<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, 1998
[ ] 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.
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(Exact name of small business registrant as specified in its charter)
California 94-2901715
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7777 Fay Avenue, Suite 160, La Jolla, California 92037
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(Address of principal executive offices)
(619) 454-6790
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(Registrant's telephone number)
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(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 April 30, 1998, La Jolla Diagnostics, Inc. had 11,603,570 shares
outstanding of the registrant's common stock, no par value.
<PAGE> 2
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of March 31, 1998
(unaudited) and June 30, 1997 3
Condensed Consolidated Statements of Operations for the Nine
Months Ended March 31, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 1998 and 1997 (unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7 - 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 16
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 17.2 17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND JUNE 30, 1997
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
(UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 12,521 $ 13,275
Accounts receivable 25,295 9,953
Advances to officer, net 6,380 8,487
Inventory - Healthcare products 20,588 26,979
Prepaid expenses 37,343 20,317
------------ ------------
TOTAL CURRENT ASSETS 102,127 79,011
INVENTORY, Antisera products 2,456,911 2,456,911
PROPERTY & EQUIPMENT, NET 33,530 45,820
NOTE RECEIVABLE 493,100 493,100
OTHER ASSETS 2,699 58,835
------------ ------------
$ 3,088,367 $ 3,133,677
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 305,407 $ 282,226
Accrued expenses 26,960 34,490
Customer deposits 17,480 40,418
Lease obligations, current portion 254 2,408
Loans payable 90,090 293,216
------------ ------------
TOTAL CURRENT LIABILITIES 440,191 652,758
LEASE OBLIGATIONS, NON CURRENT PORTION 3,252 5,240
MINORITY INTEREST 577,166 358,650
STOCKHOLDERS' EQUITY
Common stock, no par value (50,000,000 shares authorized;
11,403,570 and 9,137,534 shares issued and outstanding,
respectively) 12,314,344 11,816,245
Additional paid-in capital 817,398 831,247
Preferred stock, no par value (5,000,000 shares authorized,
none issued) -- --
Retained deficit (11,063,984) (10,530,463)
TOTAL STOCKHOLDERS' EQUITY 2,067,758 2,117,029
------------ ------------
$ 3,088,367 $ 3,133,677
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 4
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
NET SALES $ 67,021 $ 130,937
OPERATING EXPENSES
Cost of products sold 38,658 99,177
Selling and administrative expenses 382,381 304,913
Research and development 46,222 62,427
Consulting services 150,303 244,356
Depreciation and amortization 10,572 9,729
------------ ------------
TOTAL OPERATING EXPENSES 628,136 720,602
------------ ------------
LOSS FROM OPERATIONS (561,115) (589,665)
OTHER INCOME (EXPENSES)
Interest income -- 53,412
Interest expense (12,503) (12,958)
Minority interest 43,298 8,750
------------ ------------
TOTAL OTHER INCOME (EXPENSES) 30,795 49,204
------------ ------------
LOSS BEFORE INCOME TAXES (530,320) (540,461)
PROVISION FOR INCOME TAXES 3,200 2,400
------------ ------------
NET LOSS $ (533,520) $ (542,861)
============ ============
NET LOSS PER COMMON SHARE $ (0.06) $ (0.07)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,389,316 7,776,614
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
NET SALES $ 23,048 $ 59,988
OPERATING EXPENSES
Cost of products sold 12,704 42,778
Selling and administrative expenses 103,905 126,098
Research and development 10,945 19,879
Consulting services 36,265 191,633
Depreciation and amortization 3,564 3,495
------------ ------------
TOTAL OPERATING EXPENSES 167,383 383,883
------------ ------------
LOSS FROM OPERATIONS (144,335) (323,895)
OTHER INCOME (EXPENSES)
Interest income -- 17,506
Interest expense (2,594) (4,713)
Minority interest 6,066 2,948
------------ ------------
TOTAL OTHER INCOME (EXPENSES) 3,472 15,741
------------ ------------
LOSS BEFORE INCOME TAXES (140,863) (308,154)
PROVISION FOR INCOME TAXES 3,200 --
------------ ------------
NET LOSS $ (144,063) $ (308,154)
============ ============
NET LOSS PER COMMON SHARE $ (0.01) $ (0.04)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,350,948 7,921,370
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE> 6
LA JOLLA DIAGNOSTICS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (533,520) $ (542,861)
Adjustments to reconcile loss to net cash used
in operating activities
Depreciation and amortization 8,885 9,729
Minority interest 218,516 (8,750)
Issuance of stock for services 197,070 --
Changes in assets and liabilities
(Increase) decrease in inventories 6,391 (12,767)
(Increase) decrease in accounts receivable (15,342) (15,952)
(Increase) decrease in other assets 38,614 (31,330)
(Increase) decrease in interest receivable -- (52,833)
Increase (decrease) in liabilities (7,287) 35,444
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (86,673) (619,320)
CASH FLOWS USED IN INVESTING ACTIVITIES
Advances (to)/from shareholder, net 2,107 (4,546)
Capital expenditures for property and equipment 3,901 (17,163)
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NET CASH USED FOR INVESTING ACTIVITIES 6,008 (21,709)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 39,500 491,319
Proceeds from notes payable 52,304 155,000
Payments on notes payable (7,750) (9,189)
Payments on capital lease obligations (4,143) (2,115)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 79,911 635,015
---------- ----------
NET INCREASE (DECREASE) IN CASH (754) (6,014)
CASH AT BEGINNING OF PERIOD 13,275 28,083
---------- ----------
CASH AT END OF PERIOD $ 12,521 $ 22,069
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
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 condensed 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 are 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 nine
month and the three month periods ended March 31, 1998 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:
Inventories as of March 31, 1998 and June 30, 1997 are comprised of the
following:
<TABLE>
<CAPTION>
MARCH 31, 1998 JUNE 30, 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
Antisera products $2,456,911 $2,456,911
Healthcare products 20,588 26,979
---------- ----------
$2,477,499 $2,483,890
========== ==========
</TABLE>
C. NET 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, 1998 and 1997,
the Company's common stock equivalents were antidilutive and, therefore,
were not included in the computation of net loss per common share.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share," (SFAS 128) which is required to
be adopted on March 31, 1998. At that time, the Company will be required
to change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is not expected to result in any change in primary
earnings per share for the nine month and three
7
<PAGE> 8
month periods ended March 31, 1998 and 1997. The impact of SFAS 128 on
the calculation of fully diluted earnings per share for these periods is
expected to be not material.
D. RELATED PARTY TRANSACTIONS:
During the nine months ended March 31, 1998 and 1997, various
shareholders and directors of the Company provided consulting and
research and development activities related to the business activities
and products of the company.
In connection with these services, during the nine months ended March 31,
1998 and March 31, 1997, the Company recognized research and development
of $46,222 and $62,427 and consulting expenses of $150,303 and $244,356,
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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Interest $1,206 $3,349
====== ======
Income taxes $ 800 $ 800
====== ======
</TABLE>
F. USE OF ESTIMATES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimated and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-QSB contains forward-looking statement that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
FORWARD-LOOKING INFORMATION - GENERAL
This report contains a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results or
those anticipated. In this report, the words "anticipates", "believes",
"expects", "intends", "plans", "may", "future", and similar expressions identify
forward-looking statements. Readers are cautioned to consider the risk factors
described above and in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 1997, and not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements, to
reflect events or circumstances that may arise after the date hereof.
Additionally, these statements are based on certain assumptions that may prove
to be erroneous and are subject to certain risks including, but not limited to,
the Company's ability to introduce new products, the concentration of the
Company's current products, technological change and increased competition in
the industry, the Company's ability to manage its growth, its limited protection
of technology and trademarks, the Company's dependence on limited suppliers,
representatives, distributors, and its dependence on certain key personnel
within the Company. Accordingly, actual results may differ, possibly materially,
from the predictions contained herein.
LIQUIDITY AND CAPITAL RESOURCES
The Company, in the past, has financed operations primarily through the private
placement of common stock, issuance of convertible debt, warrant conversions,
issuing warrants to acquire stock in exchange for services rendered and to a
lesser degree from product sales. Based on its current operating plans, cash
generated from projected sales (particularly the recently introduced Feverfew
Nasal Mist) is expected to generate the necessary capital to support 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 and exercise of warrants and options will continue
to enhance working capital. Additionally, the Company during August 1997 formed
a new subsidiary, Nasal Mist, Inc. The Company through its private placement was
to raise between $300,000 and $600,000; as of March 31, 1998, $313,962 had been
raised for the marketing efforts of Feverfew Nasal Mist.
RESULTS OF OPERATIONS.
GENERALLY. The Company believes that with its business objectives in place and
proper funding, the Company should be able to meet its future expansion plans.
Management has implemented a variety of procedures and marketing efforts which
may enhance revenues and reduce costs for the Company. The Company has begun
efforts to promote its products through a distribution system which uses outside
sales representatives and other marketing efforts.
9
<PAGE> 10
The Company has been negotiating the sale of several bulk orders of its
products. Several of these orders were received after the close of this
reporting period, and more are expected before the end of the fiscal year.
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Revenues $ 67,021 $ 130,937
Cost of products sold (38,658) (99,177)
Other Operating expenses (589,478) (621,425)
Loss from operations (561,115) (589,665)
---------- ----------
Net loss $ (533,520) $ (542,861)
========== ==========
</TABLE>
The Company experienced a net loss of $533,520 for the nine month period ending
March 31, 1998, compared with a net loss of $542,861 for the same period ending
March 31, 1997. On a consolidated basis, the Company had sales totaling $67,021
for the nine months ended March 31, 1998, compared with $130,937 in sales for
the Company for the same period ending March 31, 1997. Cost of product sales and
operating expenses for the nine months ended March 31, 1998 were $628,136
compared to $720,602 for the nine months ended March 31, 1997. The decrease in
costs of products sold and operating expenses of $89,266 is a direct result of
the use of ouside consultants and various other professional services by the
Company. The Company believes this to be a positive trend.
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Revenues $ 23,048 $ 59,988
Cost of products sold 12,704 42,778
Other operating expenses 154,679 341,105
Loss from operations (144,335) (323,895)
---------- ----------
Net loss $ (144,063) $ (308,154)
========== ==========
</TABLE>
The Company experienced a net loss of $144,063 for the three month period ending
March 31, 1998, compared with a net loss of $308,154 for the same period ending
March 31, 1997. On a consolidated basis, the Company had sales totaling $23,048
for the three months ended March 31, 1998, compared with $59,988 in sales for
the Company for the same period ending March 31, 1997. Cost of product sales and
operating expenses for the three months ended March 31, 1998 were $167,383
compared to $383,883 for the three months ended March 31, 1997. The decrease in
costs of products sold and operating expenses of $216,500 is a direct result of
the use of outside consultants and various other professional services by the
Company. The Company believes this to be a positive trend.
10
<PAGE> 11
FINANCIAL RESOURCES
At March 31, 1998, the Company had current assets of $102,127 which includes
inventory of $20,588 and $37,343 in prepaid expenses.
The $2,456,911 in antisera inventory was valued by several independent unrelated
parties (brokers) as of June 1994 to be in excess of $4.1 million on a bulk sale
basis. The valuation was substantiated by an independent research scientist as
of June 1995 and 1996. During June 1997, the carrying value of the antisera was
marked down by approximately 40% to facilitate the close out sale of the product
by the Company.
The antisera inventory consists of antibody reagents used in clinical diagnostic
laboratories that analyze serum for immunoglobulin profiles. The antisera is
kept frozen and is believed to have a shelf life in excess of twenty years.
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 March 31, 1998, $313,962 had been raised
for the marketing efforts of Feverfew Nasal Mist and other nasal spray products.
NMI is a special purpose company organized solely for the purpose of providing
working capital to LAJD for the production and marketing of herbal nasal sprays.
NMI and LAJD have agreed that in exchange for NMI offering proceeds, 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 then 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 by NMI 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. LAJD intends to investigate the use of the
product for aid in the alleviation of migraines symptoms, as well as a relief of
menstrual headache symptoms, which may have the same etiology as migraine
headaches.
11
<PAGE> 12
Feverfew Nasal Mist is formulated using the exclusive patented clustered water
system, which enhances bio-availability. This technology is used with other LAJD
products, and may be used in other future nasal sprays the Company intends to
develop.
Nasal Mist, Inc. Private Placement Offering
- Type of Security Offered: Common Stock
- 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
- 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.
- Minimum Purchase: Two Thousand (2,000) shares.
- Common Stock Outstanding Prior to Offering: Five Hundred Thousand
(500,000) shares.
- Common Stock Outstanding Upon Completion of Offering: Eight Hundred
Thousand (800,000) shares.
As of March 31, 1998, the Company received approximately $314,000 in gross
proceeds.
12
<PAGE> 13
RESEARCH AND DEVELOPMENT
The Company conducts research and development in four areas. Expenditures for
research and development depend upon the availability of financial resources.
Research and development expense recorded for the nine month period ended March
31, 1998 was $46,222 as compared to $62,427 for the nine month period ended
March 31, 1997.
The Company maintains an active research and development program in the areas of
ophthalmic products, nasal sprays, nutriceuticals, and products for the
symptomatic relief of allergies, and immuno/molecular diagnostics using a
network of consultants in 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
Healthcare Products and Diagnostic Divisions.
HEATHCARE PRODUCTS
The Healthcare Products Division is largely based on products using a patented
(U.S. Patent Number 5711950) Microcluster Template Induction Process which
produces a unique clustered water product (trademarked CLUSTERWATER(TM)). This
liquid crystalline structure remains chemically identical with unprocessed
water, however, when exposed to active biological molecules, the liquid
crystalline structure forms new polywater complexes which take on the structural
and electronic "signature" of biomolecules, a process which enhances the
effectiveness of the solution. The Company feels this technology, which can be
used with a broad array of compounds, has significant advantages because it
increases the bioavailability of formulations. Products being marketed or under
development using ClusterWater(TM) include:
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 quantities are beginning to be shipped to distributors.
13
<PAGE> 14
MIGRASPRAY(TM) (currently being marketed)
MIGRASPRAY(TM), a saline solution containing the herb feverfew, is designed to
be sprayed under the tongue. This sublingual method of administration promotes
excellent absorption.
Feverfew is the common name for Tanacetum parthenium, a flowering plant related
to the chrysanthemum, whose leaves have been used for centuries in herbal
remedies for the treatment of various conditions, including migraine headaches.
MIGRASPRAY(TM) can be promoted for the treatment of migraine headaches because
it is classified as a nutriceutical.
OTHER NASAL SPRAYS
The Company is investigating other nasal spray possibilities using the clustered
water technology, including a product for the symptomatic relief of allergies.
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).
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.
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<PAGE> 15
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.
OTHER OPHTHALMIC PRODUCTS
The Company is developing additional eye solutions using the ClusterWater
technology, including a product for the symptomatic relief of allergies.
DRUG DELIVERY LICENSING
The Company is in contact with major pharmaceutical companies in regards to the
licensing of the clustered water process as a more efficient drug delivery
system for ophthalmic, nasal, injectables, parenterals and oral medications.
Results of recent meetings have been encouraging.
DIAGNOSTIC DIVISION PRODUCTS
The Diagnostic Division is developing and marketing clinical diagnostic products
using immunologic and molecular biologic technologies. These products include:
15
<PAGE> 16
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.
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 attack predictor to market.
CLUSTERWATER SOLUTIONS
The Company has been developing a new class of diagnostic solvents which enhance
biochemical activity called ClusterWater(TM). These solvents enhance the
effectiveness of diagnostic tests because the bound water clusters are
structurally stabilizing factors increase testing sensitivity.
16
<PAGE> 17
EXHIBIT 17.2
OTHER
On February 18, 1998, the Company announced that Robert A. Rist has joined its
Board of Directors.
17
<PAGE> 18
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 13, 1998 LA JOLLA DIAGNOSTICS, INC.
By: /s/ Don Brucker
-------------------------------------
Don Brucker
President, Chief Executive Officer
and Chief Financial Officer
18
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