<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[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 EXCHANGE ACT
For the transition period from __________ to ____________
Commission file number 33-93132
La Jolla Diagnostics, Inc.
(Exact name of small business registrant as specified in its character)
California 94-2901715
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7777 Fay Avenue, Suite 160, La Jolla, California 92037
(Address of principal executive offices)
(619) 454-6790
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
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: Yes X No .
--- ---
As of May 10, 1996, La Jolla Diagnostics, Inc. had 6,811,178 shares of
outstanding of the registrant's common stock, no par value.
<PAGE> 2
LA JOLLA DIAGNOSTICS, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED):
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1996 (UNAUDITED)
AND JUNE 30, 1995 1
STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) 2
STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1996
AND 1995 (UNAUDITED) 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4-5
ITEM 2 MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 6-8
PART II OTHER INFORMATION -
ITEMS 1-6 EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
</TABLE>
<PAGE> 3
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I -FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
ASSETS March 31, 1996 June 30, 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,101 $ 20,358
Account receivable 909 29,115
Advances to officer -- 5,659
Interest receivable 83,215 33,286
------------ ------------
TOTAL CURRENT ASSETS 88,225 88,418
INVENTORY 4,164,152 4,154,181
PROPERTY & EQUIPMENT, net 46,092 13,889
NOTE RECEIVABLE 900,000 900,000
OTHER ASSETS 18,617 68,109
------------ ------------
$ 5,217,086 $ 5,224,597
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 245,759 $ 104,063
Accrued expenses 22,760 5,967
Customer deposits 8,750 --
Lease obligations, current portion 2,584 2,136
Loans payable 102,594 42,369
------------ ------------
TOTAL CURRENT LIABILITIES 382,447 154,535
LEASE OBLIGATIONS, non-current portion 9,843 6,354
MINORITY INTEREST 794,847 804,481
SHAREHOLDERS' EQUITY
Common stock, no par value (10,000,000 shares
authorized, 6,669,728 and 6,342,894 shares issued and
outstanding, respectively) 11,055,615 10,919,115
Additional paid-in capital 803,469 900,000
Preferred stock, no par value (5,000,000 shares authorized,
no shares issued) -- --
Retained deficit ($1,418,616 and $1,149,369 during
development stage, respectively) (7,829,135) (7,559,888)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 4,029,949 4,259,227
------------ ------------
$ 5,217,086 $ 5,224,597
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
and management's discussion and analysis of financial condition and results of
operations.
<PAGE> 4
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
March 31, March 31,
---------- ----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 107,048 $ 60,046 $ 26,556 $ 38,796
COSTS AND EXPENSES
Cost of products sold 69,908 29,852 9,942 22,868
Selling and administrative expenses 235,978 134,387 61,301 99,398
Research and development 62,633 308,337 19,396 99,002
Consulting services 52,506 720,000 24,072 --
Depreciation and amortization 5,121 900 2,739 200
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES 426,146 1,193,476 117,450 221,468
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (319,098) (1,133,430) (90,894) (182,672)
OTHER INCOME (EXPENSES)
Interest income 49,929 16,643 16,643 16,643
Interest expense (7,313) (941) (6,325) (941)
Minority interest 9,635 191,515 3,342 2,236
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSES) 52,251 207,217 13,660 17,938
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (266,847) (926,213) (77,234) (164,734)
PROVISION FOR INCOME TAXES 2,400 2,400 -- --
----------- ----------- ----------- -----------
NET LOSS, DURING DEVELOPMENT STAGE $ (269,247) $ (928,613) $ (77,234) $ (164,734)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.04) $ (0.16) $ (0.01) $ (0.03)
=========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING 6,657,783 5,766,394 6,660,172 5,768,493
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
and management's discussion and analysis of financial condition and results of
operations.
2
<PAGE> 5
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
For the nine months ended
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss during development stage $(269,247) $(928,613)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,121 900
Minority interest (9,635) 708,485
Changes in assets and liabilities:
Increase in inventories (6,972) (10,080)
(Increase) decrease in accounts receivable 28,206 (7,842)
Increase in notes receivable -- (900,000)
(Increase) decrease in other assets (49,492) 8,830
Increase in interest receivable (49,929) (16,643)
Increase in customer deposits 8,750 --
Increase in accounts payable and accrued expenses 158,470 43,462
Increase in related party payables -- 900,000
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (184,758) (198,659)
CASH FLOWS FROM INVESTING ACTIVITIES
Advances from shareholder, net 5,659 (12,160)
Capital expenditures for property and equipment (31,667) (16,480)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (26,008) (28,640)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and exercise of warrants 136,500 131,000
Payments on capital lease obligations (4,962) --
Proceeds from minority interest in partnership -- 100,000
Proceeds from loans and notes payable, net 62,971 12,697
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 194,509 243,697
--------- ---------
NET INCREASE (DECREASE) IN CASH (16,257) 16,398
CASH AT BEGINNING OF PERIOD 20,358 120
--------- ---------
CASH AT END OF PERIOD $ 4,101 $ 16,518
========= =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
and management's discussion and analysis of financial condition and results of
operations.
3
<PAGE> 6
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DEVELOPMENT STAGE ENTERPRISE)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements
and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for Form
10-QSB. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of a normal recurring
nature considered necessary for a fair presentation, have been
included. It is suggested that these financial statements be
read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB
for the year ended June 30, 1995. The results of operations for
the three month period and nine month period ended March 31,
1996 are not necessarily indicative of the operating results
for the year ended June 30, 1996. For further information,
refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB
for the fiscal year June 30, 1995.
Reclassifications
Certain March 31, 1995 balances have been reclassified to
conform to the March 31, 1996 consolidated financial statement
presentation.
B. INVENTORIES:
Inventory as of March 31, 1996 and June 30, 1995 is comprised
of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---------- ----------
(unaudited)
<S> <C> <C>
Antisera products $4,140,497 $4,140,579
Healthcare products 23,655 13,602
---------- ----------
$4,164,152 $4,154,181
========== ==========
</TABLE>
C. LOSS PER COMMON SHARE:
Net loss per common share is computed by dividing the net loss
by the weighted average number of common shares outstanding
during the period. For the nine month and three month periods
ended March 31, 1996 and 1995, the Company's common stock
equivalents were antidilutive and, therefore, were not included
in the computation of net loss per common share. The per share
computations reflect the effect of a 10 for 1 reverse stock
split that occurred on April 14, 1995 and a 2 for 1 stock
exchange between the Company and UTI on April 17, 1995.
4
<PAGE> 7
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DEVELOPMENT STAGE COMPANY)
D. RELATED PARTY TRANSACTIONS:
During the nine months ended March 31, 1996, various
shareholders and directors of the Company provided consulting
and research and development activities related to the
formation and recommencement of business activities.
In connection with these services, the Company recognized
research and development and consulting expenses of $62,633
and $52,506, respectively.
E. SUPPLEMENTAL CASH FLOW INFORMATION:
Interest and Income Taxes Paid
Cash paid for interest and income taxes for the nine months
ended March 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Interest $7,313 $ 941
====== ======
Income taxes $2,400 $2,400
====== ======
</TABLE>
5
<PAGE> 8
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through private placements of
common stock, issuing warrants to acquire stock in exchange for services
rendered for the benefit of the Company, and to a lesser degree sales. Based on
its current operating plans, capital expenditures necessary to support the
further development and marketing of the Company's products through July, 1996
are expected to exceed cash generated from operations. The Company anticipates,
however, that the proceeds from private placements of stock and exercise of
warrants (of which $11,500 of common stock warrants were converted into common
stock), together with existing capital and revenues from product sales will be
sufficient to finance its operations and working capital requirements for at
least twelve months.
RESULTS OF OPERATIONS.
GENERALLY. The Company has been endeavoring for the past year to refine its
business plan to become a commercially viable entity. Management believes that
it has refined the business plan of the Company and that the business plan, as
redefined, will have been fully implemented by the end of fiscal 1996.
Management has also implemented a variety of procedures which will enhance
revenues and reduce costs.
The Company has not engaged in any significant business prior to April 17, 1995.
On that day, the Company acquired Unified, a small development stage business.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
March 31, 1996 March 31, 1995
<S> <C> <C>
Revenues $ 107,048 $ 60,046
Cost of Sales 69,908 29,852
Operating Expenses 426,146 1,193,476
Loss from Operations (319,098) (1,133,430)
Net Loss $ (269,247) $ (928,613)
</TABLE>
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995.
On a consolidated basis, the Company had sales totaling $107,048 for the nine
months ended March 31, 1996, compared with $60,046 in sales for the Company
(including the results of Unified) for the same period ending March 31, 1995.
The increase in sales for the nine months ended March 31, 1996 resulted from the
recommencement of operations and sales of antisera and other healthcare related
products.
The Company experienced a net loss of $269,247 for the period ending March 31,
1996, compared with a net loss of $928,613 for the same period ending March 31,
1995. The decrease in losses is principally attributable to expenditures related
to recommencing operations, which includes research and development costs of
$62,633, consulting fees of $52,506, and salaries of $86,675 for the nine month
period ending March 31, 1996, versus the significant expenditures that were
incurred for the nine months ended March 31, 1995. The Company, during fiscal
year 1995, incurred substantial expenditures related to research and development
and formation of the Company.
Operating expenses for the nine months ended March 31, 1996 were $426,146
resulting in a loss from operations for the period of $319,098 compared to costs
and expenses for the nine months ended March 31, 1995 of $1,193,476. Costs and
expenses included consulting fees of $52,506 and research and development
expense of $62,632, substantially most of which was for services performed by
the directors, officers and advisors. During the nine months ended March 31,
1995, the Company incurred approximately $900,000 in expenses related to the
research and
6
<PAGE> 9
development of healthcare products. The increase in selling and administrative
expenses for the nine months ended March 31, 1996 are due to the Company's
continuing efforts in research and development, sales and financial reporting
responsibilities. Selling and administrative expenses included approximately
$32,000 in rent expense, and $75,000 in legal and accounting fees. The Company
has recently begun to aggressively market its health care products.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, 1996 March 31, 1995
<S> <C> <C>
Revenues $ 26,556 $ 38,796
Cost of Sales 9,942 22,868
Operating Expenses 117,450 221,468
Loss from Operations (90,894) (182,672)
Net Loss $ (77,234) $(164,734)
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995.
On a consolidated basis, the Company had sales totaling $26,556 for the three
months ended March 31, 1996, compared with $38,796 in sales for the Company
(including the results of Unified) for the same period ending March 31, 1995.
The decrease in sales was primarily due to the reduction in sales of Living
Water Eye Lotion while production and packaging of the product was changed to
prepare for mass marketing.
The Company experienced a net loss of $77,234 for the period ending March 31,
1996, compared with a net loss of $164,734 for the same period ending March 31,
1995. The decrease in losses is principally attributable to the research and
development and consulting expenses that the Company incurred during the three
month period ended March 31, 1995.
Costs and expenses for the three months ended March 31, 1996 were $117,450
resulting in a loss from operations for the period of $90,894 compared to costs
and expenses for the three months ended March 31, 1995 of $221,468. Costs and
expenses included research and development expense of $19,396 and consulting
expense of $24,072, substantially most of which was for services performed by
the directors, officers and advisors. The increase in selling and administrative
expenses for the three months ended March 31, 1996 are due to the Company's
continuing efforts in research and development, sales and financial reporting
responsibilities. Selling and administrative expenses included approximately
$4,800 in rent expense, and $21,000 in legal and accounting fees. The Company
has recently begun to aggressively market its health care products.
Management believes that cash on hand and generated from sales of inventory will
be sufficient to continue operations for an additional twelve months. Sales for
the third quarter ended March 31, 1996 were $26,566 comprised of approximately
$900 in eye lotion, $800 in Electronica-2 and $25,300 in contact lenses. Contact
lens sales were all overseas and constituted approximately 95% of total sales.
RESEARCH AND DEVELOPMENT.
The Company is conducting research and development in four areas over the next
twelve months. Expenditures on research and development will depend upon the
financial resources of the Company. Research and development expense recorded
for the nine month period ended March 31, 1996 was approximately $43,000.
The research and development activities being performed by the Company are
designed to discover and screen potential consumer health care and diagnostic
products. Activities underway at the present time include the following:
- Living Water Eye Lotion, an eye wash irrigating
solution used in cleansing the eye to help
relieve irritation, burning, stinging, and
itching.
As opposed to "eye lubricants" which contain ingredients which increase
viscosity, and "eye redness relievers" which
7
<PAGE> 10
contain viasoconstrictors, the eye wash is designed to enhance eye comfort by
irrigating, flushing, and cleansing without interfering with natural functions.
- Marketing a treatment for open angle glaucoma.
Glaucoma is a condition of the eye in where is usually an elevation of the
intraocular pressure which may lead to deterioration of the visual fields and
ultimately to blindness. The active ingredient in the Company's product
(available by prescription only) is pilocarpine, which has been in use for over
a hundred years. This new product will be called Pilocarpine LW. The vehicle for
pilocarpine is a solution similar to the Company's eye lotion.
- Marketing a hypertonic saline solution.
The Company has developed Hypertonic LW , a saline solution eye drop, used to
reduce corneal edema of various etiologies, including the over wearing of
contact lenses and healing after photorefractive keratectomy (PRK) surgery.
The Solution is similar to Living Water Eye Lotion.
- Marketing a Veterinary Eye Drop.
The Company has developed a Veterinary Eye Drop based on the Living Water
technology which has proven effective in cleansing the eyes of dogs and cats (a
major problem in certain breeds). Arrangements are being made to market this
solution through a veterinary pharmaceutical company. (In addition other
veterinary eye solutions are being developed at the request of the above
company).
- Reconfirming the validity of a Breast Cancer
Molecular Diagnostic Test.
The Company is currently testing its molecular probe technology for the
detection of breast cancer using paraffin-fixed tissue samples obtained from the
Sharp Memorial Hospital, San Diego, CA pathology bank. Data on the histological
evaluation of the samples remains with the tissue bank and is revealed to La
Jolla Diagnostics only upon the completion of the characterization of each
sample using the Company's technology. To date all the samples tested have
agreed with the histological diagnosis. Assuming the results remain favorable at
the completion of the study, testing will be initiated on fresh and/or
fresh-frozen tissue
- Developing a Colon Cancer Immunodiagnostic Test
for Colon Cancer
The Company is assessing the possibility of developing a diagnostic test
specific for patients with colon cancer. In order to confirm the accuracy of
this test, the Company is using blood samples from Sharp Rees-Stealy Medical
Center of San Diego, and are comparing results from patients with different
forms of cancer including pancreatic cancer, liver cancer, colon cancer and
cancer of the esophagus.
- Developing a Nasal Spray Solution under the
direction of Don Brucker.
The Company is continuing the formulation, using its proprietary technology, of
various combinations of natural ingredients such as ascorbyl palmitate (fat
soluble vitamin C), and beta carotene, to develop a nasal hydrating solution
which has the properties of soothing irritated membranes while opening the nasal
passages.
8
<PAGE> 11
LA JOLLA DIAGNOSTICS, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1996
INDEX
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
ITEM 2 CHANGES IN SECURITIES - NONE
ITEM 3 DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5 OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K: NONE
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LA JOLLA DIAGNOSTICS, INC.
Date: May 13, 1996 By: /s/ Don Brucker
-------------------------------------
President, Chief Executive Officer,
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,101
<SECURITIES> 0
<RECEIVABLES> 909
<ALLOWANCES> 0
<INVENTORY> 4,164,152
<CURRENT-ASSETS> 88,225
<PP&E> 46,092
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,217,086
<CURRENT-LIABILITIES> 382,447
<BONDS> 0
0
0
<COMMON> 11,055,615
<OTHER-SE> (7,025,666)
<TOTAL-LIABILITY-AND-EQUITY> 5,217,086
<SALES> 107,048
<TOTAL-REVENUES> 107,048
<CGS> 69,908
<TOTAL-COSTS> 426,146
<OTHER-EXPENSES> (52,251)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (266,847)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (269,247)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (269,247)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
