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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 March 31, 1995
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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
incorporation or organization) Identification No.)
3 Entin Road, Parsippany, New Jersey 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
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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 May 12, 1995
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Common Stock, $.01 par value 4,864,000
Page 1 of 15
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PERSONAL DIAGNOSTICS, INCORPORATED
INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
- March 31, 1995 and September 30, 1994. . . . . . . . . 3
Consolidated Statements of Operations
- For the Three and Six Months ended
March 31, 1995 and 1994. . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows -
For the Six Months Ended
March 31, 1995 and 1994. . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . 8
Item 2. Management's Discussion and
Analysis of Consolidated Financial
Condition and Results of Operations. . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . 14
Page 2 of 15
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
March, 31 September 30,
1995 1994
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(UNAUDITED)
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 4,560,000 $ 5,554,000
Trading securities 1,150,000 1,030,000
Receivable-net 358,000 540,000
Inventories 125,000 141,000
Other current assets 364,000 505,000
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Total Current Assets 6,557,000 7,770,000
PROPERTY AND EQUIPMENT, AT COST LESS
ACCUMULATED DEPRECIATION OF $11,000
AND $2,221,000 6,000 4,895,000
PROPERTY AND EQUIPMENT, HELD FOR
SALE AT NET REALIZABLE VALUE 4,400,000 -
OTHER ASSETS 4,000 73,000
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$10,967,000 $12,738,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $44,000 $111,000
Accrued payroll 116,000 110,000
Accrued costs related to discontinued
operations 248,000 -
Deposit on sale of assets 500,000 -
Current portion of long-term debt 100,000 592,000
Other current liabilities 167,000 172,000
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Total Current Liabilities 1,175,000 985,000
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LONG-TERM DEBT 2,379,000 3,104,000
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March, 31 September 30,
1995 1994
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(UNAUDITED)
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value: authorized-
10,000,000 shares issued and outstanding -
4,864,000 shares 49,000 49,000
Capital in excess of par value 13,316,000 13,316,000
Accumulated deficit (5,952,000) (4,716,000)
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Total Stockholders' Equity 7,413,000 8,649,000
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$10,967,000 $12,738,000
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See accompanying notes to consolidated financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
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1995 1994 1995 1994
INCOME:
Interest $ 65,000 $ 37,000 $ 130,000 $ 89,000
Trading gains (losses) (293,000) 73,000 (340,000) 62,000
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(228,000) 110,000 (210,000) 151,000
PROVISIONS FOR INCOME TAXES - 6,000 8,000
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INCOME (LOSS) FROM CONTINUING (228,000) 104,000 (210,000) (143,000)
OPERATIONS ---------- ---------- ------------ -----------
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Loss from operations (282,000) (357,000) (596,000) (508,000)
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Estimated loss on sale (430,000) - (430,000) -
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(712,000) (357,000) (1,026,000) (508,000)
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NET LOSS $ (940,000) $ (253,000) $(1,236,000) $ (365,000)
========== ========== =========== ==========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING
Income (loss) from continuing
operations $ (0.04) $ 0.02 $ (0.04) $ 0.03
Discontinued operations (0.15) (0.08) (0.21) (0.11)
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Net loss $ (0.19) $ (0.06) $ (0.25) $ (0.08)
========== ========== =========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,864,000 4,864,000 4,864,000 4,864,000
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See accompanying notes to consolidated financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
March 31,
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1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(1,236,000) $ (365,000)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 302,000 339,000
Deferred income taxes - 32,000
Provision for loss on accounts receivable 50,000 -
Write-down of property and equipment 182,000 -
Loss (gain) on disposal of property and equipment (17,000) -
Loss (gain) on investments - (61,000)
Changes in assets and liabilities
Trading securities (120,000) -
Receivables-net 132,000 631,000
Inventories 16,000 148,000
Accounts payable and accrued liabilities 182,000 (1,407,000)
Deposit on sale of assets 500,000 -
Prepaid expenses and noncurrent assets 211,000 (145,000)
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Net cash flows from operating activities 202,000 (828,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - (163,000)
Proceeds from disposal of property and 21,000 -
equipment
Purchase of marketable securities - (3,444,000)
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Six Months Ended
March 31,
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1995 1994
Proceeds from the sale of marketable
securities - 1,257,000
Other - 164,000
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Net cash flows from investing activities 21,000 (2,186,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 677,000
Principal payments on borrowings (28,000) (29,000)
Principal payments under equipment notes
payable and capital lease obligations (1,189,000) (265,000)
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Net cash flows from financing activities (1,217,000) 383,000
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DECREASE IN CASH AND EQUIVALENTS (994,000) (2,631,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 5,554,000 7,638,000
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CASH AND EQUIPMENTS, END OF PERIOD $ 4,560,000 $ 5,007,000
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See accompanying notes to consolidated financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
NOTES TO CONSOLIDATED 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 presently 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. See footnote 2
regarding the "Discontinued Operations."
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. DISCONTINUED OPERATIONS
The Company has executed a letter of intent with EBI Medical Systems,
Inc. ("EBI"), a subsidiary of Biomet, Inc., dated January 31, 1995 (the
"Letter of Intent"). The Letter of Intent provides for the purchase by EBI of
(i) the land, building, and improvements comprising the Company's executive
offices and manufacturing facility located at 3 Entin Road, Parsippany, New
Jersey (the "Premises"), (ii) all the Company's manufacturing equipment and
machinery, and (iii) certain miscellaneous office equipment and
manufacturing-related items (collectively, the "Purchased Assets"). The
purchase price for the Purchased Assets is $4,400,000. Upon execution of the
Letter of Intent, EBI deposited with the Company $500,000 which is to be
applied to the purchase price for the Purchased Assets at closing.
On February 21, 1995, EBI satisfied the sole contingency contained in
the Letter of Intent by notifying the Company in writing, that it would be able
to obtain the necessary governmental approvals to permit the operations
proposed to be conducted by EBI at the Premises. On the same date,
representatives of the Company and EBI commenced the negotiation of an Asset
Purchase Agreement designed to give effect to the purchase and sale of the
Purchased Assets. The definitive Asset Purchase Agreement (the "Purchase
Agreement") was executed by each of the Company and EBI as of March 17, 1995.
The Purchase Agreement provides for a closing of the purchase and sale
of the Purchased Assets no later than five (5) business days from the later to
occur of (i) receipt of clearance form the NJDEP under ISRA and (ii) receipt of
shareholder approval of the shareholders of the Company to authorize the Board
of Directors to sell and/or lease all or a portion of the Company's assets on
such terms and conditions and for such consideration as the Board shall be in
its discretion determine. Management expects this transaction to close May 15,
1995.
As a result of the pending sale, the financial results of the Company's
manufacturing operation have been reported as "Discontinued Operations" in
accordance with Accounting Principles Board Opinion No. 30.
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"Property held for sale" is stated at net realizable value and includes the
facilities, machinery and equipment and land which is being sold. "Accrued costs
related to discontinued operations" includes estimated future losses and
operating expenses to be incurred prior to final disposition of these assets.
3. TRADING SECURITIES
Effective October 1, 1994, the Company adopted SFAS No. 115 -
"Accounting for Certain Investments in Debt and Equity Securities". The
Company considers its securities to be classified as trading securities as
defined in the accounting standard. For the three and six months ending
March 31, 1995, the Company included a credit to earnings of $120,000 and a
charge to earnings of $26,000, respectively, representing the change in the
net unrealized holding loss on its trading securities. This statement
requires that cash flow activities for trading securities be presented as
operating activities.
At March 31, 1995, the Company had open positions for 20 Standard & Poor's
500 index contracts expiring in June 1995 which it had sold short. At March
31st the Company had market risk equal to $10,000 for each point the index
rises, approximately $50,000 for each one percentage point rise in the index.
Initial margin requirements were $12,000 per index contract, for an aggregate
of $240,000. At March 31, 1995, the Company had an aggregate of approximately
$439,000 of cash on deposit with the brokerage firm through which these
contracts were sold short. The cash is available to the brokerage firm to
execute withdrawals of trading losses for these contracts.
Since the focus of the Company will be on entering into an operating
business, the Company presently intends to allocate no more than 20% of its
assets to its trading and investment activities. It is the present intention of
management, pending completion of its review of acquisition possibilities and
business development opportunities, to hold the remainder of the Company's
assets principally in U.S. Government securities. At May 15, 1995, the
Company had no open index or futures positions and trading and investment
securities totalled less than 5% of assets.
4. INVENTORIES
Inventories are summarized as follows:
March 31, 1995 September 30, 1994
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Work in process $125,000 $146,000
Less: Progress Payments - 5,000
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$125,000 $141,000
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5. STATEMENT OF CASH FLOWS
Six Months Ended
March 31,
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1995 1994
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Supplemental disclosure of $ 187,000 $179,000
cash flows information- ---------- --------
Interest paid
Income taxes ($126,000) $ 9,000
paid/(refunded) ---------- --------
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PERSONAL DIAGNOSTICS, INCORPORATED
Item 2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations.
Liquidity and Capital Resources
At March 31, 1995, the Company had a cash balance of $4,560,000 which
represents a $994,000 decrease from the $5,554,000 balance at September 30,
1994. This $994,000 decrease results from cash flow from operations of $202,000
which represents the net result of a $1,236,000 loss offset primarily by
depreciation of $302,000, $421,000 from operating assets and liabilities and
$682,000 related to discontinued operations consisting of a $500,000 deposit on
sale of assets and $182,000 from the writedown of assets and a $50,000 provision
for loss on accounts receivable. In addition, investing activities added
$21,000 attributable to proceeds from disposal of property. Finally, financing
activities required $1,217,000 represented by payments on the term loan and
lease obligations. The Company's working capital position at March 31, 1995 was
$5,382,000 as compared to a September 30, 1994 balance of $6,785,000.
Since the Company is ceasing manufacturing operations, it has elected not
to renew its $2.5 million revolving credit line. Management believes that the
present cash balances will be sufficient to satisfy both the Company's operating
and capital needs for the foreseeable future.
The Company expects to sell all of its property and equipment related to
its manufacturing operation. A detailed description of the transaction can be
found in footnote 2 to the financial statements.
The Company intends to acquire or develop an operating business to create
further shareholder value. Management has already begun an active, general
review of acquisition possibilities and business opportunities. Management
will, of course, proceed with deliberation and prudence.
Since the focus of the Company will be on entering into an operating
business, the Company presently intends to allocate no more than 20% of its
assets to its trading and investment activities. It is the present intention of
management, pending completion of its review of acquisition possibilities and
business development opportunities, to hold the remainder of the Company's
assets principally in U.S. Government securities. At May 15, 1995, the Company
had no open index or futures positions and trading and investment securities
totaled less than 5% of assets.
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Results of Operations
Three Months Ended March 31, 1995
As a result of the pending sale of the Company's manufacturing assets, the
statement of operations has been reformatted to conform to the Accounting
Principles Board Opinion No. 30 concerning "Discontinued Operations." As a
result, this narrative has been written to conform to the new presentation.
Income
Income from continuing operations consists of interest and trading gains
and losses. The trading losses of $293,000 incurred by the Company for the three
month period ending March 31, 19195 includes a loss of $398,000 attributable to
the 20 open Standard & Poor's 500 index contracts partially offset by $105,000
of other trading gains. For the comparable prior year period the Company
incurred trading gains of $73,000.
During the current year the Company did not record an income tax benefit as
it is not expected to be utilized in the current year and the Company does not
have any unused carryback available.
Discontinued Operations
During the current quarter, the Company incurred a $282,000 loss from
discontinued operations versus a loss of $357,000 in the prior year quarter.
Net sales in the current year quarter were $667,000 versus a $1,285,000 in the
prior year. This decline in sales of $618,000 or 48% results from a decline of
business with two major customers. The operating loss in both years results
from the Company's inability to lower fixed costs and expenses in proportion to
the sales decline.
The Company has estimated a loss on sale of the manufacturing operations of
$430,000 which includes a $125,000 estimate for losses between the balance sheet
date and the expected date of sale of May 15, 1995.
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Results of Operations
Six Months Ended March 31, 1995
Income
Income from continuing operations consists of interest and trading gains
and losses. The trading losses of $340,000 incurred by the Company for the six
months ended March 31, 1995 include a loss of $398,000 attributable to the 20
open Standard & Poor's 500 index contracts partially offset by $58,000 of other
trading gains. In the comparable prior year period the Company incurred trading
gains of $62,000.
During the current year the Company did not record an income tax benefit as
it is not expected to be utilized in the current year and the Company does not
have any unused carryback available.
Discontinued Operations
During the six month period ended March 31, 1995, the Company incurred a
loss of $596,000 versus a loss of $508,000 in the prior year period. Net sales
in the six month period were $1,408,000 versus $4,253,000 or a decline of
$2,845,000 or 66.9%. This decline in revenue reflects an overall deterioration
of business resulting from internal changes at its key customers as well as
within the healthcare industry overall. The operating loss in both years
reflects the Company's inability to lower fixed costs and expenses in proportion
to the sales decline.
The Company's estimated loss on the sale of operations has been explained
on the prior page.
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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
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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.
PERSONAL DIAGNOSTICS, INCORPORATED
Registrant
Date: May 12, 1995 By: /s/ John H. Michael
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John H. Michael, Chairman
(on behalf of the registrant)
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EXHIBIT INDEX
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Exhibit No. Description
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Ex-27 Financial Data Schedule