<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 December 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 Identification No.)
incorporation or organization)
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 February 7, 1997
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Common Stock, $.01 par value 5,014,000
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PERSONAL DIAGNOSTICS, INCORPORATED
<TABLE>
<CAPTION>
Index Page No..
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets - December 31, 1996 and September 30, 1996 3
Statements of Operations - For the Three Months ended
December 31, 1996 and 1995 4
Statements of Cash Flows - For the Three Months Ended December 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 10
</TABLE>
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PERSONAL DIAGNOSTICS, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents (including three month Treasury Bills) $ 6,481,000 $ 6,910,000
Property held for development and sale-net 1,640,000 866,000
Due from stockholder (collected January 2, 1997) 105,000 105,000
Other current assets 4,000 1,000
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Total Current Assets 8,230,000 7,882,000
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TOTAL ASSETS $ 8,230,000 $ 7,882,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,000 $ 10,000
Accrued payroll 300,000 150,000
Current liabilities of discontinued operations 150,000 150,000
Other current liabilities 107,000 70,000
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Total Current Liabilities 572,000 380,000
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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 (5,812,000) (5,968,000)
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Total Stockholders' Equity 7,658,000 7,502,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,230,000 $ 7,882,000
============ ============
</TABLE>
See accompanying notes to financial statements.
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
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1996 1995
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<S> <C> <C>
INCOME:
Interest $ 76,000 $ 110,000
Trading gains (losses) 438,000 --
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514,000 110,000
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EXPENSES:
Allowance for loss on property held for sale 120,000 --
General and administrative 238,000 122,000
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INCOME (LOSS) FROM
CONTINUING OPERATIONS 156,000 (12,000)
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INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAXES:
Income (loss) from operations -- (50,000)
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NET INCOME (LOSS) $ 156,000 $ (62,000)
=========== ===========
NET INCOME (LOSS) PER COMMON
SHARES OUTSTANDING:
Income (loss) from continuing operations $ 0.03 $ --
Discontinued operations -- (0.01)
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Net income (loss) $ 0.03 $ (0.01)
=========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,014,000 4,864,000
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</TABLE>
See accompanying notes to financial statements
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PERSONAL DIAGNOSTICS, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 156,000 $ (62,000)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Provision (benefit) for loss on accounts receivable -- (30,000)
Provision for loss on property held for sale 120,000 --
Changes in assets and liabilities:
Trading securities -- 4,963,000
Receivables-net -- 143,000
Property held for development and sale (894,000) --
Accounts payable and accrued liabilities 192,000 132,000
Other current assets (3,000) --
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Net cash flows from operating activities (429,000) 5,146,000
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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:
Principal payments on borrowings -- --
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Net cash flows from financing activities -- --
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (429,000) 5,146,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,910,000 2,794,000
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CASH AND EQUIVALENTS, END OF PERIOD $ 6,481,000 $ 7,940,000
=========== ===========
</TABLE>
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 three months ending December 31, 1996 and 1995, there was no
charge or credit to earnings representing the change in the net unrealized
holding loss on trading securities. At December 31, 1996 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 December 31, 1996 the Company had
approximately 75% of its assets in United States Treasury Bills.
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
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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>
Three Months Ended
December 31,
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1996 1995
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Supplemental disclosure of cash flows information-
Income taxes paid/(refunded) $-0- $-0-
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</TABLE>
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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 December 31, 1996, the Company had a cash and Treasury Bill balance
of $6,481,000 which represents a $429,000 decrease from the $6,910,000 balance
at September 30, 1996. This $429,000 decrease results entirely from cash flow
from operations which represents the result of net income of $156,000 combined
with the provision for loss on property held for sale of $120,000 and changes in
operating assets and liabilities of $189,000 offset by an $894,000 cash outlay
for the purchase of property held for development and sale and capital
improvement of such property. The Company's working capital position at December
31, 1996 was $7,658,000 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 Fulbright 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 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 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 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 investment
often involve a high degree of risk and must be considered extremely
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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 late November and early December 1996, Management became
convinced that the overall stock market had become at least temporarily severely
overpriced. Management took short term short positions in S & P 500 Futures and
S & P 500 Index Options. The Company realized a pre-tax non-recurring trading
gain of $438,000.
The Company continues to consider and evaluate possible acquisitions,
business combinations, or start-up projects which could be advantageous to
shareholders. These include a small medical instrument development project the
Company is engaged in with Precision Assembly, Inc. in New Jersey. The Company
is also actively negotiating to purchase a controlling interest in a small
start-up trucking company specializing in refrigerated transport in South
America. No assurance can be given that either of these projects will be
favorably concluded.
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 December 31, 1996 the Company had
approximately 75% of its assets in United States Treasury Bills. At December 31,
1996 the Company had no outstanding investment or trading positions.
Results of Operations
Three Months Ended December 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 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 $156,000 versus a loss of $12,000 in the prior year period. Interest
income declined $34,000 to $76,000 primarily due to less invested funds. Trading
gains equaled $438,000 compared to no activity 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 $238,000 were $116,000 higher than the prior year period of $122,000
due primarily to a special investment performance bonus of $150,000 paid to
President John H. Michael in connection with the trading gains mentioned
previously.
During the current quarter the Company has not recorded an income tax
provision due to available tax carryforwards.
Discontinued Operations
During the current quarter, the Company experienced no
activity from discontinued operations versus a loss of $50,000 in the prior year
quarter. The loss of $50,000 in the prior year quarter 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) 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
Date: February 7, 1997 (on behalf of the registrant)
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,481,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,230,000
<PP&E> 1,640,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,230,000
<CURRENT-LIABILITIES> 572,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,658,000
<TOTAL-LIABILITY-AND-EQUITY> 8,230,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 358,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 514,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 156,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
