UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q




x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended December 31, 2009





OR





o
            TRANSITION REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from ________________________________ to
___________________________





Commission
File Number          000-20175





NYER MEDICAL GROUP,
INC.


(Exact
Name of Registrant as Specified in Its Charter)





Florida
                            
                            01-0469607(State
      or Other Jurisdiction of Incorporation
                            
                            (I.R.S.
      Employer Identification No.)or
      Organization)13 Water Street, Holliston, Massachusetts
                            
                            01746(Address
      of Principal Executive Offices)
                            
                            (Zip
      Code)





(508)
429-8506


(Registrant’s
Telephone Number, Including Area Code)





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 o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).      
  Yes o No   o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x


(do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o No x




The
number of the registrant’s shares of common stock outstanding as of February 12,
2010:   3,978,199.








INDEX





Page No.PART
      I – FINANCIAL INFORMATIONItem
      1.
                  Financial
      Statements
                  3Consolidated
      Balance Sheets (unaudited) as of December 31, 2009, and June 30,
      2009
                  3Consolidated
      Statements of Operations (unaudited) for the three and six months ended
      December 31, 2009 and 2008
                  4Consolidated
      Statements of Cash Flows (unaudited) for the three and six months ended
      December 31, 2009 and 2008
                  5Selected
      Notes to Consolidated Financial Statements (unaudited)
                  6Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  13Item
      4T.
                  Controls
      and Procedures
                  17PART
      II – OTHER INFORMATIONItem
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  18Item
      6.
                  Exhibits
                  18Signatures
                  19


2





PART
I—Financial Information


Item
1.  Financial Statements





NYER
MEDICAL GROUP, INC.


Consolidated
Balance Sheets (unaudited)





December 31
                                        
                                        
                                        June 302009
                                        
                                        
                                        2009AssetsCurrent
      assets:Cash
                                        
                                        $
                                        1,356,865
                                        
                                        
                                        $
                                        62,752Accounts
      receivable, net of allowance for doubtful accounts of $18,200 at December
      31, 2009, and June 30, 2009
                                        
                                        
                                        5,152,052
                                        
                                        
                                        
                                        5,348,256Inventories,
      net
                                        
                                        
                                        6,661,100
                                        
                                        
                                        
                                        6,966,107Prepaid
      expenses and other current assets
                                        
                                        
                                        382,297
                                        
                                        
                                        
                                        979,226Current
      portion of deferred tax assets
                                        
                                        
                                        361,300
                                        
                                        
                                        
                                        361,300Assets
      to be disposed of from discontinued operations
                                        
                                        
                                        105,200
                                        
                                        
                                        
                                        219,476Total
      current assets
                                        
                                        
                                        14,018,814
                                        
                                        
                                        
                                        13,937,117Property
      and equipment, net
                                        
                                        
                                        1,207,891
                                        
                                        
                                        
                                        1,393,844Goodwill
                                        
                                        
                                        2,593,616
                                        
                                        
                                        
                                        2,593,616Other
      intangible assets, net
                                        
                                        
                                        582,048
                                        
                                        
                                        
                                        625,959Long-term
      portion of deferred tax assets
                                        
                                        
                                        353,200
                                        
                                        
                                        
                                        353,200Other
      assets
                                        
                                        
                                        34,028
                                        
                                        
                                        
                                        36,067Total
      assets
                                        
                                        $
                                        18,789,597
                                        
                                        
                                        $
                                        18,939,803Liabilities
      and shareholders' equityCurrent
      liabilities:Current
      portion of long-term debt and lease financing obligations
                                        
                                        $
                                        106,058
                                        
                                        
                                        $
                                        106,058Current
      portion of long-term debt due related parties
                                        
                                        
                                        1,580,004
                                        
                                        
                                        
                                        80,004Accounts
      payable
                                        
                                        
                                        6,867,582
                                        
                                        
                                        
                                        6,495,687Accrued
      expenses and other current liabilities
                                        
                                        
                                        812,260
                                        
                                        
                                        
                                        1,128,376Liabilities
      to be disposed of from discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        310,771Total
      current liabilities
                                        
                                        
                                        9,365,904
                                        
                                        
                                        
                                        8,120,896Long-term
      debt and lease financing obligations, net of current
    portion
                                        
                                        
                                        262,847
                                        
                                        
                                        
                                        315,876Long-term
      debt, net of current portion, due related parties
                                        
                                        
                                        173,329
                                        
                                        
                                        
                                        1,713,329Total
      liabilities
                                        
                                        
                                        9,802,080
                                        
                                        
                                        
                                        10,150,101Commitments
      and contingenciesShareholders'
      equity:Preferred
      stock, Class A, $0.001 par value, 5,000 shares; none
      outstanding
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Preferred stock,
      Class B, $0.001 par value, 2,500,000 shares authorized;2,500 shares
      designated Series 1 Class B; none outstanding
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -2,000
      shares designated convertible Series 2 Class B;2,000
      shares
                                            issued and
      outstanding at December 31, 2009, and June 30, 2009
                                        
                                        
                                        400,000
                                        
                                        
                                        
                                        400,000Common
      stock, $0.0001 par value, 25,000,000 shares authorized; 3,978,199 shares
      issued and outstanding at December 31, 2009, and June 30,
    2009
                                        
                                        
                                        398
                                        
                                        
                                        
                                        398Additional
      paid-in capital
                                        
                                        
                                        17,832,887
                                        
                                        
                                        
                                        17,824,763Accumulated
      deficit
                                        
                                        
                                        (9,245,768
                                        )
                                        
                                        
                                        (9,435,459
                                        )Total
      shareholders' equity
                                        
                                        
                                        8,987,517
                                        
                                        
                                        
                                        8,789,702Total
      liabilities and shareholders' equity
                                        
                                        $
                                        18,789,597
                                        
                                        
                                        $
                                        18,939,803





See
accompanying notes to consolidated financial statements.


3





NYER
MEDICAL GROUP, INC.


Consolidated
Statements of Operations (unaudited)





For the three months
                
                
                For the six monthsended December 31
                
                
                ended December 312009
                
                
                2008
                
                
                2009
                
                
                2008Net
      revenues:Sales
                
                $
                17,800,466
                
                
                $
                17,446,053
                
                
                $
                35,181,823
                
                
                $
                34,165,135Dispensing
      fees
                
                
                1,777,977
                
                
                
                1,540,716
                
                
                
                3,511,894
                
                
                
                2,446,142Total
      net revenues
                
                
                19,578,443
                
                
                
                18,986,769
                
                
                
                38,693,717
                
                
                
                36,611,277Cost
      and expenses:Cost
      of sales
                
                
                14,033,577
                
                
                
                13,990,704
                
                
                
                27,717,832
                
                
                
                26,964,744Selling,
      general, and administrative expenses
                
                
                5,410,225
                
                
                
                4,933,177
                
                
                
                10,944,996
                
                
                
                9,306,182Depreciation
      and amortization
                
                
                131,852
                
                
                
                134,689
                
                
                
                275,293
                
                
                
                279,327Total
      costs and expenses
                
                
                19,575,654
                
                
                
                19,058,570
                
                
                
                38,938,121
                
                
                
                36,550,253Income
      (loss) from operations
                
                
                2,789
                
                
                
                (71,801
                )
                
                
                (244,404
                )
                
                
                61,024Other
      income (expense), net:Interest
      expense
                
                
                (40,749
                )
                
                
                (44,774
                )
                
                
                (86,563
                )
                
                
                (92,169
                )Interest
      income
                
                
                3,181
                
                
                
                1,280
                
                
                
                6,620
                
                
                
                4,403Other
      income (expense)
                
                
                (10,070
                )
                
                
                4,672
                
                
                
                (8,004
                )
                
                
                6,791Total
      other income (expense), net
                
                
                (47,638
                )
                
                
                (38,822
                )
                
                
                (87,947
                )
                
                
                (80,975
                )Loss
      from continuing operations before provision for income
    taxes
                
                
                (44,849
                )
                
                
                (110,623
                )
                
                
                (332,351
                )
                
                
                (19,951
                )Benefit
      for income taxes
                
                
                (13,006
                )
                
                
                (58,083
                )
                
                
                (127,820
                )
                
                
                (8,579
                )Loss
      from continuing operations
                
                
                (31,843
                )
                
                
                (52,540
                )
                
                
                (204,531
                )
                
                
                (11,372
                )Discontinued
      operations:Gain
      from discontinued operations, net of $0, $4,420, $0 and $2,647 income
      taxes, for the three and six months ended December 31, 2009 and 2008,
      respectively
                
                
                -
                
                
                
                (7,751
                )
                
                
                -
                
                
                
                (11,236
                )Gain
      on disposal, net of $0, $215,000, $262,814, and $190,203 income taxes, for
      the three and six months ended December 31, 2009 and 2008,
      respectively
                
                
                -
                
                
                
                285,000
                
                
                
                394,222
                
                
                
                236,879Net
      gain from discontinued operations
                
                
                -
                
                
                
                277,249
                
                
                
                394,222
                
                
                
                225,643Net
      (loss) income
                
                $
                (31,843
                )
                
                $
                224,709
                
                
                $
                189,691
                
                
                $
                214,271Basic
      and diluted earnings (loss) per share:Loss
      per share, continuing operations
                
                $
                (0.01
                )
                
                $
                (0.01
                )
                
                $
                (0.05
                )
                
                $
                (0.00
                )Earnings
      per share, discontinued operations
                
                
                -
                
                
                
                0.07
                
                
                
                0.10
                
                
                
                0.05Earnings
      (loss) per share
                
                $
                (0.01
                )
                
                $
                0.06
                
                
                $
                0.05
                
                
                $
                0.05Shares
      used in computing earnings (loss) per share:Basic
                
                
                3,978,199
                
                
                
                3,978,199
                
                
                
                3,978,199
                
                
                
                3,978,199Diluted
                
                
                3,978,199
                
                
                
                3,978,199
                
                
                
                3,978,199
                
                
                
                3,978,199





See
accompanying notes to consolidated financial statements.


4





NYER
MEDICAL GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows(unaudited)





For the six monthsended December 312009
                      
                      
                      2008Operating
      activities:Net
      income
                      
                      $
                      189,691
                      
                      
                      $
                      214,271Less
      gain from discontinued operations
                      
                      
                      394,222
                      
                      
                      
                      225,643Loss
      from continuing operations
                      
                      
                      (204,531
                      )
                      
                      
                      (11,372
                      )Adjustments
      to reconcile (loss) income from continuing operations  to cash
      provided by operating activities:Depreciation
                      
                      
                      231,382
                      
                      
                      
                      234,749Amortization
                      
                      
                      43,911
                      
                      
                      
                      44,578Stock-based
      compensation expense
                      
                      
                      8,124
                      
                      
                      
                      43,122Deferred
      income taxes
                      
                      
                      -
                      
                      
                      
                      46,000Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      196,204
                      
                      
                      
                      (670,177
                      )Inventories
                      
                      
                      305,007
                      
                      
                      
                      (329,067
                      )Prepaid
      expenses and other current assets
                      
                      
                      596,929
                      
                      
                      
                      96,347Accounts
      payable
                      
                      
                      371,895
                      
                      
                      
                      636,488Accrued
      expenses and other current liabililties
                      
                      
                      (314,077
                      )
                      
                      
                      (55,431
                      )Cash
      provided by operating activities, continuing operations
                      
                      
                      1,234,844
                      
                      
                      
                      35,237Cash
      (used in) provided by operating activities, discontinued
      operations
                      
                      
                      (332,273
                      )
                      
                      
                      676,786Cash
      provided by operating activities
                      
                      
                      902,571
                      
                      
                      
                      712,023Investing
      activities:Purchase
      of property and equipment
                      
                      
                      (45,429
                      )
                      
                      
                      (245,130
                      )Cash
      used in investing activities, continuing operations
                      
                      
                      (45,429
                      )
                      
                      
                      (245,130
                      )Cash
      provided by investing activities, discontinued operations
                      
                      
                      830,000
                      
                      
                      
                      -Cash
      provided by (used in) investing activities
                      
                      
                      784,571
                      
                      
                      
                      (245,130
                      )Financing
      activities:Principal
      payments on capital lease obligations
                      
                      
                      (18,028
                      )
                      
                      
                      -Payments
      on long-term debt
                      
                      
                      (75,001
                      )
                      
                      
                      (143,375
                      )Cash
      used in financing activities, continuing operations
                      
                      
                      (93,029
                      )
                      
                      
                      (143,375
                      )Cash
      used in investing activities, discontinued operations
                      
                      
                      (300,000
                      )
                      
                      
                      -Cash
      used in financing activities
                      
                      
                      (393,029
                      )
                      
                      
                      (143,375
                      )Net
      increase in cash
                      
                      
                      1,294,113
                      
                      
                      
                      323,518Cash
      at beginning of period
                      
                      
                      62,752
                      
                      
                      
                      140,688Cash
      at end of period
                      
                      $
                      1,356,865
                      
                      
                      $
                      464,206Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                      
                      $
                      87,155
                      
                      
                      $
                      92,306Cash
      paid (received) for income taxes (refunds), net
                      
                      $
                      358,597
                      
                      
                      $
                      -





See
accompanying notes to consolidated financial statements.


5





NYER
MEDICAL GROUP, INC.





SELECTED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)





1.
            Accounting
      policies





Basis
of presentation





The
consolidated financial statements included herein have been prepared by Nyer
Medical Group, Inc. (the “Company” or “Nyer”), without audit, in accordance with
generally accepted accounting principles in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”).  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP 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.  The consolidated financial statements include the accounts of
the Company and its subsidiaries, and all intercompany transactions have been
eliminated.




The
results shown for the interim period are not necessarily indicative of the
results to be obtained for the full year.  These consolidated interim
financial statements should 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, 2009.




Reclassifications




Prior
year information is reclassified whenever necessary to conform to current year’s
presentation.




Use
of estimates




The
preparation of financial statements in conformity with GAAP 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.




Fair
value of financial instruments




The
carrying values of accounts receivable, accounts payables, and debt approximate
their fair values.  The carrying values and estimated fair values for
long-term debt based on quoted market rates of financial instruments were
approximately the same.




Recent
Accounting Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
PrinciplesTM, (codified within ASC Topic 105, Generally Accepted Accounting
Principles), which establishes the FASB Accounting Standards Codification
(“ASC”) as the single source of authoritative GAAP (the
“Codification”).  The Codification supersedes all previous non-SEC
accounting and reporting standards.  The Company adopted SFAS No. 168
for its first quarter ended September 30, 2009, and has conformed all references
to accounting literature in the Quarterly Report to the appropriate reference
within the Codification.  All new authoritative guidance is issued in
the form of ASC Updates.  The Company has provided dual-referencing
for those standards that it adopted prior to the issuance of the
Codification.   The adoption of this standard did not have any
impact on the Company’s financial position or results of
operations.





Effective
July 1, 2009, the Company adopted Emerging Issues Task Force Issue No. 07-5,
Determining Whether an
Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock ,
as codified in ASC Topic 815 (“ASC 815”).  ASC 815 provides that an entity
should use a two-step approach to evaluate whether an equity-linked financial
instrument (or embedded feature) is indexed to its own stock, including
evaluating the instrument's contingent exercise and settlement
provisions.   The consensus must be applied to outstanding
instruments as of the beginning of the fiscal year in which the consensus is
adopted and should be treated as a cumulative-effect adjustment to the opening
balance of retained earnings.   The adoption of ASC 815 did not have a
material impact on the Company’s consolidated financial statements.





Effective
July 1, 2009, the Company adopted FSP FAS No. 142-3, Determination of the Useful Life of
Intangible Assets, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets, as codified in ASC Topic 350, Intangibles – Goodwill and
Other (“ASC 350”).  The adoption of ASC 350 did not have a
material impact on the Company’s consolidated financial
statements.


6





Effective
July 1, 2009, the Company adopted FSP Accounting Principles Board 14-1, Accounting for Convertible Debt
Instruments That May be Settled in Cash upon Conversion (Including Partial
Settlement), as codified in ASC Topic 470 (“ASC 470”).  ASC 470
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer’s nonconvertible debt borrowing rate.  The
adoption of ASC 470 did not have a material impact on the Company’s consolidated
financial statements.





Effective
July 1, 2009, the Company adopted FASB SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement
No. 133, as codified in ASC 815.   ASC 815
requires enhanced disclosures regarding an entity’s derivative instruments and
related hedging activities.  These enhanced disclosures include information
regarding how and why an entity uses derivative instruments; how derivative
instruments and related hedge items are accounted for under SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities, and its related interpretations;
and how derivative instruments and related hedge items affect an entity’s
financial position, financial performance, and cash flows.  The adoption of
ASC 815 did not have a material impact on the Company’s consolidated financial
statements.





Effective
July 1, 2009, the Company adopted FASB SFAS No. 141(R), Business Combinations, as
codified in ASC 805, Business
Combinations.  ASC Topic 805 (“ASC 805”) broadens the guidance
applicability to all transactions and other events in which one entity obtains
control over one or more other businesses.  It broadens the fair value
measurement and recognition of assets acquired, liabilities assumed, and
interests transferred as a result of business combinations.  ASC 805
expands on required disclosures to improve the statement users’ abilities to
evaluate the nature and financial effects of business combinations. The adoption
of ASC 805 did not have a material impact on the Company’s consolidated
financial statements.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, Fair Value Measurements and
Disclosures. ASU 2009-05 amends Subtopic 820-10, Fair Value Measurements and
Disclosures, to provide guidance on the fair value measurement of
liabilities. ASU 2009-05 provides clarification for circumstances in which a
quoted price in an active market for the identical liability is not available.
ASU 2009-05 is effective for interim and annual periods beginning after August
26, 2009. The adoption of ASU 2009-05 did not have a material impact on the
Company’s consolidated financial statements.





2.
            Prepaid expenses and
      other current assets




Prepaid
expenses and other current assets consisted of the following:





December 31
                  
                  
                  June 302009
                  
                  
                  2009Vendor
      rebates receivable
                  
                  $
                  276,804
                  
                  
                  $
                  906,372Prepaid
      other
                  
                  
                  105,493
                  
                  
                  
                  72,854Total
      prepaid expenses and other current assets
                  
                  $
                  382,297
                  
                  
                  $
                  979,226





3.
            Goodwill
      and other intangible assets





Goodwill





Goodwill
represents the amount of consideration paid in connection with business
acquisitions in excess of the fair value of assets acquired and liabilities
assumed.  The Company evaluates the balance of the carrying value of
goodwill based on a single reporting unit annually during the fourth quarter and
more frequently if certain indicators are present or changes in circumstances
suggest that impairment may exist.





The first
step of its goodwill impairment test, used to identify potential impairment,
compares the fair value of our reporting unit with its carrying amount,
including goodwill.  If the fair value of its reporting unit exceeds
its carrying amount, the goodwill of the reporting unit is considered not
impaired, and the second step of the impairment test, used to measure the amount
of the impairment loss, is unnecessary.  If the carrying amount of its
reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment loss, if
any.  The second step of the goodwill impairment test, used to measure
the amount of impairment loss, compares the implied fair value of the reporting
unit goodwill as of the date of the impairment review with the carrying amount
of that goodwill.  The implied fair value of goodwill is determined on
the same basis as the amount of goodwill recognized in connection with a
business combination.  Specifically, the fair value of a reporting
unit is allocated to all of the assets and liabilities (including any
unrecognized intangible assets) as if the reporting unit had been acquired in a
business combination as of the date of the impairment review and as if the fair
value of the reporting unit was the price paid to acquire the reporting
unit.  The excess of the fair value of a reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of
goodwill.  If the carrying amount of the reporting unit goodwill
exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess.


7





On
December 31, 2009, the carrying value of the Company’s net assets was
$8,987,517; and the market capitalization of the Company’s outstanding shares,
assuming conversion of outstanding preferred shares, was
$7,637,082.  The Company calculated the estimated fair value of the
Company as of December 31, 2009, as that amount that would be received to sell
the Company as a whole on that date.  It arrived at the estimated fair
value by using the selling price of the WAG Transaction (as defined in Note 11),
which closed on January 29, 2010.  See Note 11, Subsequent events, for
further information on the WAG Transaction.  The Company has concluded
that the Company’s fair value exceeds its carrying value as of December 31,
2009, and that goodwill is not impaired.




Other
intangible assets





The
following is a summary of other intangible assets:





December31,2009
                            
                            
                            June30,2009Gross
                            
                            
                            
                            
                            
                            
                            
                            GrossCarrying
                            
                            Accumulated
                            
                            
                            Carrying
                            
                            
                            Carrying
                            
                            
                            Accumulated
                            
                            
                            CarryingValue
                            
                            Amortization
                            
                            
                            Value
                            
                            
                            Value
                            
                            
                            Amortization
                            
                            
                            Value$
                            1,011,555
                            
                            $
                            (429,507
                            )
                            
                            $
                            582,048
                            
                            
                            $
                            1,011,555
                            
                            
                            $
                            (385,596
                            )
                            
                            $
                            625,959





Amortization
expense was $21,956 and $32,357 for the three months ended December 31, 2009 and
2008, respectively, and $43,911 and $44,578 for the six months ended December
31, 2009 and 2008, respectively.  Based on the balance of intangible
assets as of December 31, 2009, the remaining amortization expense for the
remainder of fiscal 2010 and each of the succeeding five years is estimated to
be as follows:





AmortizationYear
                      
                      Amount2010
      (remaining 6 months)
                      
                      
                      43,9112011
                      
                      
                      87,8222012
                      
                      
                      85,7162013
                      
                      
                      81,1562014
                      
                      
                      81,1562015
                      
                      
                      81,156Thereafter
                      
                      
                      121,131Total
                      
                      $
                      582,048




8





4.
            Indebtedness and
      related parties





Indebtedness





December 31
                  
                  
                  June 302009
                  
                  
                  2009Related
      parties:Convertible
      notes
                  
                  $
                  1,500,000
                  
                  
                  $
                  1,500,000Note
      payable, shareholder
                  
                  
                  253,333
                  
                  
                  
                  293,3331,753,333
                  
                  
                  
                  1,793,333Less
      current portion of debt due related parties
                  
                  
                  1,580,004
                  
                  
                  
                  80,004Long-term
      portion of debt due related parties
                  
                  $
                  173,329
                  
                  
                  $
                  1,713,329Other
      debt:Note
      payable, former shareholder
                  
                  $
                  221,667
                  
                  
                  $
                  256,668Obligations
      under capital leases
                  
                  
                  147,238
                  
                  
                  
                  165,266368,905
                  
                  
                  
                  421,934Less
      current portion of debt
                  
                  
                  106,058
                  
                  
                  
                  106,058Long-term
      portion of debt
                  
                  $
                  262,847
                  
                  
                  $
                  315,876





The
Company’s discontinued operations, ADCO Surgical Supply, Inc., (“ADCO”) had a
line of credit (the “line”), which was secured by land and a building owned by
ADCO (not sold with the rest of ADCO’s assets) and guaranteed by the
Company.  Repayment of the line was in monthly payments of interest
only, with the principal being due at maturity, unless
renewed.   Prior to the maturity date, ADCO would have had to
repay the amounts outstanding under the line upon the demand of the
bank.   The interest rate was two percentage points over the Wall Street Journal Prime
Rate.  The building that was used as collateral for the line was sold
on September 21, 2009; and a portion of the proceeds from the sale was used to
pay off the line.  The line was terminated as of September 21,
2009.





The
former minority shareholders (the “Minority Shareholders”) of the Company’s now
wholly owned subsidiary, D.A.W., Inc., (“DAW”) can convert all or any portion of
their allocable payment of the convertible notes they own into shares of the
Company’s common stock or they can redeem them for cash.  In
conjunction with the WAG Transaction (as defined in Note 11), the Minority
Shareholders have notified the Company of their intent to convert their all of
their convertible notes into 815,217 shares of common stock.  See Note
11, Subsequent events, for further information on the WAG
Transaction.





Other
related party transactions





The
Company leases a drug store facility owned by the mother of the Company’s
president, chief executive officer, and director and another
director.  The Company paid $2,190 and $2,106 for the three months
ended December 31, 2009 and 2008, respectively, and $4,380 and $4,212 for the
six months ended December 31, 2009 and 2008, respectively.  The lease
expires July 31, 2011.




5.
            Accrued
      expenses and other current
liabilities





Accrued
expenses and other current liabilities consisted of the following:





December 31
                    
                    
                    June 302009
                    
                    
                    2009Accrued
      salaries and wages
                    
                    $
                    738,939
                    
                    
                    $
                    732,989Accrued
      income taxes
                    
                    
                    (4,197
                    )
                    
                    
                    198,139Accrued
      other
                    
                    
                    77,518
                    
                    
                    
                    197,248Total
      accrued expenses and other current liabilities
                    
                    $
                    812,260
                    
                    
                    $
                    1,128,376


9


6.
            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 on the sale.




In
December 2008, the Company sold the inventory and prescription lists of its
Topsfield pharmacy to CVS Pharmacy L.L.C. (“CVS”).  In conjunction
with this sale, the Company also entered into a non-compete agreement with CVS,
whereby it has agreed not to compete for three years within a 10-mile radius of
the CVS store located in Danvers, Massachusetts, excluding two currently
operating Eaton Apothecary pharmacies.




In
September 2008, the Company sold certain assets and liabilities of ADCO, a
medical and surgical equipment and supplies company, and recognized a loss on
disposal at September 30, 2008 of $61,078 on the sale.   In connection
with this sale, the Company received a $50,000 note receivable that was payable
January 31, 2009.  The Company and the buyer are currently in dispute
over certain assets and liabilities that were included in the ADCO
sale, and the note receivable has not been paid.  The Company is
unable to determine the final outcome of this dispute, but it may result in an
additional charge to the disposal of discontinued operations.





The
Company’s consolidated financial statements have been reclassified to reflect
these businesses as discontinued operations.  The following table shows the
assets and liabilities for the discontinued operations:





December 31
                          
                          
                          June 302009
                          
                          
                          2009Assets:Cash
                          
                          $
                          -
                          
                          
                          $
                          2,275Property
      and equipment, net
                          
                          
                          -
                          
                          
                          
                          112,001Current
      portion of deferred tax assets
                          
                          
                          105,200
                          
                          
                          
                          105,200Total
      assets
                          
                          $
                          105,200
                          
                          
                          $
                          219,476Liabilities:Line
      of credit
                          
                          $
                          -
                          
                          
                          $
                          300,000Accrued
      expenses and other liabilities
                          
                          
                          -
                          
                          
                          
                          10,771Total
      current liabilities
                          
                          $
                          -
                          
                          
                          $
                          310,771





The
following table shows a summary of revenues and pre-tax operating results from
the discontinued operations:





For the three months
                  
                  
                  For the six monthsended December 31
                  
                  
                  ended December 312009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Sales
                  
                  $
                  -
                  
                  
                  $
                  583,980
                  
                  
                  $
                  -
                  
                  
                  $
                  1,664,872Pre-tax
      income from discontinued operations
                  
                  $
                  -
                  
                  
                  $
                  496,669
                  
                  
                  $
                  657,036
                  
                  
                  $
                  418,493





7.
            Shareholders’
      equity




Class
A preferred stock




Total
authorized shares are 5,000, par value $.001; no shares are
outstanding.  Each share has voting rights equal to 1,000 shares of
common stock.





Class
B preferred stock




Total
authorized shares are 2,500,000, par value $.001; 2,500 shares have been
designated as Series 1 Class B Preferred Stock of which none are
outstanding.  Each share has voting rights equal to 2,000 shares of
common stock.




Series
2 Class B preferred stock




In
February 2008, 2,000 shares of Series 2 Class B Preferred Stock (“Series 2
Stock”), a newly-created series of convertible preferred stock of the Company,
were issued to the Minority Shareholders.  Each share has voting
rights equal to 2,000 shares of common stock for an aggregate of 4,000,000
votes.  The shares are initially convertible into 218,000 shares of
the Company’s common stock, based upon an initial conversion price of $1.84,
which is subject to adjustment (the “Conversion Price”).


10





At any
time, the holders of the Series 2 Stock may convert their shares into common
stock upon the Company’s (i) consolidation with or merger into any other person
or (ii) transfer of all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of the
Company subject to certain conditions described below, which may be waived by
the holders of at least a majority of the Series 2 Stock then
outstanding.   In conjunction with the WAG Transaction (as
defined in Note 11), the Minority Shareholders notified the Company of their
intent to convert all of their Series 2 Stock  into 218,000 shares on
common stock.  See Note 11, Subsequent events, for further information
on the WAG Transaction.





8.
            Warrants
      and share-based compensation





Stock
option 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 (the “1993 Plan”) was amended in
fiscal year 2003 to, among other things, (a) cease grants under such plan upon
the effectiveness of the 2002 Stock Option Plan of the Company (the “2002 Plan”)
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 10
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 and
non-qualified options, which are not non-discretionary options (as such term is
used in the 1993 Plan), 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 and certain non-qualified options, 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.





Stock
options and warrants





The
Company’s share-based compensation consists of stock option awards, which are
accounted for as compensation expense at the fair value on the grant date, using
the Black-Scholes valuation model.  The Company recorded share-based
compensation expense of $4,062 and $22,044 for the three months ended December
31, 2009 and 2008, and $8,124 and $43,122 for the six months ended December 31,
2009 and 2008, respectively.  The Company did not grant any stock options
for the six months ended December 31, 2009 or 2008.





In April
2005, the Company granted to investors warrants to purchase 53,320 common shares
over a five-year period at an exercise price of $2.60 per share.  None
of these have been exercised as of December 31, 2009.   In addition,
the Company had 150,000 stock options that were granted in 1999 to a third party
in connection with consulting services that were not exercised and expired in
January 2009.




9.
            Earnings
      per share




Below is
reconciliation of weighted average common shares outstanding for purposes of
calculating basic and diluted earnings (loss) per share:





For the three months
                        
                        
                        For the six monthsended December 31
                        
                        
                        ended December 312009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Numerator
      for basic and diluted earnings per common share
    calculation:(Loss)
      income from continuing operations
                        
                        $
                        (31,843
                        )
                        
                        $
                        (52,540
                        )
                        
                        $
                        (204,531
                        )
                        
                        $
                        (11,372
                        )Income
      from discontinued operations, net of income tax
                        
                        
                        -
                        
                        
                        
                        277,249
                        
                        
                        
                        394,222
                        
                        
                        
                        225,643Net
      (loss) income
                        
                        $
                        (31,843
                        )
                        
                        $
                        224,709
                        
                        
                        $
                        189,691
                        
                        
                        $
                        214,271Denominator
      for basic and diluted earnings per common share
    calculation:Weighted
      average common shares outstanding
                        
                        
                        3,978,199
                        
                        
                        
                        3,978,199
                        
                        
                        
                        3,978,199
                        
                        
                        
                        3,978,199Basic
      and diluted earnings (loss) per share:Loss
      from continuing operations
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.00
                        )Income
      from discontinued operations
                        
                        
                        0.00
                        
                        
                        
                        0.07
                        
                        
                        
                        0.10
                        
                        
                        
                        0.05Net
      (loss) income
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.06
                        
                        
                        $
                        0.05
                        
                        
                        $
                        0.05


11




Due to
their anti-dilutive effect, the following potential common shares have been
excluded from the computation of diluted earnings (loss) per share:


For
      the three months
                    
                    
                    For
      the six monthsended
      December 31
                    
                    
                    ended
      December 312009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Stock
      options
                    
                    
                    901,000
                    
                    
                    
                    1,614,000
                    
                    
                    
                    901,000
                    
                    
                    
                    1,614,000Warrants
                    
                    
                    53,320
                    
                    
                    
                    53,320
                    
                    
                    
                    53,320
                    
                    
                    
                    53,320Convertible
      notes
                    
                    
                    815,217
                    
                    
                    
                    815,217
                    
                    
                    
                    815,217
                    
                    
                    
                    815,217Convertible
      preferred stock
                    
                    
                    218,000
                    
                    
                    
                    218,000
                    
                    
                    
                    218,000
                    
                    
                    
                    218,0001,987,537
                    
                    
                    
                    2,700,537
                    
                    
                    
                    1,987,537
                    
                    
                    
                    2,700,537





10.
            Contingencies




Legal
proceedings




The
Company and the buyer of ADCO are currently in dispute over certain assets and
liabilities that were included in the ADCO sale.  The Company is
unable to determine the final outcome of this dispute, but it may result in an
additional charge to the disposal of discontinued operations.




In
the ordinary course of business, the Company may become involved in litigation
incidental to its business; however, the Company is not aware of any pending
legal proceeding that would have a material effect on its operating
results.





11.
            Subsequent
      events/liquidation and
dissolution





Management
has evaluated subsequent events through February 16, 2010, which is the date the
financial statements were issued.





Special
shareholders’ meeting





At the
special shareholders’ meeting of the Company, held on January 20, 2010, the
shareholders of the Company approved: (a) the Asset Purchase Agreement, dated as
of October 22, 2009, among Walgreen Eastern Co., Inc. (“Walgreens”), DAW, and
the Company and the transactions contemplated thereby (the “WAG Transaction”),
(b) the Transaction Agreement, dated October 23, 2009, among DAW, certain
members of management of DAW (the “Management Team”) and the Company and the
transactions contemplated thereby (“ the DAW Transaction”), and (c) the Plan of
Dissolution of the Company and the transactions contemplated thereby (“ the Plan
of Dissolution”), and together with the WAG Transaction and the DAW Transaction
(“ the Transactions”), each as described in the Company’s Proxy Statement dated
December 17, 2009.





Asset
purchase agreement





On
January 29, 2010, the Company closed the transactions contemplated by the WAG
Transaction, whereby DAW sold to Walgreens a substantial portion of its
operating assets, including prescription files and inventory of a total of 12
neighborhood pharmacies, which included the assignment of nine leases, for a
cash purchase price of $12.0 million plus $6.6 million of qualifying inventory,
$1.1 million of operating equipment, and $71,980 for prepaid rent
amounts.





Stock
purchase agreement





On
February 3, 2010, the Company closed the DAW Transaction, with an effective date
of February 1, 2010, whereby the Management Team purchased the stock of DAW in
exchange for $300,000 in cash and the assumption of $1.2 million of
liabilities.  The Management Team included certain officers and
directors of the Company and DAW, who owned all of the outstanding preferred
stock of the Company and also owned convertible and other notes, options, and
common stock of the Company.  Because of the relationships between the
Management Team and the Company, the DAW Transaction was approved by a special
committee of the Board of Directors (the “Board”) of the Company comprised of
independent directors (the “Special Committee”), in addition to the full
Board.





Liquidation
and dissolution of Nyer





Upon the
closing of the WAG Transaction and the DAW Transaction, the Company has no
remaining assets other than the cash received from the
Transactions.  It is currently in the process of an orderly
liquidation and dissolution of Nyer in accordance with the Plan of Dissolution,
which is expected to be completed in approximately 90 days.  The Plan
of Dissolution is described more fully in the Company’s Proxy Statement dated
December 17, 2009.The Board has also
authorized the Company to cause the common stock of the Company to be delisted
from the NASDAQ Stock Market (“NASDAQ”) following the closing of the WAG
Transaction.  The Company notified the NASDAQ of its intent to
voluntarily delist its securities by filing a Form 25, which it filed with the
Securities and Exchange Commission on February 9, 2010.   Nyer
anticipates that the delisting will be effective 10 days after the date of
filing of the Form 25, on or about February 19, 2010.  Upon delisting
from NASDAQ, Nyer’s securities will be added to the over-the-counter
market.  In connection with the delisting, Nyer requested that NASDAQ
suspend trading effective at the close of business on February 1,
2010.


12




Item
2.  Management’s Discussion and Analysis of Financial Condition and Results
of Operations




This
Quarterly Report on Form 10-Q contains statements which constitute forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and other federal securities laws.  Forward looking
information includes statements concerning pharmacy sales trends, the sale of
discontinued operations, and demographic trends; as well as those that include
or are preceded by the words “expects,” “estimates,” “believes,” “plans,”
“anticipates,” or similar language.  For example:  This
report states that the closing of the Plan of Dissolution is expected to be
completed approximately 90 days after the date hereof.  In fact, the
closing of the Plan of Dissolution is subject to various conditions and
contingencies as are customary in plans of dissolution in the United
States.   If these conditions are not satisfied or the specified
contingencies occur, the Plan of Dissolution may be delayed or may not be
completed.  Forward looking statements may involve risks and
uncertainties, known or unknown to us that could cause results to differ
materially from management’s expectations as projected in such forward-looking
statements, including the risk that we may fail to complete the Plan of
Dissolution.  You should not place undue reliance upon on these
forward-looking statements or rely upon them as predictions of future events
because we cannot assure you that the events or circumstances reflected in these
statements will be achieved or will occur.  The completion of the Plan
of Dissolution is subject to certain conditions, these conditions may be delayed
or may not occur, causing our liquidation  to occur at a later date
than expected or not at all.  Except as required by law, Nyer
undertakes no obligation to release publicly the result of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated
events.  These risks and uncertainties are discussed in Item 1A in our
most recent Annual Report on Form 10-K as filed with the SEC as well as our
other filings with the SEC.  Unless otherwise required by applicable
securities laws, we assume no obligation to update our forward-looking
statements to reflect subsequent events or circumstances.





The
following discussion provides information with respect to our results of
operations, liquidity, and capital resources on a comparative basis for the
three and six months ended December 31, 2009 and 2008.  The following
discussion should be read in conjunction with our consolidated financial
statements and selected notes thereto for the three and six months ended
December 31, 2009 and 2008, included herein, and our audited consolidated
financial statements and notes thereto contained in our Annual Report on Form
10-K for the year ended June 30, 2009, as filed with the SEC.




Overview




During
the three and six months ended December 31, 2009, we operated a chain of
pharmacies and provided pharmacy management services to various not-for-profit
entities. The majority of our business was conducted pursuant to contracts with
pharmacy benefit management companies and the Commonwealth of Massachusetts
Medicaid Department. Each applied consistent downward pressure on our margins.
The current recessionary economic environment did not significantly adversely
affect the number of prescriptions dispensed at our pharmacies, as our business
was generally recession resistant.




Recent
Developments/liquidation and dissolution





Special
shareholders’ meeting





At the
special shareholders’ meeting of the Company, held on January 20, 2010, the
shareholders of the Company approved the Transactions, each as described in the
Company’s Proxy Statement dated December 17, 2009.





Asset
purchase agreement





On
January 29, 2010, the Company closed the transactions contemplated by the WAG
Transaction, whereby DAW sold to Walgreens a substantial portion of its
operating assets, including prescription files and inventory of a total of 12
neighborhood pharmacies, which included the assignment of nine leases, for a
cash purchase price of $12.0 million plus $6.6 million of qualifying inventory,
$1.1 million of operating equipment, and $71,980 for prepaid rent
amounts.





Stock
purchase agreement





On
February 3, 2010, the Company closed the DAW Transaction, with an effective date
of February 1, 2010, whereby the Management Team purchased the stock of DAW in
exchange for $300,000 in cash and the assumption of $1.2 million of liabilities.
The Management Team included certain officers and directors of the Company and
DAW, who own all of the outstanding preferred stock of the Company and also own
convertible and other notes, options, and common stock of the Company. Because
of the relationships between the Management Team and the Company, the DAW
Transaction was approved by the Special Committee, in addition to the full
Board.





Liquidation
and dissolution of Nyer





Upon the closing of the WAG Transaction
and the DAW Transaction, the Company has no remaining assets other than the cash
received from the Transactions. It is currently in the process of an orderly
liquidation and dissolution of Nyer in accordance with the Plan of Dissolution,
which is expected to be completed in approximately 90 days. The Plan of
Dissolution is described more fully in the Company’s Proxy Statement dated
December 17, 2009.


13





The Board
had also authorized the Company to cause the common stock of the Company to be
delisted from the NASDAQ following the closing of the WAG
Transaction.  The Company  notified the NASDAQ of its intent
to voluntarily delist its securities by filing a Form 25 with the Securities and
Exchange Commission, which it filed on February 9, 2010.  Nyer
anticipates that the delisting will be effective 10 days after the date of
filing of the Form 25, on or about February 19, 2010.  Upon delisting
from the NASDAQ, Nyer’s securities will be added to the over-the-counter
market.  In connection with the delisting, Nyer requested that NASDAQ
suspend trading effective at the close of business on February 1,
2010.





Results
of Operations




Net
revenues.   We recognized revenue both from the sale of
prescription medications and other products as well as through dispensing fee
revenue derived through dispensing of prescriptions with inventory owned by
Federally Qualified Health centers (“FQHCs”) pursuant to pharmacy management
services contracts entered into between us and various FQHCs.  The
following table sets forth for the periods indicated pharmacy and dispensing
fees revenues from continuing operations and changes between the specified
periods expressed as a percentage increase or decrease:





For
      the three months ended December 31
                              
                              
                              For
      the six months ended December 31Change
                              
                              
                              
                              
                              
                              
                              
                              
                              Change2009
                              
                              
                              2008
                              
                              
                              $
                              
                              
                              %
                              
                              
                              2009
                              
                              
                              2008
                              
                              
                              $
                              
                              
                              %Pharmacy
      sales
                              
                              $
                              17,800,466
                              
                              
                              $
                              17,446,053
                              
                              
                              $
                              354,413
                              
                              
                              
                              2.0
                              %
                              
                              $
                              35,181,823
                              
                              
                              $
                              34,165,135
                              
                              
                              $
                              1,016,688
                              
                              
                              
                              3.0
                              %Dispensing
      fees
                              
                              
                              1,777,977
                              
                              
                              
                              1,540,716
                              
                              
                              
                              237,261
                              
                              
                              
                              15.4
                              %
                              
                              
                              3,511,894
                              
                              
                              
                              2,446,142
                              
                              
                              
                              1,065,752
                              
                              
                              
                              43.6
                              %Total
                              
                              $
                              19,578,443
                              
                              
                              $
                              18,986,769
                              
                              
                              $
                              591,674
                              
                              
                              
                              3.1
                              %
                              
                              $
                              38,693,717
                              
                              
                              $
                              36,611,277
                              
                              
                              $
                              2,082,440
                              
                              
                              
                              5.7
                              %





Net revenues increased $591,674 or 3.1% to
$19,578,443 and $2,082,440 or 5.7% to $38,693,717 for the three and six months
ended December 31, 2009, respectively, as compared to $18,986,769 and
$36,611,277 for the three and six months ended December 31, 2008, respectively,
primarily due to the increase in the number of prescriptions filled and
dispensing fees.




The
pharmacy sales (revenues other than dispensing fees) increased $354,413 or 2.0%
to $17,800,466 and $1,016,688 or 3.0% to $35,181,823 for the three and six
months ended December 31, 2009, respectively, as compared to $17,446,053 and
$34,165,135 for the three and six months ended December 31, 2008, respectively,
primarily due to the increase in the number of prescriptions
filled.




The total
number of prescriptions dispensed increased 9.5% and 18.6% for the three and six
months ended December 31, 2009, respectively, compared to the comparable periods
in the prior year.  The number of prescriptions dispensed did not
correlate to a commensurate growth in revenue due to an increased number of
generic medications as a percentage of total number of prescriptions
dispensed.  Generic medications typically have a lower selling price
than brand name medications.  We attribute the increase in
prescription dispensing to greater drug utilization on the part of an aging
population, an overall increase in market share within certain communities, and
an increased utilization of pharmacy services by patients of FQHCs with whom the
pharmacies have contracts to provide services.  The pharmacies managed
five pharmacies owned by FQHCs and additionally had contracts to provide
pharmacy services to patients of five other FQHCs.  The pharmacies
maintained a segregated inventory owned by the FQHCs for the purpose of
dispensing prescriptions to health center patients.




Dispensing
fee revenue increased $237,261 or 15.4% to $1,777,977 and $1,065,752 or 43.6% to
$3,511,894 for the three and six months ended December 31, 2009, respectively,
as compared to $1,540,716 and $2,446,142 for the three and six months ended
December 31, 2008, respectively.  This increase is primarily
attributable to the expanded number and increased demand for covered medications
effectuated during the periods by the Massachusetts Health Safety Net Office, an
increased number of prescription benefit management contracts entered into by
the FQHCs contracted with us, and marketing initiatives targeting the patients
of the FQHCs.


14




Cost of sales. The
following table sets forth for the periods indicated cost of sales from
continuing operations and changes between the specified periods expressed as a
percentage increase or decrease:


For
      the three months ended December 31
                                  
                                  
                                  For
      the six months ended December 31Change
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Change2009
                                  
                                  
                                  2008
                                  
                                  
                                  $
                                  
                                  
                                  %
                                  
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  $
                                  
                                  
                                  %Cost
      of sales
                                  
                                  $
                                  14,033,577
                                  
                                  
                                  $
                                  13,990,704
                                  
                                  
                                  $
                                  42,873
                                  
                                  
                                  
                                  0.3
                                  %
                                  
                                  $
                                  27,717,832
                                  
                                  
                                  $
                                  26,964,744
                                  
                                  
                                  $
                                  753,088
                                  
                                  
                                  
                                  2.8
                                  %Profit
      margin rate
                                  
                                  
                                  21.2
                                  %
                                  
                                  
                                  19.8
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  1.4
                                  %
                                  
                                  
                                  21.2
                                  %
                                  
                                  
                                  21.1
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  0.1
                                  %


Cost of
sales increased $42,873 or 0.3% to $14,033,577 and $753,088 or 2.8% to
$27,717,832 for the three and six months ended December 31, 2009, respectively,
as compared to $13,990,704 and $26,964,744 for the three and six months ended
December 31, 2008, respectively, 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.




Gross profit
margins.  Pharmacy gross profit margins increased by 1.4% to
21.2% and 0.1% to 21.2% for the three and six months ended December 31, 2009, as
compared to 19.8% and 21.1% for the three and six months ended December 31,
2008.  Dispensing fee revenue is excluded from the calculation as
there is no correlating inventory cost associated with the services
provided.




Selling, general, and administrative
expenses (“SG&A”).  The following table sets forth for the
periods indicated SG&A from continuing operations and changes between the
specified periods expressed as a percentage increase or decrease:




For
      the three months ended December 31
                        
                        
                        For
      the six months ended December 31Change
                        
                        
                        
                        
                        
                        
                        
                        
                        Change2009
                        
                        
                        2008
                        
                        
                        $
                        
                        
                        %
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        $
                        
                        
                        %SG&A
      expenses
                        
                        $
                        5,410,225
                        
                        
                        $
                        4,933,177
                        
                        
                        $
                        477,048
                        
                        
                        
                        9.7
                        %
                        
                        $
                        10,944,996
                        
                        
                        $
                        9,306,182
                        
                        
                        $
                        1,638,814
                        
                        
                        
                        17.6
                        %





SG&A
increased $477,048 or 9.7% to $5,410,225 and $1,638,814 or 17.6% to $10,944,996
for the three and six months ended December 31, 2009, respectively, as compared
to $4,933,177 and $9,306,182 for the three and six months ended December 31,
2008, respectively.  The increase for the three months ended December
31, 2009, was primarily due to increases in professional fees of approximately
$122,000.  The increase for the six months ended December 31, 2009,
was primarily due to increases in professional fees of approximately $446,000
and increases in payroll costs of $978,000.  The increase in payroll
costs was primarily due to salaries 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
Transaction and DAW Transaction.




Other income (expense),
net. The following table sets forth for the periods indicated
the breakdown of other income (expense):





For
      the three months ended December 31
                          
                          
                          For
      the six months ended December 31Change
                          
                          
                          
                          
                          
                          
                          
                          
                          Change2009
                          
                          
                          2008
                          
                          
                          $
                          
                          
                          %
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          $
                          
                          
                          %Interest
      expense
                          
                          $
                          (40,749
                          )
                          
                          $
                          (44,774
                          )
                          
                          $
                          4,025
                          
                          
                          
                          (9.0
                          )%
                          
                          $
                          (86,563
                          )
                          
                          $
                          (92,169
                          )
                          
                          $
                          5,606
                          
                          
                          
                          (6.1
                          )%Interest
      income
                          
                          
                          3,181
                          
                          
                          
                          1,280
                          
                          
                          
                          1,901
                          
                          
                          
                          148.5
                          %
                          
                          
                          6,620
                          
                          
                          
                          4,403
                          
                          
                          
                          2,217
                          
                          
                          
                          50.4
                          %Other
      income
                          
                          
                          (10,070
                          )
                          
                          
                          4,672
                          
                          
                          
                          (14,742
                          )
                          
                          
                          (315.5
                          )%
                          
                          
                          (8,004
                          )
                          
                          
                          6,791
                          
                          
                          
                          (14,795
                          )
                          
                          
                          (217.9
                          )%$
                          (47,638
                          )
                          
                          $
                          (38,822
                          )
                          
                          $
                          (8,816
                          )
                          
                          
                          22.7
                          %
                          
                          $
                          (87,947
                          )
                          
                          $
                          (80,975
                          )
                          
                          $
                          (6,972
                          )
                          
                          
                          8.6
                          %





Total
other expense, net, increased $8,816 or 22.7% to $47,638 and $6,972 or 8.6% to
$87,947 for the three and six months ended December 31, 2009, respectively, as
compared to $38,822 and $80,975 for the three and six months ended December 31,
2008, respectively.





Income taxes.  We
recorded an income tax benefit of $13,006 and $127,820 from continuing
operations for the three and six months ended December 31, 2009, respectively,
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 benefit of $58,083 and $8,579 from continuing operations for
the three and six months ended December 31, 2008, primarily due to the losses
from operations and recorded income tax benefit of $219,420 and $192,850 for the
three and six months ended December 31, 2008, due to the sale of ADCO
discontinued operations.


15





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).





In
September 2008, we sold certain assets and liabilities of ADCO, a medical and
surgical equipment and supplies company and recognized a loss on disposal of
$61,078 on the sale.   In connection with this sale, we received a
$50,000 note receivable that was payable January 31, 2009.  We and the
buyer are currently in dispute over certain assets and liabilities that were
included in the ADCO sale, and the note receivable has not been
paid.  We are unable to determine the final outcome of this dispute,
but it may result in an additional charge to the disposal of discontinued
operations.




Liquidity and Capital
Resources




As of
December 31, 2009, we had $1,356,865 of cash as compared to $62,752 at June 30,
2009, primarily due to the net proceeds from the sale of the ADCO building after
the repayment of ADCO’s line of credit.  Our primary source of
liquidity is cash provided by operations, and our principal uses of cash are
operating expenses, acquisitions, capital expenditures, and repayments of
debt.




Net cash provided by operating
activities from continuing operations.  Net cash provided by
operating activities from continuing operations was $1,234,844 for the six
months ended December 31, 2009, and consisted of our net loss of $204,531,
adjusted for non-cash items of $283,417 (including depreciation of $231,382,
amortization of $43,911, and stock-based compensation expenses of $8,124), and
net cash provided by changes in working capital of $1,155,958.  The
net cash provided by changes in working capital was principally the result of
decreases in accounts receivable, inventories and prepaid expenses and increases
in accounts payable, partially offset by a decrease in accrued expenses and
other current liabilities.




Net cash used in investing activities
from continuing operations.   Net cash used in investing
activities from continuing operations was $45,429 for the six months ended
December 31, 2009, and consisted of the purchase of equipment primarily due to
the new pharmacy locations.




Net cash used in financing activities
from continuing operations.   Net cash used in financing
activities from continuing operations was $93,029 for six months ended December
31, 2009, and consisted of long-term debt repayments of $75,001 and principal
payments on the capital lease obligation of $18,028.





Asset security
interest.  DAW has an agreement with its major supplier to
purchase pharmaceuticals.  This agreement terminates January 31,
2012.  Payment for merchandise delivered is secured by a first primary
interest in all assets of DAW.  As noted above, as of February 3,
2010, the Company no longer DAW.


16




Item
4(T).   Controls and Procedures




Evaluation
of Disclosure Controls and Procedures.




We
maintain a system of disclosure controls and procedures that are designed for
the purposes of ensuring that information required to be disclosed in our SEC
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosures.   As of the end of the period covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended.  Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are
effective.




Changes
in Internal Control over Financial Reporting.




There has
been no change in our internal control over financial reporting during the
quarter ended December 31, 2009, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.


17





PART
II - Other Information




Item 2.  Unregistered Sales
of Equity Securities and Use of Proceeds





On May
12, 2003, we announced that our Board of Directors had authorized the repurchase
of up to 150,000 shares of our 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, of which there remains 148,000 shares
authorized for repurchase.  There was no common stock repurchased or
sales of unregistered securities for the six months ended December 31,
2009.





Item
6.  Exhibits





Exhibit 2.1
              
              Asset
      Purchase Agreement, dated as of October 22, 2009, among Walgreen Eastern
      Co., Inc., D.A.W., Inc. and Nyer Medical Group, Inc. (Incorporated by
      reference to the Company’s Current Report on Form 8-K filed October 23,
      2009.)Exhibit
      2.2
              
              Transaction
      Agreement, dated as of October 23, 2009, among, D.A.W., Inc., Nyer Medical
      Group, Inc. and certain management investors listed
      therein.  (Incorporated by reference to the Company’s Current
      Report on Form 8-K filed October 23, 2009.)Exhibit
      2.3
              
              Plan
      of Dissolution of Nyer Medical Group, Inc.  (Incorporated by
      reference to Annex C of the Company’s Preliminary Proxy Statement for a
      Special Meeting of Shareholders filed November 9,
2009.)Exhibit
      31.1
              
              Certification
      Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act
      of 1934 (filed herewith).Exhibit
      31.2
              
              Certification
      Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act
      of 1934 (filed herewith).Exhibit
      32.1
              
              Certification
      Pursuant to 18 U.S.C. Section 1350 (furnished
herewith).Exhibit
      32.2
              
              Certification
      Pursuant to 18 U.S.C. Section 1350 (furnished
  herewith).


18





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.
                  RegistrantDate:  February
      16, 2010
                By:
                /s/ 
      Mark DumouchelName:
                Mark
      DumouchelTitle:
                President
      and Chief  Executive Officer
                  (Principal
      Executive Officer)Date:  February
      16, 2010
                By:
                /s/
      Sandra M. ZimmermanName:
                Sandra
      M. ZimmermanTitle:
                Chief
      Financial Officer
                  (Principal
      Financial Officer)


19