<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24696
NATIONAL DIAGNOSTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-3248917
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
737B West Brandon Blvd., Brandon, Florida 33511
----------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (813) 661-9501
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 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
<TABLE>
<S> <C>
Class: Common Stock, No Par Value Outstanding at July 11, 1996: 2,573,077
Transitional Small Business Disclosure Format (check one) YES [ ] NO [X]
Page 1 of 17
</TABLE>
<PAGE> 2
NATIONAL DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL STATEMENTS
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1995 and June 30, 1996 3
Condensed Consolidated Statements of Operations
for the three and six months ended June 30,
1995 and 1996 5
Condensed Consolidated Statements of Cash Flows
for the three and six months ended
June 30, 1995 and 1996 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE> 3
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
ITEM - 1
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION> June 30,
December 31, 1996
1995 (Unaudited)
------------ -----------
<S> <C> <C>
Current assets:
Cash $ 128,094 $ 133,680
Accounts receivable, net of allowance of $342,900 in
1995 and $417,000 in 1996 1,500,841 2,075,015
Prepaid expenses and other current assets 301,761 168,984
------------ -----------
Total current assets 1,930,696 2,377,679
------------ -----------
Property and equipment 6,732,150 7,683,651
Less: accumulated depreciation and
amortization (2,197,420) (2,640,164)
------------ -----------
Net property and equipment 4,534,730 5,043,487
------------ -----------
Other assets:
Note receivable from related party - 77,904
Excess of purchase price over net assets
acquired, net of accumulated amortization
of $36,547 in 1995 and $49,035 in 1996 452,914 440,426
Organization and start-up costs, net 57,805 171,845
Deposits 53,115 64,474
------------ -----------
Total other assets 563,834 754,649
------------ -----------
$ 7,029,260 $ 8,175,815
============ ===========
</TABLE>
See Accompanying Notes.
3
<PAGE> 4
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
December 31, 1996
1995 (Unaudited)
------------ -----------
<S> <C> <C>
Current liabilities:
Lines of credit $ 409,500 $ 510,500
Note payable 8,000 -
Note due related party 49,243 50,000
Current installments of long-term debt 100,487 96,000
Current installments of obligations under
capital leases 648,909 878,000
Accounts payable 604,479 1,023,839
Accrued radiologist fees 225,815 319,111
Accrued expenses other 411,262 403,648
Due to related party 57,231 5,430
------------ -----------
Total current liabilities 2,514,926 3,286,528
Long-term liabilities:
Long-term debt, excluding current installments 541,124 497,429
Obligations under capital leases, excluding
current installments 2,489,444 2,674,503
Deferred lease payments 210,335 265,921
------------ -----------
Total liabilities 5,755,829 6,724,381
------------ -----------
Stockholders' equity:
Preferred stock, no par value, 1,000,000
shares authorized, no shares issued
and outstanding - -
Common stock, no par value, 9,000,000
shares authorized, 2,539,629 shares
issued and outstanding in 1995 and 1996 668 675
Additional paid-in capital 2,079,267 2,146,559
Retained earnings (deficit) (806,504) (695,800)
------------ -----------
Net stockholders' equity 1,273,431 1,451,434
------------ -----------
$ 7,029,260 $ 8,175,815
============ ===========
</TABLE>
See Accompanying Notes.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue, net $ 1,359,447 $ 2,293,429 $ 2,701,478 $ 4,483,135
------------ ----------- ----------- -----------
Operating expenses:
Direct operating expenses 771,007 1,136,255 1,448,524 2,192,411
General and administrative 670,400 783,444 1,136,857 1,506,348
Depreciation and amortization 204,454 256,026 406,808 500,907
------------ ----------- ----------- -----------
Total operating expenses 1,645,861 2,175,725 2,992,189 4,199,666
------------ ----------- ----------- -----------
Operating income (loss) (286,414) 117,704 (290,711) 283,469
Interest expense 77,749 116,093 153,287 213,930
Other income 10,691 9,183 17,997 41,625
------------ ----------- ----------- -----------
Income (loss) before income taxes (353,472) 10,794 (426,001) 111,164
============ =========== =========== ===========
Income taxes - - - -
Net income (loss) $ (353,472) $ 10,794 $ (426,001) $ 111,164
Net income (loss) per
common share $ (.21) $ - $ (.25) $ .04
------------ ----------- ----------- -----------
Weighted average number of common
shares outstanding 1,700,000 2,551,758 1,700,000 2,545,694
------------ ----------- ----------- -----------
</TABLE>
See Accompanying Notes.
5
<PAGE> 6
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months Three month Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (353,472) $ 10,334 $ (426,001) $ 110,704
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Income taxes - - (11,000) -
Depreciation and amortization 204,454 256,026 406,808 500,907
Provision for Bad Debts 38,338 51,700 103,738 74,100
(Increase) decrease in accounts receivable 3,646 (274,567) (303,668) (648,274)
Loss on disposition of equipment - 494 - 4,871
(Increase) decrease in prepaid
expenses and other current assets 5,705 108,773 (139,344) 54,873
Increase in organization & start-up costs - (134,728) (49,417) (134,728)
Increase (decrease) in accounts payable (67,090) 354,852 (90,118) 419,360
Increase (decrease) in accrued radiologist fees 98,148 37,913 164,095 93,296
Increase (decrease) in other accrued expenses 3 35,507) 42,237 (7,614)
Decrease in deferred lease payments - (10,339) - 55,586
---------- --------- ------------ -----------
Net cash provided (used) by operating activities (70,268) 364,951 (302,670) 523,081
---------- --------- ------------ -----------
Cash flows provided (used) by investing activities:
Purchases of property and equipment - (273,095) (391,910) (292,022)
Increase in goodwill - - (69,535) -
---------- --------- ------------ -----------
Net cash used by investing activities - (273,095) (461,445) (292,022)
---------- --------- ------------ -----------
Cash flows provided (used) by financing activities:
Increase in line of credit - 60,000 - 101,000
Proceeds from long-term borrowings 43,720 - 389,098 -
Repayment of long-term borrowings (21,003) (24,985) (334,570) (48,182)
Proceeds of borrowing from related parties - (2,328) - 16,255
Proceeds from other notes payable 61,136 - 109,833 -
Repayment from other notes payable (25,000) (4,644) (25,000) (8,000)
Principal payments under capital lease obligations (120,043) (138,379) (252,454) (275,187)
Increase in deposits (95,072) (11,359) (183,750) (11,359)
---------- --------- ------------ -----------
Net cash used by financing activities (156,262) (121,695) (296,843) (225,473)
---------- --------- ------------ -----------
Net increase (decrease) in cash (446,122) (29,839) (1,061,255) 5,586
Cash at beginning of period 882,377 163,519 1,497,510 128,094
---------- --------- ------------ -----------
Cash at end of period $ 436,255 $ 133,680 $ 436,255 $ 133,680
========== ========= ============ ===========
See Accompanying Notes. (continued)
</TABLE>
6
<PAGE> 7
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Supplemental disclosure of cash
flow information - Interest paid $76,000 $134,000 $153,000 $220,000
======= ======== ======== ========
Stock issued as satisfaction for related party debt $ - $ - $ - $ 67,299
======= ======== ======== ========
Asset added under capital lease $ - $ 66,214 $ - $689,337
======= ======== ======== ========
Note received for pre-opening costs $ - $ - $ - $ 77,904
======= ======== ======== ========
</TABLE>
See Accompanying Notes.
7
<PAGE> 8
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by National Diagnostics, Inc., and
Subsidiaries (the "Company") for quarterly financial reporting purposes are
the same as those disclosed in the Company's annual financial statements.
In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (which consist only of normal
recurring adjustments) necessary for a fair presentation of the
information presented.
The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company management believes the disclosures are adequate to
make the information not misleading, it is suggested that these quarterly
condensed consolidated financial statements be read in conjunction with
the audited annual financial statements and footnotes thereto.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
December 31, June 30, service
1995 1996 life (years)
------------ ---------- ------------
<S> <C> <C> <C>
Land $ 85,000 85,000
Buildings 253,041 253,041 39
Medical Equipment 5,200,475 6,037,067 7
Office furniture and equipment 477,739 524,149 7
Vehicles 232,542 228,165 5
Leasehold improvements 483,353 556,229 10
Construction in progress - -
------------ ----------
$ 6,732,150 $7,683,651
============ ==========
</TABLE>
(3) LINES OF CREDIT
The banks have a first security interest on certain accounts receivable.
The lines have varying interest rates ranging from bank index plus 1 to 2
percent (at June 30, 1996, 9.25%).
Line of credit limit $550,000
Qualifying borrowing base 550,000
Outstanding loan balance 510,500
Payment and declaration of dividends are restricted. In accordance with
the loan agreement the Company may not pay or declare dividends without the
prior written consent of the bank. No dividends have been paid or declared
at June 30, 1996.
8
<PAGE> 9
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(4) LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
December 31, June 30,
1995 1996
------------ ----------
<S> <C> <C>
Installment loans payable which consist of a
number of separate installment loan contracts
secured by equipment and vehicles. The loans
require monthly installments of principal and
interest over terms that vary from two to five
years. At June 30, 1996, the loans bear
interest at rates ranging from 9.5% to 12.25%. 346,334 299,990
Mortgage note payable in monthly installments
of $2,445.88 including interest at 8.75%;
maturing April, 2020; secured by
mortgaged real estate property. 295,277 293,439
----------- ---------
Total long-term debt 641,611 593,429
Less current installments of long-term debt 100,487 96,000
----------- ---------
Long-term debt, excluding current installments $ 541,124 $ 497,429
========== =========
The aggregate principal payments of long-term debt required annually are:
Six months ending December 31: 1996 $ 52,304
Year ending December 31: 1997 96,493
1998 91,967
1999 74,142
2000 5,184
2001 5,657
Thereafter 267,682
----------
$ 593,429
==========
</TABLE>
9
<PAGE> 10
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(5) LEASES
The Company has entered into capital leases for medical equipment which
expire in 2002. The gross amount of equipment and related accumulated
amortization recorded under capital leases are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ -----------
<S> <C> <C>
Medical equipment $5,012,412 $5,254,565
Less accumulated amortization 2,045,692 2,063,328
---------- ----------
$2,966,720 $3,191,237
========== ==========
</TABLE>
Amortization of assets held under capital lease is included with depreciation
expense.
The present value of future minimum capital lease payments is as follows:
<TABLE>
<S> <C>
Six months ending December 31, 1996 $ 375,060
Year ending December 31: 1997 878,556
1998 974,911
1999 610,316
2000 360,419
2001 278,474
Thereafter 74,767
----------
Present value of minimum capital lease 3,552,503
Less current installments of obligations under capital leases 878,000
----------
Obligations under capital leases, excluding
current installments $2,674,503
==========
</TABLE>
The Company is obligated under noncancellable operating leases that expire
through 2001.
Rental expense related to these noncancellable lease was approximately
$156,000 and $497,000 for the six months ended June 30, 1995 and 1996,
respectively.
10
<PAGE> 11
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(6) NOTES PAYABLE TO RELATED PARTIES
Note payable to related parties is as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ --------
<S> <C> <C>
Note payable with interest at 8.5%, payable in
twelve monthly installments of $4,167 plus
interest commencing September 1996. $ 49,243 $ 50,000
============ ========
</TABLE>
Interest expense to related parties totaled $760 and $2,000 for the six
months ended June 30, 1995 and 1996, respectively.
(7) OTHER NOTES PAYABLE
Other notes payable are summarized as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
----------- ---------
<S> <C> <C>
Note payable with interest at 9.5%, due
April, 1996; unsecured $ 8,000 $ -
=========== =========
</TABLE>
(8) INCOME TAXES
The Company had no income tax expense for the six months ended June 30,
1995 and 1996.
The income tax provision for 1995 and 1996 reconciled to the tax computed
at the statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Income taxes (benefit) at statutory rate $(25,000) $ 37,000
State income taxes (3,000) 4,000
Increase in valuation allowance 24,000 -
Nondeductible expenses 4,000 3,000
Utilization of operating loss carryforwards - (44,000)
--------- -------
$ - $ -
========= =======
</TABLE>
11
<PAGE> 12
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
The deferred tax asset and liability consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ ----------
<S> <C> <C>
Assets
Net operating loss carry forward $ 158,000 $ 107,000
Allowance for doubtful accounts 133,700 142,500
Deferred rents 75,800 107,700
Accrued compensation 18,600 -
Pre-opening costs 29,900 25,900
Acquisition basis difference 122,300 122,000
------------ ---------
538,300 505,100
Less: valuation allowance (310,900) (266,300)
------------ ---------
227,400 238,800
------------ ---------
Liabilities
Fixed assets 227,000 238,300
Goodwill 400 500
------------ ---------
227,400 238,800
Deferred taxes $ - $ -
============ =========
</TABLE>
At June 30, 1996 approximately $272,000 in net operating carry forwards
remain which will expire if not utilized by 2010.
(9) ORGANIZATION
The condensed consolidated financial statements include the accounts of
National Diagnostics, Inc. ("Company"), Alpha Associates, Inc.
("Associates"), Alpha Acquisitions Corp. ("Acquisitions"), SunPoint
Diagnostic Center, Inc. ("SunPoint"), National Diagnostics/Orange Park,
Inc. ("Orange Park"), National Diagnostics/Cardiology, Inc. ("Cardiology")
and National Diagnostics/Riverside, Inc. ("Riverside"). Associates and
Acquisitions hold 100% of the partnership interests in Brandon Diagnostic
Center, Ltd. ("Brandon"). National Diagnostics, Inc., is a holding company
which was formed in June, 1994. The Company, Associates, and Acquisitions
had common stockholders. In September, 1994, the stockholders exchanged
all of their shares of common stock of Associates and Acquisitions for
1,200,000 shares of common stock and 1,200,000 common share purchase
warrants exercisable at $7.20 per share of the Company. The stock exchange
resulted in a combination of entities under common control and was
accounted for by combining the historical amounts of the companies (similar
to a pooling of interests).
Effective September 20, 1994, the Company completed an Initial Public
Offering (IPO) of 500,000 units wherein each unit consists of one share of
common stock and one common share purchase warrant exercisable at $7.20
per share. The net proceeds from this sale were approximately $2,400,000.
On Novemer 7, 1994, the Company formed a wholly-owned subsidiary and opened
SunPoint Diagnostic Center, Inc. (SunPoint).
12
<PAGE> 13
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
On February 1, 1995, the Company formed a wholly-owned subsidiary, National
Diagnostics/Orange Park, Inc. (Orange Park) and purchased the assets of a
mobile company.
The Company provides medical imaging services to patients in Brandon
(Brandon), Ruskin (SunPoint), and greater Jacksonville area (Orange Park
and Cardiology), Florida.
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
unaudited financial statements and the related notes thereto for June 30,
1995 and 1996 include all normal and recurring adjustments which in the
opinion of management are necessary for a fair presentation and are
prepared on the same basis as the audited annual statements. The interim
results are not necessarily indicative of the results that may be
expected for the full fiscal year.
(10) LEGAL ACTION
On February 9, 1996 the East Pasco Radiologist physician group, which in
December, 1995 terminated its contract for reading services with the
Brandon and SunPoint centers, filed suit against the centers alleging the
centers materially breached the contract by failing to pay physician fees
timely and incorrectly billed certain procedures. The Company denies any
material breach of the contract. The court recently denied the plaintiff's
motion for partial summary judgment for $400,000 in damages. The case is
currently scheduled for mediation on October 16, 1996. Management feels it
has reserved an adequate loss provision in the event of an adverse outcome.
On March 10, 1995 legal action was instituted against A.T. Brod & Co., Inc.
(a national stock brokerage firm) by a terminated employee of A.T. Brod &
Co., Inc. ("A.T. Brod"). A.T. Brod was a major market maker for National
Diagnostics, Inc. stock. The action alleges wrongful discharge, breach of
contract, defamation of character, conspiracy and tortious interference
with a contract arising out of the alleged wrongful termination of the
plaintiff by A.T. Brod. The Company was named in the suit. Compensatory
and punitive damages of $2,830,000 are sought. On June 14, 1995, a motion
was made under the rules of the National Association of Dealers to compel
arbitration of the matter and to stay the action in entirety against the
Company pending the outcome of the arbitration. Upon receiving the motion,
the plaintiff's attorney indicated he agreed with the defendants' position,
consenting to arbitration and to stay the action pending the outcome of
that arbitration. Through August 1, 1996, the plaintiff's attorney has
taken no steps to progress his claim in arbitration. Based upon
information available to defendants' counsel through this date, counsel
indicates the claim appears to be not meritorious. The Company feels the
suit is without merit and intends to vigorously defend itself. The
ultimate outcome of this legal matter cannot be determined at this time,
and accordingly, no adjustments have been made to the consolidated
financial statements.
13
<PAGE> 14
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(11) SUBSEQUENT EVENT
The Company opened in July its fourth fixed site diagnostic center. The
Company entered into a lease for a 7,100 square feet free standing facility
located in the Riverside area of Jacksonville, Florida. The Company is
committed to pay build out costs approximating $150,000. The Company
expects the exercise of 100,000 warrants issued on July 25, 1996 with a
strike price of $3.00 per share to help finance the expansion. The Company
is also exploring the possibility of expanding its line of credit to
include all of its accounts receivable. This could potentially add
approximately $500,000 to its borrowing base.
The Company has entered into lease commitments for medical equipment it
will be utilizing in the new center. Cost of the equipment approximates
$480,000 which will be financed with 60 month leases to be accounted for as
capital leases. Payments will be made in monthly installment of
approximately $10,700. Additionally, the Company has accepted a proposal
for a Siemens Magnetom Open .2 Tesla magnet (MRI) at a cost of $837,000.
The Company is currently negotiating leasing terms for the magnet. Future
minimum lease payments (excluding the Magnetom) are as follows:
<TABLE>
<CAPTION>
FUTURE LEASE PAYMENTS
---------------------
<S> <C>
1996 $ 26,000
1997 153,000
1998 153,000
1999 153,000
2000 139,000
2001 84,000
Thereafter 9,000
</TABLE>
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
Net revenues for the six months ended June 30, 1996 were $4,483,135 compared to
$2,701,478 for the same period in 1995, representing a 66% increase. The
increase is primarily attributable to an increase in the volume of procedures
performed. The Company generated net revenues of $1,358,921 in the first half
of 1996 as a result of the addition of the National Diagnostics/Orange Park,
Inc. ("Orange Park") in February 1995 and National Diagnostics/Cardiology, Inc.
("Cardiology") in September 1995. In May, 1996 Orange Park and Cardiology were
merged.
Direct operating expenses for the six months ended June 30, 1996 were
$2,192,411 compared to $1,448,524 for the same period in 1995, representing a
51% increase. The increase in direct operating expenses was primarily due to
the addition of Orange Park and Cardiology. Direct operating expenses as a
percentage of net revenue decreased to 49.5% from 56.8% for the three months
ended June 30, 1996 and 1995, respectively. The decrease of direct costs as a
percent of net revenue was a result of certain cost cutting measures taken by
the Company in December 1995 including obtaining more favorable contracts for
medical supplies and radiology reading fees.
General and administrative expenses for the six months ended June 30, 1996 were
$1,506,348 compared to $1,136,857 for the same period in 1995, representing a
32.5% increase. The increase is primarily attributable to the addition of the
Orange Park and Cardiology facilities and additional personnel costs.
Personnel were added in response to the increase volume of procedures performed
overall and the expansion of facilities. General and administrative expenses
also decreased as a percent of net revenues to 33.6% for the six months ending
June 30, 1996 compared to 42% for the same period in 1995.
The substantial increase in net revenues over that experienced in 1995 (a 69%
or $934,000 increase in revenues over the quarter ending June 30, 1995) and
decrease of operating expenses as a percent of net revenue down to 94.8% from
121% resulted in a net profit of $10,794 for the three months ended June 30,
1996 from a net (loss) of $(355,472) for the three months ended June 30, 1995.
Net income for the Brandon Diagnostic Center ("Brandon"), the Company's most
mature center, increased to $181,357 on revenues of $1,202,997 for the three
months ended June 30, 1996 from $16,878 on revenues of $938,616 for the three
months ended June 30, 1995 as a result of expanded services and additional
capacity to perform services. A net loss for the SunPoint Diagnostic Center,
Inc. ("SunPoint") facility decreased to $18,114 on revenues of $310,852 for the
three months ended June 30, 1996 from a loss of $(112,869) on revenues of
$230,896 for the same period in 1995 as a result of increased revenues and
decreased expenses. National Diagnostics/Orange Park, Inc. ("Orange Park") did
not become a full fixed site facility until the 3rd quarter of 1995. However,
Orange Park realized a loss of $(43,226) on revenues of $779,582 for the
quarter ending June 30, 1996 compared to the preceding quarter's loss of
$(107,148) on revenues of $579,341. National Diagnostics/Cardiology, Inc.
("Cardiology") was not operational until the 3rd quarter of 1995 and was merged
into Orange Park im May 1996. The preceding Orange Park analysis contains the
pro forma merged operations. National Diagnostics, Inc. ("Parent") company
which provides executive management, billing and accounting functions for its
subsidiaries realized a loss of $(106,735) on management fees of $196,000 for
the quarter ending June 30, 1996 compared to a loss of $(206,174) on management
fees of $56,000 for the same period in 1995. The management fees charged to
its subsidiaries are eliminated upon consolidation. The billing services and
costs did not commence until the 3rd quarter of 1995.
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LIQUIDITY AND CAPITAL RESOURCES
The Company generated $364,951 from operations in the 2nd quarter 1996 compared
to the same period in 1995 when operations used $(70,268). Investing
activities used $273,000 for the acquisition of equipment. Financing
activities used $122,000; approximately $170,000 was used toward debt
retirement offset by approximately $60,000 of proceeds from additional
borrowing. The Company decreased its net cash balance after the above
transactions by approximately $30,000. The Company attributes the positive
performance experienced in the second quarter to the increase in revenues and
certain cost cutting measures the Company undertook in December 1995. Based on
the Company's belief that the positive performance from operations will
continue and other financing factors discussed below, the Company believes that
its presently anticipated short and long-term needs for operations, capital
debt repayments and capital expenditures with respect to its current operations
can be satisfied through internally generated funds, third party leasing, and
its existing credit facilities with South Trust Bank of West Florida. (See
also the Company's growth strategy below). There is no assurance that these
short-term needs can be met.
The Company issued in the 2nd quarter 33,448 common shares of stock to retire
approximately $67,000 of current debt owed to a Company executive.
Due to the rapid expansion of facilities and increase in additional personnel
and related costs the Company has continued to experience difficulty in meeting
timely its current obligations to its trade vendors. In December the
Company acted upon numerous annual cost cutting measures from which a partial
effect has already been realized in the 1st half of 1996. The Company expects
the positive effects of these savings and increased revenues to continue.
There is no assurance that these goals will be met.
Medical equipment, capital improvements, acquisitions and new center
development historically have been funded through the Company's initial public
offering in September 1994, third party capital lease and debt obligations and
internally generated cash flow. The leases are generally secured by the
equipment, and sometimes other assets, of particular facilities. Interest
rates in connection with the leases and borrowings range from fixed rates of up
to 12.25% to a variable rate equal to the bank prime rate plus 1%. Certain of
the Company's long-term debt obligations are personally guaranteed by the
Company's principal shareholders and their spouses.
The Company's remaining growth strategies will require additional funds. In
the event the Company proceeds with the establishment of additional facilities,
or encounter favorable acquisition opportunities in the near future, the
Company may incur, from time to time, additional indebtedness and attempt to
issue equity or debt securities in public or private transactions. The Company
entered into a contract effective April 1, 1996 with financial consultants.
They will assist in the formulation and execution of the Company's continued
acquisition and financing program. As partial compensation the Company intends
to issue warrants to purchase 40,000 common shares exercisable at $2.50 per
share and 40,000 common shares exercisable at $3.00 per share. Additionally,
the Company entered into a consulting contract effective April 1, 1996 to
structure the Company's management and financial information systems for future
expansion. As partial compensation on July 25, 1996 the Company issued
warrants to purchase 100,000 shares, exercisable at $3.00 per share. There is
no assurance that the Company will be successful in securing additional
financing or capital through equity or debt securities.
On March 6, 1995, Brandon Diagnostic Center, Ltd. entered into a credit
facility with SouthTrust Bank of West Florida, consisting of a $300,000
five-year term loan and a $500,000 revolving line of credit. The proceeds of
the term loan were used to refinance an existing $300,000 term loan with
another financial institution. Interest on both the revolving line of credit
and term loan are payable at the bank's prime rate (9.25% as of July 18, 1996),
plus one percent. As of August 8, 1996, the outstanding principal balance
thereunder was $460,500. Pursuant to the terms of the agreement, as of August
8, 1996, an additional 44,500 of available credit remained to be borrowed.
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The revolving line of credit discussed in the preceding paragraph is secured by
the Brandon facility's account receivables which approximated $911,000, or 44%
of the Company's total receivables, as of June 30, 1996. The Company's
receivables at June 30, 1996 increased 38% to $2,075,015 from December 31,
1995, and its receivables at December 31, 1995 were $1,500,841 or 144% higher
than at December 31, 1994. The company attributes this increase mainly to
start-up operations. Whiles the Company has experienced some delays in
collections at its newest facility, the Company feels it is merely a temporary
condition.
The revolving line of credit was renewed with an expiration date of January 31,
1997. The company is also discussing the possibility of increasing or
refinancing the line of credit by financing all of its trade receivables,
thereby expanding available credit by as much as $500,000. Additionally, the
company continues to place emphasis on the collection of receivables with
refinement of its existing billing and collection efforts.
The Company has over the last few years experienced increased pressures on
reimbursement from third parties. The Company expects such pressures to cause
reduced pricing in the aggregate for diagnostic procedures in the future. Due
primarily from the Company's revenue mix the effects of reduced pricing have
been minimized . Approximately 47% of which has been derived from private
insurance carriers, individuals, worker's compensation and other sources that
have not experienced reimbursement pressures characteristic of managed care
providers, Medicare and Medicaid. Additionally, the Company has entered into
certain capitation contracts with minimum flooring reimbursements which the
Company believes will ultimately bring new found business to the Centers.
The capitation contracts are fixed fee arrangements made with HMO's wherein the
Company receives a fixed fee per HMO participant regardless of whether the
participant receives patient services or not. A minimum floor reimbursement
(example: 65% of the Medicare allowable rate) is agreed to which serves to
minimize the risk to the Company should an excess number of participants
require patient services. The advantage to the Company results when the
aggregated fixed fee per HMO participant exceeds the fees earned from actual
HMO participant patient services rendered. Additionally, the Company may
obtain regular fee for service revenues from referred HMO participants for
services not covered under the capitation contract.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The "East Pasco Radiologists" legal action described in Note 10 to the
financial statements and more fully described in Part I Item 3 of Form
10-KSB for the year ending December 31, 1995 is in the discovery stage.
The court recently denied the plaintiff's motion for partial summary
judgment for $400,000 damages. The case is currently scheduled for
mediation on October 16, 1996.
The has been no material developments in the "Blackey" legal action
described in Note 10 to the financial statements and more fully described
in Part I Item 3 of Form 10-KSB for the year ending December 31, 1995.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.33 Lease Agreement dated August 15, 1995 between National
Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
relating to the Company's Riverside fixed site facility.
27 Financial Data Schedule (for S.E.C. only)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
June 30, 1996.
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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.
Date: August 12, 1996
NATIONAL DIAGNOSTICS, INC.
/s/ Curtis L. Alliston
---------------------------------------
Curtis L. Alliston
President and Chief Operating Officer
/s/ Dennis C. Hult
---------------------------------------
Dennis C. Hult
Comptroller
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NATIONAL DIAGNOSTICS, INC.
EXHIBIT INDEX TO FORM 10-QSB
Exhibits
10.33 Lease Agreement dated August 15, 1995 between National
Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
relating to the Company's Riverside fixed site facility.
27 Financial Data Schedule (for S.E.C. only)
20
<PAGE> 1
EXHIBIT 10.33
LEASE
THIS LEASE AGREEMENT (this "Lease") made this 15th day of August,
1995, effective February 1, 1996 by and between Sundance Partner II
(hereinafter called "Landlord"), and National Diagnostics/Riverside, Inc.,
(hereinafter called "Tenant").
WITNESSETH:
IN CONSIDERATION OF THESE PRESENTS, and in consideration of the mutual
covenants hereinafter contained, Landlord leases to Tenant and Tenant rents
from Landlord, the premises in Duval County, Florida, described and depicted in
Exhibit "A" (the "Premises"), which is the Building and the real property
described in Exhibit "B" (the "Land") on which it is located, in accordance
with the occupancy schedule described below for the aggregate term of Five (5)
years (the "Term") from and after July 1, 1996 (the "Beginning Date").
Provided Tenant complies with the following terms and conditions, Tenant shall
have quiet, continues and undisturbed possession of the Premises, free from the
claims of the Landlord, and all persons claiming under, by, or through the
Landlord, and free from the claims of all persons through and under whom the
Landlord claims.
THE TERMS AND CONDITIONS OF THIS LEASE are as follows:
OCCUPANCY SCHEDULE
1. Tenant has occupied, taken possession of, leased, and
commenced paying rent with respect to the areas designated on Exhibit "A" upon
the effective date of this Lease.
EXTENSION OF TERM
2. The Initial Term of this Lease shall automatically extend for
one (1) successive term(s) of five (5) year(s) ("Extended Term"), unless Tenant
notifies landlord, in writing, no later than ninety 90 days prior to the end of
the Initial Term that it elects that the Initial Term not be so extended. If
in accordance with such notice. All of the terms and conditions set forth in
this Lease for the Initial Term shall apply during the Extended Term, except as
otherwise expressly provided.
PURPOSES OF USE
3. The Premises shall be used as a medical office or for other
lawful purposes and for no other use or purpose during the Initial Term and the
Extended Term, if any, except upon the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant's use and occupancy of the
Premises shall conform to all applicable laws, ordinances, rules, regulations
and orders of the federal, state or local governments having jurisdiction over
the Premises or of any department thereof ("Applicable Law").
<PAGE> 2
RENT 4. Tenant shall pay Base Rent to Landlord monthly in advance beginning
when Landlord has obtained certificate of occupancy from all Governmental
Agencies and said rental space is ready for occupancy for Tenant in the
following amounts:
During the Initial Term, Tenant shall pay to Landlord, without notice or
demand, a base annual rental amount of $15.50 per square foot of Premises,
totaling One Hundred Ten Thousand Fifty Dollars ($110,050 ("Base Rent"),
together with applicable sales tax thereon of Six Thousand Six Hundred Twenty
Eight Dollars ($6,628) ("Sales Tax"), which sums Tenant shall pay in equal
monthly installments of $9,723.17 ("Monthly Base Installment"). The Monthly
Base Installment shall be paid in advance on or before the tenth (10th) day of
each and every month during the Initial Term and shall be considered delinquent
if not paid on or before the tenth (10th) day of such month.
Said Base rent is calculated based upon a charge of $15.50 per square foot per
year for gross floor area including the area occupied by interior and exterior
walls that represent a reasonable build out. This statement of the basis of
the Base Rent calculation is for information purposes only, it being understood
that the aforesaid Base Rent amount shall control if there is conflict. Each
monthly payment of Base Rent shall be due on the tenth day of each and every
month during the Term hereof without notice or demand, together with all
applicable sales and use taxes.
a. In the event the Rental Commencement Date or the date of
occupancy shall be a date other than the first day of a month, the Base Rent for
the first month of the Term shall be prorated for the actual number of days
during which Tenant shall occupy or have the right to occupy the Premises, based
upon a month of thirty (30) days duration.
b. Base Rent, all sums which Tenant is required to pay under this
Lease, and all other sums provided in this Lease to be paid by Tenant to
Landlord, constitute rent under this Lease, and if not paid within five (5) days
after the same are due, shall be considered delinquent. Tenant shall pay a late
payment fee in the following amounts if any payment (including, but not limited
to Monthly Base Rent, Operation and Maintenance Expense, taxes, charges and
costs) is received by Landlord more than fifteen (15) days subsequent to the due
date: (i) $50.00 if payment is not received within ten (10) days of the due date
for each payment, (ii) $100.00 if payment is not received within thirty (30)
days of due date for each payment, (iii) $150.00 if payment is not received
within forty-five (45) days of due date for each payment and (iv) $200.00 if
payment is not received within sixty (60) days of the due date for each payment.
Receipt of the late payment fee shall not act as a waiver of Tenant's default to
Landlord, nor shall the late payment fee off-set legal fees that are the
responsibility of Tenant.
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Tenant's covenant to pay Rent shall be independent of every other covenant in
this Lease.
RIGHT OF FIRST-REFUSAL TO PURCHASE
5. If during the term of this lease the Landlord shall have a bona
fide offer to purchase the Premises which the Landlord desires to accept, the
Landlord shall notify the Tenant in writing of such bona fide offer stating the
price and other terms thereof. Tenant shall have fifteen (15) days following
the mailing of this written notice within which to notify the Landlord in
writing if and that the Tenant desires to purchase the Premises at the same
price and on the same terms as contained in the bona fide offer received by
Landlord.
Any neglect or failure on the part of the Tenant to respond to the
Landlord's notice of the bona fide offer shall be conclusively deemed to be an
election not to purchase the Premises. If the Tenant elects to purchase the
Premises, the Landlord shall convey the Premises to the Tenant for the price and
on the terms contained in the bona fide offer. If the Tenant elects either
directly or indirectly not to purchase the Premises in accordance with the terms
and conditions of the bona fide offer, then the Landlord shall be at liberty to
sell and convey the Premises for acceptable to Landlord.
This right of first refusal shall exist with respect to the first of any
such bona fide offers that are acceptable to Landlord. Thereafter, this right
of first refusal shall lapse and be of no force and effect with respect to any
subsequent offers to purchase. As a condition precedent to Landlord's
obligation to sell to Tenant on terms whereby Landlord would provide purchase
money financing to Tenant, the credit worthiness and net worth of Tenant must be
at least as good as that existing on the Beginning Date of this Lease.
This lease may be terminated by mutual consent of both parties to said
Agreement.
3
<PAGE> 4
MAINTENANCE
6. During the entire term of this Lease, Landlord shall pay or
provide for the following items: (i) premiums for insurance on any buildings
and improvements, insurance against general liability risks and insurance for
loss of rentals, (ii) repairs and maintenance to the Building and its
mechanical equipment, the landscaping on the Property upon which the Building
is located, including but not limited to lawn service, routine periodic
maintenance activities, common area repairs, replacement and refurbishment of
exterior building lights, paving and striping, painting, repair of building
structural components including but not limited to the roof and roof membrane,
floor, walls, underground facilities, electrical service to the building and
other routine and extraordinary repairs and replacements not required as a
result of abuse, damage, neglect or destruction caused by Tenant or Tenant's
officers, employees, invitee, vendor's, clerks, agents, servants or others
whose presence or activities are authorized by Tenant, (iii) dues and
assessments of any property owner's association and expenses assessed with
respect to the Property under any applicable covenants, conditions, or
restrictions applicable to the Property, (iv) any deductible or co-insurance
amounts which Landlord is required to pay as result of the provisions of any
insurance policies obtained by the Landlord with respect to the Building, the
Property or liabilities arising with respect to any of them, (v) real estate ad
valorem taxes and assessments with respect to the real estate upon which the
Building is located, (vi) electrical service, water and sewage charges with
respect to the Building, and (vii) janitorial services for all common areas to
be provided by Landlord under the terms of this Lease.
JANITORIAL SERVICES
7. During the entire term of this Lease, Landlord shall provide
Janitorial services to the Building consisting of the following common areas.
The phrase "Common Area" shall mean, individually and collectively, such of the
areas and equipment located on or at the Medical Park and shall be maintained
(or caused to be maintained) by Landlord at Landlord's expense: all parking
areas (including employee parking areas), access roads, traffic signal
equipment, signs, truck, ways, driveways, entrances and exits, walk ways,
loading areas, passage ways, courts and ramps, landscaped and planting areas,
retaining walls and curbs, stairways, roofs, foundation, structural supports,
exterior walls, doors, window glass and plate glass located at the entrance to
the Premises, electrical systems, air conditioning equipment, plumbing,
sewerage lines, bus stops, lighting facilities, sound equipment, sprinklers,
and such other areas, facilities and improvements at, on or in the Medical
Park; as Landlord may expand same. No equipment or facility installed in a
premises leased by the Landlord to a tenant for the use of that tenant or
anywhere maintained for the private use of a single tenant shall be deemed
"Common Area." The
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<PAGE> 5
Common Area shall be operated by Landlord in a prudent and safe manner and
shall be maintained by Landlord in good condition and repair.
ADJUSTMENT OF RENT
8. The Base Rent provided by paragraph 4 shall be adjusted
effective on __________________________________ of each year commencing
__________________________, 199_ by $.25 per square foot per year for the total
Premises leased under said agreement. Said adjustment shall be added to the
initial Base Rent plus the previous adjustments to determine the Base Rent then
in effect. (See Exhibit "D" for Rental Schedule).
PLACE OF PAYMENT
9. Tenant shall pay the rent and any other moneys due to Landlord
at such place as Landlord may from time to time designate by written notice to
Tenant and, in default of such designation, then at the offices of Sundance
Partners II, Curt Alliston, Managing Partner, 737B West Brandon Blvd., Brandon,
FL 33511.
REQUIRED INSURANCE
10. At all times during the term of this Lease or its occupancy of
the Premises, whichever is longer, Tenant shall provide comprehensive liability
insurance with a single combined limit of_______________________________. The
insurance policy shall be written by an insurance company or companies
reasonably satisfactory to Landlord and any lender or mortgagee with respect to
the Premises and shall name as additional insured Landlord; the beneficiaries
of the land trust which is the Landlord and any corporations, partnerships or
trusts which are related, subsidiary or affiliated with any of said
beneficiaries as designated from time to time by Landlord; Tenant; and
Landlord's mortgagees from time to time, as their interests may appear and
shall provide that none of such insurance may be canceled except upon thirty
(30) days written notice to Landlord and any mortgagees of the Premises. The
liability insurance shall insure against any liability that may accrue against
the Tenant and additional insured on account of any occurrence in, on, or
originating from the Premises during the term of this Lease resulting in
personal injury, death, property damage, or other claim whatsoever; and said
policies shall include indemnity against loss, expense and damage of any and
every kind, including costs of investigation and attorney's fees and other
costs of defense. Tenant agrees to pay all premiums due on the Beginning Date;
and from time to time thereafter promptly as premiums become due or Tenant's
insurance companies may change, Tenant shall deliver an original or duplicate
original of all such policies to Landlord, together with evidence of payment of
premium thereon.
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WAIVER OF LANDLORD LIABILITY; INDEMNITY
11. Tenant waives, surrenders, and releases the Landlord, the
beneficiaries of the land trust which is the Landlord, and any corporations,
partnerships or trusts which are related, subsidiary or affiliated with any of
said beneficiaries from any and all claims for damage to goods, wares,
merchandise, persons, and property located in, upon and about the Premises or
on adjacent sidewalks and arising for any reasons whatsoever with respect to or
on account of the Premises during the term of this Lease, excluding the
negligence of Landlord, its agents, employees or contractors, or the failure of
Landlord to perform any of its obligations under this Lease, or the negligence
or other fault of other tenants, if any, of the Premises. Tenant shall pay all
losses and claims which would be paid by insurance which Tenant is required to
provide by this Lease, but which are not paid because of deductible and
co-insurance provisions of policies provided by Tenant.
HAZARDOUS MATERIALS AND POLLUTANTS
12. In the use and occupancy of the demised premises, the Tenant
shall conform to all laws, orders and regulations of any governmental
authority; (a) will ensure that all infectious and hazardous waste products,
all items contaminated with blood and other body fluids and all contaminated
sharps (syringes, scalpels, etc.) derived from the Demised Premises are
appropriately segregated in approved containers and disposed of in an approved
manner; (b) will comply with all applicable biohazardous waste disposal laws
and regulations; (c) will not use the Demised Premises in any manner which may
invalidate or increase the amount of premiums for any policy of insurance
affecting the Building, and if any additional amounts of insurance premium are
incurred, Tenant will pay to Landlord the additional amount on demand, provided
such payment shall not authorize such use; (d) will take all possible care to
conserve the premises by assuring that material not intended for introduction
into the sanitary sewer system (such as sanitary napkins and disposable
diapers) are excluded from same; (e) will ensure that no carts or wheeled
equipment are introduced into the Demised Premises or common areas which are
not equipped with full bumper (4 sides) systems; and (f) will not in any manner
deface or damage the property.
OFFICE PARKS; ASSOCIATION DUES
13. If the Premises are a part of an Office Park or other similar
development, Tenant, its successors, transferee and assigns agree to abide by
and comply with any and all reasonable restrictions and regulations which
generally affect Tenants and Owners of property within such Park or development
and which are promulgated from time to time, except requirements for payment of
association dues, fees, and assessments which Landlord is required to pay under
the terms of this Lease.
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<PAGE> 7
UTILITIES
14. Tenant shall maintain telephone, electrical, water, sewer
service and any other utilities to the Premises during the Term and shall pay
all charges assessed by the utilities providing the same before the same become
delinquent. Landlord shall furnish security and fire monitoring to the
premises. Prior to occupancy of the Premises, Tenant shall arrange for any
desired utility services which are not provided by Landlord and such utility
services shall be without liability or expense to Landlord.
CONDITION OF THE PREMISES
15. Tenant acknowledges that the Premises and all mechanical
equipment are leased in "as is" condition except as expressly provided herein
and that the same are suitable in every respect for Tenant's intended use.
ALTERATIONS
16. No alterations, repairs, or improvements in the Premises
requiring a governmental permit ("Alterations") shall be made unless a plan of
the same is first submitted to Landlord and until Landlord shall have given its
written consent to such Alterations; and all Alterations shall be performed by
firms and/or individuals approved by the Landlord at the expense of Tenant.
BUILDING STRUCTURE; MACHINERY AND EQUIPMENT
17. Tenant will not drill, or cause or permit any penetration
into the roof of the Building or any of its columns, girders, beams, and floors
without the written consent of the Landlord. Furthermore, Tenant shall have
the right to make such interior, cosmetic, non-storefront changes, alterations,
or additions to the Premises, and excepting structural or exterior alterations
or improvements, as may be proper, in Tenant's reasonable discretion, for the
conduct of its business and for the full beneficial use of the Premises,
permitted herein, provided Tenant shall pay all costs, expenses, and charges
thereof, shall make such changes, alterations, or additions in accordance with
applicable laws and building codes and in good and workman-like manner, and
shall fully and completely indemnity Landlord against any mechanics' lien or
other liens or claims in connection with the making of such changes,
alterations, or additions. Tenant shall not make, nor permit to be made, any
changes of a structural nature to the Premises or any storefront changes
without Landlord's prior written consent, which consent shall not be
unreasonably withheld.
LANDLORD INSPECTION, MAINTENANCE AND REPAIRS
18. Landlord and its agents and other representatives shall have
the right upon such prior notice as may be practicable under
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<PAGE> 8
the circumstances to enter any part of the Premises at all reasonable hours for
the purposes of performing inspections, maintenance, and repairs. If Tenant
fails to perform maintenance and repairs required by this Lease, Landlord may
provide such maintenance and repairs during the Term or after its expiration or
termination at Tenant's cost and expense, payable upon demand.
ASSIGNMENT
19. Tenant shall not assign this Lease or any part thereof, to any
person, firm or corporation except a parent, affiliate or subsidiary
corporation of similar financial strength to Tenant, nor permit the premises or
any part thereof to be used for any other purposes than those listed in
paragraph 3, without the written consent of Landlord, which consent shall not
be unreasonably withheld; however, in no event shall Tenant be released from
its obligations under this Lease except by written document specifically
providing for such release. It shall not be unreasonable for Landlord to deny
a release or refuse attornment if the assignee's use would or could involve
introduction of hazardous substances into or on the Premises. Tenant further
agrees that after Landlord's consent to assign, no assignment or transfer shall
be made unless the assignee thereof shall expressly assume and agree to perform
each and every of the covenants of this Lease which, by the terms hereof,
Tenant agrees to keep and perform, shall undertake to pay and perform the same
directly to Landlord and each assumption on the part of the assignee shall be
evidenced by a written instrument executed in such fashion as to entitle it to
recording, and such assignment and assumption agreements shall be delivered to
Landlord prior to the effective date thereof. In the event of assignment
contrary to the above stipulations, Tenant shall forfeit the remainder of the
Term at the election of the Landlord without notice.
SUBLEASING
20. Tenant shall have the right to sublet the Premises only to
such subtenant or subtenants as shall have been approved in writing by Landlord
and under such sublease or subleases as Landlord shall have approved in form
and substance prior to the execution thereof, which approvals shall not be
unreasonably withheld. It shall not be unreasonable for Landlord to deny
approval if a subtenant's use would or could involve introduction of hazardous
substances into or on the Premises. No such sublease or subleases shall be
approved unless the subtenant's or subtenants agree to pay and perform directly
to Landlord all obligations of Tenant under this Lease, shall pay all rents to
be paid under said sublease or subleases not in excess of the rent provided in
this Lease directly to Landlord, and shall covenant to abide by the rules and
regulations and covenants and restrictions applicable to the Premises. Tenant
shall furnish an executed copy of any sublease to Landlord immediately upon its
execution. No sublease shall release Tenant from its primary obligation under
this Lease.
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CONDUCT OF BUSINESS
21. Tenant shall not leave the Premises vacant for any continuous
period in excess of sixty (60) days during the term of this Lease, but shall
conduct and carry on continuously and without interruption in the Premises the
type of business for which the Premises are leased.
FINANCIAL STATEMENTS
22. Tenant shall furnish to Landlord within thirty (30) days after
Landlord's written request, a copy of Tenant's annual financial
statements, including a Balance Sheet, Income Statement, and such applicable and
amplifying schedules, notes and information as shall be prepared in connection
therewith. For use by Landlord to obtain a mortgage. Said information shall be
placed in a sealed envelope by the Tenant and labeled "Attention: Prospective
Mortgagee."
PARKING
23. Landlord covenants and agrees to provide parking areas, as
currently existing, during all terms of this Lease for parking and other uses,
in common with others, by Tenant, Tenant's customers and Tenant's employees,
together with the right of ingress to and egress from the Premises over the
applicable portions of the Common Area. Landlord shall provide parking spaces
consistent with applicable zoning requirements and the parking area shall be
lighted as currently in effect.
RULES AND REGULATIONS; RESTRICTIONS; ZONING
24. Tenant shall comply with all covenants and restrictions and all
statutes, laws, regulations, ordinances, and fire, zoning and building
regulations applicable to the Premises and shall insure that disposition of all
trash and rubbish is accomplished off the Premises. Landlord reserves the right
reasonably to promulgate and to amend or rescind such rules or regulations as
Landlord may determine may be necessary from time to time for the safety, care
and convenience, cleanliness, or the general maintenance and operation of the
Premises, or for the comfort of other tenants of the Premises, if any; provided
such rules and regulations shall not impair unreasonably the utility of the
Premises for Tenant's use.
SIGNS
25. No signs which are visible from the exterior of the Premises,
including but not limited to roof signs, pylons, and projecting store signs,
shall be displayed or erected on the Premises without the prior written consent
of Landlord, which consent shall not be unreasonably withheld, and compliance
with the require-
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ments of any rules and regulations applicable to the office park in which the
Premises are located. Tenant shall not show or display any signs, posters or
other material which shall be visible to persons in common areas, except signs
which identify the Demised Premises. Landlord may, at its option, exclusively
provide all mutually agreed interior signs on or at doors to tenant suites;
otherwise, Tenant shall have right to provide a single sign or lettered name on
or at the door to his/her suite, provided that such sign or letter shall be
nearly, attractively, and professionally styled and constructed in only such
design, color, size, character and material as approved by Landlord and solely
at Landlord's option. Landlord will provide in the Medical Park a directory
which includes Tenant's name and location as well as a listing of Tenant
physicians' names.
CONSTRUCTION LIENS
26. Tenant shall not create any lien or do any act or make any
contract which may create or be the foundation for any lien upon Landlord's
interest in the Premises; and all materialmen, contractors, artisans, mechanics
and laborers or other persons who contract with Tenant with respect to the
Premises or any part thereof, are hereby charged with notice that they must
look to Tenant to secure payment of any bill for work done or material
furnished or for any other purpose during the Term.
27. If any such lien attaches or claim of lien is made against the
Premises and is not released by payment, bond or otherwise within thirty (30)
days after the same attaches, Landlord shall have the option to pay or
discharge the same and Tenant shall reimburse Landlord promptly upon demand
and, upon failure of Tenant to reimburse Landlord, this Lease shall terminate
at the election of Landlord without reasonable notice.
RESERVED RIGHTS OF LANDLORD
28. Landlord reserves the right to enter all or any part of the
Premises to exhibit the Premises to prospective purchasers or others; to
display during the last one hundred and eighty (180) days of the term, without
hindrance or molestation by Tenant, "For Rent" signs and similar signs on
doors, windows or elsewhere on the Premises; to perform any acts related to the
safety, protection, and preservation of the Premises, and, without interfering
unreasonably with Tenant's operations, acts related to reletting, sale or
improvement of the Premises; and, during the last one hundred and eighty (180)
days of the Term or any part thereof, if during or prior to that time tenant
vacates the Premises, to enter and decorate, remodel, repair, alter or
otherwise prepare the Premises for occupancy. The exercise of any of these
reserved rights by Landlord shall never be deemed eviction or disturbance of
Tenant's use and possession of the Premises and shall never render Landlord
liable to Tenant or any other person.
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<PAGE> 11
EMINENT DOMAIN
29. If the whole or any part of the Premises is taken by any
public authority under the power of eminent domain, then the Term shall
terminate as to the part taken from the day possession of that part must be
surrendered, and Base Rent shall be paid up to that day, but not thereafter.
If the portion taken destroys the usefulness of the Building and Improvements
for the purpose for which the same is leased, Tenant shall have the right to
terminate this Lease by written election within forty-five (45) days after
entry of an Order of Taking. The notice shall be effective upon actual receipt
by Landlord. It Tenant fails to terminate this Lease within forty-five (45)
days after entry of an Order of Taking, this Lease shall continue in full force
and effect and Tenant shall continue in possession of the remainder of the
Premises under this Lease and Base Rent shall be adjusted based upon the area
within the Building remaining after the taking and any restoration made
necessary by the taking. Tenant shall not be entitled to any damages against
Landlord by reason of any taking of its leasehold. Landlord and Tenant shall
each be entitled to pursue such award in condemnation as its interest in the
Premises may establish under applicable law.
DESTRUCTION
30. In the event the Premises shall be completely damaged or so
destroyed by fire or other casualty beyond Landlord's control as to become
untenantable, both parties hereto shall have the right but not the obligation
to terminate this lease upon five (5) days written notice to the
non-terminating party, and Tenant shall be allowed an abatement of Base Rent,
Sales Tax and all other charges to be paid by Tenant to Landlord hereunder from
the date of such damage or destruction. If neither party elects to terminate
this Lease, Landlord shall proceed with reasonable diligence to restore the
Premises to its condition prior to the fire or other casualty.
Notwithstanding, the foregoing, if the Premises are so damaged or destroyed
that Landlord cannot make necessary repairs or rebuild within 180 days from the
date of such damage or destruction this Lease shall automatically terminate as
of the date of the damage or destruction. If the Premises shall be so damaged
or destroyed and Landlord can make necessary repairs or rebuild within 180 days
from the date of such damage or destruction, then this Lease shall not
terminate, the Premises shall be repaired or rebuilt by Landlord at its own
expense, and Base Rent, Sales Tax and all other charges to be paid by Tenant to
Landlord hereunder shall abate until the repairs or rebuilding are completed
and possession of the Premises is given to Tenant. Notwithstanding the
foregoing, if the Premises are so damaged or destroyed, and Landlord can make
necessary repairs or rebuild within 180 days from the date of such damage or
destruction, and if Tenant elects to occupy and utilize the Premises during the
period of rebuilding and repair, Base Rent, Sales Tax and all other charges to
be paid by Tenant to Landlord hereunder shall abate in the same proportion as
the proportion of square footage damaged
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<PAGE> 12
or destroyed bears to the total square footage of the Premises before such
damage or destruction, or shall abate equitably, whichever abatement is
greater.
In the event of a casualty loss or damage which arises out of or in
connection with the negligence of Tenant, its employees or agents or the misuse
of the Premises by Tenant, its employees, or agents, Tenant shall indemnity
Landlord for any, claims, loss or damage not covered under Landlord's standard
insurance coverage, including the deductible portion of such insurance.
SUBORDINATION
31. This Lease is subject and subordinate to all ground or
underlying leases, if any, and to all mortgages which may now or hereafter
encumber the real property of which the Premises are a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided however that Tenant's possession of the Premises shall not be
disturbed by any such mortgagee as long as Tenant shall duly and promptly
perform all obligations by it to be performed under the terms of this Lease and
shall attorn to such mortgagee, all without demand or notice (except notice of
such attornment). This subordination shall be automatic and self operative, and
no document of subordination need be required by any mortgagee or other party;
but, if any party shall request confirmation of such subordination, Tenant
agrees, on request of Landlord, to promptly execute and return such
subordination documents as such mortgagee, mortgagees or other parties may
reasonably require or request within ten (10) days after the same are submitted
to Tenant.
ESTOPPEL CERTIFICATES
32. Tenant shall furnish to Landlord from time to time as Landlord
may request, within ten (10) days after Landlord shall request the same, a
certificate, duly sworn by an officer or duly authorized agent of Tenant,
effective as of a date specified by Landlord, reciting the date through which
rents are paid under this lease, that no defaults exist under the terms of this
lease on the part of Landlord or enumerating with specificity the defaults, if
any, that Tenant may claim exist, any defaults hereunder committed by Tenant
and such other matters as Landlord or Landlord's mortgagee or prospective
mortgagee reasonably may request.
MEMORANDUM OF LEASE
33. Within fifteen (15) days after the written request of Landlord
or Tenant, Tenant and Landlord shall execute a Memorandum of this Lease
reciting the description of the Premises and the term hereof and such other
matters as may be reasonably required by any mortgagee of any part of the
Premises in form and substance sufficient for recording among the land records
of the county in which the Premises are located.
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<PAGE> 13
BANKRUPTCY OR INSOLVENCY
34. Neither this Lease nor any interest in it shall be assignable
or transferable by operation of law. In the event any proceeding under the
Bankruptcy Code is commenced against Tenant and is not be dismissed within
forty-five (45) days; or in the event a receiver is appointed for Tenant or a
writ of execution is levied on the business of Tenant conducted on the Premises
or on this Lease or on the assets of the Tenant located on the Premises and the
same is not discharged or dissolved within forty-five (45) days; or in the
event Tenant shall commence any proceeding under the Bankruptcy Code, or make
any assignment for the benefit of creditors, or be unable to pay its debts as
the same are due, or be adjudged insolvent; then, in any of such events, this
Lease shall immediately terminate and shall not be an asset of Tenant, and
Landlord shall have the right forthwith to enter and take possession of the
Premises, all without notice.
DEFAULT
35. If Tenant shall fail without notice or demand to pay rent
within five (5) days after the same is due, or shall fail to pay any other sums
required to be paid by this Lease within ten (10) days after written notice of
non-payment thereof, or shall fail to perform any of its other obligations
under this Lease within thirty (30) days after written notice, Landlord, at its
option, may terminate this Lease and re-enter the Premises or any part of the
Premises without process of law and take immediate possession thereof. In the
alternative or concurrently, Landlord may seek and may have such other remedy
or relief as the law provides or as may be afforded by this Lease. In the
event a default occurs for which a notice of thirty (30) days is required by
this paragraph, Landlord may not terminate this Lease if (a) the default is of
such nature that it reasonably cannot be cured within thirty (30) days and (b)
promptly within thirty (30) days after notice, the Tenant shall commence action
which reasonably will result in a cure of the default and (c) Tenant thereafter
continuously and without interruption prosecutes such action until such default
is cured; provided that such default shall be cured in all events within no
more than one hundred twenty (120) days after Landlord's notice. The right
given Landlord in this Lease to collect the rent or the right to collect any
money or payments due under this Lease or the right given to Landlord to
enforce any of the terms and provision of this Lease, shall not in any way
affect nor be affected by Landlord's termination of this Lease for a Tenant
default.
WAIVER OF REQUIRED PERFORMANCE
36. No waiver of any covenant, provision, requirement or condition
of this lease shall be effective unless in writing and signed by or on behalf
of Landlord by Landlord's duly authorized agent. Any such waiver shall extend
to the particular case only for
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<PAGE> 14
the particular time and in the particular manner specified, and such waiver
shall not be construed or understood as waiving any further or other rights of
any character whatever. Acquiescence by Landlord in any action taken or
omitted by Tenant shall not be deemed an agreement or consent thereto and the
custom and practice of the parties, however manifested, shall not modify or
amend this agreement unless the same is reduced to writing and signed by or on
behalf of the party to be charged therewith.
FORCE MAJEURE
37. Neither Landlord nor Tenant shall be in default with respect
to any provision, covenant or condition of this Lease on the part of either of
them, respectively, to be performed if the performance thereof shall be
delayed, interfered with or rendered impossible because of any strike,
lock-out, civil commotion, war, war-like operation, invasion, insurrection,
rebellion, hostility, revolution, military or usurped power, sabotage,
inability to obtain any necessary material or service, failure after due
diligence of the party responsible therefor of any governmental or
administrative agency having jurisdiction to issue any required approval or
permit, act of God, or other cause beyond the control of the party obligated to
execute such performance; provided however, that such performance shall be
resumed with due diligence as soon as the contingency causing delay or
impossibility shall abate; and provided further, that nothing in this paragraph
contained shall operate or be construed to relieve Tenant of any obligation for
the payment of rent promptly as the same shall be due or alter the time periods
of paragraph 30 relating to partial destruction.
REMOVAL OF TENANT'S PROPERTY
38. All improvements, additions, and trade fixtures installed by
Tenant for the business conducted by it (excluding only Landlord Improvements)
shall remain the property of Tenant, and such improvements, additions and trade
fixtures shall be removed at the expiration or termination hereof if such
removal is practicable and will not cause material injury to the Premises,
provided any damage caused by such removal shall be repaired by Tenant at its
own expense and the Premises left in good condition, ordinary wear and tear
expected. All other improvements, additions, and repairs made to the Premises
during the term of this Lease shall, at the expiration or other termination
hereof, become the property of Landlord, without cost to it.
LOSS OR DAMAGE TO TENANT'S PROPERTY
39. The Landlord shall not be liable for any damage to or
destruction of the property of Tenant or others located in the Premises by
reason of any casualty, or for the loss of any such property by theft or
otherwise. Tenant may carry such insurance on
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<PAGE> 15
its property as it may elect. Tenant shall hold the Landlord harmless from any
claims, demands and expenses, including but not limited to attorney's fees,
arising out of any such injury or damage, including subrogation claims of
Tenant's insurance carriers.
SECURITY DEPOSIT
40. The Tenant, concurrently with the execution of this Lease,
has deposited with the Landlord the sum of $ None, the receipt being hereby
acknowledged, which sum shall be retained by the Landlord as security for the
payment by the Tenant of the rent herein agreed to be paid and for the faithful
performance of the covenants of this Lease. If at any time the Tenant shall be
in default in any of the provisions of this Lease, the Landlord shall have the
right to use said deposit, or so much thereof as may be necessary in payment of
any rent in default as aforesaid and/or in payment of any expense incurred by
the Landlord in and about the curing of any default by said Tenant, and/or in
payment of any damages incurred by the Landlord by reason of such default of
the Tenant or, at the Landlord's option, the same may be retained by the
Landlord in liquidation of part of the damages suffered by the Landlord by
reason of the default of the Tenant. In the event that said deposit shall not
be utilized for any such purpose, then such deposit shall be applied to the
rent last due for the term of this Lease. Said deposit shall not bear
interest.
EFFECT OF TERMINATION
41. Upon the expiration or termination of this lease or
termination of Tenant's right of possession of the Demised Premises, Tenant
shall surrender and vacate the Demised Premises immediately and deliver
possession thereof to Landlord in a clean, good and tenantable condition,
ordinary wear excepted. Tenant shall pay, upon demand, all costs and expenses,
including reasonable attorney's fees, incurred by Landlord in restoring
premises to leasable condition, reasonable wear and tear excepted.
SURRENDER AT END OF TERM
42. Upon any termination of this Lease, Tenant agrees to remove
from the Demised Premises all of Tenant's tangible personal property. However,
any of Tenant's tangible personal property which is affixed to or which has
become a part of the building such as light fixtures, cabinetry, medical
equipment, etc. may be removed by Tenant only if Tenant restores the Demised
Premises to tenantable condition. Any of Tenant's tangible personal property
which is affixed to or has become part of the building and which is not removed
by Tenant shall become the property of Landlord without any further payment to
Tenant. In the event possession of the Demised Premises is not immediately
delivered to Landlord or if Tenant shall fail to remove any personal property
which Tenant is entitled to remove, Landlord is hereby authorized and directed
by Tenant to
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<PAGE> 16
remove same without any liability to Tenant and Tenant agrees to pay to
Landlord any costs incurred by Landlord in such removal. Landlord is further
authorized and empowered by Tenant to sell all such trade fixtures and
personality and to apply the proceeds thereof to payment of the obligations of
Tenant to Landlord.
NOTICE
43. Tenant shall give prompt notice to Landlord in case of fire or
accident affecting the Premises or of defects therein.
44. When either party desires or is required to give the other
notice under this Lease, such notice shall be delivered personally or by
telecopier or shall be given by registered or certified mail. If given by
personal delivery or by telecopier, such notice shall be effective upon the
date of delivery. If given by mail, such notice shall be effective on the
third day after the same is mailed provided the notice is deposited in the mail
with postage prepaid addressed as follows:
FOR THE LANDLORD: Sundance Partners II
Curt Alliston
Managing Partner
737B West Brandon Blvd.
Brandon, FL 33511
FOR THE TENANT: National Diagnostics/Riverside, Inc.
2345 Forbes Street
Jacksonville, Florida
LITIGATION, COURT COSTS AND ATTORNEY'S FEES
45. If either Landlord or Tenant involuntarily is made a party
defendant to any litigation concerning this Lease or the Premises by reason of
any act or omission of the other, then the party by reason of whose act or
omission the other is joined shall hold the other harmless from all liabilities
by reason thereof, including reasonable attorney's fees and all court costs
incurred by such party in such litigation. In case either party to this Lease
brings an action against the other to enforce any of the terms of this Lease or
in the event the Landlord commences a summary proceeding for the forfeiture of
this Lease and possession of the Premises, or either of them, the party
prevailing in such action or dispute shall recover from the other the
reasonable attorney's fees, expenses and court costs incurred therein by the
prevailing party. The right to recovery of such attorney's fees and expenses
shall be deemed to have accrued on the commencement of such action, and shall
be enforceable whether or not such action is prosecuted to final judgment, and
such fees and costs shall be included in any judgment rendered. The right to
recover attorney's fees, costs, and expenses
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shall include such fees, costs, and expenses of attorneys and legal assistants
at trial, on appeal, or in bankruptcy, whether or not suit or claim be brought.
GENERAL PROVISIONS
46. Time is of the essence in every particular of this Lease in
respect to the promises, covenants and agreements, terms and conditions of
either Landlord or Tenant.
47. All references herein to the Landlord and Tenant mean the
persons or parties who from time to time occupy the positions, respectively, of
the Landlord and Tenant, although this shall not be construed as relieving any
person, firm or corporation of any liability incurred by him, her or it, by
reason of or in connection with his, her or its having been Landlord or Tenant
at one time or another.
48. Nothing contained in this Lease shall be deemed or construed
as creating the relationship of principal and agent or of partnership or of
joint venture between Landlord and Tenant. Tenant specifically acknowledges
that all statutory proceedings provided for by the laws of the State of Florida
regulating the relationship of Landlord and Tenant and remedies accruing to the
Landlord upon the default of the Tenant respecting collection of the rent or
repossession of the Premises shall, at the option of the Landlord, accrue to
the Landlord, who shall have the benefit of any and all such laws and statutes.
49. Landlord and Tenant intend, understand and agree that the
various rights, powers, options, elections, privileges and remedies of the
Landlord set forth in this Lease or otherwise shall be construed as cumulative,
and no one of them shall be construed as being exclusive of the other or
exclusive of any rights or priorities allowed by law, except as herein
otherwise provided.
50. Both parties intend, understand and agree that all default and
grace periods referred to in this Lease, if any, shall run concurrently and not
consecutively.
51. In the event of the death, disability, or retirement of a sole
proprietor Tenant or all of the partners of a partnership or all of the
shareholders of a professional association constituting the Tenant, then the
Tenant, at its option, may cancel this Lease upon payment to the Landlord of an
amount equal to three months of Rent. For purposes of this cancellation
provision, "disability" shall mean that because of injury or sickness Tenant
cannot perform each of the material duties of his/her/their regular occupation
and has been unable to do so for a period of at least four (4) consecutive
months.
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52. It is further understood and agreed that no modification,
release, discharge or waiver of any provision of this Lease shall be
enforceable unless in writing, signed by the party against whom the same is
offered. This Lease shall not be modified or amended and no release,
discharge, or waiver with respect to any of its terms shall arise from any
custom or course of dealing between Landlord and Tenant regardless of reliance
of or actions by any party.
53. The singular number shall include the plural, and the
masculine gender shall include the feminine and neuter genders wherever the
context shall require or permit.
54. This Lease represents and recites the entire agreement between
the parties and that there are no collateral agreements or understandings
concerning its subject-matter. Any negotiations, conversations, or agreements
between Landlord and Tenant are either contained in or are superseded by the
Lease. Tenant agrees that it is not relying on any representations or
agreements other than those contained in this Lease.
55. This Lease is made under, is to be performed in, and is to be
governed by the laws of the State of Florida.
56. This Lease may be executed in several counterparts, each one
of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Lease.
Witnesses: LANDLORD:
Sundance Partners II
/s/
- ----------------------
Print Name
By: /s/ Curt Alliston
-----------------------------
Print Name: Curt Alliston
Title: Managing Partner
Witness: TENANT:
/s/ Tonya Mathes
- -----------------------
Print name
By: /s/ C.L. Alliston
------------------------------
Print Name
Title: President
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EXHIBIT "A"
THE PREMISES
Rental space will be 7,100 square feet. Plans will be attached and
made apart of the lease once space has been designated by Tenant and approved
by Landlord and all other buildout expenses will be the responsibility of the
Tenant.
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EXHIBIT "A"
NDI'S DEVELOPMENT AND LEASEHOLD IMPROVEMENTS
<TABLE>
<S> <C>
Architectural and Engineering fees (actual cost) 24,850.00
Civil Survey (actual cost) 350.00
Additional Survey costs per SouthTrust 350.00
Other NDI'S Improvement Costs:
A-Fabco- Provide all lead doors, lead windows
frames, lead glass, and 2 revolving doors
for the dark rooms. 7,281.07
Tenant Finishes- Provide lead gypsum board. 8,700.00
OPEN- Provide labor to install vinyl tile,
carpet, etc. 4,490.00
PRO SOURCE- Provide all carpet, vinyl tile,
sheet vinyl and vinyl base. 8,700.00
Area Communications Co.- Pull wire for
telephone system, paging system, and
background music. 1,260.00
Scott Alarm- Install security system per owner's
instructions. Price includes pre-wiring. 640.00
Scott Alarm- Install fire and smoke alarm system
per owner's instructions. Price includes
pre-wiring. 600.00
Trim Design- Fabricate and install interior
signage system. Quote plus sales tax. 1,437.68
Lamar Sign Co.- Fabricate and erect 2 exterior
routed signs to meet code requirements
of City of Jacksonville. (Est) 4,000.00
Innovatives Network- Pull/install computer
cable. This was coordinated with and
approved by Debbie. 2,064.00
Air Engineers- Provide and install HVAC
System 22,200.00
A-Fabco- Provide Nuclear Medicine Cabinet. 4,093.76
Solid Surface- Millwork. 12,260.00
OPEN- Finish Carpentry & Materials 3,500.00
Ray Ware- All metal frames. 5,565.00
Lumber Unlimited- All interior doors
pre machined. 3,799.00
Ray Ware- Provide all hardware for interior
and exterior doors. 8,000.00
OPEN- Labor to install door hardware. 3,500.00
Tenant Finishes- Paint doors, interior &
exterior walls. 12,250.00
OPEN- Provide wash room accessories like:
tissue holder, paper towel dispenser, etc. 5,500.00
Able Plumbing- Provide all fixtures. 7,970.00
TOTAL OF IMPROVEMENTS $153,360.51
</TABLE>
<PAGE> 21
EXHIBIT "B"
LEGAL DESCRIPTION
Lots 5, 6 and 7, Block 72, RIVERSIDE, according to plat thereof
recorded in Plat Book 2, page 24 of the current public records of Duval County,
Florida.
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EXHIBIT "C"
INSURANCE REQUIREMENTS
At all times during the term of this Lease or its occupancy of the
Premises to which these requirements apply, whichever is longer, Tenant shall
provide the following insurance at its sole expense upon the Building and
Improvements:
a. All risk fire and physical damage insurance,
including windstorm and difference in conditions
coverage, with respect to the Building and
Improvements;
b. Rent loss insurance for a period of not less than
twelve (12) months; and
c Comprehensive liability insurance with a single
combined limit of $1,000,000/$300,000 and without a
self insured retention or deductible greater than
$____________________ unless a greater deductible is
approved by Landlord.
All insurance policies shall be written by an insurance company or companies
reasonably satisfactory to Landlord and any lender or mortgagee with respect to
the Premises and shall be made payable to and shall name as additional insured
Landlord; the beneficiaries of the land trust which is the Landlord and any
corporations, partnerships or trusts which are related, subsidiary or
affiliated with any of said beneficiaries as designated from time to time by
Landlord; Tenant; and Landlord's mortgagees from time to time, as their
interests may appear and shall provide that none of such insurance may be
canceled except upon thirty (30) days written notice to Landlord and any
mortgagees of the Premises. The amount of insurance with respect to fire and
physical damage shall be equal to not less than the full replacement cost of
any improvements located on the Premises. Rent loss insurance shall be
sufficient to pay any Base Rent to Landlord that is not paid because of fire or
physical damage to or destruction of the Building or Improvements or because of
rent prorations due to damage or destruction of the Building or Improvements.
Comprehensive liability insurance shall insure against any liability that may
accrue against the insured and additional insured on account of any occurrence
in, on, or originating from the Premises during the term of this Lease
resulting in personal injury, death, property damage, or other claim
whatsoever; and said policies shall include indemnity against loss, expense and
damage of any and every kind, including costs of investigation and attorney's
fees and other costs of defense. The policy or policies shall include such
other endorsements or provisions with respect to Landlord's mortgagees as the
latter may require.
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Tenant agrees to pay all premiums due on the Beginning Date; and from time to
time thereafter promptly as premiums become due or Tenant's insurance companies
may change, Tenant shall deliver an original or duplicate original of all such
policies to Landlord, together with evidence of payment of premium thereon.
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EXHIBIT "D"
RENT SCHEDULE
<TABLE>
<S> <C>
1st year $15.50 per square foot
2nd year $15.75 per square foot
3rd year $16.00 per square foot
4th year $16.25 per square foot
5th year $16.50 per square foot
6th year $16.75 per square foot
7th year $17.00 per square foot
8th year $17.25 per square foot
9th year $17.50 per square foot
10th year $17.75 per square foot
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<S> <C>
OCCUPANCY SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXTENSION OF TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURPOSES OF USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RIGHT OF FIRST REFUSAL TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
JANITORIAL SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ADJUSTMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PLACE OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
REQUIRED INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WAIVER OF LANDLORD LIABILITY; INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
HAZARDOUS MATERIALS AND POLLUTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
OFFICE PARKS; ASSOCIATION DUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CONDITION OF THE PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
BUILDING STRUCTURE; MACHINERY AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
LANDLORD INSPECTION, MAINTENANCE AND REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SUBLEASING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
RULES AND REGULATIONS; RESTRICTIONS, ZONING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C>
CONSTRUCTION LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
RESERVED RIGHTS OF LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
BANKRUPTCY OR INSOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
WAIVER OF REQUIRED PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
REMOVAL OF TENANT'S PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
LOSS OR DAMAGE TO TENANT'S PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SURRENDER AT END OF TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LITIGATION, COURT COSTS AND ATTORNEY'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT "A" - THE PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBIT "B" - LEGAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT "C" - INSURANCE REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT "D" - RENT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
DIAGNOSTICS, INC. FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDING JUNE 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 133,680
<SECURITIES> 0
<RECEIVABLES> 2,492,015
<ALLOWANCES> 417,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,377,679
<PP&E> 7,683,651
<DEPRECIATION> 2,640,164
<TOTAL-ASSETS> 8,175,815
<CURRENT-LIABILITIES> 3,286,528
<BONDS> 293,439
0
0
<COMMON> 675
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,175,815
<SALES> 0
<TOTAL-REVENUES> 4,524,760
<CGS> 0
<TOTAL-COSTS> 2,192,411
<OTHER-EXPENSES> 2,007,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,930
<INCOME-PRETAX> 111,164
<INCOME-TAX> 0
<INCOME-CONTINUING> 111,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,164
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
