<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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 33-93132
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La Jolla Diagnostics, Inc.
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(Exact name of small business registrant as specified in its character)
California 94-2901715
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7777 Fay Avenue, Suite 160, La Jolla, California 92037
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(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, 9 1997, La Jolla Diagnostics, Inc. had 9,124,784 shares outstanding
of the registrant's common stock, no par value.
1
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LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED MARCH 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited):
Consolidated Balance Sheets at March 31, 1997 3
(unaudited) and June 30, 1996
Statements of Operations for the Nine Months Ended 4
March 31, 1997 and 1996 (unaudited)
Statements of Operations for the Three Months Ended 5
March 31, 1997 and 1996 (unaudited)
Statements of Cash Flows for the Nine Months Ended 6
March 31, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements (unaudited) 7 - 8
Item 2 Management's Discussion and Analysis of Financial 9 - 16
Condition and Results of Operations
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 - None
Exhibit 27 - Financial Data Schedule
SIGNATURES 17
</TABLE>
2
<PAGE> 3
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
-------------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 22,069 $ 28,083
Accounts receivable 17,681 1,729
Advances to officer, net 5,702 1,156
Interest receivable 153,481 100,648
-------------------- -----------------
TOTAL CURRENT ASSETS 198,933 131,616
INVENTORY 4,164,652 4,151,885
PROPERTY & EQUIPMENT, NET 50,682 43,248
NOTE RECEIVABLE 900,000 900,000
OTHER ASSETS 45,149 13,819
-------------------- -----------------
$ 5,359,416 $ 5,240,568
==================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 191,298 $ 178,528
Accrued expenses 57,659 37,385
Lease obligations, current portion 3,270 2,836
Loans payable 245,090 99,279
-------------------- -----------------
TOTAL CURRENT LIABILITIES 497,317 318,028
LEASE OBLIGATIONS, NON CURRENT PORTION 6,379 8,928
MINORITY INTEREST 783,242 791,992
STOCKHOLDERS' EQUITY
Common stock, no par value (50,000,000 shares 11,796,059 11,304,740
authorized; 9,091,148 and 7,576,175 shares
issued and outstanding, respectively)
Additional paid-in capital 831,247 831,247
Preferred stock, no par value (5,000,000 shares
authorized, no shares issued) -- --
Retained deficit (8,554,828) (8,014,367)
-------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 4,072,478 4,121,620
-------------------- -----------------
$ 5,359,416 $ 5,240,568
==================== =================
</TABLE>
See accompanying notes to financial statements
3
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LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE 9 MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------------------------------
<S> <C> <C>
NET SALES $ 130,937 $ 107,048
OPERATING EXPENSES
Cost of products sold 99,177 69,908
Selling and administrative expenses 304,913 235,978
Research and development 62,427 62,633
Consulting services 244,356 52,506
Depreciation and amortization 9,729 5,121
----------------- ---------------
TOTAL OPERATING EXPENSES 720,602 426,146
----------------- ---------------
LOSS FROM OPERATIONS (589,665) (319,098)
OTHER INCOME (EXPENSES)
Interest income 53,412 49,929
Interest expense (12,958) (7,313)
Minority interest 8,750 9,635
----------------- ---------------
TOTAL OTHER INCOME (EXPENSES) 49,204 52,251
----------------- ---------------
LOSS BEFORE INCOME TAXES (540,461) (226,847)
PROVISION FOR INCOME TAXES 2,400 2,400
----------------- ---------------
NET LOSS $ (542,861) $ (269,247)
================= ===============
NET LOSS PER COMMON SHARE $ (0.07) $ (0.04)
================= ===============
AVERAGE COMMON SHARES OUTSTANDING 7,776,614 6,657,783
================= ===============
</TABLE>
See accompanying notes to financial statements
4
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LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------------------------------
<S> <C> <C>
NET SALES $ 59,988 $ 26,556
OPERATING EXPENSES
Cost of products sold 42,778 9,942
Selling and administrative expenses 126,098 61,301
Research and development 19,879 19,396
Consulting services 191,633 24,072
Depreciation and amortization 3,495 2,739
----------------- ---------------
TOTAL OPERATING EXPENSES 383,883 117,450
----------------- ---------------
LOSS FROM OPERATIONS (323,895) (90,894)
OTHER INCOME (EXPENSES)
Interest income 17,506 16,643
Interest expense (4,713) (6,325)
Minority interest 2,948 3,342
----------------- ---------------
TOTAL OTHER INCOME (EXPENSES) 15,741 13,660
----------------- ---------------
LOSS BEFORE INCOME TAXES (308,154) (77,234)
PROVISION FOR INCOME TAXES -- --
----------------- ---------------
NET LOSS $ (308,154) $ (77,234)
================= ===============
NET LOSS PER COMMON SHARE $ (0.04) $ (0.01)
================= ===============
AVERAGE COMMON SHARES OUTSTANDING 7,921,370 6,660,172
================= ===============
</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 9 MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (542,861) $ (191,994)
Adjustments to reconcile loss to net cash used
in operating activities
Depreciation and amortization 9,729 2,382
Minority interest (8,750) (6,292)
Changes in assets and liabilities
(Increase) decrease in inventories (12,767) (1,834)
(Increase) decrease in accounts (15,952) 27,406
receivable
(Increase) decrease in other assets (31,330) (36,635)
(Increase) decrease in interest (52,833) (33,286)
receivable
Increase (decrease) in accounts payable
and accrued expenses 35,444 80,866
----------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (619,320) (159,387)
CASH FLOWS USED IN INVESTING ACTIVITIES
Advances (to)/from shareholder, net (4,546) 10,509
Capital expenditures for property and equipment (17,163) (10,830)
----------------- ----------------
NET CASH USED FOR INVESTING ACTIVITIES (21,709) (321)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 491,319 125,000
Proceeds from notes payable 155,000 22,185
Payments on notes payable (9,189) --
Payments on capital lease obligations (2,115) (1,422)
----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 635,015 145,763
----------------- ----------------
NET INCREASE (DECREASE) IN CASH (6,014) (13,945)
CASH AT BEGINNING OF PERIOD 28,083 20,358
----------------- ----------------
CASH AT END OF PERIOD $ 22,069 $ 6,413
================= ================
</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, 1996. The
results of operations for the three month and nine month periods ended
March 31, 1997 are not necessarily indicative of the operating results
for the year ended June 30, 1997. 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, 1996.
B. INVENTORIES:
Inventory as of March 31, 1997 and June 30, 1996 is comprised of the
following:
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30, 1996
-------------------- ------------------
Unaudited
<S> <C> <C>
Antisera products $ 4,140,431 $ 4,140,579
Healthcare products 24,221 11,306
-------------------- ------------------
$ 4,164,652 $ 4,151,885
==================== ==================
</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 and nine month periods ended March 31, 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 and nine months ended March 31, 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 nine months ended March
31, 1997 and March 31, 1996, the Company recognized research and
development of $62,427 and $ 62,633 and consulting expenses of $244,356
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, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Interest $ 3,349 $ 7,313
======== ========
Income taxes $ 800 $ 2,400
======== ========
</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 1997. In addition 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.
RESULTS OF OPERATIONS.
GENERALLY. Management believes that its business plan objectives were fully
implemented during fiscal year 1996. The Company further 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.
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
and the Company recommenced operations.
9
<PAGE> 10
COMPARISON OF RESULTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------------- ----------------------
<S> <C> <C>
Revenues $ 130,937 $ 107,048
Cost of products sold 99,177 69,908
Other Operating expenses 621,425 356,238
Loss from operations (589,665) (319,098)
Net loss $ (542,861) $ (269,247)
-------------------- ----------------------
</TABLE>
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
On a consolidated basis, the Company had sales totaling $130,937 for the nine
months ended March 31, 1997, compared with $107,048 in sales for the Company for
the same period ending March 31, 1996. The increase in sales for the nine months
ended March 31, 1997 resulted from an increase in the number of orders of
contact lenses, in addition to sales of eyecare and other healthcare related
products. The Company is just beginning to sell products nationally and believes
that this will enable the Company to effect its general business plans and to
properly market its products for future growth.
The Company experienced a net loss of $542,861 for the nine month period ending
March 31, 1997, compared with a net loss of $269,247 for the same period ending
March 31, 1996. Cost of product sales and operating expenses for the nine months
ended March 31, 1997 were $720,602 compared to $426,146 for the nine months
ended March 31, 1996. The increase in costs of products sold of $29,269 is a
direct result of increased net sales. Selling and Administrative costs increased
$68,935 as a result of higher insurance and accounting fees, and consulting
costs increased $91,850 as a result of expanded market efforts.
COMPARISON OF RESULTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Revenues $ 59,988 $ 26,556
Cost of products sold 42,778 9,942
Other Operating 341,105 107,508
expenses
Loss from operations (323,895) (90,894)
Net loss $ (308,154) $ (77,234)
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
On a consolidated basis, the Company had sales totaling $59,988 for the three
months ended March 31, 1997, compared with $26,556 in sales for the Company for
the same period ending March 31, 1996. The increase in sales for the three
months ended March 31, 1997 resulted from an increase in orders of contact
lenses, in addition to sales of eyecare and other healthcare related products.
10
<PAGE> 11
The Company experienced a net loss of $308,154 for the three month period ending
March 31, 1997, compared with a net loss of $77,234 for the same period ending
March 31, 1996. Cost of product sales and operating expenses for the three
months ended March 31, 1997 were $383,883 compared to $117,450 for the three
months ended March 31, 1996. The increase in costs of products sold of $32,836
is a direct result of increased net sales. Selling and Administrative costs
increased $64,797 as a result of higher insurance and accounting fees, and
consulting costs increased $167,561 as a result of expanded marketing.
FINANCIAL RESOURCES
At March 31, 1997, the Company had current assets of $198,933 and inventory of
$4,164,652 ($4,140,431 of which constituted the inventory of antisera). The
antisera inventory was the result of 15 years of work by the late Dr. James
Plummer, a well-known San Diego immunologist. On June 8, 1994, Unified acquired
the inventory from the Plummer Family Trust in exchange for 1,065,940 shares of
Unified common stock along with warrants to purchase an additional 120,000
shares of Unified stock at $0.10 per share (532,970 shares of the Company's
common stock along with warrants to purchase an additional 60,000 shares at
$0.20 per share, after giving effect for the subsequent 1 for 2 shares of
Unified stock exchanged in the merger). The purchase was recorded at Unified's
cost, the fair value of the inventory received for the stock of $4,142,784 based
on the valuation of the antisera as of June 8, 1994 equivalent to $7.77 per
share for the common stock received by the Plummer Family Trust (not considering
the value of the warrants also given to the Trust). As a result of the issuance
of Common Stock at $.40 per share in private placements, the merger, losses, and
shares issued to other founders for product rights, services and know-how, the
book value per share at March 31, 1997 was $.45 per share representing
considerable dilution compared to the $7.77 per share value paid by the Plummer
Family Trust. The inventory was transferred at historical cost to La Jolla
Diagnostics, Inc. on April 17, 1995, the date of the acquisition of Unified, as
the business combination was recorded under the pooling of interest method.
The antisera inventory consists of antibody reagents used in clinical diagnostic
laboratories that analyze serum for immunoglobulin profiles. In addition, the
Company has antigen samples which can be used for the continued production of
antisera once the existing antisera reagent inventory is sold. The Company
intends to purify and package the antisera in individual commercial quantities
and offer it for sale to the medical and scientific communities. The antisera
and antigen samples are 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. There might be a modest change in titre
(concentration) over a prolonged period of time.
In addition, during October 1996, the Company has 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.
11
<PAGE> 12
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.
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 nine month period
ended March 31, 1997 was $62,427 as compared to $62,633 for the nine month
period ended March 31, 1996.
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
Ophthalmic and Diagnostic Divisions.
OPHTHALMIC DIVISION PRODUCTS
OPHTHALMIC SOLUTIONS
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
patent-pending clustered water technology 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:
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 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).
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.
12
<PAGE> 13
The product has been marketed for several months and has generally exceeded the
expectations of those who have tried it.
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.
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.
VETERINARY EYE DROP (future marketing effort and product)
An eye drop based on the LIVING WATER EYE LOTION(TM) technology helps in
cleansing the eyes of dogs and cats (a major problem in certain breeds).
OTHER OPHTHALMIC SOLUTIONS
Several compounds, such as steroids, antibiotics and antioxidants using LIVING
WATER EYE LOTION(TM) type of solution as a vehicle are being studied by the
Company. As with PILOCARPINE LW(TM), the use of a LIVING WATER EYE LOTION(TM)
type solution may offer certain advantages to the user.
13
<PAGE> 14
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 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.
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. The
cost of marketing and processing the antisera for sale has been factored in
arriving at the $4.1 million valuation.
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<PAGE> 15
In addition to the antisera in inventory, the Company has a large supply of
antigen samples which can be used for the continued production of antisera if
the company makes the decision to produce additional antisera.
The Company has added three unique anti-human opioid receptor antibodies to its
line of Antisera Products, making them available commercially for the first
time. In addition the Company will be using two types of Antisera in preparation
of its diagnostic tests for colon cancer, and heart attack predictor.
There is good evidence that these anti-bodies, Polyclonal anti-kappa receptor
antibodies, Ployclonal anti-mu receptor antibodies and Polyclonal anti-delta
receptor antibodies, will prove useful as research immuno-reagents for studies
in: 1) AIDS and generalized immunosuppression; 2) autoimmune diseases; 3)
habitual drug use; and 4) neuropharmacology.
In addition the Company is adding two new anti-human cytokine antibodies to its
research product line. Neutralizing Polyclonal antibodies specific for human
Interleukin-6 and Interleukin-8 will now be offered. These cytokines are known
to be involved in: 1) the regulation of normal antibody synthesis; 2) autoimmune
diseases; and 3) inflammatory responses.
MOLECULAR DIAGNOSTICS (BREAST CANCER TEST)
The Company is expanding its current technology to develop tests for the DNA
fingerprinting by use of gene amplification of certain proteins specifically
associated with both primary and metastatic breast cancer tumors.
Potential molecular diagnostic tests include the DNA fingerprinting of tumor
biopsies. Breast cancer has been targeted as the first tumor for diagnostic
development. This molecular diagnostic method of breast cancer detection has the
potential to be intrinsically superior to the present method of identification
by histological examination.
The Company's method of finding cancerous tissue may be so sensitive that it can
identify small numbers of malignant cells, which could prove critically
important in the search for both primary and metastatic tumors which may spread
to the lymph system and beyond.
Tissue samples have been tested using the Company's Breast Cancer DNA
fingerprinting, and preliminary results of a blinded study confirm the
specificity and sensitivity of the technology.
The Company anticipates beginning clinical trials of its breast cancer markers
soon, with the objective of receiving clearance from the FDA to market the
product in a diagnostic test.
Ultimately this DNA fingerprint technology could be developed for many other
tumor types.
15
<PAGE> 16
IMMUNODIAGNOSTICS (COLON CANCER TEST)
Immunodiagnostic tests are frequently used by clinical diagnostic laboratories
for the diagnosis of cancer, autoimmune and infectious diseases. A list of
potential tests have been identified by the Company and several have been
selected for possible development. The serologic diagnostic test for colon
cancer will be the first in the list to be developed.
The test uses Enzyme-Linked Immunosorbent Assay (ELISA) technology, and appears
to have a specificity for colon cancer.
The Company has access to clinical serum samples recruited from patients to
validate the test in cooperation with clinicians at Sharp Rees-Stealy Medical
Center in San Diego (which has a Certificate of Approval from the Western
International Review Board to collect samples).
Preliminary results from a small number of samples are encouraging, and the
Company has made the decision to expand the study. If the results continue to be
positive, the Company plans to proceed with clinical trials leading towards FDA
clearance to market the product as an immunodiagnostic test.
MYOCARDIAL INFARCTION PREDICTOR
The Company is filing for patent application on a novel method of identifying
risk factors for myocardial infarction among a certain subset of mature people.
The company intends to market an inexpensive test which would be used for
screening purposes. Those with this risk factor are several times more likely to
experience morbidity or mortality from a condition which may be ameliorated by
changes in living conditions and life style.
16
<PAGE> 17
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: May 9, 1997 LA JOLLA DIAGNOSTICS, INC.
By: /s/ DON BRUCKER
----------------------------------
Don Brucker
President, Chief Executive Officer
and Chief Financial Officer
17
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