<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1997
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
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
P.O. Box 5310, 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
--------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check [X] 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 5, 1997
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Common Stock, $.01 par value 5,014,000
Page 1 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
<TABLE>
<CAPTION>
INDEX PAGE NO.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Balance Sheets - March 31, 1997 and September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations - For the Three and Six Months Ended
March 31, 1997 and 1996............................................................................. 4
Statements of Cash Flows - For the Six Months Ended
March 31, 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
</TABLE>
Page 2 of 12
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PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
March 31, 1997 1996
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(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 6,275,000 $ 6,910,000
Property held for development and sale-net 1,650,000 866,000
Due from stockholder (collected January 2, 1997) -- 105,000
Other current assets 5,000 1,000
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Total Current Assets 7,930,000 7,882,000
------------ ------------
TOTAL ASSETS $ 7,930,000 $ 7,882,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,000 $ 10,000
Accrued payroll 50,000 150,000
Current liabilities of discontinued operations 150,000 150,000
Other current liabilities 57,000 70,000
------------ ------------
Total Current Liabilities 267,000 380,000
============ ============
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 (5,807,000) (5,968,000)
------------ ------------
Total Stockholders' Equity 7,663,000 7,502,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,930,000 $ 7,882,000
============ ============
</TABLE>
See accompanying notes to 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,
---------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME:
Interest $ 71,000 $ 87,000 $ 147,000 $ 197,000
Trading gains (losses) 266,000 (47,000) 704,000 (47,000)
----------- ----------- ----------- -----------
337,000 (40,000) 851,000 (150,000)
----------- ----------- ----------- -----------
EXPENSES:
Allowance for loss on property held for sale -- -- 120,000 --
General and administrative 332,000 69,000 570,000 191,000
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 5,000 (29,000) 161,000 (41,000)
----------- ----------- ----------- -----------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations -- -- -- (50,000)
Gain (loss) on sale -- -- -- --
----------- ----------- ----------- -----------
-- -- -- (50,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 5,000 $ (29,000) $ 161,000 $ (91,000)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from continuing operations $ -- $ (0.01) $ 0.03 $ (0.01)
Discontinued operations -- -- -- (0.01)
----------- ----------- ----------- -----------
Net income (loss) $ -- $ (0.01) $ 0.03 $ (0.02)
=========== =========== =========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,014,000 4,864,000 5,014,000 4,864,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to 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,
----------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 161,000 $ (91,000)
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 (904,000) --
Accounts payable and accrued liabilities (113,000) (58,000)
Other current assets (4,000) (2,000)
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Net cash flows from operating activities (740,000) 4,960,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment -- --
Proceeds from disposal of property and equipment -- --
----------- -----------
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 flow from financing activities 105,000 --
----------- -----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (635,000) 4,960,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,910,000 2,794,000
----------- -----------
CASH AND EQUIPMENTS, END OF PERIOD $ 6,275,000 $ 7,754,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 5 of 12
<PAGE> 6
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. 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
For the six months ending March 31, 1997 and 1996, there was
no charge or credit to earnings representing any change in the net unrealized
holding loss on trading securities. At December 31, 1996 the Company had no open
trading or investment position.
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 March 31, 1997 the Company had
approximately 70% of its assets in United States Treasury Bills.
Page 6 of 12
<PAGE> 7
4. PROPERTY HELD FOR DEVELOPMENT AND SALE
On June 13, 1996 the Company purchased 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. During the first quarter
of fiscal 1997 the Company provided an allowance of $120,000 for loss on the
sale of this property due to large scale private and public construction in the
adjacent area. The Company is presently evaluating all options with respect to
this property to determine an appropriate improvement level. See Management's
Discussion and Analysis of Financial Condition (Liquidity and Capital Resources)
for a further discussion of this matter.
On October 2, 1996 the Board of Directors approved the purchase for
improvement and resale of a property owned by the Company President John H.
Michael. The property is located at 1810 24th Street, N.W., Washington, D.C. The
purchase price was $817,500 and the transfer took place on December 17, 1996.
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
<TABLE>
<CAPTION>
Six Months Ended
March 31,
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1997 1996
<S> <C> <C>
Supplemental disclosure of cash flows information-
Income taxes paid/(refunded) $(2,000) $(-0-)
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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, 1997, the Company had a cash and Treasury Bill
balance of $6,275,000 which represents a $635,000 decrease from the $6,910,000
balance at September 30, 1996. This $635,000 decrease results from cash flow for
operations of $740,000 which includes the result of net income of $161,000
combined with the provision for loss on property held for sale of $120,000
offset by changes in operating assets and liabilities of $117,000 and a $904,000
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 March 31, 1997 was $7,663,000
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.
On June 13, 1996 the Company purchased the residence of the
late Senator William Fullbright which is located in the 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. The Company is presently
evaluating all options with respect to this property including the possibility
of modest ($100,000) or more extensive ($300,000-$500,000) improvement prior to
resale. Many factors are involved including the actions of the DC Fine Arts
Commission and certain Historical and Neighborhood Advisory Boards. The Company
continues to monitor the resale market to determine an appropriate improvement
level.
On October 2, 1996 the Board of Directors approved the
purchase for improvement and resale of property owned by the Company President
John H. Michael. The property is located 1810 24th Street N.W., Washington, D.C.
The purchase price was set at $817,500 and the transfer took place on December
17, 1996. The Board carefully considered and deliberated the issue of potential
conflict of interest inherent in this transaction. The Board reviewed
independent appraisals of the property which were conducted by a designee of
Riggs National Bank J. Lee Donnelly & Son, and a second appraisal conducted by
Sotheby's Realty. These appraisals suggested a range of net value in "as is"
condition of between $840,000 and $900,000. Mr. Michael agreed to permit certain
improvement work to be initiated prior to
Page 8 of 12
<PAGE> 9
December in order to expedite the improvement process and to utilize available
labor and management. The Board and Management believe this project represents a
solid step in becoming more active in the acquisition, improvement and resale of
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 in investment activities. At March 31, 1997 the Company had
approximately 70% of its assets in United States Treasury Bills. At March 31,
1997 the Company had no outstanding investment or trading positions.
Results of Operations
Three Months Ended March 31, 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 income from continuing operations in the current three month
period of $5,000 versus a loss of $29,000 in the prior year period. Interest
income declined $16,000 to $71,000 primarily due to less invested funds. Trading
gains equaled $266,000 compared to trading losses of $47,000 in the prior year
period. General and administrative expenses of $332,000 were $263,000 higher
than the prior year period $69,000 due primarily to increased payroll expenses
paid to President John H. Michael.
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.
Page 9 of 12
<PAGE> 10
Result of Operations
Six Months Ended March 31, 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 six month
period of $161,000 versus a loss of $41,000 in the prior year period. Interest
income declined $50,000 to $147,000 primarily due to less invested funds.
Trading gains equaled $704,000 compared to trading losses of $47,000 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. (Fullbright) property
due to large scale private and public construction in the adjacent area. General
and administrative expenses of $570,000 were $379,000 higher than the prior year
period of $191,000 due primarily to increased payroll and bonus expenses paid to
President John H. Michael.
During the current six month period the Company has not
recorded an income tax provision due to available tax carryforwards.
Discontinued Operations
During the current six 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.
Page 10 of 12
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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
Page 11 of 12
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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 5, 1997
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,275,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,930,000
<PP&E> 1,650,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,930,000
<CURRENT-LIABILITIES> 267,000
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> 7,613,000
<TOTAL-LIABILITY-AND-EQUITY> 7,930,999
<SALES> 0
<TOTAL-REVENUES> 337,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 332,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,000
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 5,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
