<PAGE> 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 March 31, 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 (I.R.S. Employer
incorporation or organization) Identification 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 May 10, 1996
Common Stock, $.01 par value 4,864,000
Page 1 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
<TABLE>
<CAPTION>
INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Balance Sheets - March 31, 1996 and September 30, 1995...................... 3
Statements of Operations - For the Three and Six Months ended
March 31, 1996 and 1995..................................................... 4
Statements of Cash Flows - For the Six Months Ended
March 31, 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
</TABLE>
Page 2 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
March, 31 September 30,
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 7,754,000 $ 2,794,000
U.S. Treasury Bills (over three months maturity) -- 4,963,000
Current assets of discontinued operations -- 148,000
Other current assets 18,000 16,000
----------- -----------
Total Current Assets 7,772,000 7,921,000
----------- -----------
TOTAL ASSETS $ 7,772,000 $ 7,921,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,000 $ 12,000
Accrued payroll 20,000 143,000
Current liabilities of discontinued operations 200,000 150,000
Other current liabilities 85,000 70,000
----------- -----------
Total Current Liabilities 317,000 375,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value: authorized,
25,000,000 shares; issued and outstanding, 49,000 49,000
4,864,000 shares 13,316,000 13,316,000
Capital in excess of par value (5,910,000) (5,819,000)
----------- -----------
Accumulated deficit 7,455,000 7,546,000
----------- -----------
Total Stockholders' Equity $ 7,772,000 $ 7,921,000
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME:
Interest $ 87,000 $ 65,000 $ 197,000 $ 130,000
Trading gains (losses) (47,000) (293,000) (47,000) (340,000)
----------- ----------- ----------- -----------
40,000 (228,000) 150,000 (210,000)
----------- ----------- ----------- -----------
EXPENSES:
General and administrative 69,000 30,000 191,000 61,000
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (29,000) (258,000) (41,000) (271,000)
----------- ----------- ----------- -----------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations -- (252,000) (50,000) (535,000)
Gain (loss) on sale -- (430,000) -- (430,000)
----------- ----------- ----------- -----------
-- (682,000) (50,000) (965,000)
----------- ----------- ----------- -----------
$(1,236,000)
===========
NET INCOME (LOSS) $ (29,000) $ (940,000) $ (91,000)
=========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from continuing operations $ (0.01) $ (0.05) $ (0.01) $ (0.05)
Discontinued operations -- (0.14) (0.01) (0.20)
----------- ----------- ----------- -----------
Net income (loss) $ (0.01) $ (0.19) $ (0.02) $ (0.25)
=========== =========== =========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,864,000 4,864,000 4,864,000 4,864,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (91,000) $(1,236,000)
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) 50,000
Write-down of property and equipment -- 182,000
Loss (gain) on disposal of property and equipment -- (17,000)
Changes in assets and liabilities
Trading securities 4,963,000 (120,000)
Receivables-net 198,000 132,000
Inventories -- 16,000
Accounts payable and accrued liabilities (58,000) 182,000
Deposit on sale of assets -- 500,000
Prepaid expenses and noncurrent assets (2,000) 211,000
----------- -----------
Net cash flows from operating activities 4,960,000 202,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment -- --
Proceeds from disposal of property and equipment -- 21,000
----------- -----------
Net cash flows from investing activities -- 21,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (28,000)
Principal payments under equipment notes
payable and capital lease obligations -- (1,189,000)
----------- -----------
Net cash flows from financing activities -- (1,217,000
----------- -----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 4,960,000 (994,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 2,794,000 5,554,000
----------- -----------
CASH AND EQUIPMENTS, END OF PERIOD $ 7,754,000 $ 4,560,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 12
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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 March 31, 1996, there was no
charge or credit to earnings representing the change in the net unrealized
holding loss on its trading securities. In the prior year six month period the
Company included a charge to earnings of $26,000 representing the change in the
net unrealized holding loss on its trading securities.
At March 31, 1996, the Company had open short positions for five Standard &
Poor's 500 index contracts expiring in June 1996. The Company had a potential
market risk exposure of approximately $17,000 for each 1% increase in the
Standard & Poor's 500 index.
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
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quarter of its total assets. At March 31, 1996 over 90% of the Company's total
assets were in the form of U.S. Government Treasury Bills.
4. STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------------------------
1996 1995
-------- ---------
<S> <C> <C>
Supplemental disclosure of cash flows information-Interest paid $ -0- $187,000
-------- ---------
Income taxes paid/(refunded) ($15,000) ($126,000)
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</TABLE>
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<PAGE> 8
PERSONAL DIAGNOSTICS, INCORPORATED
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At March 31, 1996, the Company had a cash and Treasury Bill balance of
$7,754,000 which represents a $3,000 decrease from the $7,757,000 balance at
September 30, 1995. This $3,000 decrease results entirely from cash flow from
operations which represents the result of a net loss of $91,000 combined with
the benefit of the reduction in a bad debt reserve of $50,000 offset by changes
in operating assets and liabilities of $138,000. The Company's working capital
position at March 31, 1996 was $7,455,000 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. 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
stately 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 will be approximately $857,000 plus closing
costs and the transaction is expected to close June 7, 1996. Subsequently, the
Company will spend between $300,000 and $600,000 in 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 stated contract
purchase price of the property from $875,000 to $857,000. Future transactions
may be handled in a different fashion.
Additionally, the Company is considering development opportunities both in
the Washington D.C. area and Florida. The Company expects to derive significant
revenue during
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<PAGE> 9
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 March 31, 1996 more than 90% 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 March 31, 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
$29,000 loss from continuing operations in the current three month period versus
a loss of $258,000 in the prior year period. Interest income increased $22,000
to $87,000 due to more invested funds. During the current quarter the Company
experienced a trading loss of $47,000 on Standard & Poor's 500 index contracts
versus a loss of $293,000 in the comparable prior year quarter. The trading
losses of $293,000 incurred by the Company for the three month period ending
March 31, 1995 includes a loss of $398,000 attributable to 20 Standard & Poor's
500 index contracts partially offset by $105,000 of other trading gains. General
and administrative expenses of $69,000 were $39,000 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.
Discontinued Operations
During the current quarter, the Company experienced no activity from
discontinued operations versus a loss of $682,000 in the prior year quarter. The
loss of $682,000
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<PAGE> 10
in the prior year quarter included a loss on the sale of the Company's
manufacturing operations of $430,000. See note 2 for a further discussion of the
sale.
Result of Operations
Six Months Ended March 31, 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
$41,000 loss from continuing operations in the current six month period versus a
loss of $271,000 in the prior year period. Interest income increased $67,000 to
$197,000 due to more invested funds. During the current six month period the
Company experienced a trading loss of $47,000 on Standard & Poor's 500 index
contracts versus a loss of $340,000 in the comparable prior year period. The
trading losses of $340,000 incurred by the Company for the six month period
ending March 31, 1995 included a loss of $398,000 attributable to 20 Standard &
Poor's 500 index contracts partially offset by $58,000 of other trading gains.
General and administrative expenses of $191,000 were $130,000 higher than the
prior year period of $61,000 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 six 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 $965,000 in the prior year
period. The loss of $965,000 in the prior year period included a loss on the
sale of the Company's manufacturing operations of $430,000. 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 H. Michael
--------------------------
John H. Michael, Chairman
(on behalf of the registrant)
Date: May 10, 1996
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EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,754,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,772,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,772,000
<CURRENT-LIABILITIES> 317,000
<BONDS> 0
7,455,000
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,772,000
<SALES> 0
<TOTAL-REVENUES> 40,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 69,000
<LOSS-PROVISION> (50,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40,000
<INCOME-TAX> (15,000)
<INCOME-CONTINUING> (29,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
