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, 1998
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 (I.R.S. Employer Identification No.)
incorporation or organization)
PO Box 5310, Parsippany, NJ 07054
(Address of principal executive (Zip Code)
offices)
(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 April 30, 1998
----- -----------------------------
Common Stock, $.01 par value 5,014,000
PERSONAL DIAGNOSTICS, INCORPORATED
Index Page No.
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Part I Financial Information
Item 1. Financial Statements:
Balance Sheets - March 31, 1998 and September 30, 1997 3
Statements of Operations - For the Three and SixMonths Ended
March 31, 1998 and 1997 4
Statements of Cash Flows - For the Six Months Ended
March 31, 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
PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
September 30,
March 31, 1998 1997
-------------------- -------------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 6,640,000 $ 6,117,000
Property held for development and sale-net 860,000 1,661,000
Other current assets 5,000 7,000
-------------------- -------------------
Total Current Assets 7,505,000 7,785,000
-------------------- -------------------
TOTAL ASSETS $ 7,505,000 $ 7,785,000
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,000 $ 12,000
Accrued payroll 88,000 -
Current liabilities of discontinued operations 100,000 125,000
Other current liabilities 65,000 93,000
-------------------- -------------------
Total Current Liabilities 258,000 230,000
-------------------- -------------------
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 (6,223,000) (5,915,000)
-------------------- -------------------
Total Stockholders' Equity 7,247,000 7,555,000
-------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,505,000 $ 7,785,000
==================== ===================
See accompanying notes to financial statements.
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------------- ------------------------------------
1998 1997 1998 1997
-------------- -------------- ---------------- ----------------
INCOME:
Interest $ 85,000 $ 71,000 $ 167,000 $ 147,000
Trading gains (losses) (340,000) 266,000 (323,000) 704,000
-------------- -------------- ---------------- ----------------
(255,000) 337,000 (156,000) 851,000
-------------- -------------- ---------------- ----------------
EXPENSES:
General and administrative 63,000 332,000 152,000 690,000
-------------- -------------- ---------------- ----------------
INCOME (LOSS) BEFORE
INCOME TAXES (318,000) 5,000 (308,000) 161,000
-------------- -------------- ---------------- ----------------
PROVISION (BENEFIT)
FOR INCOME TAXES - - - -
-------------- -------------- ---------------- ----------------
NET INCOME (LOSS) $ (318,000) $ 5,000 $ (308,000) $ 161,000
============== ============== ================ ================
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING $ (0.06) - $ (0.06) $ 0.03
============== ============== ================ ================
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,050,000 5,014,000 5,050,000 5,014,000
============== ============== ================ ================
See accompanying notes to financial statements.
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
March 31,
-------------------------------------------------
1998 1997
------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (308,000) $ 161,000
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 801,000 (904,000)
Accounts payable and accrued liabilities 28,000 (113,000)
Other current assets 2,000 (4,000)
------------------- --------------------
Net cash flows from operating activities 523,000 (740,000)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - -
Proceeds from disposal of property and equipment - -
------------------- --------------------
Net cash flows from investing activities - -
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options - 105,000
------------------- --------------------
Net cash flows from financing activities - 105,000
------------------- --------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 523,000 (635,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,117,000 6,910,000
------------------- --------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 6,640,000 $ 6,275,000
=================== ====================
See accompanying notes to financial statements.
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 March 31, 1998 and 1997, there was no
charge or credit to earnings representing the change in the net unrealized
holding loss on trading securities. At March 31, 1998 the Company had no open
trading or investment positions. During the quarter the Company incurred a loss
of $340,000 on its trading and investment activities as compared with a gain of
$266,000 in the prior year period. During the quarter the nominal value of the
Company's exposure to financial derivatives averaged approximately $475,000 per
month compared with an average of $250,000 per month during the prior year
period.
A t March 31, 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
Six Months Ended
March 31,
---------
1998 1997
---- ----
Supplemental disclosure of cash flows information-
Income taxes paid/(refunded) $-0- $(2,000)
==== ========
PERSONAL DIAGNOSTICS, INCORPORATED
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
At March 31, 1998, the Company had a cash and Treasury Bill balance of
$6,640,000 which represents an $523,000 increase from the $6,117,000 balance at
September 30, 1997. This $523,000 increase results entirely from cash flow from
operations which includes the result of a net loss of $308,000 offset by the
proceeds from the sale of a property for $801,000 and changes in operating
assets and liabilities of $30,000. The Company's working capital position at
March 31, 1998 was $7,247,000 as compared to a September 30, 1997 balance of
$7,555,000. Subsequent to the end of the quarter, the Company agreed in two
private transactions with parties unrelated to the Company to purchase a total
of 138,211 shares of the Company's common stock at $1.20 per share or a total of
$165,853. This transaction will be completed May 4, 1998 and the shares will be
cancelled.
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 continues to invest considerable time and
effort evaluating 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 development business and will decide during the next several months
whether to continue or expand 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 futures 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 a loss of $340,000 on its trading and investment activities as compared
with a gain of $266,000 in the prior year period. During the quarter the nominal
value of the Company's exposure to financial derivatives averaged approximately
$475,000 per month compared with an average of $250,000 per month during the
prior year period.
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 March 31, 1998, the Company
had approximately 80% of its assets in United States Treasury Bills. At March
31, 1998 the Company had no outstanding investment or trading positions.
Results of Operations
Three Months Ended March 31, 1998
Net income (loss)
The Company incurred a loss in the current three-month period of
$318,000 versus a gain of $5,000 in the prior year period. Interest income
increased $14,000 to $85,000 primarily due to more invested funds. Trading
losses equaled $340,000 compared to trading gains of $266,000 in the prior year
period. General and administrative expenses of $63,000 were $269,000 lower than
the prior year period of $332,000. The reduction of $269,000 was due to a lower
level of compensation to President John Michael, a lower level of real estate
development activity and lower insurance and professional costs. During the
current quarter Mr. Michael accrued total compensation of $44,000 compared to
compensation of $244,000 (which included a $200,000 special investment
performance bonus) in the prior year quarter. In addition, a lower level of real
estate development activity and lower insurance and professional costs accounted
for the remaining decline of $69,000 compared to last year.
During the current quarter the Company had not recorded an income tax
benefit due to unavailable tax carryforwards.
Results of Operations
Six Months Ended March 31, 1998
Net income (loss)
The Company incurred a loss in the current six-month period of $253,000
versus a gain of $161,000 in the prior year period. Interest income increased
$20,000 to $167,000 primarily due to more invested funds. Trading losses equaled
$323,000 compared to trading gains of $704,000 in the prior year period. General
and administrative expenses of $152,000 were $538,000 lower than the prior year
period of $690,000. The reduction of $538,000 was due to a lower level of
compensation to President John Michael, a lower level of real estate development
activity and lower insurance and professional costs. During the current
six-month period Mr. Michael accrued total compensation of $88,000 as compared
to compensation of $438,000 (which included a special investment performance
bonus of $350,000) in the prior year period. In addition, general and
administrative expenses were $188,000 lower in the current six-month period due
to lower insurance and professional costs and a lower level of real estate
development activity which last year included a special provision of $120,000
for the diminished value of one of the Company's real estate properties.
During the current six-month period the Company had not recorded an
income tax benefit due to unavailable tax carryforwards.
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
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: April 30, 1998 By:__________________________
John H. Michael, Chairman
(on behalf of the registrant)