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, 2002
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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................
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 Identification No.)
incorporation or organization)
PO Box 5544, Parsippany, NJ 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 August 9, 2002
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Common Stock, $.01 par value 3,740,000
Page 1 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
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Index Page No.
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Part I Financial Information
Item 1. Financial Statements:
Balance Sheets - June 30, 2002 and September 30, 2001 3
Statements of Operations - For the Three and Nine Months Ended
June 30, 2002 and 2001 4
Statements of Cash Flows - For the Nine Months Ended June 30, 2002 and 2001 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Page 2 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
June 30, 2002 September 30, 2001
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 17,000 $ 3,806,000
Due from brokers -- 977,000
Trading securities 7,099,000 1,575,000
Other current assets 2,000 7,000
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Total Current Assets 7,118,000 6,365,000
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TOTAL ASSETS $ 7,118,000 $ 6,365,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings-brokers $ 3,473,000 $ --
Accounts payable and accrued expenses 31,000 56,000
Accrued compensation 121,000 --
Income taxes payable -- 15,000
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Total Current Liabilities 3,625,000 71,000
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STOCKHOLDERS' EQUITY:
Common Stock,$.01 par value; authorized,
25,000,000 shares; issued 3,740,000 37,000 37,000
Capital in excess of par value 11,914,000 11,914,000
Accumulated deficit (8,458,000) (5,657,000)
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Total Stockholders' Equity 3,493,000 6,294,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,118,000 $ 6,365,000
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See accompanying notes to financial statements.
Page 3 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
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2002 2001 2002 2001
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INCOME:
Interest $ 11,000 $ 60,000 $ 71,000 $ 195,000
Trading gains (losses) (1,629,000) 519,000 (2,652,000) 1,039,000
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(1,618,000) 579,000 (2,581,000) 1,234,000
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EXPENSES:
General and administrative 61,000 440,000 204,000 988,000
Interest expense 16,000 -- 16,000 --
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77,000 440,000 220,000 988,000
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INCOME (LOSS) BEFORE
INCOME TAXES (1,695,000) 139,000 (2,801,000) 246,000
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PROVISION FOR
INCOME TAXES -- 50,000 -- 50,000
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NET INCOME (LOSS) $(1,695,000) $ 89,000 $(2,801,000) $ 196,000
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC 3,740,000 3,740,000 3,740,000 3,740,000
=========== =========== =========== ===========
DILUTED 3,740,000 3,785,000 3,740,000 3,782,000
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE:
BASIC $ (0.45) $ 0.02 $ (0.75) $ 0.05
=========== =========== =========== ===========
DILUTED $ (0.45) $ 0.02 $ (0.75) $ 0.05
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See accompanying notes to financial statements.
Page 4 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,801,000) $ 196,000
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Changes in assets and liabilities:
Due from brokers 977,000 --
Trading securities (2,051,000) --
Accounts payable and accrued liabilities 81,000 431,000
Other current assets 5,000 (1,000)
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Net cash flows (used in) provided by operating activities (3,789,000) 626,000
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3,789,000) 626,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3,806,000 6,082,000
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CASH AND EQUIVALENTS, END OF PERIOD $ 17,000 $ 6,708,000
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See accompanying notes to financial statements.
Page 5 of 10
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 operations 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 June 30, 2002 the Company incurred a loss
of $1,629,000 on trading and investment activities compared with a gain of
$519,000 in the prior year period. There was a charge to earnings of $1,629,000
representing the change in the net unrealized holding gains/losses on trading
securities during the quarter ending June 30, 2002 compared to no charge or
credit to earnings during the comparable year earlier period.
At June 30, 2002, investments in trading securities were approximately
94% invested in the telecommunication industry, specifically American Telephone
& Telegraph Company common stock.
3. STATEMENT OF CASH FLOWS
Nine Months Ended
June 30,
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2002 2001
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Supplemental disclosure of cash flows information-
Income taxes paid $15,000 $ -0-
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Non-cash investing and financing activities:
During the nine months ended June 30, 2002 the Company financed the
purchase of $3,473,000 of trading securities.
In October 2000, the Company retired all of its treasury stock, which
consisted of 1,124,000 shares that were carried at a cost of $1,399,000 at
September 30, 2000.
4. SHORT-TERM BORROWINGS-BROKERS
At June 30, 2002 the Company had short-term borrowings from two brokers
amounting to $3,473,000. The borrowings are collateralized by the trading
securities and interest is approximately 5.65% per annum.
Page 6 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
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At June 30, 2002, the Company had a cash and equivalents balance of
$17,000, which represents a $3,789,000 decrease from the $3,806,000 balance at
September 30, 2001. This $3,789,000 decrease results entirely from cash flow
from operations, which includes a net loss of $2,801,000, due mainly to trading
losses of $2,652,000, coupled with changes in operating assets and liabilities
of $988,000 consisting primarily of purchases of trading securities for
$2,051,000 offset by the receipt of monies due from brokers of $977,000 and a
net increase in accrued liabilities for $86,000. The Company's working capital
position at June 30, 2002 was $3,493,000 as compared to a September 30, 2001
balance of $6,294,000.
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. During fiscal 2001, the Company
actively entertained a proposal to acquire the packaging and material subsidiary
of Paper Pak Products, Inc. After considerable evaluation, site visits and
financial analysis the Company was not satisfied that there was sufficient
organizational cohesion or proprietary product differentiation. Also during the
year management evaluated and rejected an opportunity to acquire a major
interest in a regional finance company. This business specializes in high yield
consumer automobile loans in the Mid-Atlantic region. Management decided there
was excessive risk of credit quality deterioration and rejected this
opportunity. Finally, the Company considered and rejected a proposal for a
reverse merger made by an Australian marketing organization.
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 invested substantial time evaluating
and considering numerous proposals for possible acquisition or combination
developed by management or presented by investment professionals, the Company's
advisors and others. During the past four years the Company has limited its'
activities to relatively small real estate projects and modest trading and
investment activities. The Company continues to consider acquisitions, business
combinations, or start up proposals, which could be advantageous to
shareholders. No assurance can be given that any such project, acquisition or
combination will be concluded.
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 a 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. It is the intention of management
to acquire or develop an operating business.
Page 7 of 10
Results of Operations
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Three Months Ended June 30, 2002
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Net income (loss)
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Net income (loss) consists of interest and trading gains and losses and
general and administrative expenses. The Company incurred a net loss of
$1,695,000 in the current three-month period versus income of $89,000 in the
prior year period. Interest income decreased $49,000 to $11,000 primarily due to
lower interest rates and lower invested funds. Unrealized trading losses of
$1,629,000 were incurred in the current quarter as compared to gains of $519,000
in the prior year period. General and administrative expenses (including
interest expense) of $77,000 were $363,000 lower than the prior year period of
$440,000. The decrease of $363,000 was due primarily to a lower level of
compensation accrued to President John Michael of which a significant portion
was related to the increased level of trading profits achieved in the prior year
quarter.
During the current quarter the Company did not record an income tax
benefit because tax losses could not be utilized. During the prior year quarter
the Company recorded an income tax provision of $50,000, as tax losses were not
available to offset investment type income.
Nine Months Ended June 30, 2002
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Net income (loss)
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Net income (loss) consists of interest and trading gains and losses and
general and administrative expenses. The Company incurred a net loss of
$2,801,000 in the current nine-month period versus income of $196,000 in the
prior year period. Interest income decreased $124,000 to $71,000 primarily due
to lower interest rates. Trading losses of $2,652,000 were incurred, of which
$1,629,000 were unrealized, in the current nine-month period as compared to
gains of $1,039,000 in the prior year period. General and administrative
expenses (including interest expense) of $220,000 were $768,000 lower than the
prior year period of $988,000. The decrease of $768,000 was due primarily to a
lower level of compensation accrued to President John Michael of which a
significant portion was related to the level of trading profits achieved in the
prior year nine-month period.
During the current nine-month period the Company did not record an
income tax benefit because tax losses could not be utilized. During the prior
year nine-month period the Company recorded an income tax provision of $50,000,
as tax losses were not available to offset investment type income.
Page 8 of 10
PERSONAL DIAGNOSTICS, INCORPORATED
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PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
Page 9 of 10
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 9, 2002 By: /s/ John H. Michael
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John H. Michael, Chairman
(on behalf of the registrant)
Page 10 of 10