<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 September 30, 1997
[ ] 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 October 31, 1997, La Jolla Diagnostics, Inc. had 10,662,137 shares
outstanding of the registrant's common stock, no par value.
1
<PAGE> 2
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited):
Consolidated Balance Sheets at September 30, 1997
(unaudited) and June 30, 1997 3
Statements of Operations for the Three Months Ended
September 30, 1997 and 1996 (unaudited) 4
Statements of Cash Flows for the Three Months Ended
September 30, 1997 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6 - 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 14
PART II OTHER INFORMATION
Item 1 Legal Proceedings - None
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 - None
Item 6 Exhibits and Reports on Form 8-K - Exhibit 17 15
SIGNATURES 16
</TABLE>
2
<PAGE> 3
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,651 $ 13,275
Accounts receivable 10,128 9,953
Advances to officer, net 6,275 8,487
Inventory - Healthcare products 27,507 26,979
Prepaid Expenses 12,821 20,317
Interest receivable 0 0
---------- ----------
TOTAL CURRENT ASSETS 20,054 79,011
INVENTORY, Antisera Products 2,456,911 2,456,911
PROPERTY & EQUIPMENT, NET 40,208 45,820
NOTE RECEIVABLE 493,100 493,100
OTHER ASSETS 8,589 58,835
---------- ----------
$3,059,190 $3,133,677
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 275,581 $ 282,226
Accrued expenses 44,357 34,490
Customer Department 17,480 40,418
Lease obligations, current portion 440 2,408
Loans payable 320,890 293,216
---------- ----------
TOTAL CURRENT LIABILITIES 658,748 652,758
</TABLE>
3
<PAGE> 4
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (CON'T)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (CON'T)
LEASE OBLIGATIONS, NON CURRENT PORTION 4,014 5,240
MINORITY INTEREST 315,883 358,650
STOCKHOLDERS' EQUITY
Common stock, no par value (50,000,000 shares
authorized; 9,205,852 and 9,137,534 shares issued
and outstanding, respectively) 11,907,927 11,816,245
Additional paid-in capital 831,247 831,247
Preferred stock, no par value (5,000,000 shares authorized, no shares issued)
------------ ------------
Retained deficit (10,658,629) (10,530,463)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,080,545 2,117,029
------------ ------------
$ 3,059,190 $ 3,133,677
============ ============
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
----------- -----------
<S> <C> <C>
NET SALES $ 30,673 $ 33,167
OPERATING EXPENSES
Cost of products sold 21,463 27,727
Selling and administrative expenses 103,746 58,282
Research and development 17,927 19,680
Consulting services 23,388 14,852
Depreciation and amortization 3,504 2,739
----------- -----------
TOTAL OPERATING EXPENSES 170,029 123,280
----------- -----------
LOSS FROM OPERATIONS (139,356) 90,113
OTHER INCOME (EXPENSES)
Interest income -- 17,511
Interest expense (6,891) (1,548)
Minority interest 18,080 2,854
----------- -----------
TOTAL OTHER INCOME (EXPENSES) 11,189 18,817
----------- -----------
LOSS BEFORE INCOME TAXES (128,166) (71,296)
PROVISION FOR INCOME TAXES -- 2,400
----------- -----------
NET LOSS $ (128,166) $ (73,696)
=========== ===========
NET LOSS PER COMMON SHARE $ (0.01) $ (0.01)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 9,137,534 7,639,342
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(128,166) $ (73,969)
Adjustments to reconcile loss to net cash used in operating activities
Depreciation and amortization 3,339 2,739
Minority interest (42,767) (2,854)
Changes in assets and liabilities
(Increase) decrease in inventories (528) 1,512
(Increase) decrease in accounts receivable (175) 762
(Increase) decrease in prepaid expenses and
other assets 57,742 2,109
(Increase) decrease in interest receivable -- (17,511)
Increase (decrease) in accounts payable,
accrued expenses and customer deposits
(19,715) 20,214
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (130,270) (66,725)
CASH FLOWS USED IN INVESTING ACTIVITIES
Advances (to)/from shareholder, net 2,212 399
Capital expenditures for property and equipment 2,273 --
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES 4,485 (399)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 91,682 53,725
Proceeds from notes payable 27,674 (6,938)
Payments on notes payable -- --
Payments on capital lease obligations (3,195) (697)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 116,161 46,090
--------- ---------
NET INCREASE (DECREASE) IN CASH (9,624) (20,236)
CASH AT BEGINNING OF PERIOD 13,275 28,083
--------- ---------
CASH AT END OF PERIOD $ 3,651 $ 7,847
========= =========
</TABLE>
See accompanying notes to financial statement
6
<PAGE> 7
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DEVELOPMENT STAGE COMPANY)
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, 1997. The results of operations for the
three month period ended September 30, 1997 are not necessarily
indicative of the operating results for the year ended June 30, 1998.
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, 1997.
B. INVENTORIES:
Inventory as of September 30, 1997 and June 30, 1997 is comprised of
the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
---------- ----------
Unaudited
<S> <C> <C>
Antisera products $2,456,911 $2,456,911
Healthcare products 27,507 26,979
---------- ----------
$2,484,418 $2,483,890
========== ==========
</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 three month period ended September 30, 1997 and 1996, the
Company's common stock equivalents were antidilutive and, therefore,
were not included in the computation of net loss per common share.
7
<PAGE> 8
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DEVELOPMENT STAGE COMPANY)
D. RELATED PARTY TRANSACTIONS:
During the three months ended September 30, 1997 and 1996, various
shareholders and directors of the Company provided consulting and
research and development activities related to the recommencement of
business activities and products.
In connection with these services, during the three months ended
September 30, 1997 and September 30, 1996, the Company recognized
research and development of $17,927 and $19,680 and consulting expenses
of $23,388 and $14,852, respectively.
E. SUPPLEMENTAL CASH FLOW INFORMATION:
Interest and Income Taxes Paid
Cash paid for interest and income taxes for the nine months ended
September 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
----------- -----------
<S> <C> <C>
Interest $ 208 $ 606
=========== ===========
Income taxes $ -- $ 800
=========== ===========
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company, in the past, has financed its operations primarily through private
placements of common stock, issuance of convertible debt instruments, warrant
conversions, issuing warrants to acquire stock in exchange for services rendered
for the benefit of the Company, and to a lesser degree from product sales. Based
on its current operating plans, cash generated from projected increased sales,
particularly of the recently introduced Feverfew Nasal Mist, are expected to
generate the cash necessary to support the further development of the Company's
products through June of 1998. The Company anticipates that the proceeds from
conventional private placements of stock, issuance of convertible debt
instruments and the exercise of warrants and options will enhance its working
capital. In addition, the Company formed a subsidiary, Nasal Mist, Inc., in
August 1997 to raise between $300,000 and $600,000; as of September 30, 1997,
$82,462.38 had been raised for the marketing of Feverfew Nasal Mist.
RESULTS OF OPERATIONS.
GENERALLY. The Company believes that with its business objectives in place and
proper funding, the Company will meet its future expansion plans. Management has
also implemented a variety of procedures and marketing efforts which will
enhance revenues and reduce costs for the Company's operations. The Company has
engaged in efforts to promote its products through a distribution system through
the use of outside sales representatives.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
COMPARISON OF RESULTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Revenues $ 30,673 $ 33,167
Cost of products sold (21,463) (27,727)
Other Operating expenses (148,565) (95,553)
Loss from operations (139,356) (90,113)
Net loss $(128,166) $ (73,969)
</TABLE>
The Company experienced a net loss of $128,166 for the three month period ending
September 30, 1997, compared with a net loss of $73,696 for the same period
ending September 30, 1996. On a consolidated basis, the Company had sales
totaling $30,673 for the three months ended September 30, 1997, compared with
$33,167 in sales for the Company for the same period ending September 30, 1996.
Cost of product sales and operating expenses for the three months ended
September 30, 1997 were $21,463 compared to $27,727 for the three months ended
September 30, 1996. The decrease in costs of products sold of $6,264 is a direct
result of decreased net sales. Selling and Administrative costs increased
$45,051 resulting from the addition of the subsidiary Nasal Mist, Inc., and
consulting costs increased $8,536 as a result of expanded marketing.
9
<PAGE> 10
In addition there were substantial increases in the following areas; salaries
and consulting expense, legal expense, convention expense and outside services
due to the addition of Nasal Mist, Inc. Additionally the company has instated
both an employee health insurance policy as well as directors & officers
liability, and product and office liability insurance policies after the first
quarter of the fiscal year ended, June 30, 1997.
FINANCIAL RESOURCES
At September 30, 1997, the Company had current assets of $20,054 and inventory
of $2,484,418 ($2,456,911 of which constituted the inventory of antisera). The
inventory was valued by unrelated parties (brokers) as of June 1994 in excess of
$4.1 million on a bulk sale basis. These valuations have been substantiated by
an independent research scientist as of June 1995 and again as of June 1996. In
June 1997, the value of the antisera was marked down by 40% to facilitate the
close out sale of the product over the next three years.
The antisera inventory consists of antibody reagents used in clinical diagnostic
laboratories that analyze serum for immunoglobulin profiles. The antisera is
kept frozen and have a shelf life in excess of twenty years. Since the Company
intends to market and sell the antisera reagents over the next four years, there
is not expected to be any obsolescence or deterioration of the inventory.
In addition, during October 1996, the Company added several types of antisera
called anti-human opioid receptor antibodies. The Company will be using two
types of antisera, already in its inventory, in preparation of its diagnostic
kits, which it intends to market in the near future.
The Company during October of 1996 received debt financing and equity infusion
in the amount of $200,000 from an unrelated party at the time. These
transactions were negotiated in a manner to occur as an arms length transaction.
This unrelated party subsequent to December 31, 1996, became a director of the
Company. The Company issued restricted stock of 200,000 shares in exchange for
the receipt of $100,000. These shares are not freely trading and are not subject
to registration rights.
Furthermore, the Company has issued both 8% and 10% convertible debt
instruments, during October 1996 and January 1997 in exchange for an additional
$100,000 and $55,000, respectively. The debt instruments are convertible into
shares of common stock at $1.00 per share. The shares subject to the convertible
debt are restricted and are not subject to registration rights.
NASAL MIST, INC.
The Company formed a subsidiary, Nasal Mist, Inc. (NMI), in August 1997 to raise
between $300,000 and $600,000; as of September 30, 1997, $82,462.38 had been
raised for the marketing development of Feverfew Nasal Mist and other nasal
spray products.
10
<PAGE> 11
NMI is a special purpose company organized solely for the purpose of providing
capital to LAJD for the production and marketing of herbal nasal sprays. NMI and
LAJD have agreed that in exchange for NMI providing all net proceeds of this
offering to LAJD, LAJD will grant to NMI a license and right to receive from
LAJD and its successors-in-interest, from time-to-time, an amount equal to 10%
of the net sales (half of which will come back to LAJD) less commissions and
discounts of nasal sprays sold by LAJD and its successors-in-interest. NMI does
not anticipate having any other sources of revenue.
After utilization of all proceeds provided by NMI to LAJD, all operational costs
will be the responsibility of LAJD, with the exception of internal legal,
accounting, administrative costs, along with associated overhead, and tax
obligations of NMI.
The first nasal spray being introduced is the patent pending Feverfew Nasal Mist
(the product), a spray containing the herb feverfew.
While the product is being sold as a moisturizing nasal spray, feverfew is an
herb which has been used for centuries as a folk remedy for the treatment of the
symptoms of migraine headaches, and LAJD intends to investigate the possibility
of adding an indication for the use of the product for aiding in the alleviation
of the symptoms of migraines, as well as a relief of symptoms of some menstrual
headaches, which may have the same etiology as migraine headaches.
Feverfew Nasal Mist is formulated using an exclusive clustered water system, for
which a patent is being issued, which enhances bio-availability. The technology
is used with other LAJD products, and may also be used in future nasal sprays
the Company plans to develop.
Nasal Mist, Inc. Private Placement Offering
o Type of Security Offered: Common Stock
o Number of Shares Offered: Up to Three Hundred Thousand (300,000)
shares on a best efforts basis. No minimum number of shares must be
sold by the Company
o Price per Share: Initial and minimum offering price One Dollar
($1.00) per share, with the price to be adjusted from time-to-time
at the discretion of the Company.
o Minimum Purchase: Two Thousand (2,000) shares.
o Common Stock Outstanding Prior to Offering: Five Hundred Thousand
(500,000) shares.
o Common Stock Outstanding Upon Completion of Offering: Eight Hundred
Thousand (800,000) shares.
The estimated gross proceeds available to the Company upon completion of this
offering will depend on the average selling price of the stock.
RESEARCH AND DEVELOPMENT
The Company is conducting research and development in four areas. Expenditures
on research and development will depend upon the financial resources of the
Company. Research and development expense recorded for the three month period
ended September 30, 1997 was $17,927 as compared to $19,680 for the three month
period ended September 30, 1996.
11
<PAGE> 12
The Company is maintaining an active research and development program in the
areas of ophthalmic products and immuno/molecular diagnostics using a network of
prominent consultants as an addition to its internal staff and facilities.
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 for the
Nasal Spray & Ophthalmic and Diagnostic Divisions.
NASAL SPRAY & OPHTHALMIC PRODUCTS TECHNOLOGY
One of the Company's founders, Don Brucker, was a pioneer in the development of
soft contact lenses and other ophthalmic products, and using his know-how and
reputation, the Company has negotiated for exclusive access to a proprietary
clustered water technology, for which a patent is being issued, for the
preparation of solutions. These solutions have certain properties which give
them competitive advantages over existing solutions. They include, but are not
limited to the following:
FEVERFEW NASAL MIST(TM) (currently being marketed)
FEVERFEW NASAL MIST(TM) is being marketed by La Jolla Diagnostics, Inc. as a
moisturizing nasal spray. It uses the same clustered water borate buffering
system as the company's enthusiastically received LIVING WATER EYE LOTION(TM).
FEVERFEW NASAL MIST(TM) is designed to avoid interference with natural
functions, as it moistens, soothes and clears the nasal passages.
The Company intends to investigate the possibility that its patent pending
moisturizing nasal spray, Feverfew Nasal Mist, may also be effective in aiding
in the alleviation of the symptoms of migraine, menstrual and hangover
headaches. If the results of the investigation are promising, (and there can be
no assurance that they will be) the Company intends to pursue the regulatory
processes necessary to add an indication to its labeling for the product's use
with migraines.
The Company has applied for a patent on the product, which was introduced to the
market in the latter part of April 1997 and thus far is being extremely
well-received. Leading alternative medicine doctors have endorsed the product,
and distributors are placing large orders.
OTHER NASAL SPRAYS
The Company is investigating other nasal spray possibilities using the clustered
water technology.
LIVING WATER EYE LOTION(TM) (currently being marketed)
LIVING WATER EYE LOTION(TM) is an eye wash or irrigating solution, used in
cleansing the eye to help relieve irritation, burning, stinging, and itching due
to loose foreign material, air pollutants (smog or pollen), or chlorinated
water. The solution is a specially clustered water borate buffered, sterile
isotonic aqueous solution containing sodium chloride. It is preserved with a
mild preservative, 0.1% sorbic acid and disodium EDTA (ingredients commonly used
in solutions for sensitive eyes).
12
<PAGE> 13
LIVING WATER EYE LOTION(TM) is specially formulated to enhance eye comfort by
irrigating, flushing and cleansing without interfering with natural functions.
In contrast with "eye lubricants," "Artificial Tears," and "Lens Lubricants,"
which contain ingredients which increase fluid viscosity in an attempt to
relieve eye dryness or re-wet contact lenses; "eye redness relievers," which
contain vasoconstrictors which can cause eye problems when used too frequently;
and eye drops, which contain antihistamines to treat allergy symptoms.
The product has been marketed for more than a year and has generally exceeded
the expectations of those who have tried it.
OPTOPET EYE WASH(TM) (currently being marketed)
OPTOPET EYE WASH(TM) is for cleansing the eyes of dogs and cats and removing
mucous which causes fur stains beneath the eyes (a major problem in certain
breeds).
The product has been introduced to pet stores and veterinarians through a public
relations campaign in pet magazines and the general press. The initial response
to publicity has been encouraging.
HYPERTONIC LW(TM) (future marketing effort and product)
HYPERTONIC LW(TM) is a hypertonic saline (2%) agent (eye drop) which may be used
to reduce corneal edema (swelling) of various etiologies, including the
overwearing of contact lenses, and healing after photorefractive keratectomy
(PRK) surgery.
A hypertonic solution exerts an osmotic gradient greater than that present in
body tissues and fluids, so that water is drawn from the body tissue across
semi-permeable membranes. Applied topically to the eye, it draws fluid out of
the cornea.
Most hypertonic saline agents may cause temporary burning and irritation on
instillation. The HYPERTONIC LW(TM)formulation is similar that of LIVING WATER
EYE LOTION(TM), and is designed to enhance eye comfort.
PILOCARPINE LW(TM) (future marketing effort and product)
PILOCARPINE LW(TM) is a prescription drug used in the treatment of glaucoma, a
condition of the eye in which there is usually an elevation of the intraocular
pressure which may lead to deterioration of the visual fields and ultimately to
blindness. The condition, more prevalent after the age of forty, is frequently
symptomless in its early stages unless it is diagnosed during an eye
examination.
The active ingredient in the product, pilocarpine (one of the oldest methods of
glaucoma treatment), is in a solution similar to the Company's LIVING WATER EYE
LOTION(TM). The properties of LIVING WATER EYE LOTION(TM) make it an exceptional
vehicle for the introduction of the pilocarpine to the eye. Presently, the use
of pilocarpine (a miotic, i.e., makes the pupil smaller) is limited, because it
is uncomfortable to use and is frequently only partially effective. Its use in a
LIVING WATER EYE LOTION(TM) type of solution may allow the use of a smaller
concentration of pilocarpine, and diminish side effects.
13
<PAGE> 14
MISCELLANEOUS PRODUCTS
The Company has arranged to have contact lenses privately labeled by a large
manufacturer under the name of the BRUCKER THIN PROFILE(TM) Soft Contact Lens.
This lens is designed to allow the efficient fitting of an exceptionally
versatile contact lens which enables the fitter to stock a small inventory of
lenses, and is especially suited for export. Several orders have been shipped to
Russia during the past year.
The Company is also working on certain other product related projects, and is
test marketing a muscle relaxing device called the Electronica-2.
DIAGNOSTIC DIVISION PRODUCTS
The Diagnostic Division is developing and marketing clinical diagnostic products
using immunologic and molecular biologic technologies. These products include:
ANTISERA
All clinical diagnostic laboratories that analyze serum for immunoglobulin
profiles require at least five antibody reagents: anti-IgG, anti-IgM, anti-IgA,
anti-lambda chain and anti-kappa chain for routine clinical analysis of patient
serum by immunoelectrophoresis and nephelometry.
The Company is now marketing an inventory of such antisera reagents. The entire
inventory was valued by unrelated parties (brokers) as of June 1994 in excess of
$4.1 million on a bulk sale basis. These valuations have been substantiated by
an independent research scientist as of June 1995 and again as of June 1996. In
June 1997 the value of the antisera was marked down by 40% to facilitate the
close out sale of the product. The Company expects that this sale will supply
significant revenue over the next three years.
HEART ATTACK PREDICTOR
The Company is planning to market its rapid diagnostic screening test (for which
the Company is filing a patent application) this year. The test identifies a
particular risk factor for myocardial infarction in a certain subset of mature
people. Those with this risk factor are several times more likely to experience
morbidity or mortality from a condition which may be ameliorated by a change in
living conditions and life style.
CANCER DIAGNOSTIC TESTS
The Company has been working on molecular diagnostic and immunodiagnostic tests
for various types of cancer. It continues to work on these projects, and is
looking for financial partners to help fund the research. In the meantime it is
focusing most of its diagnostic resources on the marketing of antisera and
bringing the heart attach predictor to market.
14
<PAGE> 15
Exhibit 17
OTHER
On October 30, 1997, David C. Flaugh resigned from the Board of Directors of La
Jolla Diagnostics, Inc., as well as his position as secretary of the Board. Mr.
Flaugh's resignation was acknowledged and accepted by the Board.
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 18, 1997 LA JOLLA DIAGNOSTICS, INC.
By: /s/ Don Brucker
-----------------------------------
Don Brucker
President, Chief Executive Officer
and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,651
<SECURITIES> 0
<RECEIVABLES> 503,228
<ALLOWANCES> 0
<INVENTORY> 2,484,418
<CURRENT-ASSETS> 20,054
<PP&E> 40,208
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,059,190
<CURRENT-LIABILITIES> 658,748
<BONDS> 0
0
0
<COMMON> 11,907,927
<OTHER-SE> 9,827,382
<TOTAL-LIABILITY-AND-EQUITY> 3,059,170
<SALES> 30,673
<TOTAL-REVENUES> 30,673
<CGS> 21,463
<TOTAL-COSTS> 148,566
<OTHER-EXPENSES> 11,189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (128,166)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,166)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
