and benefit packages for pharmacists. The increase in the professional fees is due to the costs incurred with the WAG Agreement and DAW Stock Agreement.
Income taxes. We recorded an income tax benefit of $114,814 from continuing operations for the three months ended September 30, 2009, primarily due to the losses from operations and recorded income tax expense of $262,814 due to the gain on the sale of the ADCO building. We recorded income tax expense of $49,504 from continuing operations for the three months ended September 30, 2008, primarily due to the income from operations and recorded income tax benefit of $31,465 from discontinued operations.
On September 21, 2009, ADCO sold its building in Bangor, Maine, to Dovesco, LLC, for $830,000 and recognized a gain of $657,036 (previously preliminarily reported as $519,199).
Net cash provided by operating activities from continuing operations. Net cash provided by operating activities from continuing operations was $793,358 for the three months ended September 30, 2009, and consisted of our net loss of $172,688, adjusted for non-cash items of $147,503 (including depreciation of $121,486, amortization of $21,955, and stock-based compensation expenses of $4,062), and net cash provided by changes in working capital of $818,543. The net cash provided by changes in working capital was principally the result of decreases in inventories and prepaid expenses and increases in accounts payable and other accrued expenses and other current liabilities, partially offset by an increase in accounts receivable. The increase in accounts receivable was due to the increase in sales.
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