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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 June 30, 1997
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
PERSONAL DIAGNOSTICS, INCORPORATED
(Exact name of registrant as specified in its charter)
New Jersey 22-2325136
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
PO 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
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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 5, 1997
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Common Stock, $.01 par value 5,014,000
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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, 1997 and September 30, 1996 3
Statements of Operations - For the Three and Nine Months Ended
June 30, 1997 and 1996 4
Statements of Cash Flows - For the Nine Months Ended June 30, 1997 and 1996 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
Exhibit Index 13
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PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
September 30,
June 30, 1997 1996
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 6,140,000 $ 6,910,000
Property held for development and sale-net 1,675,000 866,000
Due from stockholder (collected January 2, 1997) -- 105,000
Other current assets 5,000 1,000
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Total Current Assets 7,820,000 7,882,000
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TOTAL ASSETS $ 7,820,000 $ 7,882,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,000 $ 10,000
Accrued payroll -- 150,000
Current liabilities of discontinued operations 150,000 150,000
Other current liabilities 75,000 70,000
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Total Current Liabilities 235,000 380,000
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STOCKHOLDERS' EQUITY:
Common Stock,$.01 par value; authorized,
25,000,000 shares; issued and outstanding,
5,014,000 shares 50,000 50,000
Capital in excess of par value 13,420,000 13,420,000
Accumulated deficit (5,885,000) (5,968,000)
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Total Stockholders' Equity 7,585,000 7,502,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,820,000 $ 7,882,000
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See accompanying notes to financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
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1997 1996 1997 1996
---------- ---------- ---------- ----------
INCOME:
Interest $ 68,000 $ 92,000 $ 215,000 $ 289,000
Trading gains (losses) (13,000) (32,000) 691,000 (79,000)
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55,000 60,000 906,000 210,000
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EXPENSES:
Allowance for loss on property held for sale -- -- 120,000 --
General and administrative 133,000 63,000 703,000 254,000
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INCOME (LOSS) FROM
CONTINUING OPERATIONS (78,000) (3,000) 83,000 (44,000)
---------- ---------- ---------- ----------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations -- -- -- (50,000)
Gain (loss) on sale -- -- -- --
---------- ---------- ---------- ----------
-- -- -- (50,000)
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NET INCOME (LOSS) $ (78,000) $ (3,000) $ 83,000 $ (94,000)
========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from continuing operations $ (0.02) $ -- $ 0.02 $ (0.01)
Discontinued operations -- -- -- (0.01)
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Net income (loss) $ (0.02) $ -- $ 0.02 $ (0.02)
========== ========== ========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,014,000 4,864,000 5,014,000 4,864,000
========== ========== ========== ==========
See accompanying notes to financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 83,000 $ (94,000)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Provision (benefit) for loss on accounts receivable -- (50,000)
Provision for loss on property held for sale 120,000 --
Changes in assets and liabilities:
Trading securities -- 4,963,000
Receivables - net -- 198,000
Property held for development and sale (929,000) (867,000)
Accounts payable and accrued liabilities (145,000) (70,000)
Other current assets (4,000) 11,000
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Net cash flows from operating activities (875,000) 4,091,000
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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:
Proceeds from exercise of stock options 105,000 --
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Net cash flows from financing activities 105,000 --
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (770,000) 4,091,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,910,000 2,794,000
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CASH AND EQUIVALENTS, END OF PERIOD $6,140,000 $6,885,000
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See accompanying notes to 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 "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
For the nine months ending June 30, 1997 and 1996, there was no charge
or credit to earnings representing the change in the net unrealized holding loss
on trading securities. At June 30, 1997 the Company had no open trading or
investment positions.
The focus of the Company's efforts is to engage in an operating
business. The Company presently intends to risk no more than 20% of net worth in
trading or investment activities. At June 30, 1997, not including real estate
held for development and sale, the Company had approximately 75% of its assets
in United States Treasury Bills.
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4. PROPERTY HELD FOR DEVELOPMENT AND SALE
The Company owns two properties in Washington D.C. which it acquired
with the intention to improve and resell. The first property is located at
1810 24th Street, NW and is in the process of substantial renovation. The
second property, the Fulbright property, located at 2527 Belmont Road, NW
has presented management with a series of challenges. These include zoning
issues, historic regulations, commencement of significant public and embassy
construction in the immediate area and a weaker than expected resale market.
The Company is reviewing all of its options with respect to this property.
5. STATEMENT OF CASH FLOWS
Nine Months Ended
June 30,
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1997 1996
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Supplemental disclosure of cash flows information-
Income taxes paid/(refunded) $(2,000) $(15,000)
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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, 1997, the Company had a cash and Treasury Bill balance of
$6,140,000 which represents a $770,000 decrease from the $6,910,000 balance at
September 30, 1996. This $770,000 decrease results from cash flow from
operations of $875,000 which includes the result of net income of $83,000
combined with the provision for loss on property held for sale of $120,000
offset by changes in operating assets and liabilities of $149,000 and a
$929,000 cash outlay for the purchase of property held for development and
sale and capital improvement of such property. In addition, cash flow from
financing activities added $105,000 representing proceeds from the exercise of
stock options. The Company's working capital position at June 30, 1997 was
$7,585,000 as compared to a September 30, 1996 balance of $7,502,000.
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 owns two properties in Washington D.C. which it acquired
with the intention to improve and resell. The first property is located at 1810
24th Street, NW and is in the process of substantial renovation. The second
property, the Fulbright property, located at 2527 Belmont Road, NW has presented
management with a series of challenges. These include zoning issues, historic
regulations, commencement of significant public and embassy construction in the
immediate area and a weaker than expected resale market. The Company is
reviewing all of its options with respect to this property.
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
investments often involve 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.
The focus of the Company's efforts is to engage in an operating
business. The Company presently intends to risk no more than 20% of net worth in
trading or investment activities. At June 30, 1997, not including real estate
held for development and sale, the Company had approximately 75% of its assets
in United States Treasury Bills. At June 30, 1997 the Company had no outstanding
investment or trading positions.
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Results of Operations
Three Months Ended June 30, 1997
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 and in the
first quarter of 1997 an allowance for loss on property held for sale. The
Company realized a loss from continuing operations in the current three month
period of $78,000 versus a loss of $3,000 in the prior year period. Interest
income declined $24,000 to $68,000 primarily due to less invested funds. Trading
losses equaled $13,000 compared to trading losses of $32,000 in the prior year
period. General and administrative expenses of $133,000 were $70,000 higher than
the prior year period of $63,000 due primarily to increased payroll expenses
paid to President John H. Michael and costs associated with real estate
activity.
During the current quarter the Company has not recorded an income tax
provision due to available tax carryforwards.
Discontinued Operations
During the current quarter and prior year period, the Company
experienced no activity from discontinued operations.
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Results of Operations
Nine Months Ended June 30, 1997
Income (Loss) from Continuing Operations
Income (loss) from continuing operations consists of interest and
trading gains and losses and general and administrative expenses and in the
first quarter of 1997 an allowance for loss on property held for sale. The
Company realized income from continuing operations in the current nine month
period of $83,000 versus a loss of $44,000 in the prior year period. Interest
income declined $74,000 to $215,000 primarily due to less invested funds.
Trading gains equaled $691,000 compared to trading losses of $79,000 in the
prior year period. Real estate operations were impacted by a special allowance
of $120,000 for the diminished value of the Belmont Rd. (Fulbright) property due
to large scale private and public construction in the adjacent area. General and
administrative expenses of $703,000 were $449,000 higher than the prior year
period of $254,000 due primarily to increased payroll and bonus expenses paid to
President John H. Michael and costs associated with real estate activity.
During the current nine month period the Company has not recorded an
income tax provision due to available tax carryforwards.
Discontinued Operations
During the current nine month period, the Company experienced no
activity from discontinued operations versus a loss of $50,000 in the prior year
period. The loss of $50,000 in the prior year period was attributable to an
increase in estimated future product liability insurance costs. See Note 2 to
the financial statements for a discussion of the sale of the Company's
manufacturing operation.
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PERSONAL DIAGNOSTICS, INCORPORATED
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed as
part of this report on Form 10-Q are
listed in the attached Exhibit Index.
(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 5, 1997 By: /s/ John H. Michael
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John H. Michael, Chairman
(on behalf of the registrant)
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