1
FORM 10-Q/A
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, 1996
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
(Exact name of registrant as specified in its charter)
New Jersey 22-2325136
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
P.O. Box 5310, Parsippany, NJ 07054
(Address of principal executive offices) (Zip Code)
(201) 952-9000
(Registrant's telephone number, including area code)
Not applicable
(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 17, 1996
Common Stock, $.01 par value 4,864,000
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PERSONAL DIAGNOSTICS, INCORPORATED
INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets - June 30, 1996 and September 30, 1995............................................... 3
Statements of Operations - For the Three and Nine Months ended
June 30, 1996 and 1995.............................................................................. 4
Statements of Cash Flows - For the Nine Months Ended
June 30, 1996 and 1995.............................................................................. 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
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PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
June, 30 September 30,
1996 1995
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 6,885,000 $ 2,794,000
U.S. Treasury Bills (over three months maturity) -- 4,963,000
Property held for development and sale 867,000 --
Current assets of discontinued operations -- 148,000
Other current assets 5,000 16,000
------------ ------------
Total Current Assets 7,757,000 7,921,000
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TOTAL ASSETS $ 7,757,000 $ 7,921,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,000 $ 12,000
Accrued payroll -- 143,000
Current liabilities of discontinued operations 200,000 150,000
Other current liabilities 95,000 70,000
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Total Current Liabilities 305,000 375,000
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STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value: authorized,
25,000,000 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 (5,913,000) (5,819,000)
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Total Stockholders' Equity 7,452,000 7,546,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,757,000 $ 7,921,000
============ ============
See accompanying notes to consolidated financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, March 31,
------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
INCOME:
Interest $ 92,000 $ 84,000 $ 289,000 $ 214,000
Trading gains (losses) (32,000) (202,000) (79,000) (542,000)
----------- ----------- ----------- -----------
60,000 (118,000) 210,000 (328,000)
----------- ----------- ----------- -----------
EXPENSES:
General and administrative 63,000 30,000 254,000 91,000
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (3,000) (148,000) (44,000) (419,000)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations -- 51,000 (50,000) (484,000)
Gain (loss) on sale -- 88,000 -- (342,000)
----------- ----------- ----------- -----------
-- 139,000 (50,000) (826,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (3,000) $ (9,000) $ (94,000) $(1,245,000)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from continuing operations $ -- $ (0.03) $ (0.01) $ (0.09)
Discontinued operations -- (0.02) (0.01) (0.17)
----------- ----------- ----------- -----------
Net income (loss) $ -- $ (0.01) $ (0.02) $ (0.26)
=========== =========== =========== ===========
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
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (94,000) $(1,245,000)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization -- 302,000
Provision (benefit) for loss on accounts receivable (50,000) 100,000
Write-down of property and equipment -- (19,000)
Loss (gain) on disposal of property and equipment -- 342,000
Changes in assets and liabilities
Trading securities 4,963,000 930,000
Receivables-net 198,000 242,000
Inventories -- (70,000)
Property held for development and sale (867,000) --
Accounts payable and accrued liabilities (70,000) (103,000)
Prepaid expenses and noncurrent assets 11,000 564,000
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Net cash flows from operating activities 4,091,000 1,043,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment -- --
Proceeds from disposal of property and equipment -- 29,000
Net proceeds from sale of discontinued operations -- 4,496,000
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Net cash flows from investing activities -- 4,525,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (2,451,000)
Principal payments under equipment notes
payable and capital lease obligations -- (1,195,000)
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Net cash flows from financing activities -- (3,646,000)
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS 4,091,000 1,992,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 2,794,000 5,554,000
----------- -----------
CASH AND EQUIPMENTS, END OF PERIOD $ 6,885,000 $ 7,476,000
=========== ===========
See accompanying notes to consolidated financial statements.
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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. 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
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 have been reported as "Discontinued
Operations" in accordance with Accounting Principles Board Opinion No. 30.
"Current liabilities of 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 six months ending June 30, 1996, there was no
charge or credit to earnings representing any change in the net unrealized
holdings on its trading securities. In the prior year six month period the
Company included a charge to earnings of $87,000 representing the change in the
net unrealized holding loss on its trading securities.
At June 30, 1996 the Company had no open trading or investment
positions.
The focus of the Company's activities is on entering an
operating business and the Company presently intends to limit its trading and
investment positions to no more than approximately one quarter of its total
assets. At June 30, 1996 over 80% of the Company's total assets were in the form
of U.S. Government Treasury Bills.
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4. PROPERTY HELD FOR DEVELOPMENT AND SALE
On April 17, 1996 the Company entered into a contract to purchase the
residence of the late Senator William Fulbright which is located in the choice
Embassy section of Washington D.C., adjacent to Rock Creek Park. The net
purchase price of this property was approximately $855,000 plus closing costs
and the transaction closed June 13, 1996. The Company presently intends to
invest between $200,000 and $500,000 on capital improvements and immediately
offer the property for sale. See Management's Discussion and Analysis of
Financial Condition (Liquidity and Capital Resources) for a further discussion
of this matter.
5. STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
-------------------------
1996 1995
Supplemental disclosure of cash flows information-Interest paid $ -0- $ 210,000
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Income taxes paid/(refunded) $(15,000) $(126,000)
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PERSONAL DIAGNOSTICS, INCORPORATED
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At June 30, 1996, the Company had a cash and Treasury Bill
balance of $6,885,000 which represents a $872,000 decrease from the $7,757,000
balance at September 30, 1995. This $872,000 decrease results entirely from cash
flow from operations which represents the result of a net loss of $94,000
combined with the benefit of the reduction in a bad debt reserve of $50,000 and
an $867,000 cash outlay for the purchase for development and sale offset by
changes in operating assets and liabilities of $139,000. The Company's working
capital position at June 30, 1996 was $7,452,000 as compared to a September 30,
1995 balance of $7,546,000.
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 and Treasury Bill balances will be sufficient to satisfy
both the Company's operating and capital needs for the foreseeable future.
Management has considered many alternatives to resume active
operations. It has taken into account the risk of possible opportunities as well
as their potential rewards. Two possible acquisitions in the Company's former
primary business (precision machinery of medical implants) were evaluated in
detail and rejected for a variety of reasons including potential long-term
profitability and competitive position. Management has also invested
considerable time evaluating and finally rejecting numerous proposals for
possible acquisition or combination. These proposals included media operations
(small market television stations), a data search system and several other
proposals and suggestions presented by investment professionals, the Company's
advisors and others. 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. After much
thought and deliberation, 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.
On April 17, 1996 the Company entered into a contract to
purchase the residence of the late Senator William Fulbright which is located
in the choice Embassy section of Washington D.C. adjacent to Rock Creek Park.
The net purchase price of this property was approximately $855,000 plus closing
costs and the transaction closed June 13, 1996. The Company presently intends
to invest between $200,000 and $500,000 on improvements. The exact scope of the
improvements will be determined when the resale market price category is more
precisely identified. A study to determine this targeted resale category is in
progress. The Company has retained the highly regarded architectural firm of
Rixey & Rixey to coordinate the development activities related to the Property.
Upon completion of the anticipated improvements the Company will aggressively
market the property. Management wishes to note that Karen Michael, wife of
Company President John Michael, acted as agent for the buyer in this
transaction. In order to make the net purchase price to the Company more
attractive, Mrs. Michael canceled her potential fee of approximately $18,000.
This action effectively reduced the contract purchase price of the property by
that amount. Future transactions may be handled in a different fashion.
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Additionally, the Company is considering development
opportunities both in the Washington D.C. area and Florida. The Company expects
to derive significant revenue during the coming year from these activities. The
Company may make offers on other substantial properties where it believes its
general business expertise and financial flexibility will enable it to profit.
The focus of the Company's activities will be operational.
Therefore, the Company presently intends to limit its trading and investment
activities to no more than one quarter of its total assets. At June 30, 1996
more than 80% of the Company's total assets were held in the form of U.S.
Government Treasury Bills.
Mr. William Oberdorf, who served on the Board of Directors of
the Company for many years, retired effective May 2, 1996. At a meeting of the
Board on May 1, 1996 the Directors thanked Mr. Oberdorf for his tireless efforts
on the Company's behalf over the years and expressed appreciation for his work
and advice. The Board unanimously elected Dr. Alfonso Espinosa to the Board of
Directors effective May 2, 1996 to replace Mr. Oberdorf. Dr. Espinosa is a
former Peruvian diplomat who served as the Cultural Minister of Peru to the
United States for many years and retired from the Peruvian Foreign Ministry with
the rank of Ambassador. Dr. Espinosa is also a highly respected, retired faculty
member of Georgetown University in Washington, D.C.
Results of Operations
Three Months Ended June 30, 1996
As a result of the sale of the Company's manufacturing assets,
the financial results of the Company's manufacturing operation has been reported
as "Discontinued Operations" in accordance with Accounting Principles Board
Opinion No. 30. The prior years' results have been restated to conform to the
new reporting format.
Income (Loss) from Continuing Operations
Income (loss) from continuing operations consists of interest
and trading gains and losses and general and administrative expenses. The
Company incurred a $3,000 loss from continuing operations in the current three
month period versus a loss of $148,000 in the prior year period. Interest income
increased $8,000 to $92,000 due to more invested funds. During the current
quarter the Company experienced a trading loss of $32,000 on Standard & Poor's
500 index contracts versus a loss of $202,000 in the comparable prior year
quarter. The trading losses of $202,000 incurred by the Company for the three
month period ending June 30, 1995 included a loss of $186,000 attributable to
Standard & Poor's 500 index contracts. General and administrative expenses of
$63,000 were $33,000 higher than the prior year period of $30,000 due mainly to
higher payroll costs.
During the current year the Company has not recorded 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.
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Discontinued Operations
During the current quarter, the Company experienced no
activity from discontinued operations versus a gain of $139,000 in the prior
year quarter. The gain of $139,000 in the prior year quarter included a gain on
the sale of the Company's manufacturing operations of $88,000 which represented
a positive adjustment to the estimated loss on sale due to a favorable
resolution of certain inventory issues and greater than expected efficiency
during the transaction period. See note 2 for a further discussion of the sale.
Result of Operations
Nine Months Ended June 30, 1996
Income (Loss) from Continuing Operations
Income (loss) from continuing operations consists of interest
and trading gains and losses and general and administrative expenses. The
Company incurred a $44,000 loss from continuing operations in the current six
month period versus a loss of $419,000 in the prior year period. Interest income
increased $75,000 to $289,000 due to more invested funds. During the current
nine month period the Company experienced a trading loss of $79,000 on Standard
& Poor's 500 index contracts versus a loss of $542,000 in the comparable prior
year period. The trading losses of $542,000 incurred by the Company for the nine
month period ending June 30, 1995 included a loss of $584,000 attributable to 20
Standard & Poor's 500 index contracts partially offset by $42,000 of other
trading gains. General and administrative expenses of $254,000 were $163,000
higher than the prior year period of $91,000 due mainly to higher payroll costs
and increased insurance, relocation costs, and professional fees resulting from
the Company's sale of its manufacturing operation.
During the current period the Company has not recorded 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 nine month period, the Company experienced
a loss of $50,000 from discontinued operations due to an increase in estimated
future product liability insurance costs versus a loss of $826,000 in the prior
year period. The loss of $826,000 in the prior year period included a loss on
the sale of the Company's manufacturing operations of $342,000. See note 2 for a
further discussion of the sale.
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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
By: /s/ John M. Michael
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John H. Michael, Chairman
(on behalf of the registrant)
Date: July 17, 1996
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