1
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 30,1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ______________
Commission file number 0-10128
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 incorporation (I.R.S. Employer
or organization) Identification No.)
3 Entin Road, Parsippany, NJ 07054
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(Address of principal executive offices) (Zip Codes)
(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 August 11,1995
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Common Stock, $.01 par value 4,864,000
Page 1 of 12
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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 - June 30,1995 and September 30,1994 3
Consolidated Statements of Operations - For the Three and Nine Months
Ended June 30, 1995 and 1994 4
Consolidated Statements of Cash Flows - For the Nine Months Ended
June 30,1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1995 1994
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(UNAUDITED)
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 7,476,000 $ 5,554,000
Trading securities 100,000 1,030,000
Receivables-net 198,000 540,000
Inventories - 141,000
Other current assets 10,000 505,000
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Total Current Assets 7,784,000 7,770,000
PROPERTY AND EQUIPMENT, AT COST
LESS ACCUMULATED DEPRECIATION OF
$0 AND $2,221,000 - 4,895,000
OTHER ASSETS - 73,000
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$ 7,784,000 $ 12,738,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 15,000 $ 111,000
Accrued payroll 125,000 110,000
Accrued costs related to discontinued 155,000 -
operations
Current portion of long-term debt - 592,000
Other current liabilities 85,000 172,000
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Total Current Liabilities 380,000 985,000
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LONG-TERM DEBT - 3,104,000
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STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized - 10,000,000 shares
issued and outstanding-
4,864,000 shares 49,000 49,000
Capital in excess of par value 13,316,000 13,316,000
Accumulated deficit (5,961,000) (4,716,000)
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Total Stockholders' Equity 7,404,000 8,649,000
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$ 7,784,000 $ 12,738,00
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See accompanying notes to consolidated financial statements.
Page 3 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
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1995 1994 1995 1994
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INCOME:
Interest $ 84,000 $ 36,000 $214,000 $ 125,000
Trading gains (losses) (202,000) 138,000 (542,000) 200,000
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(118,000) 174,000 (328,000) 325,000
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PROVISION FOR INCOME TAXES - 5,000 - 13,000
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INCOME (LOSS) FROM CONTINUING
OPERATIONS (118,000) 169,000 (328,000) 312,000
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INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations 21,000 (707,000) (575,000) (1,215,000)
Gain (loss) on sale 88,000 - (342,000) -
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109,000 (707,000) (917,000) (1,215,000)
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NET INCOME (LOSS) $ (9,000) $ (538,000) $(1,245,000) $ (903,000)
============== =========== =========== ==========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from
continuing operations $ (0.03) $ 0.03 $ (0.07) $ 0.06
Discontinued operations 0.02 (0.14) (0.19) (0.25)
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Net income (loss) $ (0.01) $ (0.11) $ (0.26) $ (0.19)
============== =========== =========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,864,000 4,864,000 4,864,000 4,864,000
============== =========== =========== ==========
See accompanying notes to consolidated financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
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1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,245,000) $(903,000)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization 302,000 509,000
Deferred income taxes - 73,000
Provision for loss on accounts receivable 100,000 -
Loss (gain) on disposal of property and equipment (19,000) -
Loss on sale of discontinued operations 342,000 -
Loss (gain) on investments - (200,000)
Changes in assets and liabilities:
Trading securities 930,000 -
Receivables - net 242,000 878,000
Inventories (70,000) 48,000
Accounts payable and accrued liabilities (103,000) (1,478,000)
Prepaid expenses and noncurrent assets 564,000 (41,000)
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Net cash flows from operating activities 1,043,000 (1,114,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - (168,000)
Proceeds from disposal of property and equipment 29,000 -
Net proceeds from sale of discontinued operations 4,496,000
Purchase of marketable securities - (4,673,000)
Proceeds from the sale of marketable securities - 3,620,000
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Net cash flows from investing activities 4,525,000 (1,221,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 677,000
Principal payments on borrowings (2,451,000) (192,000)
Principal payments under equipment notes
payable and capital lease obligations (1,195,000) (406,000)
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Net cash flows from financing activities (3,646,000) 79,000
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DECREASE IN CASH AND EQUIVALENTS 1,922,000 (2,256,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 5,554,000 7,638,000
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CASH AND EQUIVALENTS, END OF PERIOD $ 7,476,000 $ 5,382,000
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See accompanying notes to consolidated financial statements.
167779-1 Page 5 of 12
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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 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. See footnote 2
regarding "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
On May 15,1995 the Company completed the sale of certain assets to
EBI Medical Systems, Inc. ("EBI"), a subsidiary of Biomet, Inc. The assets
sold consisted 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 office equipment and
manufacturing-related items (collectively, the "Purchased Assets"). The
purchase price for the Purchased Assets was $4,400,000. Certain additional
items, including miscellaneous inventory, were purchased separately.
As a result of the sale, the financial results of the Company's
manufacturing operation has been reported as "Discontinued Operations" in
accordance with Accounting Principles Board Opinion No. 30. "Accrued costs
related to discontinued operations" includes operating expenses to be
incurred.
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 nine months ending June
30, 1995, the Company included a credit to earnings of $112,000 and $87,000,
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 June 30,1995, the
Company had no open positions for Standard & Poor's 500 index 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
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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.
4. INVENTORIES
Inventories are summarized as follows:
June 30, September 30,
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1995 1994
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Work in process $ -0- $146,000
Less: Progress Payments - 5,000
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$ -0- $141,000
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5. STATEMENTS OF CASH FLOWS
Six Months Ended
March 31,
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1995 1994
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Supplemental disclosure of
cash flows information-Interest paid $210,000 $179,000
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Income taxes paid/(refunded) ($126,000) $ 9,000
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Page 7 of 12
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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 June 30,1995, the Company had a cash balance of $7,476,000 which
represents a $1,922,000 increase from the $5,554,000 balance at September
30,1994. This $1,922,000 increase results from cash flow from operations of
$1,043,000 which represents the net result of a $1,245,000 loss offset
primarily by depreciation of $302,000, $1,563,000 from operating assets and
liabilities, $342,000 related to the loss on sale of discontinued operations
and a $100,000 provision for loss on accounts receivable. In addition,
investing activities added $4,525,000 attributable to proceeds from disposal
of property and the sale of the Company's manufacturing operations. Finally,
financing activities required $3,646,000 represented by the complete payoff of
the Company's term loan and lease obligations. The Company's working capital
position at June 30,1995 was $7,404,000 as compared to a September 30,1994
balance of $6,785,000.
Since the Company has ceased 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.
A detailed description of the sale 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. On July 21,1995 the common
stock of Personal Diagnostics, Incorporated began trading on the Bulletin
Board system. Consequently, the daily price will no longer appear in many
financial publications. The current quotation may be obtained from
stockbrokers.
Page 8 of 12
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Results of Operations
Three Months Ended June 30,1995
As a result of the 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 $202,000 incurred by the Company for the
three month period ending June 30,1995 includes a loss of $186,000
attributable to closed Standard & Poor's 500 index contracts. For the
comparable prior year period the Company incurred trading gains of $138,000.
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 $21,000 gain from
discontinued operations versus a loss of $707,000 in the prior year quarter.
Net sales in the current year quarter were $513,000 versus $911,000 in the
prior year. This decline in sales of $398,000 or 44% results from a decline
of business with two major customers. The small operating gain in 1995
results from non-recurring credits and refunds associated with the cessation
of operations. The operating loss for the prior year results from the
Company's inability to lower fixed costs and expenses in proportion to the
sales decline.
The Company had estimated a loss on the sale of its manufacturing
operations of $430,000. The recorded loss of $342,000 reflects a favorable
resolution of certain inventory issues and greater than expected efficiency
during the transition period.
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Results of Operations
Nine Months Ended June 30,1995
Income
Income from continuing operations consists of interest and trading gains
and losses. The net trading losses of $542,000 incurred by the Company for
the nine months ended June 30,1995 include a loss of $584,000 attributable to
Standard & Poor's 500 index contracts partially offset by $42,000 of other,
net trading gains. In the comparable prior year period the Company incurred
trading gains of $200,000.
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 nine month period ended June 30,1995, the Company incurred a
loss of $575,000 versus a loss of $1,215,000 in the prior year period. Net
sales in the nine month period were $1,921,000 versus $5,164,000 or a decline
of $3,243,000 or 62.8%. 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 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: August 11, 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 27 Financial Data Schedule