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

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 o

Non-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 INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets (unaudited) as of December 31, 2009, and June 30, 2009	3
	Consolidated Statements of Operations (unaudited) for the three and six months ended December 31, 2009 and 2008	4
	Consolidated Statements of Cash Flows (unaudited) for the three and six months ended December 31, 2009 and 2008	5
	Selected Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4T.	Controls and Procedures	17

	PART II – OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 6.	Exhibits	18
	Signatures	19

PART I—Financial Information

Item 1. Financial Statements

NYER MEDICAL GROUP, INC.

Consolidated Balance Sheets (unaudited)

	December 31			June 30
	2009			2009
Assets
Current assets:
Cash	$	1,356,865		$	62,752
Accounts receivable, net of allowance for doubtful accounts of $18,200 at December 31, 2009, and June 30, 2009		5,152,052			5,348,256
Inventories, net		6,661,100			6,966,107
Prepaid expenses and other current assets		382,297			979,226
Current portion of deferred tax assets		361,300			361,300
Assets to be disposed of from discontinued operations		105,200			219,476
Total current assets		14,018,814			13,937,117
Property and equipment, net		1,207,891			1,393,844
Goodwill		2,593,616			2,593,616
Other intangible assets, net		582,048			625,959
Long-term portion of deferred tax assets		353,200			353,200
Other assets		34,028			36,067
Total assets	$	18,789,597		$	18,939,803
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term debt and lease financing obligations	$	106,058		$	106,058
Current portion of long-term debt due related parties		1,580,004			80,004
Accounts payable		6,867,582			6,495,687
Accrued expenses and other current liabilities		812,260			1,128,376
Liabilities to be disposed of from discontinued operations		-			310,771
Total current liabilities		9,365,904			8,120,896
Long-term debt and lease financing obligations, net of current portion		262,847			315,876
Long-term debt, net of current portion, due related parties		173,329			1,713,329
Total liabilities		9,802,080			10,150,101
Commitments and contingencies
Shareholders' 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			400,000
Common 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			398
Additional paid-in capital		17,832,887			17,824,763
Accumulated deficit		(9,245,768	)		(9,435,459	)
Total shareholders' equity		8,987,517			8,789,702
Total liabilities and shareholders' equity	$	18,789,597		$	18,939,803

See accompanying notes to consolidated financial statements.

NYER MEDICAL GROUP, INC.

Consolidated Statements of Operations (unaudited)

	For the three months						For the six months
	ended December 31						ended December 31
	2009			2008			2009			2008
Net revenues:
Sales	$	17,800,466		$	17,446,053		$	35,181,823		$	34,165,135
Dispensing fees		1,777,977			1,540,716			3,511,894			2,446,142
Total net revenues		19,578,443			18,986,769			38,693,717			36,611,277
Cost and expenses:
Cost of sales		14,033,577			13,990,704			27,717,832			26,964,744
Selling, general, and administrative expenses		5,410,225			4,933,177			10,944,996			9,306,182
Depreciation and amortization		131,852			134,689			275,293			279,327
Total costs and expenses		19,575,654			19,058,570			38,938,121			36,550,253
Income (loss) from operations		2,789			(71,801	)		(244,404	)		61,024
Other income (expense), net:
Interest expense		(40,749	)		(44,774	)		(86,563	)		(92,169	)
Interest income		3,181			1,280			6,620			4,403
Other income (expense)		(10,070	)		4,672			(8,004	)		6,791
Total 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			236,879
Net gain from discontinued operations		-			277,249			394,222			225,643
Net (loss) income	$	(31,843	)	$	224,709		$	189,691		$	214,271

Basic 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			0.05
Earnings (loss) per share	$	(0.01	)	$	0.06		$	0.05		$	0.05

Shares used in computing earnings (loss) per share:
Basic		3,978,199			3,978,199			3,978,199			3,978,199
Diluted		3,978,199			3,978,199			3,978,199			3,978,199

See accompanying notes to consolidated financial statements.

NYER MEDICAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

	For the six months
	ended December 31
	2009			2008
Operating activities:
Net income	$	189,691		$	214,271
Less gain from discontinued operations		394,222			225,643
Loss from continuing operations		(204,531	)		(11,372	)
Adjustments to reconcile (loss) income from continuing operations to cash provided by operating activities:
Depreciation		231,382			234,749
Amortization		43,911			44,578
Stock-based compensation expense		8,124			43,122
Deferred income taxes		-			46,000
Changes in operating assets and liabilities:
Accounts receivable		196,204			(670,177	)
Inventories		305,007			(329,067	)
Prepaid expenses and other current assets		596,929			96,347
Accounts payable		371,895			636,488
Accrued expenses and other current liabililties		(314,077	)		(55,431	)
Cash provided by operating activities, continuing operations		1,234,844			35,237
Cash (used in) provided by operating activities, discontinued operations		(332,273	)		676,786
Cash provided by operating activities		902,571			712,023
Investing 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			323,518
Cash at beginning of period		62,752			140,688
Cash at end of period	$	1,356,865		$	464,206

Supplemental disclosure of cash flow information:
Cash paid for interest	$	87,155		$	92,306
Cash paid (received) for income taxes (refunds), net	$	358,597		$	-

See accompanying notes to consolidated financial statements.

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 Principles™, (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.

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 30
	2009		2009
Vendor rebates receivable	$	276,804	$	906,372
Prepaid other		105,493		72,854
Total 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.

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:

	December 31, 2009						June 30, 2009
	Gross						Gross
	Carrying	Accumulated			Carrying		Carrying		Accumulated			Carrying
	Value	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:

	Amortization
Year	Amount
2010 (remaining 6 months)		43,911
2011		87,822
2012		85,716
2013		81,156
2014		81,156
2015		81,156
Thereafter		121,131
Total	$	582,048

4.	Indebtedness and related parties

Indebtedness

	December 31		June 30
	2009		2009
Related parties:
Convertible notes	$	1,500,000	$	1,500,000
Note payable, shareholder		253,333		293,333
		1,753,333		1,793,333
Less current portion of debt due related parties		1,580,004		80,004
Long-term portion of debt due related parties	$	173,329	$	1,713,329

Other debt:
Note payable, former shareholder	$	221,667	$	256,668
Obligations under capital leases		147,238		165,266
		368,905		421,934
Less current portion of debt		106,058		106,058
Long-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 30
	2009			2009
Accrued salaries and wages	$	738,939		$	732,989
Accrued income taxes		(4,197	)		198,139
Accrued other		77,518			197,248
Total accrued expenses and other current liabilities	$	812,260		$	1,128,376

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 30
	2009		2009
Assets:
Cash	$	-	$	2,275
Property and equipment, net		-		112,001
Current portion of deferred tax assets		105,200		105,200
Total assets	$	105,200	$	219,476
Liabilities:
Line of credit	$	-	$	300,000
Accrued expenses and other liabilities		-		10,771
Total 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 months
	ended December 31				ended December 31
	2009		2008		2009		2008
Sales	$	-	$	583,980	$	-	$	1,664,872
Pre-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”).

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 months
	ended December 31						ended December 31
	2009			2008			2009			2008
Numerator 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			225,643
Net (loss) income	$	(31,843	)	$	224,709		$	189,691		$	214,271

Denominator for basic and diluted earnings per common share calculation:
Weighted average common shares outstanding		3,978,199			3,978,199			3,978,199			3,978,199

Basic 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			0.05
Net (loss) income	$	(0.01	)	$	0.06		$	0.05		$	0.05

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 months
	ended December 31				ended December 31
	2009		2008		2009		2008
Stock options		901,000		1,614,000		901,000		1,614,000
Warrants		53,320		53,320		53,320		53,320
Convertible notes		815,217		815,217		815,217		815,217
Convertible preferred stock		218,000		218,000		218,000		218,000
		1,987,537		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.

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

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

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 31
					Change									Change
	2009		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.

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 31
							Change											Change
	2009			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 31
					Change									Change
	2009		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 31
							Change												Change
	2009			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.

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.

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.

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).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NYER MEDICAL GROUP, INC. Registrant
Date: February 16, 2010	By:	/s/ Mark Dumouchel

	Name:	Mark Dumouchel
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Date: February 16, 2010	By:	/s/ Sandra M. Zimmerman

	Name:	Sandra M. Zimmerman
	Title:	Chief Financial Officer (Principal Financial Officer)

NYER MEDICAL GROUP INC 10-Q