10-Q 1 b319901_10q.txt QUARTERLY REPORT 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 ------------- 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 5544, 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 August 9, 2002 ----- ----------------------------- Common Stock, $.01 par value 3,740,000 Page 1 of 10 PERSONAL DIAGNOSTICS, INCORPORATED ----------------------------------

Index Page No. ----- -------- Part I Financial Information Item 1. Financial Statements: Balance Sheets - ~~December~~June 3130, ~~2001~~2002 and September 30, 2001 3 Statements of Operations - For the Three and Nine Months Ended ~~December~~June 3130, ~~2001~~2002 and ~~2000~~2001 4 Statements of Cash Flows - For the ~~Three~~Nine Months Ended ~~December~~June 3130, ~~2001~~2002 and ~~2000~~2001 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results 7 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

~~December~~June 3130, 2002 September 30, 2001 ~~2001~~ ------------- ------------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash and equivalents $ 217,~~197,~~000 $ 3,806,000 Due from brokers -- 977,000 Trading securities 47,~~340~~099,000 1,575,000 Other current assets 32,000 7,000 ------------ ------------ Total Current Assets 67,~~540~~118,000 6,365,000 ------------ ------------ TOTAL ASSETS $ 67,~~540~~118,000 $ 6,365,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings-brokers $ 3,473,000 $ -- Accounts payable and accrued expenses ~~$ 66~~31,000 $ 56,000 Accrued compensation 44121,000 -- Income taxes payable ~~54,000~~-- 15,000 ------------ ------------ Total Current Liabilities ~~164~~3,625,000 71,000 ------------ ------------ 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 (58,~~575~~458,000) (5,657,000) ------------ ------------ Total Stockholders' Equity 63,~~376~~493,000 6,294,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67,~~540~~118,000 $ 6,365,000 ============ ============

See accompanying notes to financial statements. Page 3 of 10 PERSONAL DIAGNOSTICS, INCORPORATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended ~~December~~Nine 31Months Ended June 30, June 30, -------------------------- -------------------------- 2002 2001 ~~2000~~2002 2001 ----------- ----------- ----------- ----------- INCOME: Interest $ 3811,000 $ 7060,000 $ 71,000 $ 195,000 Trading gains ~~173~~(losses) (1,629,000) ~~495~~519,000 (2,652,000) 1,039,000 ----------- ----------- ~~211~~----------- ----------- (1,618,000) ~~565~~579,000 (2,581,000) 1,234,000 ----------- ----------- ----------- ----------- EXPENSES: General and administrative 7561,000 ~~461~~440,000 204,000 988,000 Interest expense 16,000 -- 16,000 -- ----------- ----------- ----------- ----------- 77,000 440,000 220,000 988,000 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES ~~136~~(1,695,000) ~~104~~139,000 (2,801,000) 246,000 ----------- ----------- ----------- ----------- PROVISION FOR INCOME TAXES 54-- 50,000 -- 50,000 ----------- ----------- ----------- ----------- NET INCOME (LOSS) $(1,695,000) 82$ 89,000 $(2,801,000) ~~104~~$ 196,000 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: -BASIC ~~Basic~~3,740,000 3,740,000 3,740,000 3,740,000 =========== =========== ~~Diluted~~=========== =========== DILUTED 3,~~768~~740,000 3,~~762~~785,000 3,740,000 3,782,000 =========== =========== =========== =========== NET INCOME (LOSS) PER SHARE-: ~~Basic~~BASIC ~~and~~$ ~~Diluted~~(0.45) $ 0.02 $ (0.0375) $ 0.05 =========== =========== =========== =========== DILUTED $ (0.45) $ 0.02 $ (0.75) $ 0.05 =========== =========== =========== ===========

See accompanying notes to financial statements. Page 4 of 10 PERSONAL DIAGNOSTICS, INCORPORATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~Three~~Nine Months Ended ~~December~~June 3130, --------------------------~~----------~~ 2002 2001 ~~2000~~ ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $(loss) 82$(2,801,000) $ ~~104~~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,~~765~~051,000) -- Accounts payable and accrued liabilities 9381,000 ~~448~~431,000 Other current assets 45,000 (1,000) ----------- ----------- Net cash flows ~~from~~(used in) provided by operating activities (13,~~609~~789,000) ~~553~~626,000 ----------- ----------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS (13,~~609~~789,000) ~~553~~626,000 CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3,806,000 6,082,000 ----------- ----------- CASH AND EQUIVALENTS, END OF PERIOD $ 217,~~197,~~000 $ 6,~~635~~708,000 =========== ===========

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

~~Three~~Nine Months Ended ~~December~~June 3130, -----------------~~-----~~ 2002 2001 ~~2000~~ ------- ----- Supplemental disclosure of cash flows information- Income taxes paid $15,000 $ -0- ======= =====

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 ---------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources ------------------------------- 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 --------------------- Three Months Ended June 30, 2002 -------------------------------- Net income (loss) ----------------- 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 ------------------------------- Net income (loss) ----------------- 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 ---------------------------------- 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 ------------------------------- John H. Michael, Chairman (on behalf of the registrant) Page 10 of 10

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