UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0 - 21284
Saliva Diagnostic Systems, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 91-1549305
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11719 NE 95th Street Suite G, Vancouver WA 98682
(Address of Principal executive offices) (Zip Code)
(360) 696-4800
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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. [x] Yes [ ] No
Indicate the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date:
Outstanding at
Class of Common Stock May 16, 1996
$.01 par value 20,810,285 shares
Page 1 of 9. There is no Exhibit Index.
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC.
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
December 31, 1995 and March 31, 1996
Consolidated Condensed Statements of 4
Operations - Three Months Ended March 31,
1995 and 1996
Condensed Statement of Cash Flows - 5
Three Months Ended March 31, 1995
and 1996
Notes to Consolidated Condensed 6
Financial Statements
Item 2. Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
Signature 9
<PAGE>
<TABLE>
<CAPTION>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, March 31,
1995 1996
----------- ----------
(Derived from (Unaudited)
Audited Financial
Statements)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,688,014 $ 1,711,811
Accounts receivable 43,291 116,064
Inventory 300,161 329,054
Prepaid expenses 28,956 22,364
------------ ------------
TOTAL CURRENT ASSETS 3,060,422 2,179,293
PROPERTY AND EQUIPMENT, NET 470,593 506,323
OTHER ASSETS 827,443 767,913
------------ ------------
$ 4,358,458 $ 3,453,529
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other
accrued expenses $ 500,078 $ 514,757
Accrued interest payable 49,703 68,240
Current portion of obliga-
tions under capital leases 15,869 15,869
Convertible debentures 2,785,000
---------- -------------
TOTAL CURRENT LIABILITIES 3,350,650 598,866
OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion 30,497 25,129
------------ ------------
TOTAL LIABILITIES 3,381,147 623,995
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - authorized 25,000,000
shares, $.01 par value, issued
and outstanding 13,126,366 and
19,683,674 on December 31, 1995
and March 31, 1996, respect-
ively 131,264 196,837
Additional paid-in capital 17,726,578 20,522,957
Notes receivable related
to sale of stock (83,825) (83,825)
Cumulative foreign translation
adjustment (34,859) (39,997)
Accumulated deficit (16,761,847) (17,766,438)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 977,311 2,829,534
============ ============
$ 4,358,458 $ 3,453,529
============ ============
See accompanying Notes to Condensed Consolidated Financial Statements
<CAPTION>
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
1995 1996
---- -----
<S> <C> <C>
REVENUES
Product sales $ 73,293 171,379
Other fees and interest income 1,538 22,342
--------- ---------
TOTAL REVENUES 74,831 193,721
COSTS AND EXPENSESS
Cost of product sold 23,005 120,510
Research and development 90,972 103,955
Selling, general and administrative 494,319 904,784
Interest expense and loan fees 3,490 69,023
--------- ---------
TOTAL COSTS AND EXPENSES 611,786 1,198,312
--------- ---------
NET LOSS $(536,955) $(1,004,591)
========= ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,050,165 15,039,334
========= ==========
LOSS PER COMMON SHARE $ (0.08) $ (0.07)
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
<CAPTION>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (536,955) $(1,004,591)
Adjustment to reconcile net loss
to net cash used by operating
activities:
Cumulative foreign translation
adjustment 13,694 (5,138)
Depreciation and amortization 74,170 114,590
Expenses satisfied with issuance of
shares 11,952
Changes in operating assets and
liabilities:
(Increase) decrease in receivables 7,330 (72,773)
(Increase) decrease in inventory (3,137) (28,893)
(Increase) decrease in prepaid expenses 6,592
Increase (decrease) in accounts payable
and accrued expenses (244,703) 33,216
-------- ----------
NET CASH USED BY OPERATING ACTIVITIES (689,601) (945,045)
CASH FLOWS FROM INVESTING ACTIVITIES
Patents and trademarks (2,225) (134)
Deposits and other (1,523) (3,003)
Purchase of equipment (47,500) (87,653)
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES (51,248) (90,790)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable and interim financing,
net (4,805) (25,000)
Repayment of obligations under capital
leases (5,368)
Sale of stock - private placement and
exempt offering 1,572,500
Stock warrants exercised 90,000
----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,567,695 59,632
---------- ----------
NET INCREASE (DECREASE) IN CASH $ 826,846 $ (976,203)
CASH BALANCE, Beginning of period 96,431 2,688,014
========== ==========
CASH BALANCE, End of period $ 923,277 $ 1,711,811
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Shares issued in lieu of fees and
expenses $ $ 11,952
Conversion of debentures into common shares 2,760,000
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements are
unaudited but, in the opinion of the Company, contain all
adjustments, consisting of only normal recurring accruals,
necessary to present fairly the financial position at March 31,
1996, the results of operations for the three months ended March
31, 1995 and 1996, and the changes in cash flows for the three
months ended March 31, 1995 and 1996. Certain information and
footnote disclosures normally included in financial statements
that have been prepared in accordance with generally accepted
accounting principles have been condensed of omitted pursuant
to the rules and regulations of the Securities and Exchange
Commission, although management of the Company believes that the
disclosures in these financial statements are adequate to make
the information presented therein not misleading. For further
information, refer to the financial statements and footnotes
thereto included in the Company's 1995 Form 10-KSB filed with
the Securities and Exchange Commission. Operating results for
the three month period ended March 31, 1996, are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996.
2. PROFORMA STOCKHOLDERS' EQUITY
Subsequent to quarter ended March 31, 1996, the Company raised
$1,286,096 from the exercise of certain warrants to purchase
1,213,361 shares of the Company's common stock.
Following is a condensed proforma statement of stockholders'
equity and total assets as of March 31, 1996, giving effect to
the various sales of the Company's common stock after year end:
March 31,
1996
---------
Historical stockholders' equity $ 2,829,534
Warrants exercised 1,286,096
Proforma stockholders' equity $ 4,115,630
==========
Historical total assets $ 3,453,529
Warrants exercised 1,286,096
----------
Proforma total assets $ 4,739,625
==========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations: Three Months Ended March 31
The Company had total revenues of $193,721 and $74,831 for the
three months ended March 31, 1996 and 1995, respectively. The
increase in revenues was primarily the result of sales of Omni-SAL
from the Company's Singapore facility and sales of Omni-SWAB.
Selling, general and administrative expenses ("SG&A") increased
to $904,785 from $494,319 for the three months ended March 31, 1996
and 1995, respectively. This increase of $410,466 or 83% was
largely attributable to an increase in personnel and salaries.
The Company incurred a net loss of $1,004,591 or $.07 per share,
for the quarter ended March 31, 1996, compared with a loss of
$536,955, or $.08 per share, in the year ago period. The increase
in net loss was primarily attributable to the increase in SGA and
an increase in costs associated with an increase in the number of
products produced by the Company. During the 1996 period, there
were 15,039,334 weighted average number of shares outstanding as
compared to 7,050,165 shares in the corresponding year earlier
period.
Financial Condition
The Company's working capital at March 31, 1996 was $1,580,427.
It had a working capital deficit of $290,228 at December 31, 1995.
The Company's current ratio was 1.21 to 1 at March 31, 1996 as
compared to .91 to 1 at December 31, 1995.
During the quarter ended March 31, 1996, net cash used from the
Company's operating activities was $945,045 as compared to $689,601
of cash used in operating activities in the quarter ended March 31,
1995. The primary use of funds during both periods was to finance
losses from operations.
Cash used in investment activities for the first quarter of 1996
was $90,790 as compared to cash used of $51,248 in the year ago
period. The primary use of funds in both periods was the purchase
of equipment.
Cash provided by financing activities in the quarter ended March
31, 1996 was $59,632 as compared to cash provided from these
activities in the first quarter of 1995 of $1,567,695. The largest
portion of cash provided was from the Company's private offering of
securities in the first quarter of 1995.
The Company has significant requirements for capital to continue
to fund its activities. As a result of the above-described
activities, management believes it has adequate resources to fund
only limited activities for the next several months. After this
period, the Company will be required to obtain additional capital
to continue to fund its activities. There is no assurance,
however, that such additional capital will be available, or if
available, whether it will be available on terms acceptable to the
Company.
Part II OTHER INFORMATION
Item 1. Legal Proceedings
In January 1996, the Company filed suit against Home Access
Health Corporation ("HAHC") (Saliva Diagnostic Systems, Inc. v.
Home Access Health Corporation) in Washington Superior Court, Clark
County. The Company had entered into a license agreement with HAHC
which have HAHC the exclusive right to market Omni-SAL for home
testing kits. The Company believes HAHC has failed to utilize the
license and is seeking declaratory judgment to revoke the license.
The lawsuit is in the preliminary stage; although the Company
intends to vigorously pursue this case, there is no assurance that
it will prevail. In the event the Company does not prevail, the
Company may be forced to pay royalties to HAHC for Omni-SAL
products directly sold by the Company.
Meritxell Ltd. v. Saliva Diagnostic Systems, inc., commenced in
the United States District Court for the Southern District,
involves the conversion rate of a convertible debenture issued to
it by the Company. The Company believes the suit is without merit
inasmuch as the plaintiff failed to comply with all the terms of
the convertible debenture. Plaintiff is seeking damages in an
unspecified amount. The suit is in the preliminary stages and
management of the Company intends to vigorously defend the Company.
<PAGE>
SIGNATURE
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.
SALIVA DIAGNOSTIC SYSTEMS, INC.
Date: May 16, 1996 By: s/Ronald L. Lealos
President, Treasurer
SALIVA\1OQ-mar.96
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,711,811
<SECURITIES> 0
<RECEIVABLES> 116,064
<ALLOWANCES> 0
<INVENTORY> 329,054
<CURRENT-ASSETS> 2,179,293
<PP&E> 506,323
<DEPRECIATION> 114,590
<TOTAL-ASSETS> 3,453,529
<CURRENT-LIABILITIES> 598,866
<BONDS> 0
0
0
<COMMON> 196,837
<OTHER-SE> 2,632,697
<TOTAL-LIABILITY-AND-EQUITY> 3,453,529
<SALES> 171,379
<TOTAL-REVENUES> 193,721
<CGS> 120,510
<TOTAL-COSTS> 1,198,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,004,591
<INTEREST-EXPENSE> 69,023
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,004,591)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
