FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 0-10128
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PERSONAL DIAGNOSTICS, INCORPORATED
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(Exact name of registrant as specified in its charter)
New Jersey 22-2325136
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
PO Box 5310, Parsippany, NJ 07054
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(Address of principal executive offices) (Zip Code)
(201) 952-9000
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 10, 1998
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Common Stock, $.01 par value 4,427,000
Page 1 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
Index Page No.
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Part I Financial Information
Item 1. Financial Statements:
Balance Sheets - June 30, 1998 and September 30, 1997 3
Statements of Operations - For the Three and Nine Months
Ended June 30, 1998 and 1997 4
Statements of Cash Flows - For the Nine Months Ended
June 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
September 30,
June 30, 1998 1997
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 5,772,000 $ 6,117,000
Property held for development and sale-net 875,000 1,661,000
Other current assets 3,000 7,000
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Total Current Assets 6,650,000 7,785,000
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TOTAL ASSETS $ 6,650,000 $ 7,785,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,000 $ 12,000
Current liabilities of discontinued operations 50,000 125,000
Other current liabilities 70,000 93,000
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Total Current Liabilities 130,000 230,000
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STOCKHOLDERS' EQUITY:
Common Stock,$.01 par value; authorized,
25,000,000 shares; issued and outstanding,
4,427,000 and 5,014,000 shares 44,000 50,000
Capital in excess of par value 12,647,000 13,420,000
Accumulated deficit (6,171,000) (5,915,000)
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Total Stockholders' Equity 6,520,000 7,555,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,650,000 $ 7,785,000
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See accompanying notes to financial statements.
Page 3 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
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1998 1997 1998 1997
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INCOME:
Interest $ 79,000 $ 68,000 $ 246,000 $ 215,000
Trading gains (losses) -- (13,000) (323,000) 691,000
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79,000 55,000 (77,000) 906,000
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EXPENSES:
General and administrative 27,000 133,000 179,000 823,000
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INCOME (LOSS) BEFORE
INCOME TAXES 52,000 (78,000) (256,000) 83,000
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PROVISION (BENEFIT)
FOR INCOME TAXES -- -- -- --
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NET INCOME (LOSS) $ 52,000 $ (78,000) $ (256,000) $ 83,000
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NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING $ 0.01 $ (0.02) $.(0.05) $ 0.02
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AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,923,000 5,014,000 4,819,000 5,014,000
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See accompanying notes to financial statements.
Page 4 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (256,000) $ 83,000
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Provision for loss on property held for sale -- 120,000
Changes in assets and liabilities:
Property held for development and sale 786,000 (929,000)
Accounts payable and accrued liabilities (100,000) (145,000)
Other current assets 4,000 (4,000)
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Net cash flows from operating activities 434,000 (875,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment -- --
Proceeds from disposal of property and equipment -- --
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Net cash flows from investing activities -- --
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of outstanding shares (884,000) --
Proceeds from exercise of stock options 105,000 105,000
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Net cash flows from financing activities (779,000) 105,000
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (345,000) (770,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,117,000 6,910,000
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CASH AND EQUIVALENTS, END OF PERIOD $ 5,772,000 $ 6,140,000
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See accompanying notes to financial statements.
Page 5 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The balance sheet at the end of the preceding fiscal year has been
derived from the audited balance sheet contained in the Company's Form 10-K and
is presented for comparative purposes. All other financial statements are
unaudited. In the opinion of management, all adjustments which include only
normal recurring adjustments necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have been made.
The results of operation for interim periods are not necessarily indicative of
the operating results for the full year.
Footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K for the most recent fiscal year.
2. TRADING SECURITIES
For the three months ending June 30, 1998 and 1997, there was no charge
or credit to earnings representing the change in the net unrealized holding loss
on trading securities. At June 30, 1998 the Company had no open trading or
investment positions. During the quarter the Company incurred no gain or loss on
its trading and investment activities as compared with a loss of $13,000 in the
prior year period. During the quarter the Company's had no exposure to financial
derivatives.
At June 30, 1998 approximately 80% of total Company's assets were held
in United States Treasury Bills. Since it is the intention of the Company to
acquire or develop an operating business, the Company presently intends to risk
no more than 15% of net worth in trading or investment activities.
3. PROPERTY HELD FOR DEVELOPMENT AND SALE
The Company presently owns one property in Washington D.C., which it
acquired with the intention to improve and resell. The property is in the
process of renovation. The Company is evaluating its experience in the real
estate improvement business and will decide during the next several months
whether to continue or expand this activity.
4. STATEMENT OF CASH FLOWS
Nine Months Ended
June 30,
1998 1997
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Supplemental disclosure of cash flows information-
Income taxes paid/(refunded) $-0- $(2,000)
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Page 6 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At June 30, 1998, the Company had a cash and Treasury Bill balance of
$5,772,000 which represents an $345,000 decrease from the $6,117,000 balance at
September 30, 1997. This $345,000 decrease results from cash flow from
operations of $434,000 which includes the result of a net loss of $256,000 and
changes in operating assets and liabilities of $96,000 offset by the net
proceeds from the sale of a property for $786,000. In addition, cash flow used
for financing activities accounted for $779,000 representing the net activity of
repurchasing and canceling of outstanding shares for $884,000 offset by the
proceeds received from President John Michael for the exercise of stock options
in the amount of $105,000. The shares repurchased included 138,211 shares
repurchased from two unrelated parties at $1.20 per share or $166,000 and
598,389 shares repurchased from Company President John H. Michael at $1.20 per
share or $718,000. At June 30, 1998 the Company had no outstanding stock
options. The Company's working capital position at June 30, 1998 was $6,520,000
as compared to a September 30, 1997 balance of $7,555,000.
Management intends to continue in business and has no intention to
liquidate the Company. The Company has considered various business alternatives
including the possible acquisition of an existing business, but to date has
found possible opportunities unsuitable or excessively priced. The Company is
also considering developing a business itself, believing that start up costs may
be preferable to the premiums required to purchase a going concern. The Company
does not contemplate limiting the scope of its search to any particular
industry. Management has considered the risk of possible opportunities as well
as their potential rewards. Management has invested considerable time evaluating
and finally rejecting numerous proposals for possible acquisition or
combination. The Company believes present valuation levels requested for
alternative operating entities are excessive partly due to the expectations of
sellers being raised by generally high stock market valuations. The Company has
decided to focus its present operating activities on the acquisition,
improvement and resale of real property. This decision does not preclude the
possibility of becoming involved in the future with additional businesses in
other areas.
The Company presently owns one property in Washington D.C. which it
acquired with the intention to improve and resell. The property is in the
process of renovation. The Company is presently evaluating its experience in the
real estate improvement business and will decide during the next several months
whether to continue this activity.
The Company intends to continue its investing and trading activities
and as a consequence the future financial results of the Company may be subject
to substantial fluctuations. Mr. Michael, the President of the Company is a
graduate of Harvard Business School (MBA). As part of the Company's investment
activities the Company may buy and sell a variety of equity, debt or derivative
securities including market index options and future contracts. Such investment
often involves a high degree of risk and must be considered extremely
speculative. Futures Contracts are particularly risky since a relatively small
amount of capital controls a large nominal market value thus greatly
exaggerating the exposure to potential losses. During the quarter the Company
incurred no gain or loss on its trading and investment activities as compared
with a loss of $13,000 in the prior year period. During the quarter the Company
had no exposure to financial derivatives.
The focus of the Company's efforts is to acquire or develop an
operating business. The Company presently intends to risk no more than 15% of
net worth in trading or investment activities. At June 30, 1998, the Company had
approximately 80% of its assets in United States Treasury Bills. At June 30,
1998 the Company had no outstanding investment or trading positions.
Page 7 of 10
Results of Operations
Three Months Ended June 30, 1998
Net income (loss)
The Company recorded income of $52,000 in the current three-month
period versus a loss of $78,000 in the prior year period. Interest income
increased $11,000 to $79,000 primarily due to more invested funds. There was no
trading activity in the current quarter compared to trading losses of $13,000 in
the prior year period. General and administrative expenses of $27,000 were
$106,000 lower than the prior year period of $133,000. The reduction of $106,000
was due primarily to lower insurance costs and a lower level of compensation
paid to President John Michael. During the current quarter the Company recorded
a $50,000 reduction in insurance costs. During the prior year quarter Mr.
Michael received a special investment performance bonus of $50,000 related to
trading gains realized in the prior year period.
During the current and prior year quarter the Company had not recorded
an income tax provision/benefit due to unavailable tax carryforwards.
Results of Operations
Nine Months Ended June 30, 1998
Net income (loss)
The Company incurred a loss in the current nine-month period of
$256,000 versus a gain of $83,000 in the prior year period. Interest income
increased $31,000 to $246,000 primarily due to more invested funds. Trading
losses equaled $323,000 compared to trading gains of $691,000 in the prior year
period. General and administrative expenses of $179,000 were $644,000 lower than
the prior year period of $823,000. The reduction of $644,000 was due primarily
to a lower level of compensation paid to President John Michael and a lower
level of real estate development activity. During the current nine-month period
Mr. Michael received compensation of $131,000 as compared to compensation of
$531,000 (which included a special investment performance bonus of $400,000
which was paid to Mr. Michael in connection with trading gains realized in the
prior year period). In addition, general and administrative expenses were
$244,000 lower in the current nine-month period due to lower insurance and
professional costs and a lower level of real estate development activity which
last year included a special allowance of $120,000 for the diminished value of
one of the Company's real estate properties.
During the current and prior year nine-month period the Company had not
recorded an income tax benefit due to unavailable tax carryforwards.
Page 8 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
Page 9 of 10
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.
PERSONAL DIAGNOSTICS, INCORPORATED
Registrant
Date: July 10, 1998 By: /s/ John H. Michael
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John H. Michael, Chairman
(on behalf of the registrant)
Page 10 of 10