U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 1O-QSB/A
Amendment No. 1
x
      
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      
      
 
For the quarterly period ended September 30, 2005
      
      
o
      
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      
      
 
For the transition period from ________ to ________
      
      
Commission File Number: 0-21284
      
      
STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY
SALIVA DIAGNOSTIC SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
      
      
      

      
      
      
Delaware
      
91-1549305
      
      
(State or other jurisdiction
      
(I.R.S. Employer
      
      
of incorporation or organization)
      
Identification No.)
      
      
1 Clarks Hill Rd.
Framingham, MA. 01702
      
      
(Address of principal executive offices and zip code)
      
      
(508) 872-2625
      
      
(Issuer's telephone number including area code)
      
      
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o
      
      
The number of shares outstanding of the Registrant's Common Stock as of November 10, 2005, 31,769,491 shares.
      
      
Transitional Small Business Disclosure Format (check one): Yes o No x
      
      

      
      
      
      
    

Explanatory Note

As indicated in the Registrant’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on October 23, 2006, this amendment is being filed to correct errors to the financial statements contained in the Registrant’s Form 10QSB for the period ending September 30, 2005.

This Amendment No. 1 on Form 10-QSB/A to the Quarterly Report on Form 10-QSB of Statsure Diagnostic Systems, Inc., Formerly Saliva Diagnostic Systems Inc. (the Company) for the three and nine month period ended September 30, 2005 is being filed to (i) restate the Company's Balance Sheet and Statements of Operations and Cash Flows (Unaudited) and (ii) revise related and other disclosures included in the quarterly report on Form 10-QSB.

The restatement as described more fully in Note 4, is being made to correct the following:

a)   to account for the beneficial conversion feature on certain convertible debentures issued using the effective interest method.

b)   to properly record the amount of compensation expense for 1,100,000 stock options granted to certain employees for the nine month period ended September 30, 2005.

c)   to record the proper expense for warrants issued for services rendered to the Company which was previously discounted.

The Statement of Cash Flows has been restated to reflect debt discount related to the debentures, the compensation cost recognized related to the options granted and additional expenses related to the warrants. Management's Discussion and Analysis has been revised to reflect the changes made.

This Amendment No. 1 amends Parts I and II of the Quarterly Report on Form 10-QSB for the three and nine month period ended September 30, 2005. This Amendment No. 1 continues to reflect circumstances as of the date of the original filing of the Quarterly Report on Form 10-QSB and the Company has not updated the disclosures contained therein to reflect events that occurred at a later date, except for items relating to the restatement.

See Note 4 to the Financial Statements regarding the restatement adjustments.

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

FORM 10-QSB

INDEX

		PAGE
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance sheets - September 30, 2005 (unaudited) and
	December 31, 2004	4
	Statements of Operations - Three Months and Nine Months Ended
	September 30, 2005 and 2004 (unaudited)	5
	Statements of Cash Flows- Nine Months Ended
	September 30, 2005 and 2004 (unaudited)	6
	Notes to Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition
	And Plan of Operation	16
Item 3.	Controls and Procedures	26
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 2.	Changes in Securities	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures.		29
Certifications

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

BALANCE SHEETS

	September 30, 2005 (Unaudited)			December 31, 2004
	(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	20,861		$	148,630
Accounts receivable, net of allowance for doubtful accounts of $107,477 and $ 55,495 for both 2005 and 2004		120,353			248,279
Inventories		70,313			102,027
Total current assets		211,527			498,936
Property and equipment, net of accumulated depreciation of $549,038 (2005) and $518,675 (2004)		104,345			73,269
Equipment under construction		664,401			603,111
Patents and trademarks, net of accumulated amortization of $123,109(2005) and $115,220 (2004)		55,757			62,046
Deferred costs, less accumulated amortization of $229,744 (2005) and $141,600 (2004)		242,256			170,400
Deposits		13,500			800
TOTAL ASSETS	$	1,291,786		$	1,408,562
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Bank overdraft	$	—		$	26,953
Note payable - shareholders		6,624			243,398
Accounts payable		70,911			129,222
Customer advances		455			18,465
Accrued expenses		262,700			356,081
Accrued payroll expense to officers		180,818			161,250
Payroll and payroll taxes payable		62,415			70,078
Debentures payable - net of discount		61,449			—
Total current liabilities		645,372			1,005,447
LONG-TERM DEBT
Note payable - shareholder		1,932,099			2,069,839
TOTAL LIABILITIES		2,577,471			3,075,286
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ DEFICIT:
Series 1998-B Convertible Preferred Stock: 1,645 shares authorized, none issued and outstanding		—			—
Common stock, $.001 par value, 50,000,000 shares authorized, issued and outstanding: 31,769,491 shares (2005) and 30,509,491 (2004)		31,769			30,509
Additional paid-in capital		44,721,716			42,073,056
Less: Deferred Compensation		(134,747	)		—
Accumulated deficit		(45,904,423	)		(43,770,289	)
TOTAL SHAREHOLDERS’ DEFICIT		(1,285,685	)		(1,666,724	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	1,291,786		$	1,408,562

The accompanying notes are an integral part of these statements.

4

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
REVENUES:	RESTATED						RESTATED
Product Sales	$	204,846		$	392,915		$	645,853		$	1,048,474
Royalty Income		-			-			546			922
		204,846			392,915			646,399			1,049,396
COST OF PRODUCTS SOLD		75,500			128,987			226,240			370,251
Gross profit		129,346			263,928			420,159			679,145
OPERATING EXPENSES:
Research and development		102,449			35,925			264,005			400,925
Selling, general and administrative		227,300			136,845			1,844,124			288,905
		329,749			172,770			2,108,129			689,830
(Loss) income from operations		(200,403	)		91,158			(1,687,970	)		(10,685	)
OTHER INCOME (EXPENSES):
Interest expense-net		(92,559	)		(80,299	)		(260,816	)		(236,782	)
Interest expense on beneficial conversion feature		(36,309	)		-			(121,449	)		-
Financing costs		(21,300	)		-			(63,899	)		-
Total other income (expenses):		(150,168	)		(80,299	)		(446,164	)		(236,782	)
NET (LOSS) INCOME TO COMMON SHAREHOLDERS	$	(350,571	)	$	10,859		$	(2,134,134	)	$	(247,467	)
NET LOSS PER SHARE:
BASIC AND DILUTED	$	(0.01	)	$	(0.00	)	$	(0.07	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED		31,720,578			30,509,700			31,335,938			30,509,700

The accompanying notes are an integral part of these statements.

5

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2005			2004
	(Restated)
OPERATING ACTIVITIES:
Net loss	$	(2,134,134	)	$	(247,467	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization		38,252			28,215
Bad debt expense		51,982			—
Amortization of deferred costs		88,144			63,899
Warrants issued for recruiting services		399,622			—
Options granted to employees as compensation		533,551			—
Beneficial conversion feature of convertible debentures		121,449			—
Changes in assets and liabilities:
Accounts receivable		75,944			(123,007	)
Royalty receivable		—			9,078
Subscription receivable		—			2,000
Inventories		31,714			(55,014	)
Other current assets		(12,700	)		(37,586	)
Accounts payable, accrued payroll expense to officers and accrued expenses		70,976			303,782
Net cash used in operating activities		(735,200	)		(56,100	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(122,729	)		(391,859	)
Acquisitions of patents and trademarks		(1,600	)		(13,710	)
Deferred finance cost		(160,000	)		—
Net cash used in investing activities		(284,329	)		(405,569	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft		(26,953	)		—
Proceeds from shareholder loans		30,000			1,335,858
Proceeds from issuance of debentures		1,510,000			—
Repayments of shareholder loans		(623,287	)		(879,657	)
Proceeds from issuance of common stock		2,000			—
Net cash provided by financing activities		891,760			456,201
NET DECREASE IN CASH AND CASH EQUIVALENTS		(127,769	)		(5,468	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		148,630			24,182
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	20,861		$	18,714
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	—		$	124
Cash paid during the period for taxes	$	830		$	1,428
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
During the nine month periods ended September 30, 2005 and 2004,the previous year’s balance of accrued interest of $228,773 and $68,265, respectively, for a shareholder’s loan was added to the loan balance as principal.	$	228,773		$	143,128
During the nine month period ended September 30, 2005, 1,000,000 shares of common stock were issued for a warrant conversion at $.01 per share. Payment due of $10,000 was offset to a note payable to this stockholder.	$	10,000		$	—
Conversion of debentures payable into common stock	$	60,000		$	—
During the nine month period ended September 30, 2005, 1,100,000 options were issued to employees as compensation	$	668,300		$	—
During the nine month period ended September 30, 2005, debenture in the amount of $1,510,000 were sold and resulted in beneficial conversion charge of $1,510,000	$	1,510,000		$	—

The accompanying notes are an integral part of these statements.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

1. Description of Business/Basis of Presentation

Statsure Diagnostic Systems, Inc. formerly Saliva Diagnostic Systems, Inc., (SDS), a Delaware corporation (the “Company”), is primarily engaged in the development and marketing of oral fluid collection devices for the drugs of abuse market, and rapid immunoassays for use in the detection of infectious diseases. The Company believes that its patented proprietary platform for rapid testing for infectious diseases, offers significant advantages over the existing products, including ease-of-use, lower costs, and significantly reduced risk of infection from collecting and handling specimens. In the oral fluid collection market, the Company’s platform has a patented internal quality control that indicates sufficient volume of the oral fluid (“volume adequacy indicator”).

In May 2002, the Company received its Investigational Device Exemption (IDE) from the U.S. Food and Drug Administration (FDA) for its Rapid HIV Hema-Strip™ Test. Upon termination of all business relationships with its then contract manufacturer, Chembio Diagnostic Systems, (CEMI.OB) the Company signed a Manufacturing / Research & Development Agreement with American Bio Medica Corporation, Nasdaq SC (ABMC), of Kinderhook, NY. Responsibilities of ABMC include manufacturing and regulatory compliance of the Company’s HIV test devices. The Company filed a new IDE with the FDA naming ABMC as its contract manufacturer. This IDE submission to the FDA was made in October 2003. Thereafter, the Company conducted its clinical trials and submitted all the modules of the Pre-Market Approval (PMA) to the FDA. The FDA requested certain additional testing and the Company has completed and in the next thirty days, will submit a Supplemental Study to satisfy this request. The Company is currently waiting for the FDA to complete its audits of certain clinical sites and of the Company’s contract manufacturer. Should the Company receive PMA approval for its rapid HIV test, it will also file for a CLIA (Clinical Laboratory Improvements Amendments) waiver.

SDS is committed to and focused on the completion of the necessary requirements towards obtaining U.S. Food and Drug Administration (FDA) PMA marketing approval of our rapid Hema-Strip™ HIV diagnostic tests in the United States. Although there is no assurance that we will receive approval, we believe that the Hema-Strip™ HIV device format, if approved for detecting antibodies to HIV-1 in fingerstick and venipuncture whole blood, serum and plasma samples, will have certain competitive advantages in the market for rapid HIV testing both in the United States and internationally.

The accompanying unaudited financial statements as of and for the three and nine month periods ended September 30, 2005 and 2004, have been prepared in conformity with accounting principles generally accepted in the United States of America. The financial information as of December 31, 2004, is derived from Statsure Diagnostic Systems, Inc. Formerly Saliva Diagnostic Systems, Inc. (the "Company") financial statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004. Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim filings. In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. The accompanying financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2004, as included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004. Operating results for the three and nine month periods ended September 30, 2005 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2005, or any other portion thereof.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

2. Substantial Doubt Regarding Ability To Continue As A Going Concern

Significant operating losses - accumulated deficit:

Since July 1990, the Company has been engaged almost exclusively in research and development activities focused on developing proprietary saliva based collection devices and rapid assays for infectious diseases. Other than sales of the Company’s collection devices, the Company has not yet commenced any significant product commercialization. The Company has incurred significant operating losses since its inception, resulting in an accumulated deficit of $45,904,423 at September 30, 2005. Such losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations. There can be no assurance that the Company will achieve or maintain profitability in the future. Substantial additional financing will be required in future periods.

The Company’s capital requirements have been and will continue to be significant. The Company’s capital base is smaller than that of many of its competitors, and there can be no assurance that the Company’s cash resources will be able to sustain its business. The Company is dependent upon its effort to raise capital to finance its future operations, including the cost of development, manufacturing and marketing of its products, to conduct clinical trials and submissions for FDA approval of its products and to continue the design and development of its new products. Marketing, manufacturing and clinical testing may require capital resources substantially greater than the resources available to the Company. The Company will continue to seek public or private placement of its equity securities and corporate partners to develop products. The Company’s future capital needs will depend upon numerous factors, including the progress of the approval for sale of the Company’s products in various countries, including the United States, the extent and timing of the acceptance of the Company’s products, the cost of marketing and manufacturing activities and the amount of revenues generated from operations, none of which can be predicted with much certainty. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s significant operating losses and significant capital requirements, however, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3. Summary Of Significant Accounting Policies

Basis of Presentation:

In the opinion of management, the accompanying unaudited Financial Statements present fairly the financial position at September 30, 2005, and the results of operations and the cash flows for all periods presented.  The results of operations for the interim periods are not necessarily indicative of the results to be obtained in any future interim period or for the entire year.

For a summary of significant accounting policies (which have not changed from December 31, 2004) and additional financial information, see the Company’s annual report on Form 10-KSB filed March 31, 2005.

The accompanying unaudited interim financial statements have been prepared in accordance with instructions to Form 10-QSB and, therefore, do not include all information and footnotes required to be in conformity with accounting principles generally accepted in the United States of America.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

3. Summary Of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

The Company does not expect that the adoption of any recent accounting pronouncements will have a material impact on its financial statements.

Reclassifications

Certain reclassifications have been made to the December 31, 2004 financial statements to conform to the current fiscal year presentation.

4. Restatement

Subsequent to the filing of form 10-QSB for the three and nine month period ended September 30, 2005, the Company determined that the filing did not reflect a beneficial conversion feature on 9% convertible debentures issued in 2005 as required under EITF 98-5 “Accounting for Convertible Securities With Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, as amended by EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”.

The Company recorded a $1,510,000 debenture debt discount from the beneficial conversion feature computation. This amount is limited to the proceeds of the convertible debt instrument in accordance with EITF 98-5. The debenture debt discount is being amortized over the life of the debentures with the unamortized discount of $1,448,551 being netted with the gross amount of the debenture payable of $1,510,000. The result of this restatement was to reflect the sale of the debentures as additional paid-in capital ($1,510,000) and to amortize the beneficial conversion feature for the three and nine month periods ended September 30, 2005 of $36,309 and $121,449, respectively.

The Company revalued options granted to employees using FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, an interpretation of APB Opinions No. 15 and No. 25 (“FIN 28”). The Interpretation clarifies the accounting for compensation related to variable stock options and specifies that compensation should be measured at the end of each period as the amount by which the quoted market value of the shares of the Company’s common stock covered by a grant, exceeds the option price or value specified under the plan and should be accrued as a charge to expense over the periods the employee performs the related services. Changes in the quoted market value should be reflected as an adjustment of accrued compensation and compensation expense in the periods in which the changes occur until the date the number of shares and purchase price, if any, are both known. As a result, the compensation charge for these options for the nine months ended September 30, 2005 has been restated to $533,551 from $221,580. The result of this restatement was to increase compensation expense by $311,971 and to reduce and accordingly to reduce additional paid-in capital by $311,971 for the nine month period ended September 30, 2005.

Further, the Company also revalued warrants issued during the first quarter 2005 as payment for services rendered for which the Company had used a 30% discount for various restriction. This revaluation increased related expense to $399,622 from $280,000. The Company accounts for warrants granted to its non-employee consultants using the fair value cost in accordance with SFAS 123 and EITF No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees”. The fair value of warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected volatility of 200.4%, risk-free interest rate of 3.71% and expected life of 4.93 years for the nine month period ended September 30, 2005. The effect of this restatement was to increase expenses and additional paid-in capital by $119,622.

The Balance Sheet as of September 30, 2005, the Statement of Operations for the three and nine month period ended September 30, 2005, and the Statement of Cash flows for the nine month period ended September 30, 2005, are now being restated in this Form 10QSB/A filing to give effect to the correction of these errors and certain resulting reclassification adjustments. The table below details the items affected by the restatement:

9

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

	September 30, 2005
	As reported			As Restated
BALANCE SHEET:
Current portion of debenture payable net of discount	$	241,667		$	61,449
Total current liabilities		825,590			645,372
Debentures payable-net of discount		1,208,333			-
Additional paid-in capital		43,368,096			44,721,716
Less: Deferred compensation		(722,720	)		(134,747	)
Accumulated deficit		(45,351,381	)		(45,904,423	)

	For the three months ended September 30, 2005						For the nine months ended September 30, 2005
	As reported			As Restated			As reported			As Restated
STATEMENT OF OPERATIONS:
Selling, general and administrative expense	$	339,644		$	227,300		$	1,412,531		$	1,844,124
Loss from operations		(312,747	)		(200,403	)		(1,256,377	)		(1,687,970	)
Interest expense-net		(113,859	)		(92,559	)		(324,715	)		(260,816	)
Interest expense on beneficial conversion feature		-			(36,309	)		-			(121,449	)
Financing costs		-			(21,300	)		-			(63,899	)
Net loss to common shareholders		(426,606	)		(350,571	)		(1,581,092	)		(2,134,134	)
Net loss per share-basic and diluted		( -	)		(.01	)		(.05	)		(.07	)

	For the nine months ended September 30, 2005
	As reported			As Restated
STATEMENT OF CASH FLOWS:
Net loss	$	(1,581,092	)	$	(2,134,134	)
Warrants issued for recruiting services		280,000			399,622
Beneficial conversion feature of convertible debentures		-			121,449
Options issued to employee as compensation		221,580			533,551
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW ACTIVITIES
Discount related to beneficial conversion feature of convertible debt		-			1,510,000
Options issued to employees as compensation		944,300			668,300

The restatement had no impact on the net cash used in operating activities.

The Company has adopted the disclosure provisions of Financial Accounting Standards Board Statement No. 123 ("SFAS 123") which defines a fair value based method of accounting for employee stock options and similar equity instruments and encourages all entities to adopt that method of accounting for all employee stock-based compensation plans. However, SFAS 123 also allows an entity to continue to measure compensation cost for such plans using the method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"). Entities electing to remain with the accounting as prescribed by APB 25 must make pro forma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined in SFAS 123 had been adopted.

10

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

The Company has elected to account for its stock-based compensation plans using APB 25. The Company has computed, for pro forma disclosure purposes, the value of options granted for the three and nine month periods ended September 30, 2005 using the Black-Scholes pricing model. 

	For the three months ended September 30, 2005						For the nine months ended September 30, 2005
	As Reported			As Restated			As Reported			As Restated
Net loss to common shareholders	$	(426,606	)	$	(350,571	)	$	(1,581,092	)	$	(2,134,134	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax affects		92,586			(19,758	)		221,580			533,551
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax affects		(90,428	)		(253,938	)		(213,266	)		(1,021,991	)
Pro forma	$	(424,448	)	$	(624,267	)	$	(1,572,778	)	$	(2,622,574	)
Basic and diluted net loss per share
As reported	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.07	)
Pro forma		(0.01	)		(0.02	)		(0.05	)		(0.08	)

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2005: expected volatility of 30%; risk-free interest rate of 3.56%; and expected lives of 5 years.

The effects of applying SFAS 123 (revised 2004) in the above pro forma disclosures are not indicative of future amounts as future amounts are likely to be affected by the number of grants awarded and since additional awards are generally expected to be made at varying prices.

5. Inventories

Inventories are stated at the lower of cost or market determined on a first-in, first-out basis and are comprised of the following:

	September 30, 2005		December 31, 2004
Raw materials	$	66,793	$	87,407
Finished goods		3,520		14,620
	$	70,313	$	102,027

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

6. Accounts Receivable

In 2005, the Company recorded a 100% allowance of $102,477 against a receivable of $102,477 from one customer. We have given this account over to attorneys for collection and we are uncertain at this time if this will result in the collection of this outstanding account.

7. Equipment Under Construction

In 2004, the Company entered into agreements with vendors to have custom assembly machinery built to assemble the Company’s Statsure HIV test. We purchased this equipment to produce production quantities of our “barrel” technology based products in an automated and cost effective manner and expect to need it initially to satisfy the market demand of our first major barrel product—the HemaStrip™ HIV test upon FDA approval. As of the Balance Sheet date, the machinery has not been completed or placed in service.

8. Accrued Expenses

	September 30, 2005		December 31, 2004
Accrued interest	$	260,817	$	228,773
Accrued legal expense		-		112,500
Other accrued liabilities		1,883		14,808
	$	262,700	$	356,081

9. Geographic Area Information

Under the disclosure requirements of SFAS No. 131, “Segment Disclosures and Related Information,” we operate within one segment. Our products are sold principally in the United States and Europe. Segmentation of operating income and identifiable assets is not applicable since all of our revenues outside the United States are export sales.

The following table represents total product sales revenue by geographic area:

	For the three months ended September 30,				For the nine months ended September 30,
	2005		2004		2005		2004
United States	$	600	$	182,136	$	152,098	$	529,956
United Kingdom		147,373		163,932		376,777		371,932
Africa		12,932		44,650		61,670		111,550
Other		43,941		2,197		55,308		35,036
	$	204,846	$	392,915	$	645,853	$	1,048,474

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

10. Deferred Costs

Deferred costs represent the value of payments of cash, warrants and shares issued to brokers and a shareholder as consideration for loan financing during the years. As of September 30, 2005, net deferred costs were $242,256, which are being amortized over the lives of the respective loan and debentures.

11. Debenture Payable

On January 19, 2005, the Company's board of directors authorized the issuance and sale of up to three million dollars of convertible debentures. These debentures mature March 31, 2009 and carry an interest rate of 9% per year and are convertible into common stock at the lower of 66.6% of the valuation of the Company's next raise of equity or $1 per share. In accordance with EITF Issue 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company had evaluated that the convertible debt had a beneficial conversion feature as the conversion price was less than the fair value of the Company's common stock on the measurement date. Accordingly, the Company recognized this beneficial conversion feature by charging an interest expense of $121,449 for the nine months ended September 30, 2005. The Company had sold an aggregate of $1,510,000 of these convertible debentures. In September 2005, a debenture in the amount of $60,000 was converted into 60,000 shares of common stock.

As of September 30, 2005, there are outstanding $1,450,000 of 9% Convertible Debentures due in January 2009. Holders of the 9% Convertible Debentures are entitled to convert principal amounts into shares of common stock at a conversion price of $1.00.

Debentures payable-net of discount in the amount of $61,449 is net of gross amount of debenture payables of $1,450,000 reduced by unamortized debt discount of $1,388,551.

12. Financing from Shareholders

Per a promissory note dated February 2003, Jules Nordlicht, agreed to advance in total or in installments, up to the amount of $1,000,000 to the Company. In November 2003 and August 2004, agreements were executed with this shareholder to cause additional advances in total or in installments up to the amount of $2,500,000 to advance the process of the FDA approval. In consideration for the financing, the Company agreed to repay such borrowed funds with accrued interest at 12% per annum and the shareholder reserves the right to demand payment in full or in part at anytime after December 31, 2006. As of September 30, 2005 the loan balance to this shareholder aggregated $1,932,099 which is all shown as long term liability since the Company does not expect to repay any of this loan during the next twelve months. An additional amount of $180,805 of interest on this note has been incurred during the first nine months of 2005, and is shown in accrued expenses.

Resonance Limited, a shareholder, is owed $6,624 as of September 30, 2005. The loan bears no interest and is due on demand.

13. Shareholders’ Equity Transactions

For the nine months ended September 30, 2005, 200,000 warrants exercisable at a price of $.01 per share, were issued as payment for services rendered to the Company. Based upon the market value of the common stock on the date of issuance of $2.00, the Company recorded an expense and related additional paid-in capital of $399,622

These warrants, as well as additional warrants exercisable into 1,000,000 shares previously issued, exercisable at $.01 per share, were converted during March 2005 into common stock, resulting in the issuance of 1,200,000 common shares during this period.

13

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

For the nine month period ended September 30, 2005, 550,000 stock options were granted to each of two employees per employment agreements. Of these options, 100,000 are vested immediately and exercisable from June 1, 2005 until June 1, 2015 and remaining options are vested in three equal amounts annually, commencing on October 1, 2005. The compensation cost related to the options is been deferred over the vesting period. An adjustment of $(19,758) and $533,551 in the selling, general and administrative expense was recorded to recognize the compensation expense for the three and nine month period ended September 30, 2005.

During September 2005, a convertible debenture in the amount of $60,000 was converted into common stock, resulting in the issuance of 60,000 common shares during this period. (See Note 11).

14. Contingencies

The following table lists the future payments required on debt and any other contractual obligations of the Company:

Payments Due by Period	Future Payments
<1 year	$	281,716
1-3 years		2,959,515
4th year		241,667
	$	3,482,898

In March 2005, the Company signed a lease to occupy premises in Framingham, MA beginning April 1, 2005. This location will be our primary corporate office. The lease has a three-year initial term ending March 31, 2008 and a base annual rental rate starting at approximately $26,350 and increasing to approximately $40,500 per year over that initial term. The lease also has a one-year renewal option at an annual base rental rate of approximately $40,500.

Legal Matters

In March 2004, Chembio Diagnostic Systems, Inc. (the Company’s former contract manufacturer) commenced an action in Federal Court, Eastern District of New York, seeking a declaration that the Company’s US Patent No. 5,935,864 was invalid and not infringed.  The Company had filed counterclaims for patent infringement seeking an injunction and damages.  Some initial discovery took place, and the remainder of discovery had been stayed pending the Court’s ruling interpreting the patent claims.

On September 27, 2005 the Hon. Joanna Seybert, issued her Claim Construction Ruling on the interpretation of the patent claims in the suit. The Court ruled that SDS' broader interpretation of SDS' patent claims was correct, and rejected Chembio's arguments seeking to narrow coverage afforded by SDS' '864 patent.

With the broad scope of the '864 patent now established, SDS will seek an expedited Court schedule for remaining proceedings to recover damages and to enjoin Chembio from selling or offering for sale the Chembio Sure Check device. SDS considers this a major victory in the matter.

In and around January 2000, the Company received notice from the United States Patent and Trademark Office that Bayer Corporation filed a petition to cancel the Company’s U.S. Trademark Registration No. 2,240,324, for the mark HEMA STRIP. The petition alleged that the Company’s HEMA STRIP trademark, would likely be confused with Bayer’s federally registered trademark, for the mark HEMASTIX. The Company has settled this matter with Bayer and will change its brand name in a manner consistent with this agreement.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(UNAUDITED)

Other than that set forth above, to the best knowledge of the Company, no other material legal proceedings are pending.

Economic Dependency

The Company had two customers that accounted for 82% of product sales (58% and 24%) during the first nine months of 2005, and two customers that accounted for 68% (36% and 32%) during the first nine months of 2004.

During the third quarter of 2005, the Company had one customer that accounted for 58% of product sales.

The loss of any of these customers could have a material adverse effect on the Company.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of the Company's financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this document.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company's other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company's fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) product development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation.

GENERAL

Since July 1990, the Company has been engaged almost exclusively in research and development activities focused on developing proprietary saliva based collection devices and rapid assays for infectious diseases. The Company’s products have been purchased by foreign governments, distributors, laboratories, as well as the U.S. Center for Disease Control (CDC), an agency of the United States government.

In February 2000, the Company closed its Vancouver, Washington manufacturing facility and moved its executive offices to New York. The Company no longer has its own manufacturing plant which would allow it to independently produce its products, and relies exclusively on its contract manufacturers to supply the Company’s needs.

In July of 2003, the Company signed a Manufacturing / Research & Development Agreement with American Bio Medica Corporation (ABMC) of Kinderhook, NY. Responsibilities of ABMC include manufacturing and regulatory compliance of the Company’s HIV test devices.

The Company is seeking a PMA for its HIV rapid test from the FDA and submitted all modules of the PMA by the end of November 2004. Since that time the FDA has inspected each of the six clinical sites that participated in the clinical trials of our HIV rapid test. The Company has completed a small SUPPLEMENTAL study of 200 samples which completes its data base for the upcoming submission to the FDA. The Supplemental Study will be submitted to the FDA in the next thirty days. Following that, the Company expects its contract manufacturer (ABMC) to be audited by the FDA. Typically, several months pass following a successful inspection and submission of a completed PMA, to receive notification. In addition to the US, the Company intends to submit the appropriate regulatory submissions, import/export documentation and any other requirement for a number of countries, including but not limited to, Russia, Brazil, Canada, Vietnam, India, Mexico, Australia, Philippines, Thailand, and a number of African countries.

The IDE, Clinical Trials, and application modules are only part of a difficult and financially costly process to receive U.S. marketing approval. There is no assurance that the Company will have the financial resources, expertise, or ability to complete the approval process.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

We believe that the potential market for rapid tests in the United States and foreign countries will continue to grow as the benefits of rapid testing are better understood by the appropriate government agencies, by diagnostic and treatment practitioners, and by the general population. Recently, the need for and availability of rapid tests to screen large populations for HIV has been the subject of the medical, scientific and lay press, including the New England Journal of Medicine’s Editorial pages. Even more recently, the FDA has decided to conduct hearings to discuss the potential need, requirements, and issues of Over The Counter marketing of HIV tests. The first of these hearings will be held in November 2005. Consequently, we are now actively working to commercialize our HIV rapid test products, and to obtain requisite regulatory approvals to introduce these products in international markets as well as in the U.S. There can be no assurance that we will achieve or sustain significant revenues from sales of HIV diagnostic tests, internationally or domestically, or from other new products we may develop or introduce.

The Company has limited marketing, sales and distribution resources. The Company relies in large part on forming partnerships for marketing, sales and distribution of its products. To date, the Company has signed an exclusive distribution agreement of our HemaStrip™ test product, for The Russian Federation, the C.I.S. and certain African countries with Memorand Limited. Memorand is currently working to obtain appropriate government and regulatory requirements. ADR PRE Ltd. acted as the agent in developing this relationship and distribution agreement. The Company has agreed to compensate ADR PRE Ltd. for their efforts based on a sales commission basis.

The Company has also signed a distribution agreement with Medsource Ozone Biomedicals for distribution of our HemaStrip™ and SeroStrip products throughout India.

Our Saliva Sampler® oral fluid collectors are being sold under a distribution agreement with Immunalysis, Inc., whereby they have been granted exclusive rights to the Saliva Sampler® for sale in the U.S. and Canada solely for the laboratory testing market to detect a drug of abuse. They have incorporated our Saliva Sampler® collector in their application for FDA marketing approval of their assay kit for oral fluid substance abuse testing.

We continue to distribute our Hema-Strip™ HIV test and Saliva Sampler® oral fluid collection product through our current distribution networks and we will also seek new distribution relationships for our current and future test products.

The Company has incurred significant operating losses since its inception, resulting in an accumulated deficit of $45,904,423 at September 30, 2005. Such losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations.

The Company believes that its current cash position will be insufficient to maintain the Company’s operations through the remainder of 2005. The Company will need to raise additional capital to fund its aggressive growth and marketing efforts and to capitalize on its IP portfolio to design, develop, test, gain regulatory approval and launch new products. Development, marketing, manufacturing and clinical testing may require capital resources substantially greater than the resources, which may be available to the Company. The Company is in the midst of raising up to three million dollars as a convertible debt instrument. The Company has received to date approximately $1.5 million dollars. The Company is reviewing its options, including the selling of common stock, as a means to fund the Company’s future growth plans. There can be no assurance that the Company will be able to obtain the additional capital resources necessary to fund its growth plans, or that such financing will be available on commercially reasonable terms.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventories, income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

The Company believes there have been no significant changes, during the nine months ended September 30, 2005, to the items disclosed as critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004.

Restatement of Financial Statements

As indicated in the Registrant’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on October 23, 2006, this amendment is being filed to correct errors to the financial statements contained in the Registrant’s Form 10QSB/A for the period ending September 30, 2005.

This Amendment No. 1 on Form 10-QSB/A to the Quarterly Report on Form 10-QSB of Statsure Diagnostic Systems, Inc., Formerly Saliva Diagnostic Systems Inc. (the Company) for the three and nine month period ended September 30, 2005 is being filed to (i) restate the Company's Balance Sheet and Statements of Operations and Cash Flows (Unaudited) and (ii) revise related and other disclosures included in the quarterly report on Form 10-QSB.

The restatement as described more fully in Note 4, is being made to correct the following:

a) to account for the beneficial conversion feature on certain convertible debentures issued using the effective interest method.

b) to properly record the amount of compensation expense for 1,100,000 stock options granted to certain employees for the nine month period ended September 30, 2005.

c) to record the proper expense for warrants issued for services rendered to the Company which was previously discounted.

The Statement of Cash Flows has been restated to reflect debt discount related to the debentures, the compensation cost recognized related to the options granted and additional expenses related to the warrants. Management's Discussion and Analysis has been revised to reflect the changes made.

This Amendment No. 1 amends Parts I and II of the Quarterly Report on Form 10-QSB for the three and nine month period ended September 30, 2005. This Amendment No. 1 continues to reflect circumstances as of the date of the original filing of the Quarterly Report on Form 10-QSB and the Company has not updated the disclosures contained therein to reflect events that occurred at a later date, except for items relating to the restatement.

a) Subsequent to the filing of form 10-QSB for the three and nine month period ended September 30, 2005, the Company determined that the filing did not reflect a beneficial conversion feature on 9% convertible debentures issued in 2005 as required under EITF 98-5 “Accounting for Convertible Securities With Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, as amended by EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”.

The Company recorded a $1,510,000 debenture debt discount from the beneficial conversion feature computation. This amount is limited to the proceeds of the convertible debt instrument in accordance with EITF 98-5. In September 2005, a debenture in the amount of $60,000 was converted into 60,000 shares of common stock. The debenture debt discount is being amortized over the life of the debentures with the unamortized discount of $1,388,551 being netted with the gross amount of the debenture payable of $1,450,000. The result of this restatement was to reflect the initial sale of the debentures as additional paid-in capital ($1,510,000) and to amortize the beneficial conversion feature for the three and nine month periods ended September 30, 2005 of $36,309 and $121,449, respectively.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

b) The Company revalued options granted to employees using FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, an interpretation of APB Opinions No. 15 and No. 25 (“FIN 28”). The Interpretation clarifies the accounting for compensation related to variable stock options and specifies that compensation should be measured at the end of each period as the amount by which the quoted market value of the shares of the Company’s common stock covered by a grant, exceeds the option price or value specified under the plan and should be accrued as a charge to expense over the periods the employee performs the related services. Changes in the quoted market value should be reflected as an adjustment of accrued compensation and compensation expense in the periods in which the changes occur until the date the number of shares and purchase price, if any, are both known. As a result, the compensation charge for these options for the nine months ended September 30, 2005 has been restated to $533,551 from $221,580. The result of this restatement was to increase compensation expense by $311,971 and to reduce and accordingly to reduce additional paid-in capital by $311,971 for the nine month period ended September 30, 2005.

c) Further, the Company also revalued warrants issued during the first quarter 2005 as payment for services rendered for which the Company had used a 30% discount for various restriction. This revaluation increased related expense to $399,622 from $280,000. The Company accounts for warrants granted to its non-employee consultants using the fair value cost in accordance with SFAS 123 and EITF No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees”. The fair value of warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected volatility of 200.4%, risk-free interest rate of 3.71% and expected life of 4.93 years for the nine month period ended September 30, 2005. The effect of this restatement was to increase expenses and additional paid-in capital by $119,622.

The Balance Sheet as of September 30, 2005, the Statement of Operations for the three and nine month period ended September 30, 2005, and the Statement of Cash flows for the nine month period ended September 30, 2005, are now being restated in this Form 10QSB/A filing to give effect to the correction of these errors and certain resulting reclassification adjustments. The table below details the items affected by the restatement:

	September 30, 2005
	As reported			As Restated
BALANCE SHEET:
Current portion of debenture payable net of discount		241,667			61,449
Total current liabilities		825,590			645,372
Debentures payable-net of discount		1,208,333			-
Additional paid-in capital		43,368,096			44,721,716
Less: Deferred compensation		(722,720	)		(134,747	)
Accumulated deficit		(45,351,381	)		(45,904,423	)

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

	For the three months ended September 30, 2005						For the nine months ended September 30, 2005
	As reported			As Restated			As reported			As Restated
STATEMENT OF OPERATIONS:
Selling, general and administrative expense	$	339,644		$	227,300		$	1,412,531		$	1,844,124
Loss from operations		(312,747	)		(200,403	)		(1,256,377	)		(1,687,970	)
Interest expense-net		(113,859	)		(92,559	)		(324,715	)		(260,816	)
Interest expense on beneficial conversion feature		-			(36,309	)		-			(121,449	)
Financing costs		-			(21,300	)		-			(63,899	)
Net loss to common shareholders		(426,606	)		(350,571	)		(1,581,092	)		(2,134,134	)

	For the nine months ended September 30, 2005
	As reported			As Restated
STATEMENT OF CASH FLOWS:
Net loss	$	(1,581,092	)	$	(2,134,134	)
Warrants issued for recruiting services		280,000			399,622
Beneficial conversion feature of convertible debentures		-			121,449
Options issued to employee as compensation		221,580			533,551
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW ACTIVITIES
Discount related to beneficial conversion feature of convertible debt		-			1,510,000
Options issued to employees as compensation		944,300			668,300

The restatement had no impact on the net cash used in operating activities.

The Company has adopted the disclosure provisions of Financial Accounting Standards Board Statement No. 123 ("SFAS 123") which defines a fair value based method of accounting for employee stock options and similar equity instruments and encourages all entities to adopt that method of accounting for all employee stock-based compensation plans. However, SFAS 123 also allows an entity to continue to measure compensation cost for such plans using the method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"). Entities electing to remain with the accounting as prescribed by APB 25 must make pro forma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined in SFAS 123 had been adopted.

The Company has elected to account for its stock-based compensation plans using APB 25. The Company has computed, for pro forma disclosure purposes, the value of options granted for the three and nine month periods ended September 30, 2005 using the Black-Scholes pricing model.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005 

	For the three months ended September 30, 2005						For the nine months ended September 30, 2005
	As Reported			As Restated			As Reported			As Restated
Net loss to common shareholders	$	(426,606	)	$	(350,571	)	$	(1,581,092	)	$	(2,134,134	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax affects		92,586			(19,758	)		221,580			533,551
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax affects		(90,428	)		(253,938	)		(213,266	)		(1,021,991	)
Pro forma	$	(424,448	)	$	(624,267	)	$	(1,572,778	)	$	(2,622,574	)
Basic and diluted net loss per share
As reported	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.07	)
Pro forma		(0.01	)		(0.02	)		(0.05	)		(0.08	)

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2005: expected volatility of 30%; risk-free interest rate of 3.56%; and expected lives of 5 years.

The effects of applying SFAS 123 (revised 2004) in the above pro forma disclosures are not indicative of future amounts as future amounts are likely to be affected by the number of grants awarded and since additional awards are generally expected to be made at varying prices.

RESULTS OF OPERATIONS

Third Quarter and First Nine Months of 2005 Compared to Third Quarter and First nine Months of 2004:

Revenues. The Company's revenues consist of product sales and royalties. Revenues decreased 48% to $204,846 in the third quarter of 2005, from $392,915 in the third quarter of 2004, and decreased 38% to $646,399 in the first nine months of 2005, from $1,049,396in the first nine months of 2004. The Company is continuing to seek new markets and sales opportunities for its products. The decrease in sales is primarily due to a large stocking inventory shipment of our saliva collector in 2004 by one of our customers and a slowing down of sales by this same customer in 2005.

During the first nine months of 2005 and 2004, the Company’s revenues were primarily generated from sales of its patented saliva collection devices.

The Company had two customers that accounted for 82% of product sales (58% and 24%) during the first nine months of 2005, and two customers that accounted for 68% (36% and 32%) during the first nine months of 2004.

During the third quarter of 2005, the Company had one customer that accounted for 58% of product sales

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

The loss of any of these customers could have a material adverse effect on the Company.

Cost of products sold: Costs of products sold decreased to $75,500 (37% of product sales) in the third quarter of 2005 from $128,987 (33% of product sales) in the third quarter of 2004, and decreased to $226,240 (35% of product sales) in the first nine months of 2005 from $370,251 (35% of product sales) in the first nine months of 2004 due to decreased sales activity. The decrease in the quality of Gross Margins was attributable to price increases from suppliers which we were unable to pass on to our customers.

Research and development expenses: Research and development expenses increased to $102,449in the third quarter of 2005 from $35,925in the third quarter of 2004 and decreased to $264,005 in the first nine months of 2005 from $400,925 in the first nine months of 2004. The Company is seeking a PMA (PreMarket Approval Application) for its HIV rapid test from the FDA This category includes costs incurred for this PMA, regulatory approvals, product evaluations registrations, and clinical studies.

The increase in the third quarter is due to:

·   additional HIV test clinical trial costs which amounted to $9,942 in the third quarter of 2005

·   additional consulting costs associated with the Food and Drug Administration PMA submissions. These consultant costs totaled $92,507 in the third quarter of 2005.

R&D costs for Hema-Strip™ HIV are expected to continue at the third quarter level in the 4th quarter of 2005.

Selling, general and administrative expenses: Selling, general and administrative expenses increased 66% to $534,000 in the third quarter of 2005 from $136,845 in the third quarter of 2004 and increased 538% to $1,844,124 in the first nine months of 2005 from $288,905 in the first nine months of 2004. This increase for the nine months in 2005 is due to significantly greater expenses for amortization of options granted to two new employees of approximately $312,000, recruiting expenses of approximately $400,000 associated with the issuance of shares and/or warrants for services, an increase in payroll (other than the options issued to the two new employees) of approximately $155,000, and an increase in bad debt expense of approximately $50,000.

Loss from operations: The loss from operations for the third quarter of 2005 of $200,403 reflects a 120% increase in loss from the $91,158 income reported for the third quarter of 2004; and the loss from operations for the first nine months of 2005 of $1,687,970 reflects a significant increase from the $10,685 loss reported for the first nine months of 2004. Decreased sales and greater expenses in 2005 contributed to the Company’s increased loss.

Other expenses: Interest expense increased to $92,559 in the third quarter of 2005 from $80,299 in the third quarter of 2004 and increased to $260,816 in the first nine months of 2005 from $236,782 in the first nine months of 2004 due to increased borrowings associated with the convertible debentures in 2005. Interest expense for the beneficial conversion feature on the convertible debentures amounted to $36,309 for the third quarter of 2005 and $121,449 for the first nine months of 2005. No similar costs were incurred in 2004. Financing costs amounted to $21,300 for the third quarter of 2005 and $63,899 for the first nine months of 2005. No similar costs were incurred in 2004.

Income taxes. The Company is in a net deferred tax asset position and has generated net operating losses to date. No provision for or benefit from income taxes has been recorded in the accompanying statements of operations. The Company will continue to provide a full valuation allowance for its deferred tax assets until it becomes more likely than not, in management’s assessment, that the Company’s deferred tax assets will be realized. The Company has a net operating loss carryforward of approximately $46 million, which is available to offset future taxable income, if any, expiring in various years through the year 2025. The Internal Revenue Code rules under Section 382 could limit the future use of these losses based on ownership changes and the value of the Company’s stock.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

LIQUIDITY AND CAPITAL RESOURCES

	September 30, 2005			December 31, 2004
Cash and cash equivalents	$	20,861		$	148,630
Working capital (deficit)		(433,845	)		(506,511	)

Net cash used in operating activities in the first nine months of 2005 was $735,200. Net cash used in the first nine months of 2004 was $56,100. In 2005, the increase in cash used in operations was primarily due to the increase of the net loss $2,134,134 (2005) and $247,467 (2004). The following expenses increased in the first nine months of 2005 when compared to the first nine months of 2004:

·   Legal and accounting costs

·   Expenses recorded for beneficial conversion features of convertible debt, and

·   Stock and warrant issuance costs

·   Consulting expenses

·   Payroll expenses

Cash used in investing activities in the first nine months of 2005 was $284,329 as compared to $405,569 in the first nine months of 2004. The increase represents costs incurred and paid for in our debenture financing. However this cost is being amortized over the life of the debenture.

Cash provided by financing activities in the first nine months of 2005 was $891,760, and in the first nine months of 2004 was $456,201. For the first nine months of 2005, the cash provided by financing activities are primarily additional net borrowings of $1,510,000 from a debenture less net repayments of shareholder loans of $593,287 . The cash provided by financing activities in the first nine months of 2004 are the net amounts of shareholder loans to the Company.

Our cash requirements depend on numerous factors, including product development activities, penetration of the direct sales market, market acceptance of our products, and effective management of accounts receivable. We expect to devote

capital resources to improve our sales and marketing efforts, continue our product development, expand manufacturing capacity and continue research and development activities. We will examine other growth opportunities, including strategic alliances, and we expect any such activities will be funded from existing cash as well as funds provided from debenture offerings in 2005.

Since inception, the Company has financed its capital requirements through the proceeds from its public offering of common stock in March 1993 and the exercise of common stock purchase warrants pursuant to such offering, proceeds from sales of convertible debentures, proceeds from private placements of common stock, the exercise of common stock purchase warrants and stock options and loans.

On January 19, 2005, the Company's board of directors authorized the issuance and sale of up to three million dollars of convertible debentures. These debentures mature March 31, 2009 and carry an interest rate of 9% per year and are convertible into common stock at the lower of 66.6% of the valuation of the Company's next raise of equity or $1 per share. In accordance with EITF Issue 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company had evaluated that the convertible debt had a beneficial conversion feature as the conversion price was less than the fair value of the Company's common stock on the measurement date. Accordingly, the Company recognized this beneficial conversion feature by charging an interest expense of $121,448 for the nine months ended September 30, 2005. The Company had sold an aggregate of $1,510,000 of these convertible debentures. In September 2005, a debenture in the amount of $60,000 was converted into 60,000 shares of common stock.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

As of September 30, 2005, there are outstanding $1,450,000 of 9% Convertible Debentures due in January 2009. Holders of the 9% Convertible Debentures are entitled to convert principal amounts into shares of common stock at a conversion price of $1.00.

Debentures payable-net of discount in the amount of $61,449 is net of gross amount of debenture payables of $1,450,000 reduced by unamortized debt discount of $1,388,551.

Per a promissory note dated February 2003, Jules Nordlicht, agreed to advance in total or in installments, up to the amount of $1,000,000 to the Company. In November 2003 and August 2004, agreements were executed with this shareholder to cause additional advances in total or in installments up to the amount of $2,500,000 to advance the process of the FDA approval. In consideration for the financing, the Company agreed to repay such borrowed funds with accrued interest at 12% per annum and the shareholder reserves the right to demand payment in full or in part at anytime after December 31, 2006. As of September 30, 2005 the loan balance to this shareholder aggregated $1,932,099 which is all shown as long term liability since the Company does not expect to repay any of this loan during the next twelve months. An additional amount of $180,805 of interest on this note has been incurred during the first nine months of 2005, and is shown in accrued expenses.

Resonance Limited, a shareholder, is owed $6,624 as of September 30, 2005. The loan bears no interest and is due on demand.

For the nine months ended September 30, 2005, 200,000 warrants exercisable at a price of $.01 per share, were issued as payment for services rendered to the Company. Based upon the market value of the common stock on the date of issuance of $2.00, the Company recorded an expense and related additional paid-in capital of $399,622

These warrants, as well as additional warrants exercisable into 1,000,000 shares previously issued, exercisable at $.01 per share, were converted during March 2005 into common stock, resulting in the issuance of 1,200,000 common shares during this period.

For the nine month period ended September 30, 2005, 550,000 stock options were granted to an employee per an employment agreement. Of these options, 100,000 are vested immediately and exercisable from June 1, 2005 until June 1, 2015 and the remaining options are vested in three equal amounts annually commencing on October 1, 2005. The compensation cost related to the options is being deferred over the vesting period. An adjustment of $1,831 and $287,965 in the selling, general and administrative expense was recorded to recognize the compensation expense for the three and nine month periods ended September 30, 2005.

For the nine month period ended September 30, 2005, 550,000 stock options were granted to a second employee per an employment agreement. Of these options, 100,000 are vested immediately and exercisable from June 1, 2005 until June 1, 2015 and the remaining options are vested in three equal amounts annually, commencing on October 1, 2005. The compensation cost related to the options is being deferred over the vesting period. An adjustment of $(21,589) and $245,586 in the selling, general and administrative expense was recorded to recognize the compensation expense for the three and nine month period ended September 30, 2005.

To conserve cash and to obtain goods and services, the Company may continue to issue options and warrants at discounts to market or issue direct stock grants. In the event that the Company issues additional options and warrants, it is anticipated that the securities will contain cost-free registration rights which will be granted to holders of the options and warrants, and that there may be dilution to the Company's existing stockholders.

The Company’s capital requirements have been and will continue to be significant. The Company currently has an accumulated deficit due to its history of losses. The Company is dependent upon its efforts to raise capital to finance its future operations, including the cost of manufacturing and marketing of its products, to conduct clinical trials and submissions for FDA approval of its products and to continue the design and development of its new products.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

Marketing, manufacturing and clinical testing may require capital resources substantially greater than the resources available to the Company.

The following table lists the future payments required on debt and any other contractual obligations of the Company:

Payments Due by Period	Future Payments
<1 year	$	281,716
1-3 years		2,959,515
4th year		241,667
	$	3,482,898

In March 2005, the Company signed a lease to occupy premises in Framingham, MA beginning April 1, 2005. This location will be our primary corporate office. The lease has a three-year initial term ending March 31, 2008 and a base annual rental rate starting at approximately $26,350 and increasing to approximately $40,500 per year over that initial term. The lease also has a one-year renewal option at an annual base rental rate of approximately $40,500.

There can be no assurance that the Company will be able to obtain the additional capital resources necessary to implement or continue its programs, or that such financing will be available on commercially reasonable terms or at all. The Company will continue to seek public or private placement of its equity securities and corporate partners to develop products. There can be no assurance that the Company will be able to sell its securities on commercially reasonable terms or to enter into agreements with corporate partners on favorable terms or at all. The Company’s future capital needs will depend upon numerous factors, including the progress of the approval for sale of the Company’s products in various countries, including the U.S., the extent and timing of the acceptance of the Company’s products, the cost of marketing and manufacturing activities and the amount of revenues generated from operations, none of which can be predicted with certainty.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, the effectiveness of the design and operation of our "disclosure controls and procedures" [as defined in the Securities Exchange Act of 1934, Rules 13a - 15(e) and 15d - 15(e)]. It is noted that the Company has amended its original Form 10-QSB filing with the SEC. The reason for this amended filing is due to complex financial transactions which resulted in accounting restatements in response to a recent SEC routine inquiry. As a result, our chief executive officer and chief financial officer have concluded that as of the date of the evaluation our disclosure controls and procedures were not effective to ensure that all material information required to be filed in this report has been made known to them. Accordingly, we have engaged an accounting firm other than our auditors to assist in the accounting for these complex transactions. Management believes that these measures will ensure the proper recording of all transactions in future periods.

CHANGE IN INTERNAL CONTROLS

There have been no changes in internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In March 2004, Chembio Diagnostic Systems, Inc. (the Company’s former contract manufacturer) commenced an action in Federal Court, Eastern District of New York, seeking a declaration that the Company’s US Patent No. 5,935,864 was invalid and not infringed.  The Company had filed counterclaims for patent infringement seeking an injunction and damages.  Some initial discovery took place, and the remainder of discovery had been stayed pending the Court’s ruling interpreting the patent claims.

On September 27, 2005 the Hon. Joanna Seybert, issued her Claim Construction Ruling on the interpretation of the patent claims in the suit. The Court ruled that SDS' broader interpretation of SDS' patent claims was correct, and rejected Chembio's arguments seeking to narrow coverage afforded by SDS' '864 patent.

With the broad scope of the '864 patent now established, SDS will seek an expedited Court schedule for remaining proceedings to recover damages and to enjoin Chembio from selling or offering for sale the Chembio Sure Check device. SDS considers this a major victory in the matter.

In and around January 2000, the Company received notice from the United States Patent and Trademark Office that Bayer Corporation filed a petition to cancel the Company’s U.S. Trademark Registration No. 2,240,324, for the mark HEMA STRIP. The petition alleged that the Company’s HEMA STRIP trademark, would likely be confused with Bayer’s federally registered trademark, for the mark HEMASTIX. The Company has settled this matter with Bayer and will change its brand name in a manner consistent with this agreement.

Other than that set forth above, to the best knowledge of the Company, no other material legal proceedings are pending.

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

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STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

ITEM 6. EXHIBITS

Exhibit
11	Earnings per share
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

28

STATSURE DIAGNOSTIC SYSTEMS, INC. FORMERLY SALIVA DIAGNOSTIC SYSTEMS, INC.

SEPTEMBER 30, 2005

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 6, 2007

STATSURE DIAGNOSTIC SYSTEMS, INC.
	/s/ Steve M. Peltzman
	Steve M. Peltzman
	Chief Executive Officer (principal executive officer)

/s/ Leo Ehrlich

Leo Ehrlich

Chief Financial Officer

(principal financial officer)

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