U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended May 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________________ to __________________________
Commission file number 0-18253
NDC Automation, Inc.
(Exact name of small business issuer as specified in its charter)
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Delaware 56-1460497
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
(Address of principal executive offices)
(704) 362-1115
(Issuer's telephone number)
N/A
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of June 15, 1998, there were 3,453,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes___; No X
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I N D E X
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
May 31, 1998 (Unaudited) and November 30, 1997 3 - 4
Condensed Statements of Operations
Three and Six months ended May 31, 1998 and May 31, 1997
(Unaudited) 5
Condensed Statements of Cash Flows Six months ended May 31, 1998
and May 31, 1997 (Unaudited) 6
Notes to Condensed Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
(a) Exhibits -- Press Releases and other Exhibits 15
(b) Reports on Form 8-K 15
SIGNATURES 16
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2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
May 31, November 30,
1998 1997
(Unaudited)
- -------------------------------------------------------------------------------
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents $ 108,242 $ 72,368
Accounts receivables, net 490,244 670,489
Inventories 743,370 813,865
Costs and estimated earnings in excess of
billings on uncompleted contracts 49,926 23,406
Prepaid expenses and other assets 56,809 47,826
- -------------------------------------------------------------------------------
Total current assets $ 1,448,591 $ 1,627,954
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 155,507 152,016
Machinery and equipment 76,814 76,814
- -------------------------------------------------------------------------------
$ 1,658,944 $ 1,655,453
Less accumulated depreciation 567,783 526,076
- -------------------------------------------------------------------------------
$ 1,091,161 $ 1,129,377
- -------------------------------------------------------------------------------
$ 2,539,752 $ 2,757,331
===============================================================================
Note: The Condensed Balance sheet at November 30, 1997 has been taken from the
Audited Financial Statements at that date.
See Notes to Condensed Financial Statements
3
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May 31, November 30,
1998 1997
(Unaudited)
- -------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ 565,887 $ 427,634
Current maturities of long- term debt (Note 4) 1,075,145 65,022
Accounts payable and accrued expenses;
including affiliates $395,370 at 1998
and $307,815 at 1997 627,835 535,201
Billings in excess of costs and estimated
earnings on uncompleted contracts 10,184 29,838
- -------------------------------------------------------------------------------------------
Total current liabilities $ 2,279,051 $ 1,057,695
- -------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 4 ) $ - $ 1,042,055
- -------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ - $ -
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 1998 and 1997; 3,453,451 shares
Issued at 1998 and 1997 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (3,985,399) (3,588,519)
- -------------------------------------------------------------------------------------------
$ 260,701 $ 657,581
- -------------------------------------------------------------------------------------------
$ 2,539,752 $ 2,757,331
===========================================================================================
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4
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NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
Net revenues $ 895,302 $ 1,219,782 $ 1,641,197 $ 2,211,735
Cost of goods sold 538,680 749,706 972,585 1,343,538
- ---------------------------------------------------------------------------------------------------------------------
Gross profit $ 356,622 $ 470,076 $ 668,612 $ 868,197
- ---------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 191,104 $ 194,043 $ 356,853 $ 347,543
General and administrative 303,519 398,111 563,935 775,787
- ---------------------------------------------------------------------------------------------------------------------
$ 494,623 $ 592,154 $ 920,788 $ 1,123,330
- ---------------------------------------------------------------------------------------------------------------------
Operating loss $ (138,001) $ (122,078) $ (252,176) $ (255,133)
- ---------------------------------------------------------------------------------------------------------------------
Net interest expense (80,108) (37,151) (144,704) (100,808)
- ---------------------------------------------------------------------------------------------------------------------
Loss before income taxes $ (218,109) $ (159,229) $ (396,880) $ (355,941)
Federal and state income taxes (Note 2) - - - -
- ---------------------------------------------------------------------------------------------------------------------
Net loss $ (218,109) $ (159,229) $ (396,880) $ (355,941)
=====================================================================================================================
Weighted average number of common
shares outstanding 3,453,451 3,453,451 3,453,451 3,453,451
- ---------------------------------------------------------------------------------------------------------------------
Loss per common share - basic (Note 3) $ (0.06) $ (0.05) $ (0.11) $ (0.10)
Loss per common share - diluted (Note 3) $ (0.06) $ (0.05) $ (0.11) $ (0.10)
=====================================================================================================================
Dividends per common share $ - $ - $ - $ -
=====================================================================================================================
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See Notes to the Condensed Financial Statements
5
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NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
May 31, May 31,
1998 1997
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (66,956) $ 164,421
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment $ - $ 5,035
Purchase of property and equipment (3,491) (3,527)
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES $ (3,491) $ 1,508
- -----------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit agreement $ 138,253 $ (389,822)
Principal payments on long-term borrowings (31,932) (33,979)
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ 106,321 $ (423,801)
- -----------------------------------------------------------------------------------------
Effect of foreign currency exchage rates changes
on cash and cash equivalents $ - $ 3,916
- -----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents $ 35,874 $ (253,956)
Cash and cash equivalents:
Beginning 72,368 399,501
- -----------------------------------------------------------------------------------------
Ending $ 108,242 $ 145,545
=========================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 132,822 $ 113,620
Income taxes $ - $ -
=========================================================================================
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See Notes to the Condensed Financial Statements
6
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NDC AUTOMATION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The unaudited internal condensed financial statements and related notes have
been prepared by NDC Automation, Inc. (the "Company"), without audit pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash flows at May 31, 1998, and for all periods
presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed financial statements be
read in conjunction with the Company's audited financial statements and notes
thereto for the fiscal year ended November 30, 1997. The results of operations
for the six months ended May 31, 1998 are not necessarily indicative of the
operating results for the full year.
Note 2. Income Taxes
The Company did not recognize any tax benefits in 1998 for its current loss as
all prior taxes were recognized in the previous financial statements and
utilization of operating loss carryforwards in the future are not assured to be
realized.
Note 3. Loss per common share:
The Company adopted SFAS No. 128, Earnings per share, in 1998. The Statement
establishes new standards for computing and presenting earnings (loss) per
share, and requires a dual presentation of basic and diluted earnings (loss) per
share. Basic earnings (loss) per share exclude dilution and is computed by
dividing income (loss) available to common stockholders by the weighted average
number of shares outstanding for the period. Diluted earnings (loss) per share
reflect the potential dilution that could occur if securities or other contracts
to issue common stock were exercised. Earnings (loss) per share presentations
for all prior years have been restated to reflect the adoption of SFAS No. 128.
7
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NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 4. Pledged Assets, Note Payable, Bank and Long-Term Debt
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The Company has the following note payable to a Bank at May 31, 1998:
The Loan Agreement allows the Company to borrow up to $1,250,000 and bears
interest at the lender's prime rate plus 1.50% per annum for the first $450,000
outstanding and prime plus 2.75% per annum for amounts in excess of $450,000.
The Company's loan outstanding shall not exceed the lesser of (a) U.S.
$1,250,000 or (b) 80% of qualified accounts receivable plus 50% of all Eligible
Inventory (as defined in the loan agreement) with a $400,000 cap on loans based
on Eligible Inventory. The loan agreement is further secured by 1) an Inventory
Repurchase Agreement and 2) a $450,000 irrevocable letter of credit issued by a
Swedish bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to repay the letter
of credit bank any funds it disburses under the letter of credit. The Company is
ultimately responsible to repay to NDCab for any amounts it pays in reimbursing
the letter of credit bank . The Repurchase Agreement guarantees that NDCab will
repurchase on certain conditions up to $400,000 worth of inventory, thereby
providing funds to pay lender should the Company be in default on its loan
obligations. The termination date of the Loan Agreement is
September 30, 1998 or upon demand by the lender. (1)(2) $ 565,887
================================================================================== ================
Long-term debt consists of the following at May 31, 1998:
Mortgage note payable to a bank, based on a 9.5% fixed rate. Original principal
balance to be repaid in twenty-three (23) consecutive monthly principal and
interest payments of $13,912, with one final payment of approximately $1,007,403
due on May 16, 1999 . The note is collaterized by the Company's land and
building with a carrying value of $999,588 The loan also contains certain
financial covenants to which the Company must adhere. As of May 31, 1998, the
Company obtained waivers for certain financial covenants as specified by the
Mortgage note agreement.
$ 1,075,145
Less current maturities: 1,075,145
- ---------------------------------------------------------------------------------- ----------------
$ -
================================================================================== ================
(1) The prime rate at May 31, 1998 was 8.50%
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory, software and intangibles.
Maturities of long-term debt at May 31, 1998 are as follows:
Year Ending
May 31,
- ------------------- -------------------------------------------------------------- ----------------
1999 $ 1,075,145
2000 -
- ------------------- -------------------------------------------------------------- ----------------
$ 1075,145
=================== ============================================================== ================
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8
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NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 5. Continued operations
The Company has suffered a significant loss from operations in 1997 and 1998.
Should such losses continue its total liabilities will exceed its total assets.
This raises substantial doubt about the Company's ability to continue as a going
concern.
Management has made plans in regards to these matters to develop an operating
plan that will increase revenues and minimize losses. This plan includes a
reorganization of present resources and reductions of fixed expenses to support
the following :
o Establish and develop strategic alliances with selected customers
o Pursue AGV system business in selected market niches
o Grow the distribution business by adding new supplementary products
o Develop a strong market position in the industrial truck market
o Expand the aftermarket sales business
The Company is also pursuing raising additional equity to assist in reaching its
goals.
There can be no assurance that the Company can successfully meet the objectives
of such plans.
9
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements (including the notes thereto) presented elsewhere herein.
Overview
The Company derives virtually all of its revenues from the sale of
hardware, software and engineering services in connection with projects
incorporating its Automated Guided Vehicle (AGV) control technology. In years
prior the Company's net revenues from AGV systems, vehicles and technology were
derived primarily from sales to customers serving two industries -- textiles and
newspaper publishing. Net revenues since 1995 however have been derived from
other industries, e.g. automotive, CD manufacturing, food. The Company's results
of operations can be expected to continue to depend substantially upon the
capital expenditure levels in those industries and in other industries that it
may enter. During 1996 and for the first three quarters of 1997, the Company
refocused its sales efforts to existing original equipment manufacturers (OEMs)
and system integrators in the AGV systems industry. Such OEMs and system
integrators have historically sold products to end users to whom the Company
occasionally had direct sales. The Company reduced its sales effort to such end
users to avoid competing with its intended OEM customers. In September of 1997,
the Company began to pursue AGV system sales directly to end users in selected
market niches to supplement revenues obtained from OEMs and system integrators.
Due to the long sales cycle involved, uncertainties in timing of projects,
and the large dollar amount a typical project usually bears to the Company's
historical and current quarterly and annual net revenues, the Company has
experienced, and may be expected to continue to experience, substantial
fluctuations in its quarterly and annual results of operations.
The Company sells its products and services primarily in two ways.
Vehicles, technology and other products and services may be sold in a "project"
that becomes an integrated AGV system. The primary business is to sell hardware,
software and services as standard items, with less involvement by the Company in
overall system design. The Company generally would recognize lower net revenue
but would realize a higher gross profit margin percentage in selling standard
items, in each case compared to the sale of a project, due to the inclusion in
project sales of other vendors' products and services with margins generally
lower than the Company's own products and services. Between any given accounting
periods, the levels of and mixture of standard item sales and project sales can
cause considerable variance in net revenues, gross profit, gross profit margin,
operating income and net income.
Revenues from standard item sales are recognized upon shipment, while
revenues from project sales are recognized under the "percentage of completion"
method. Under this method, with respect to any particular customer contract,
revenues are recognized as costs are incurred relative to each major component
of the project. Although the percentage of completion method will ordinarily
smooth out over time the net revenue and profitability effects of large
projects, such method nevertheless subjects the Company's results of operations
to substantial fluctuations dependent upon the progress of work on project
components. Such components can differ markedly from one another in amount and
in gross profit margin.
Project contracts are billed upon attainment of certain "milestones." The
Company grants payment terms of 30 to 90 days to its customers. It typically
receives a cash advance ranging from 10% to 20% of the total contract amount.
Bills are thereafter delivered as milestones are reached. Upon delivery of the
project, the customer typically reserves a "retainage" of 10% to 20% pending
system acceptance.
10
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Notwithstanding the receipt by the Company of cash advances and periodic
payments upon reaching project milestones, the Company requires external
financing for its costs and estimated earnings in excess of billings on
uncompleted contracts, inventories, receivables and other assets.
The Company's backlog consists of all amounts contracted to be paid by
customers but not yet recognized as net revenues by the Company.
Strategy diversification: The Company will have to convert several OEM and
system integrators away from their own in-house AGV technology to the Company's
technology to increase its present market share. Such technology conversions, if
they take place at all, can take one to several years to complete. Such
customers must also replace in volume and margin what the Company could
otherwise obtain selling direct to end users. The Company's strategy of not
selling directly to end users contributed to the losses incurred by the Company
during 1997. The Company changed its sales approach and began soliciting its
products directly to end users during the fourth quarter of 1997 to ensure that
its technology is available to such end users. The Company will not be selling
directly to end users in situations in which a qualified OEM or OEMs are
specifying NDC controls in their system solution to the potential end users.
There can be no assurances that such a strategy will be successful in the short
or long term.
Distribution of products and technology: The Company also intends to
pursue other related products lines that can be distributed to its targeted
customers to supplement its existing AGV business. This should allow the Company
to grow, while making the Company less dependent on its present product line.
There can be no assurance, however that this strategy will meet management's
objectives for growth.
Forward-looking statements: This report (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operation, plans,
objectives, future performance and business of the Company.
These forward-looking statements involve certain risk and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
a) Revenues from end user systems sales and new OEMs may be lower than
expected, or sales by Munck Automation may be substantially lower than the
target of $9,400,000 over the initial three years of the agreement.
b) New product lines from Thrige and Netzler and Dahlgren (Teach-in) may not
be well received in the North American industrial truck market, thereby
restricting growth opportunities for the Company.
c) The Company's existing bank relationships may not be extended which would
cause the Company to default on its current obligations.
d) The Company might be unable to raise the additional working capital needed
to finance the current business strategy which may have a serious impact on
the Company's ability to sell its current and future products, as well as
satisfy existing banking relationships.
e) General economic or business conditions, either nationally or in the
markets in which the Company is doing business, may be less favorable than
expected resulting in, among other things, a deterioration of market share
or reduced demand for its products.
11
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RESULTS OF OPERATIONS
The table below shows (a) the relationship of income and expense items
relative to net revenues, and (b) the change between the comparable prior period
and current period, for the three-month and six-month periods ended May 31, 1998
and 1997, respectively. This table should be read in the context of the
Company's condensed statements of income presented elsewhere herein:
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Percentage of Change
Period to Period
Percentage of Net Revenues Increase(Decrease)
- --------------------------------- ------------------------------------------------------------------------------------
Three Six
Three Months Six Months Months Months
Ended Ended Ended Ended
May 31, May 31,
May 31, May 31, May 31, May 31, 1997 to 1997 to
1998 1997 1998 1997 1998 1998
% % % % % %
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Net Revenues 100.0 100.0 100.0 100.0 (26.6) (25.8)
Cost of Goods Sold 60.2 61.5 59.3 60.7 (28.2) (27.6)
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Gross Profit 39.8 38.5 40.7 39.3 (24.1) (23.0)
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Operating expenses:
Selling 21.4 15.9 21.7 15.7 (1.5) 2.7
General and administrative 33.9 32.6 34.4 35.1 (23.8) (27.3)
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
55.3 48.5 56.1 50.8 (16.5) (18.0)
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Operating income (loss) (15.5) (10.0) (15.4) (11.5) 13.0 (1.2)
Net interest expense: (8.9) (3.0) (8.8) (4.6) 115.6 43.5
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Loss before income taxes (24.4) (13.0) (24.2) (16.1) 37.0 11.5
Federal and state income taxes
(benefit) - - - - -
- --------- ------------ ----------- ------------- ------------ ----------- ------------
Net Loss (24.4) (13.0) (24.2) (16.1) 37.0 11.5
================================= ============= ============= ============= ============= ============= =============
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Quarter ended May 31, 1998 Compared to the Quarter Ended May 31, 1997
Net revenues decreased by $324,480 or 26.6% from $1,219,782 in the earlier
period to $895,302 in the latter period. The Company experienced lower revenues
during the quarter from OEM customers, system suppliers, and turnkey systems for
its AGV products compared to the prior year. The Company has not yet received or
recognized any significant revenues from its Strategic Alliance with Munck
Automation and presently does not expect its revenues to increase significantly
in the near future. In addition, revenues from the Motor In Wheel Drive product
line were approximately $100,000 lower compared to the prior year. The Company
will be focusing in the short term on niche market AGV turnkey system bookings
and revenues to offset the declining OEM revenues for the current year. There
can be no assurance that the Company will be successful in obtaining such sales.
Cost of goods sold decreased from $749,706 to $538,680 or 28.2% due primarily to
lower net revenues in 1998. As a percentage of net revenues, cost of goods sold
was comparable to 1997. Gross profit decreased by $113,454 or 24.1% from
$470,076 to $356,622, while gross profit as a percentage of net revenues
increased to 39.8% from 38.5% due to the same factor.
Selling expenses decreased from $194,043 to $191,104, or 1.5%. General and
administrative expenses decreased from $398,111 to $303,519, or 23.8% due
primarily to lower personnel cost , equipment leases, legal and depreciation
cost compared to the prior year. As a percentage of net revenues, general and
administrative expenses increased from 32.6% to 33.9%.
12
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Primarily as a result of the foregoing, operating loss increased by $15,923 from
$122,078 in the earlier period to an operating loss of $138,001 in the latter
period.
Net interest expense increased from $37,151 to $80,108, an increase of $42,957.
The net increase is primarily due to late payment interest accruals on trade
payables to Netzler and Dahlgren AB. A 16% annual interest rate on such payables
was charged .
The Company did not recognize any tax benefits in 1998 domestically for its
current loss as all prior taxes have been recognized in the previous financial
statements and utilization of operating loss carryforwards in the future are not
assured.
Primarily due to lower revenues in 1998 as described above the Company incurred
a net loss of $218,109 in 1998 compared to a net loss of $159,229 in 1997.
Backlog. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At May 31, 1998, the Company
had a backlog of approximately $1,020,000 compared to approximately $830,000 one
year earlier.
Six Months Ended May 31, 1998 Compared to Six Months Ended May 31, 1997
Net revenues decreased by $570,538, or 25.8%, from $2,211,735 in the earlier
period to $1,641,197 in the latter period. The Company experienced lower
revenues from OEM customers, system suppliers, and turnkey systems for its AGV
products compared to the prior year. The Company has not yet received or
recognized any significant revenues from its strategic alliance with Munck
Automation and presently does not expect its revenues to increase significantly
in the near future. In addition, revenues from the Motor In Wheel Drive product
line were approximately $200,000 lower compared to the prior year. The Company
will be focusing in the short term on niche market AGV turnkey system bookings
and revenues to offset the declining OEM revenues for the current year. There
can be no assurance that the Company will be successful in obtaining such sales.
Cost of goods sold decreased from $1,343,538 to $972,585, or 27.6%, due
primarily to the lower level of net revenues. As a percentage of net revenues,
cost of goods sold decreased from 60.7% to 59.3%. Gross profit decreased by
$199,585, or 39.3%, from $868,197 to $668,612, while gross profit as a
percentage of net revenues increased from 39.3% to 40.7%.
Selling expenses increased from $347,543 to $356,853, or 2.7% . General and
administrative expenses decreased from $775,787 to $563,935, or 27.3%, primarily
due to lower personnel cost, equipment leases, legal and depreciation cost
compared to the prior year.
Primarily as a result of the foregoing, the operating loss for the period was
$252,176 compared to an operating loss of $255,133 the prior year.
Net interest expense increased from $100,808 to $144,704, an increase of 43.5%.
The increase is primarily due to interest payable on late trade payables to
Netzler and Dahlgren Co AB.
The Company did not recognize any tax benefits in 1998 domestically for its
current loss as all prior taxes have been recognized in the previous financial
statements and utilization of operating loss carryforwards in the future are not
assured.
Primarily due to lower revenues in 1998 as described above the Company incurred
a net loss of $396,880 in 1998 compared to a net loss of $355,941 in 1997.
In response to the above losses the Company began reducing fixed expenses in May
1998 to minimize such losses. There can be no assurance that such reductions
will make the Company profitable.
13
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Liquidity and Capital Resources
The Company experiences needs for external sources of financing to support its
working capital, capital expenditures and acquisition requirements when such
requirements exceed its cash generated from operations in any particular fiscal
period. The amount and timing of external financing requirements depend
significantly upon the nature, size, number and timing of projects and
contractual billing arrangements with customers relating to project milestones.
The Company has relied upon bank financing under a revolving working capital
facility, as well as long-term debt and capital leases and proceeds of its
public offerings, and private offerings, to satisfy its external financing
needs.
During the six months ended May 31, 1998 net cash used in operating activities
was $66,596.
The Company entered into an Inventory and Accounts Receivable Loan and Security
Agreement ("Loan Agreement") February 28, 1997 with the National Bank of Canada
and National Canada Business Corp. (herein collectively called the "Lender").
The Loan Agreement allows the Company to borrow up to a maximum of $1,250,000.
The new agreement provides for an increase in potential available credit
compared to the maximum available credit of $750,000 under the prior credit
arrangement with NationsBank, N.A.
Loans made under the new Loan Agreement are evidenced by a demand promissory
Note. The Loan Agreement allows the Company to borrow pursuant to a borrowing
formula which is secured by Company's personal property as collateral. The
Company's outstanding loan amount at any one time shall not exceed the lesser of
(a) U.S $1,250,000 or (b) 80% of qualified accounts receivable ( as defined in
the Loan Agreement) plus 50% of all eligible inventory ( as defined in the Loan
Agreement) with a $400,000 cap on loans based on eligible inventory. The
borrowed funds will bear interest at the Lender's prime rate plus 1.5% per annum
for the first $450,000 outstanding and prime plus 2.75% per annum for amounts
outstanding in excess of $450,000. The Loan Agreement is further secured by 1)
an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit
issued by a Swedish bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to
repay the letter of credit bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab for any amounts
it pays in reimbursing the letter of credit bank. The Repurchase Agreement
guarantees that NDCab will repurchase from the Company on certain conditions up
to $400,000 worth of inventory, thereby providing funds to pay the Lender should
the Company default on its loan obligations.
The lender, at its discretion, may demand payment upon written notice to the
Company. The maturity date of the Agreement was April 1, 1998 and has been
extended to September 30, 1998, or upon demand by the Bank. The extension was
conditional upon Netzler & Dahlgren extending its $450,000 irrevocable Letter of
Credit to the Bank through November 1, 1998. To further secure Netzler &
Dahlgren for providing the Letter of Credit the Company entered into a
Reimbursement Agreement which under which the Company granted to Netzler and
Dahlgren a security interest in the Company's land and building; such collateral
is a junior lien to the primary mortgage lender, security interest.
During May 1997, the mortgage loan maturity date was extended from February 10,
1998 to May 16, 1999. The interest rate on the note was increased to 9.5% from
7.75% . The combined principle and interest monthly payment was changed to
$13,912 compared to $13,057 per the prior agreement.
During the second quarter of 1998 the Company had been delaying payments of
approximately $400,000 to its affiliate Netzler and Dahlgren so not to exceed
current borrowing maximums from the lender. On June 30, 1998 the Company signed
a promissory note to repay such debt over the next two years. The note is to be
repaid in 24 equal principal payments plus accrued interest at the rate of 16%
annually beginning July 31, 1998 .
There are no assurances that the deficiency in the cash flow will not worsen if
the Company does not generate enough new business. The Company is exploring the
possibility of raising additional equity capital or subordinated debt in order
to improve its financial position . There can be no assurance that the Company
will be successful in raising the additional capital or subordinated debt to
improve its financial position. The Company's ability to continue as a going
concern would be adversely affected if such equity and/or debt financing was not
obtained in the near future.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
.
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders of the Company was held on May 8,
1998.
(b) The following individuals were elected directors of the Company:
Goran P. R. Netzler
Ralph Dollander
Jan H. L. Jutander
Richard Schofield
(c) Other matters voted upon and voting were as follows:
(i) Ratification of the selection of McGladrey & Pullen, LLP by the Board of
Directors as the Company's independent auditors.
For Abstain Against
--- ------- -------
3,053,147 8,600 13,935
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Press Releases:
None
(b) Reports on Form 8-K
None.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NDC AUTOMATION, INC.
(Registrant)
BY: /s/ Ralph Dollander
---------------------------
Ralph Dollander
President
BY: /s/ Claude Imbleau
---------------------------
Claude Imbleau
VP - Finance & Administration
(Chief Financial Officer)
Date: July 9,1998
16
<PAGE>
EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
<TABLE>
<CAPTION>
<S> <C>
Designation Number
Under Item 601 of Page
Exhibit Number Regulation S-K Exhibit Description Number
- ------------------ --------------------- ---------------------------------------------------------- ------
(A) Exhibits:
1. 10 Confirmation letter for extending Line of Credit from 18
National Canada Business Corp. to NDC Automation, Inc.
dated April 1, 1998.
2. 10 Reimbursement Agreement between NDC Automation, Inc. and 19-20
Netzler & Dahlgren Co AB dated June 29, 1998.
3. 10 Deed of Trust between NDC Automation, Inc. and Netzler & 21-25
Dahlgren Co AB dated June 29, 1998.
4. 10 Promissory Note between NDC Automation, Inc. and Netzler & 26-27
Dahlgren Co AB dated June 30, 1998.
5. 27 Financial schedule 28
</TABLE>
17
<PAGE>
NATIONAL CANADA Two First Union Center
BUSINESS CORP. Suite 2020
A National Bank Charlotte, NC 28282
OF CANADA SUBSIDUARY Telephone: (704) 358-9300
Fax: (704) 358 0505
April 1, 1998
Mr. Claude Imbleau
Vice President- Finance
NDC Automation, Inc.
3101 Latrobe Drive
Chadotte, NC 28211
Dear Claude:
By this letter, l am pleased to notify you that National Canada Business Corp.
(NCBC) has extended the Termination Date of the $1,250,000 Revolving Line of
Credit provided to NDC Automation, Inc. through September 30, 1998 subject to
the following conditions: First, the expiration date of Letter of Credit No.
3300/lR007889GBG in the amount of $450,000.00 must be extended through November
1, 1998. Second; Letter of Credit No. 3300/lR007889GBG must be amended to
reflect the Inventory and Accounts Receivable Loan and Security Agreement
referred to therein as having been executed on February 28, 1997 versus the
February 27, 1997 that is currently shown. All other terms and conditions on
this Demand Loan remain the same.
Should you have any questions, please call.
Sincerely,
/s/Gregg Simpson
---------------------------
Gregg Simpson
Vice President
Acknowledged and agreed this 1st day of April, 1998
NDC AUTOMATION, INC.
/s/ Claude Imbleau
---------------------------
Mr. Claude Imbleau
Vice President- Finance
<PAGE>
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT ("Agreement") is entered into as of June
29, 1998, between NDC AUTOMATION, INC., a Delaware corporation ("Borrower") and
NETZLER & DAHLGREN CO. AB, a Swedish corporation ("NDCAB").
WITNESSETH:
WHEREAS, Borrower is indebted to National Bank of Canada ("Lender") in
the principal sum of One Million Two Hundred Fifty Thousand Dollars
($1,250,000), as evidenced by a Promissory Note ("Note") dated February 28, 1997
(the "Loan"); and
WHEREAS, as a condition, to the Lender's willingness to renew and
extend the Loan, the Lender has required that NDCAB deliver a Letter of Credit
dated April 27, 1998 (as amended, renewed and extended, the "Letter of Credit")
for NDCAB's account as security for Borrower's obligations under the Note
("Obligations"); and
WHEREAS, in order to induce NDCAB to obtain the Letter of Credit,
Borrower has agreed to execute and deliver that certain deed of trust ("Deed of
Trust") dated of even date as security for (a) all amounts that NDCAB shall be
required to pay under the Letter of Credit, (b) all current and future accounts
payable by Borrower to NDCAB (the "Accounts") and (c) other amounts described in
the Deed of Trust;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. Reimbursement.
a. To the extent that any payment is made by NDCAB with respect
to any drawings by the Lender under the Letter of Credit,
Borrower shall reimburse NDCAB in full for the amount of the
payment made by NDCAB, said reimbursement to be made within
thirty (30) days after Borrower's receipt of written notice
from NDCAB that such amounts are due and payable.
b. In addition, Borrower shall reimburse NDCAB for reasonable
attorney's fees required to collect any amounts owed by
Borrower to NDCAB under this Agreement. As used in this
Agreement, the phrases "attorneys' fees" or "reasonable
attorneys' fees" shall mean attorneys' fees and expenses which
are reasonable in amount, based upon the standard hourly rates
of the attorneys and paralegals performing the tasks, and
determined without reference to any statutory presumption
regarding amount.
2. Miscellaneous.
a. This Agreement is intended only to define the relative rights
of Borrower and NDCAB, and nothing set forth in this Agreement
is intended to or shall impair the obligations of NDCAB to pay
any amounts as and when the same shall become due and payable
in accordance with the terms of the Letter of Credit.
b. This Agreement shall be construed under the laws of the state
of North Carolina.
c. This Agreement shall become effective upon its execution by
Borrower and NDCAB and shall continue in full force and effect
and may not be terminated or otherwise revoked by any Borrower
until all of the Obligations shall have been indefeasibly paid
in full and discharged; provided, however, that if the Letter
of Credit shall ever terminate or expire without having been
drawn upon, then this Agreement shall terminate.
[SEE ATTACHED SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, Borrower and NDCAB have executed and
delivered this Reimbursement Agreement as of the date first above written.
BORROWER:
NDC AUTOMATION, INC.,
a Delaware corporation
By: /s/Ralph Dollander
------------------------------
Title: President
------------------------------
NDCAB:
NETZLER & DAHLGREN CO. AB,
a Swedish corporation
By: /s/ Goran Netzler
------------------------------
Title: President
------------------------------
-2-
<PAGE>
<TABLE>
<S> <C>
SATISFACTION: The debt secured by the within Deed of Trust
together with the note(s) secured thereby has been satisfied
in full.
This the _____ day of ______________________, 19__
Signed:_________________________________________________
________________________________________________________
________________________________________________________
Recording Time, Book and Page
- ---------------------------------------------------------------- ---------------------------------------------------------------
Tax Lot No.: 157-064-01 __________________________________ Parcel Identifier No. ___________________________________________
Recording Time, Book and Page__________________________________
Verified by __________________________________________________ County on the ____ day of ___________________, 19__
by ____________________________________________________
Mail after recording to: Parker, Poe, Adams & Bernstein L.L.P. (GEG)
2500 Charlotte Plaza
Charlotte, NC 28244
Prepared By: Gates Grainger, Esq.
PPAB File #: 18354
Brief Description For The Index:
------------------
310 Latrobe Drive
------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA DEED OF TRUST
THIS DEED made as of June 29, 1998, by and between:
- --------------------------------------------- ------------------------------------------- ------------------------------------------
GRANTOR TRUSTEE BENEFICIARY
- --------------------------------------------- ------------------------------------------- ------------------------------------------
NDC AUTOMATION, INC., a CHARLES B. LEE, JR. NETZLER & DAHLGREN CO. AB, a
Delaware corporation Swedish corporation
- --------------------------------------------- ------------------------------------------- ------------------------------------------
Address: Address: Address:
310 Latrobe Drive Parker, Poe, Adams & Bernstein L.L.P. SE 42980 Saro
Charlotte, NC 28211-4849 2500 Charlotte Plaza Sweden
Attn: Claude Imbleau Charlotte, NC 28244
- --------------------------------------------- ------------------------------------------- ------------------------------------------
Enter in appropriate block for each party: name, address, and, if appropriate,
character of entity, e.g. corporation or partnership.
</TABLE>
The designation Grantor, Trustee and Beneficiary as used herein shall include
said parties, their heirs, successors and assigns, and shall include singular,
plural, masculine, feminine or neuter as required by context.
WITNESSETH, that whereas the Grantor is indebted to the National Bank
of Canada ("NBC") in the amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000.00) (the "Loan") evidenced by a Promissory Note ("Note")
dated February 28, 1997, for which, Beneficiary has obtained a Letter of Credit
(as amended, renewed or extended, the "Letter of Credit") for Beneficiary's
account as security for Grantor's obligations under the Note, Grantor has agreed
to reimburse Beneficiary pursuant to the terms of the Reimbursement Agreement
("Reimbursement Agreement") dated of even date herewith between Borrower and
Beneficiary for any amounts paid by Beneficiary pursuant to its obligations
under the Letter of Credit and to have such indebtedness secured by this Deed of
Trust. In addition, Grantor is indebted to Beneficiary for accounts payable for
goods and services sold to Grantor by Beneficiary (all current and future
accounts payable by Grantor to Beneficiary are collectively referred to as the
"Accounts"), which debt Grantor has also agreed to secure with this Deed of
Trust. The final due date for payment of the indebtedness under the
Reimbursement Agreement and the Accounts, if not sooner paid, is May 1, 2008.
AND WHEREAS, This Deed of Trust is given wholly or partly to secure,
and shall secure, the Accounts and such other future obligations which may be
incurred hereunder or under the Reimbursement Agreement (collectively, the
"Obligations"). The amount of present Obligations secured hereunder is $390,000.
<PAGE>
Subject to the provisions hereof, the maximum principal amount
(including present and future advances) which may be secured hereunder at any
one time shall not exceed $1,800,000.00 provided such future Obligations are
incurred not later than fifteen (15) years from the date of this instrument and
provided that all conditions of the Reimbursement Agreement and this Deed of
Trust and other loan documents have been met and there is no default with
respect to the Accounts, the Reimbursement Agreement or this Deed of Trust.
NOW, THEREFORE, as security for said Obligations, any and all
reimbursement rights or rights under law arising for Beneficiary as a result of
the Letter of Credit or the Reimbursement Agreement, along with advancements and
other sums expended by Beneficiary pursuant to this Deed of Trust and costs of
collection (including attorneys' fees as provided for in the Reimbursement
Agreement) and other valuable consideration, the receipt of which is hereby
acknowledged, the Grantor has bargained, sold, given, granted and conveyed and
does by these presents bargain, sell, give, grant and convey to said Trustee,
his heirs, or successors, and assigns, the parcel(s) of land situated in the
City of Charlotte, Mecklenburg County, North Carolina (the "Premises"), and more
particularly described as follows:
See EXHIBIT A, attached hereto and incorporated
herein by this reference.
TO HAVE AND TO HOLD said Premises with all privileges and appurtenances
thereunto belonging, to said Trustee, heirs, successors, and assigns forever,
upon the trusts, terms and conditions, and for the uses hereinafter set forth.
If the Grantor pays the Obligations secured hereby in accordance with
their terms, together with interest thereon, and any renewals or extensions
thereof in whole or in part, all other sums secured hereby and shall comply with
all of the covenants, terms and conditions of this Deed of Trust, then this
conveyance shall be null and void and may be cancelled of record at the request
and the expense of the Grantor. If, however, there shall be any default (a) in
the payment of any sums due with respect to the Obligations, this Deed of Trust,
the Reimbursement Agreement or any other instrument securing the Obligations and
such default is not cured within thirty (30) days from Grantor's receipt of
written demand from Beneficiary that such sums are due and payable, or (b) if
there shall be default in any of the covenants, terms or conditions relating to
this Deed of Trust or any other instrument securing the Obligations and such
default is not cured within fifteen (15) days after written notice, then and in
any of such events, without further notice, it shall be lawful for and the duty
of the Trustee, upon request of the Beneficiary, to sell the land herein
conveyed at public auction for cash, after having first giving such notice of
hearing as to commencement of foreclosure proceedings and obtained such findings
or leave of court as may then be required by law and giving such notice and
advertising the time and place of such sale in such manner as may then be
provided by law, and upon such and any resales and upon compliance with the law
then relating to foreclosure proceedings under power of sale to convey title to
the purchaser in as full and ample manner as the Trustee is empowered. The
Trustee shall be authorized to retain an attorney to represent him in such
proceedings.
The proceeds of the Sale shall after the Trustee retains his
commissions, together with reasonable attorneys' fees incurred by the Trustee in
such proceeding, be applied to the costs of sale, including, but not limited to,
costs of collection, taxes, assessments, costs of recording, service fees and
incidental expenditures, the amount due on the Note hereby secured and
advancements and other sums expended by the Beneficiary according to the
provisions hereof and otherwise as required by the then existing law relating to
foreclosures. The Trustee's commission shall be three percent (3%) of the gross
proceeds of the sale or the minimum sum of $ N/A, whichever is greater, for a
completed foreclosure. In the event foreclosure is commenced, but not completed,
the Grantor shall pay all expenses incurred by Trustee, including reasonable
attorneys' fees, and a partial commission computed on three percent (3%) of the
outstanding indebtedness or the above stated minimum sum, whichever is greater,
in accordance with the following schedule, to-wit: one-fourth (1/4) thereof
before the Trustee issues a notice of hearing on the right to foreclosure;
one-half (1/2) thereof after issuance of said notice; three-fourths (3/4)
thereof after such hearing; and the greater of the full commission or minimum
sum after the initial sale. As used in this Deed of Trust, the phrases
"attorneys' fees" or "reasonable attorneys' fees" shall mean attorneys' fees and
expenses which are reasonable in amount, based upon the standard hourly rates of
the attorneys and paralegals performing the tasks, and determined without
reference to any statutory presumption regarding amount.
And the said Grantor does hereby covenant and agree with the Trustee as
follows:
1. INSURANCE. Grantor shall keep all improvements on said land, now or
hereafter erected, constantly insured for the benefit of the Beneficiary against
loss by fire, windstorm and such other casualties and contingencies, in such
manner and in such companies and for such amounts, not less than that amount
necessary to pay the Obligations secured by this Deed of Trust, and as may be
satisfactory to the Beneficiary. Grantor shall purchase such insurance, pay all
premiums therefor, and shall deliver to Beneficiary such policies along with
evidence of premium payment as long as any portion of the Obligations secured
hereby remains outstanding. If Grantor fails to purchase such insurance, pay
premiums therefor or deliver said policies along with evidence of payment of
premiums thereon, then Beneficiary, at his option, may purchase such insurance.
Such amounts paid by Beneficiary shall be added to the Obligations, and shall be
due and payable upon demand of Beneficiary. All proceeds from any insurance so
maintained shall at the
<PAGE>
option of Beneficiary be applied to the debt secured hereby and if payable in
installments, applied in the inverse order of maturity of such installments or
to the repair or reconstruction of any improvements located upon the Property.
2. TAXES, ASSESSMENTS, CHARGES. Grantor shall pay all taxes,
assessments and charges as may be lawfully levied against said Premises within
thirty (30) days after the same shall become due. In the event that Grantor
fails to so pay all taxes, assessments and charges as herein required, then
Beneficiary, at its option, may pay the same and the amounts so paid shall be
added to the Obligations, and shall be due and payable upon demand of
Beneficiary.
3. ASSIGNMENT OF RENTS AND PROFITS. Grantor assigns to Beneficiary, in
the event of default, all rents and profits from the land and any improvements
thereon, and authorizes Beneficiary to enter upon and take possession of such
land and improvements, to rent same, at any reasonable rate of rent determined
by Beneficiary, and after deducting from any such rents the cost of reletting
and collection, to apply the remainder to the debt secured hereby.
4. PARTIAL RELEASE. Grantor shall not be entitled to the partial
release of any of the above described property unless a specific provision
providing therefor is included in this Deed of Trust. In the event a partial
release provision is included in this Deed of Trust, Grantor must strictly
comply with the terms thereof. Notwithstanding anything herein contained,
Grantor shall not be entitled to any release of property unless Grantor is not
in default and is in full compliance with all of the terms and provisions of any
document evidencing the Obligations, the Reimbursement Agreement and this Deed
of Trust.
5. WASTE. The Grantor covenants that it will keep the Premises herein
conveyed in as good order, repair and condition as they are now, reasonable wear
and tear excepted, and will comply with all governmental requirements respecting
the Premises or their use, and that he will not commit or permit any waste.
6. CONDEMNATION. In the event that any or all of the Premises shall be
condemned and taken under the power of eminent domain, Grantor shall give
immediate written notice to Beneficiary and Beneficiary shall have the right to
receive and collect all damages awarded by reason of such taking, and the right
to such damages hereby is assigned to Beneficiary which shall have the
discretion to apply the amount so received, or any part thereof, to the
indebtedness due hereunder and if payable in installments, applied in the
inverse order of maturity of such installments, or to any alteration, repair or
restoration of the Premises by Grantor.
7. WARRANTIES. Grantor covenants with Trustee and Beneficiary that it
is seized of the Premises in fee simple, has the right to convey the same in fee
simple, that title is marketable and free and clear of all encumbrances, and
that it will warrant and defend the title against the lawful claims of all
persons whomsoever, except for the exceptions hereinafter stated. Title to the
property hereinabove described is subject to the following exceptions:
a. The lien of 1998 and subsequent years' taxes which are not yet
due and payable.
b. See EXHIBIT A, attached hereto and incorporated herein by this
reference.
8. SUBSTITUTION OF TRUSTEE. Grantor and Trustee covenant and agree to
and with Beneficiary that in case the said Trustee, or any successor trustee,
shall die, become incapable of acting, renounce his trust, or for any reason the
Beneficiary desires to replace said Trustee, then the Beneficiary may appoint,
in writing, a trustee to take the place of the Trustee, and upon the probate and
registration of the same, the trustee thus appointed shall succeed to all
rights, powers and duties of the Trustee.
9. THIS SECTION INTENTIONALLY DELETED.
10. THIS SECTION INTENTIONALLY DELETED.
11. INDEMNITY. If any suit or proceeding be brought against the Trustee
or Beneficiary or if any suit or proceeding be brought which may affect the
value or title of the Premises, Grantor shall defend, indemnify and hold
harmless and on demand reimburse Trustee or Beneficiary from any loss, cost,
damage or expense and any sums expended by Trustee or Beneficiary shall bear
interest as provided in documents evidencing the Obligations for sums due after
default and shall be due and payable on demand.
12. WAIVERS. Grantor waives all rights to require marshalling of assets
by the Trustee or Beneficiary. No delay or omission of the Trustee or
Beneficiary in the exercise of any right, power or remedy arising under the Note
or this Deed of Trust shall be deemed a waiver of any default or acquiescence
therein or shall impair or waive the exercise of such right, power or remedy by
Trustee or Beneficiary at any other time.
<PAGE>
13. CIVIL ACTION. In the event that the Trustee is named as a party to
any civil action as Trustee in this Deed of Trust, the Trustee shall be entitled
to employ an attorney at law, including himself if he is a licensed attorney, to
represent him in said action and the reasonable attorneys' fee of the Trustee in
such action shall be paid by the Beneficiary and added to the principal of the
Obligations secured by this Deed of Trust and bear interest at the rate provided
in documents evidencing the Obligations for sums due after default.
14. PRIOR LIENS. Default under the terms of any instrument secured by a
lien to which this Deed of Trust is subordinate shall constitute default
hereunder.
IN WITNESS WHEREOF, the Grantor has caused this instrument to be duly
executed under seal, the day and year first above written.
GRANTOR:
NDC AUTOMATION, INC.
ATTEST: a Delaware corporation
By: /s/ E. Thomas Watson
_____________________________
Title: ________ Secretary By: /s/ Ralph Dollander
[CORPORATE SEAL] Title: ________ President
STATE OF NC
COUNTY OF MECKLENBURG
I, RITA L. SMITH, a Notary Public for the above State and County,
hereby certify that E. THOMAS WATSON personally came before me this day and
acknowledged that he is Secretary of NDC AUTOMATION, INC., a Delaware
corporation, and that by authority duly given and as the acts of said
corporation, the foregoing instrument was signed in its name by its President,
sealed with its corporate seal and attested by him/her as its Assistant
Secretary.
WITNESS my hand and official seal, this the 6th day of July, 1998.
My commission Expires: 12-5-99 /s/ Rita L. Smith
______________________ ________________________________
[NOTARY SEAL] Notary Public
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All of that real property located in the City of Charlotte, Mecklenburg
County, North Carolina, and more particularly described as follows:
Being all of Parcel #2, containing 3.520 acres, more or less, of
the Arnold Palmer Corporate Center, as shown on map thereof
recorded in Map Book 21, Page 559, Mecklenburg County Public
Registry.
<PAGE>
PROMISSORY NOTE
3,204,690 .00 SWEDISH KRONA June 30,1998
FOR VALUE RECEIVED, NDC AUTOMATION, INC., a Delaware corporation ( the
"Borrower") hereby promises to pay to the order of
NETZLER & DAHLGREN CO AB., a Swedish corporation ( the "Lender") at its
offices in Saro, Sweden ( or such other place or places as the lender may
designate) the principal sum of up to
THREE MILLION TWO HUNDRED AND FOUR THOUSAND SIX HUNDRED AND NINETY
SWEDISH KRONA( 3,204,690.00 SEK)
which debt constitutes transactions between the parties before and up to
June 30, 1998. The term of the note shall be two years and payable per
attached schedule. The note shall accrue interest at the rate of
16.00% annually.
Payment may be accelerated by the borrower and netting of future
invoices between the companies shall be permitted. There will be no prepayment
penalties.
In the event that the note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all cost of collection, including reasonable attorneys' fees. All
attorneys' fees of the Lender payable by the borrower shall be (i) reasonable in
amount, (ii) determined without reference to any statutory presumption and (iii)
based upon actual time spent based upon customary hourly rates.
IN WITNESS WHEREOF, the Borrower has executed this Note under seals as
of the day and year first above written.
NDC AUTOMATION, INC. NETZLER & DAHLGREN CO AB
By /s/ Ralph Dollander By /s/ Goran Netzler
---------------------------- ----------------------
President President
26
<PAGE>
------------------------
Total Debt NDCA owes to NDCab in SEK 3,204,690.00
------------------------
<TABLE>
<CAPTION>
<S> <C>
7.60
SEK SEK Approximate
Interest Principle 24.00 Total Monthly equivalent in
Period # of days rate Amount interest Principle payments Payment US$
- --------------------------------------------------------------------------------------------------------------------
1 Jun-98 30 16% 3,204,690.00 42,729.20 133,528.75 176,257.95 $ 23,191.84
2 Jul-98 30 16% 3,071,161.25 40,948.82 133,528.75 174,477.57 $ 22,957.57
3 Aug-98 30 16% 2,937,632.50 39,168.43 133,528.75 172,697.18 $ 22,723.31
4 Sep-98 30 16% 2,804,103.75 37,388.05 133,528.75 170,916.80 $ 22,489.05
5 Oct-98 30 16% 2,670,575.00 35,607.67 133,528.75 169,136.42 $ 22,254.79
6 Nov-98 30 16% 2,537,046.25 33,827.28 133,528.75 167,356.03 $ 22,020.53
7 Dec-98 30 16% 2,403,517.50 32,046.90 133,528.75 165,575.65 $ 21,786.27
8 Jan-99 30 16% 2,269,988.75 30,266.52 133,528.75 163,795.27 $ 21,552.01
9 Feb-99 30 16% 2,136,460.00 28,486.13 133,528.75 162,014.88 $ 21,317.75
10 Mar-99 30 16% 2,002,931.25 26,705.75 133,528.75 160,234.50 $ 21,083.49
11 Apr-99 30 16% 1,869,402.50 24,925.37 133,528.75 158,454.12 $ 20,849.23
12 May-99 30 16% 1,735,873.75 23,144.98 133,528.75 156,673.73 $ 20,614.96
13 Jun-99 30 16% 1,602,345.00 21,364.60 133,528.75 154,893.35 $ 20,380.70
14 Jul-99 30 16% 1,468,816.25 19,584.22 133,528.75 153,112.97 $ 20,146.44
15 Aug-99 30 16% 1,335,287.50 17,803.83 133,528.75 151,332.58 $ 19,912.18
16 Sep-99 30 16% 1,201,758.75 16,023.45 133,528.75 149,552.20 $ 19,677.92
17 Oct-99 30 16% 1,068,230.00 14,243.07 133,528.75 147,771.82 $ 19,443.66
18 Nov-99 30 16% 934,701.25 12,462.68 133,528.75 145,991.43 $ 19,209.40
19 Dec-99 30 16% 801,172.50 10,682.30 133,528.75 144,211.05 $ 18,975.14
20 Jan-00 30 16% 667,643.75 8,901.92 133,528.75 142,430.67 $ 18,740.88
21 Feb-00 30 16% 534,115.00 7,121.53 133,528.75 140,650.28 $ 18,506.62
22 Mar-00 30 16% 400,586.25 5,341.15 133,528.75 138,869.90 $ 18,272.36
23 Apr-00 30 16% 267,057.50 3,560.77 133,528.75 137,089.52 $ 18,038.09
24 May-00 30 16% 133,528.75 1,780.38 133,528.75 135,309.13 $ 17,803.83
===============================================================
534,115.00 3,204,690.00 3,738,805.00 $ 491,948.03
===============================================================
</TABLE>
Page 27
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<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
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<PERIOD-START> DEC-01-1996
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0
0
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