UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 1, 1996
$.01 par value 21,935,785 shares
Page 1 of 12. There is no Exhibit Index.
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SALIVA DIAGNOSTIC SYSTEMS, INC.
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance 3-4
Sheets - December 31, 1995 and
September 30, 1996 (Unaudited)
Consolidated Condensed Statements of 5
Operations - Three Months Ended September 30,
1995 and 1996 (Unaudited)
Consolidated Condensed Statements of 6
Operations Nine Months Ended September
30, 1995 and 1996 (Unaudited)
Consolidated Condensed Statement of 7-8
Cash Flows - Nine Months Ended
September 30, 1995 and 1996
(Unaudited)
Notes to Consolidated Condensed 9
Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis 10
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of 11
Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
<TABLE>
<CAPTION>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
December 31, September 30,
1995 1996
----------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,688,014 $ 1,780,453
Accounts receivable 43,291 156,886
Inventory 300,161 353,793
Prepaid expenses 28,956 19,487
------------ ------------
TOTAL CURRENT ASSETS 3,060,422 2,310,619
PROPERTY AND EQUIPMENT, NET 470,593 664,065
OTHER ASSETS 827,443 739,138
------------ ------------
$ 4,358,458 $ 3,713,822
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other
accrued expenses $ 500,078 $ 658,306
Accrued interest payable 49,703 68,240
Current portion of long-
term debt and obligations
under capital leases 15,869 35,175
Convertible debentures 2,785,000 -
----------- ------------
TOTAL CURRENT LIABILITIES 3,350,650 761,721
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES,
net of current portion 30,497 103,146
------------ ------------
TOTAL LIABILITIES 3,381,147 864,867
------------ ------------
<PAGE>
<CAPTION>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(continued)
December 31, September 30,
1995 1996
----------- ----------
<S> <C> <C>
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - authorized
25,000,000 shares, $.01
par value, issued and outstanding
13,126,366 and 21,885,785 on
December 31, 1995 and September 30,
1996, respectively 131,264 218,860
Additional paid-in capital 17,726,578 22,905,130
Note receivable related
to sale of stock (83,825) (83,825)
Cumulative foreign translation
adjustment (34,859) (21,404)
Accumulated deficit (16,761,847) (20,169,806)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 977,311 2,848,955
============ ===========
$ 4,358,458 $ 3,713,822
============ ===========
See accompanying Notes to Consolidated Condensed Financial Statements
<CAPTION>
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
1995 1996
------- --------
<S> <C> <C>
REVENUES
Product sales $ 272,836 $ 183,749
Other fees and interest income 5,636 12,382
-------- --------
TOTAL REVENUES 278,472 196,131
-------- --------
COSTS AND EXPENSES
Cost of product sold 31,806 124,934
Research and development 150,115
Selling, general and admini-
strative 247,496 1,232,509
Interest expense and loan fees 969 12,242
---------- ---------
TOTAL COSTS AND EXPENSES 280,271 1,519,800
---------- ---------
NET LOSS $ (1,799) $(1,323,669)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,223,807 21,886,000
=========== ==========
LOSS PER COMMON SHARE $ -- $ (.06)
=========== ==========
See accompanying Notes to Consolidated Condensed Financial
Statements
<CAPTION>
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
1995 1996
---- ----
<S> <C> <C>
REVENUES
Product sales $ 490,718 $ 480,065
Other fees and interest
income 69,516 64,461
--------- -------
TOTAL REVENUES 560,234 544,526
--------- -------
COSTS AND EXPENSES
Cost of product sold 78,835 312,197
Research and development 31,726 345,953
Selling, general and admin-
istrative 2,516,641 3,212,425
Interest expense and loan fees 7,550 81,910
--------- ---------
TOTAL COSTS AND EXPENSES 2,634,752 3,952,485
--------- ---------
NET LOSS $(2,074,518) $(3,407,959)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,325,043 19,331,000
========== ==========
LOSS PER COMMON SHARE $ (.22) $ (.18)
========= ==========
See accompanying Notes to Consolidated Condensed Financial
Statements
<CAPTION>
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
1995 1996
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (2,074,518) $(3,407,959)
Adjustment to reconcile net
loss to net cash used in op-
erating activities:
Cumulative foreign trans-
lation adjustment 78,919 13,455
Depreciation and amort-
ization 231,172 263,707
Expenses satisfied with
issuance of shares 568,750 65,251
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables (153,424) (113,595)
(Increase) decrease in
inventory (614,098) (53,632)
(Increase) decrease in
prepaid expenses 9,469
Increase (decrease) in
accounts payable
and accrued expenses (43,295) 176,765
-------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (2,006,494) (3,046,539)
--------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Increase in other assets (11,439) (9,086)
Purchase of property and
equipment (134,802) (359,788)
---------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (146,241) (368,874)
--------- ---------
<CAPTION>
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(continued)
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Notes payable and interim
financing 37,576 109,476
Repayment of obligations
under capital leases (17,521)
Repayment of convertible
debentures (25,000)
Sale of stock - private
placement and exempt
offering 2,239,193
Stock warrants and options
exercised 2,440,897
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,276,769 2,507,852
---------- ---------
NET INCREASE (DECREASE)
IN CASH $ 124,034 $ (907,561)
CASH BALANCE, Beginning of
period 96,431 2,688,014
---------- ----------
CASH BALANCE, End of period $ 220,465 $ 1,780,453
========== ==========
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
Shares issued in lieu of
fees and expenses $ 568,750 $ 65,251
Conversion of debentures
into common shares 37,500 2,760,000
See accompanying Notes to Consolidated Condensed Financial
Statements
</TABLE>
<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 management of the Company,
contain all adjustments, consisting of only normal recurring
accruals, necessary to present fairly the financial position at
September 30, 1996, the results of operations for the three months
and nine months ended September 30, 1995 and 1996, and the changes
in cash flows for the nine months ended September 30, 1995 and
1996. The consolidated balance sheet as of December 31, 1995 is
derived from the Company's audited financial statements. Certain
information and footnote disclosures normally included in
financial statements that have been prepared in accordance with
generally accepted accounting principles have been condensed or
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
notes thereto included in the Company's 1995 Form 10-KSB filed
with the Securities and Exchange Commission. Operating results
for the nine month period ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations: Nine Months Ended September 30, 1996
The Company had total revenues of $544,526 and $560,234 for the
nine months ended September 30, 1996 and 1995, respectively.
Costs and expenses increased to $3,952,485 from $2,634,752 for
the nine months ended September 30, 1996 and 1995, respectively.
The Company incurred a net loss of $3,407,959 or $.18 per share,
for the nine months ended September 30, 1996, compared with a loss
of $2,074,518 or $.22 per share, in the year ago period. Average
common shares outstanding were 19,331,000 in 1996 and 9,325,043 in
1995.
Financial Condition
The Company's working capital at September 30, 1996 was
$1,548,898 It had a working capital deficit of $290,228 at December
31, 1995. The Company's current ratio was 3.03 to 1 at September
30, 1996 as compared to .91 to 1 at December 31, 1995.
During the nine months ended September 30, 1996, net cash used
from the Company's operating activities was $3,046,539 as compared
to $2,006,494 of cash used in operating activities in the nine
months ended September 30, 1995.
Cash used in investment activities for the first nine months of
1996 was $368,874 as compared to cash used of $146,241 in the year
ago period.
Cash provided by financing activities in the nine months ended
September 30, 1996 was $2,507,852 as compared to cash provided from
these activities in the first nine months of 1995 of $2,276,769.
The largest portion of cash provided was from the Company's private
offering of securities in each of the first nine months of 1995 and
1996.
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.
<PAGE>
Part II OTHER INFORMATION
Item 3. Legal Proceedings
In September 1996, the Company settled its lawsuit with Home
Access Health Corporation ("HAHC") which had been commenced in
January 1996 in Washington Superior Court, Clark County. The
lawsuit involved a dispute relating to a series of license
agreements between the Company and HAHC. The Company and HAHC
entered into a new license agreement in September 1996 (the
"License Agreement"), which superceded all prior license
agreements. Under the terms of the License Agreement, the Company
granted to HAHC a license, which is exclusive for two years for HIV
applications (except for certain limitations) to use Omni-SAL, one
of the Company's products, in kits. The license does not apply to
rapid testing. The Company will receive a royalty of $.25 per
product for the first 1,000,000 products, $.15 per product for the
next 1,000,000 products and $.10 per product for products sold in
excess of 2,000,000 products. The Agreement also specifies rates
at which HAHC can purchase Omni-SAL devices from the Company.
Item 4. Submission of Matters to a Vote of Security Holders
On July 17, 1996, the Company held its annual shareholder's
meeting to vote for directors and to vote on two proposals. The
Company elected David Barnes, Ronald L. Lealos, Kenneth J.
McLachlan, M. Joel Scheinbaum and Hans R. Vauthier as directors.
The Company proposed to amend its Certificate of Incorporation to
increase the authorized number of shares to 40,000,000 and to
provide for a class of Series A Preferred Stock. The proposal was
not approved by a majority of the outstanding shares; 3,407,768
votes were cast in favor of the proposal and 2,933,451 were
against. The second proposal, adoption of a stock option plan, was
rescinded since the first proposal failed.
<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: November 18, 1996 By: s/ Ronald L. Lealos
Ronald L. Lealos, President
By: s/ Kenneth J. McLachlan
Kenneth J. McLachlan
Chief Financial Officer
SALIVA\1OQ-sep.96
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,780,453
<SECURITIES> 0
<RECEIVABLES> 156,886
<ALLOWANCES> 0
<INVENTORY> 353,793
<CURRENT-ASSETS> 2,310,619
<PP&E> 664,065
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,713,822
<CURRENT-LIABILITIES> 761,721
<BONDS> 0
0
0
<COMMON> 218,860
<OTHER-SE> 2,630,095
<TOTAL-LIABILITY-AND-EQUITY> 3,713,822
<SALES> 480,065
<TOTAL-REVENUES> 544,526
<CGS> 312,197
<TOTAL-COSTS> 3,952,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,407,959)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,407,959)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,407,959)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0
</TABLE>
