U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  FORM 1O-QSB

[X] QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
      For the quarterly period ended March 31, 2004

[_] 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

                        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.)

                              2294 Nostrand Avenue
                               Brooklyn, NY 11210
             -----------------------------------------------------
             (Address of principal executive offices and zip code)

                                 (718) 552-3599
                -----------------------------------------------
                (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 [_] No [X]

The number of shares outstanding of the Registrant's  Common Stock as of May 31,
2004, 30,509,491 shares.

Transitional Small Business Disclosure Format (check one):  Yes [_]    No [X]
================================================================================

<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                  FORM 10-QSB
                                     INDEX


                                                                            PAGE

  PART I FINANCIAL INFORMATION

  Item 1.    Financial Statements

             Balance sheets - March 31, 2004 (unaudited) and
             December 31, 2003.................................................3

             Statements of Operations - Three Months Ended
             March 31, 2004 and 2003 (unaudited)...............................4

             Statements of Cash Flows - Three Months Ended
             March 31, 2004 and 2003 (unaudited)...............................5

             Notes to Financial Statements (unaudited).........................6

  Item 2.    Management's Discussion and Analysis of Financial Condition
             And Plan of Operation............................................11

  Item 3.    Controls and Procedures..........................................16


  PART II OTHER INFORMATION

  Item 1.    Legal Proceedings................................................17
  Item 6.    Exhibits and Reports on Form 8-K.................................17

  Signatures..................................................................18

  Certifications..............................................................19

<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         MARCH 31, 2004    December 31,
                                                           (UNAUDITED)         2003
                                                         --------------   --------------
<S>                                                      <C>              <C>
                         ASSETS

Current assets:
     Cash and cash equivalents                           $       38,479   $       24,182
     Accounts receivable, less allowance for
          doubtful accounts $5,000 for both periods             223,733          197,114
     Royalty receivable                                              --            9,078
     Subscriptions receivable                                        --            2,000
     Inventories                                                 97,937           71,589
     Other current assets                                        31,478           31,004
                                                         --------------   --------------
          Total current assets                                  391,627          334,967


Property and equipment, less accumulated
     depreciation of $497,093 (2004) and $490,562(2003)          58,645           52,044
Equipment under construction                                    282,250          169,750
Patents and trademarks, less accumulated
     amortization of $107,546(2004) and $105,146(2003)           58,774           56,494
Deferred costs, less accumulated amortization of
     $77,702(2004) and $56,402 (2003)                           234,298          255,598
Deposits                                                            800              800
                                                         --------------   --------------
                                                         $    1,026,394   $      869,653
                                                         ==============   ==============

          LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Notes payable - shareholders                        $      174,226   $      254,461
     Accounts payable                                           118,781          131,671
     Accrued expenses                                           396,447          414,051
     Payroll and payroll taxes payable                          104,462           85,712
                                                         --------------   --------------
          Total current liabilities                             793,916          885,895

Long-term debts:
     Notes payable - shareholders                             1,767,000        1,370,000
                                                         --------------   --------------

          Total liabilities                                   2,560,916        2,255,895
                                                         --------------   --------------

Commitments and Contingencies
Series 1998-B Convertible Preferred Stock: 1,645 shares
authorized, none issued and outstanding                              --               --
Shareholders' deficit:
     Common stock,  $.001 par value, 50,000,000
          shares  authorized,  issued and outstanding:
          30,509,491 shares for both periods                     30,509           30,509
     Additional paid-in capital                              42,073,056       42,073,056
     Accumulated deficit                                    (43,638,087)     (43,489,807)
                                                         --------------   --------------
          Total shareholders' deficit                        (1,534,522)      (1,386,242)
                                                         --------------   --------------
                                                         $    1,026,394   $      869,653
                                                         ==============   ==============
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)


                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                   ---------------------------
                                                       2004           2003
                                                   ------------   ------------

Revenues:

      Product Sales                                $    280,198   $    285,172
      Royalty Income                                        921          1,852
                                                   ------------   ------------
                                                        281,119        287,024

Cost of products sold                                    73,317         66,699
                                                   ------------   ------------

Gross profit                                            207,802        220,325
                                                   ------------   ------------

Operating expenses:
      Research and development expense                  210,000        175,000
      Selling, general and administrative expense        73,159        297,252
                                                   ------------   ------------
                                                        283,159        472,252

            Loss from operations                        (75,357)      (251,927)


Interest expense                                        (72,923)      (152,799)
Other expense                                                --         (6,250)
                                                   ------------   ------------

      Net loss to common stockholders              $   (148,280)  $   (410,976)
                                                   ============   ============

Basic and diluted net loss per share               $      (0.01)  $      (0.02)
                                                   ============   ============

Shares used in basic and diluted net loss per
      share calculations                             30,509,700     18,485,047
                                                   ============   ============


   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                                  MARCH 31,
                                                           ---------------------
                                                              2004        2003
                                                           ---------   ---------
<S>                                                        <C>         <C>
Cash Flows From Operating Activities:
     Net loss                                              $(148,280)  $(410,976)
     Adjustments to reconcile net loss to net cash
          used in operating activities:
       Depreciation and amortization                           8,931       9,177
       Amortization of deferred costs                         21,300       7,412
       Write off of accounts receivable                           --     133,033
       Stock issued for consulting services                       --     123,000
       Beneficial conversion feature of convertible debts         --     118,053

     Changes in current assets and liabilities:
       Accounts receivable                                   (26,619)   (140,900)
       Royalty receivable                                      9,078       8,148
       Subscription receivable                                 2,000          --
       Inventory                                             (26,348)      9,177
       Other current assets                                     (474)         --
       Accounts payable and accrued expenses                  37,771      37,229
       Other current liabilities                              18,750          --
                                                           ---------   ---------

          Net cash used in operating activities             (103,891)   (106,647)
                                                           ---------   ---------

Cash Flows From Investing Activities:
     Acquisitions of property and equipment                 (130,312)    (15,000)
                                                           ---------   ---------
           Net cash used in investing activities            (130,312)    (15,000)
                                                           ---------   ---------

Cash Flows From Financing Activities:
     Proceeds from shareholders loans                        522,000     409,200
     Repayment of shareholders loans                        (273,500)   (289,400)
                                                           ---------   ---------

          Net cash provided by financing activities          248,500     119,800
                                                           ---------   ---------

     Net increase (decrease) in cash and cash equivalents     14,297      (1,847)

     Cash and cash equivalents, beginning of period           24,182       1,900
                                                           ---------   ---------

     Cash and cash equivalents, end of period              $  38,479   $      53
                                                           =========   =========

Supplemental Disclosure of Cash Flow Information:
     Cash paid during the period for interest              $      --   $      --

Supplemental Disclosure of Non-Cash Information:

     Conversion of shareholder loans into common stock     $      --   $ 382,500

     During three month period ended March 31, 2004,
       accrued interest of $68,265 for a shareholder's
       loan was added to the loan balance as principal     $  68,265          --
     During the three month period ended March 31, 2003,
       the Company obtained financing from a shareholder
       As consideration, the Company issued 6,000,000
       shares of common stock, valued at $252,000 to the
       shareholder                                         $      --   $ 252,000
</TABLE>


   The accompanying notes are an integral part of these financial statements

                                       5
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004


1. DESCRIPTION OF BUSINESS/BASIS OF PRESENTATION

Saliva  Diagnostic  Systems,  Inc., a Delaware  corporation (the "Company"),  is
primarily  engaged in the  development,  manufacturing  and marketing of medical
collection devices and rapid immunoassays for use in the detection of infectious
diseases.  The Company believes that its patented proprietary  platforms,  offer
significant  advantages compared to existing  competitive blood and saliva based
devices,  including  ease-of-use,  lower total costs, and significantly  reduced
risk of infection from collecting and handling specimens.

In May 2002 the Company received its Investigational Device Exemption (IDE) from
the U.S.  Food and Drug  Administration  (FDA)  for  approval  of its  Rapid HIV
Hema-Strip  Test. Upon termination of all business  relationships  with its then
contract manufacturer,  Chembio Diagnostic Systems, the Company needed to file a
new IDE with the FDA. A new submission to the FDA was made in October 2003. This
is the  initial  step  towards  FDA  approval to market and sell the test in the
United States.  After  conferring with  representatives  of the FDA's Center for
Biologics  Evaluation  and  Research  (CBER),  the Company  decided to begin its
filing using a modular pre-market approval (PMA) application  approach.  Instead
of beginning  filing after all the clinicals are  completed,  the modular method
allows  the  Company  to begin its  filings  concurrent  with its U.S.  clinical
studies.  Should  the  Company  receive  PMA  approval,  it will file for a CLIA
(Clinical Laboratory Improvements Amendments) waiver.

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,  assembly, regulatory compliance
and  documentation  of the Company's  HIV test devices.  The Company has already
completed  transferring  its  technology  to ABMC.  Based on the  results of the
Hema-Strip  HIV Test  clinical  trials  completed  in March  2004,  the  Company
believes  the  product's  performance  meets  the  criteria  necessary  for U.S.
approval.

The accompanying  unaudited  financial  statements as of and for the three month
periods  ended March 31, 2004 and 2003 have been  prepared  in  conformity  with
accounting  principles  generally accepted in the United States of America.  The
financial  information as of December 31, 2003 is derived from 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,  2003.  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, 2003, as included in the
Company's  Annual  Report on Form 10-KSB for the year ended  December  31, 2003.
Operating  results  for the three  month  period  ended  March 31,  2004 are not
necessarily  indicative  of the results that may be expected for the entire year
ending December 31, 2004, or any other portion thereof.

                                       6
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004


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 $43,638,087 at March
31, 2004.  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. Despite the Company's debt
financings in 2003,  substantial  additional  financing will be required through
2004.

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. 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:

                                     MARCH 31, 2004       December 31, 2003
                                     --------------       -----------------

       Raw materials                  $   62,993            $    55,157
       Finished goods                     34,944                 16,432
                                      ----------            -----------
                                      $   97,937            $    71,589
                                      ==========            ===========


4. ACCRUED EXPENSES
                                     MARCH 31, 2004       December 31, 2003
                                     --------------       -----------------

       Accrued interest               $  126,461            $   143,104
       Accrued legal expense             237,825                237,825
       Other accrued liabilities          32,161                 33,122
                                      ----------            -----------
                                      $  396,447            $   414,051
                                      ==========            ===========

                                       7
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004


5. 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:

                                                    THREE MONTHS ENDED
                                                        MARCH 31,
                                              -----------------------------
                                                 2003               2002
                                              ----------         ----------
             United States                    $  133,966         $   27,326
             United Kingdom                       95,339            239,979
             Africa                               26,300                 --
             Others                               24,593             17,867
                                              ----------         ----------
                                              $  280,198         $  285,172
                                              ==========         ==========

6. DEFERRED COSTS

Deferred  costs  represent  the  value  of  warrants  and  shares  issued  to  a
shareholder as  consideration  for loan financing  during the years. As of March
31, 2004, net deferred costs were $234,298,  which are being  amortized over the
life of the loan.

7. FINANCING FROM SHAREHOLDERS

Pursuant to an agreement  dated  October 1999 and later amended as to amount and
expiration  date,  Helenka Bodner,  agreed to advance or cause to be advanced to
the Company  from time to time,  through  December  31,  2004,  up to the sum of
$1,500,000.  In  consideration  for the above,  the Company agreed to repay such
borrowed funds with accrued  interest at 12% per annum, six months from the date
of the loan or upon demand,  at the option of the lender.  Pursuant to the terms
of the loan  instrument,  the loan is convertible,  at the option of the holder,
into Common  Stock of the Company  upon terms  similar to the Series B Preferred
Stock (i.e. 75% of the closing bid price for the five prior days of conversion).
In  accordance  with  EITF  Issue  98-5,  the  Company  has  evaluated  that the
convertible  debt has a beneficial  conversion  feature as the exercise price is
less than the fair value of the Company's common stock on the measurement  date.
Accordingly,  the Company has recognized this beneficial  conversion  feature by
charging interest expense of $-0- and $118,053 for the three month periods ended
March 31, 2004 and 2003,  respectively;  and  corresponding  additional  paid-in
capital account.  The conversion  feature inherent in the convertible  debts was
recognized at the commitment date since they were immediately convertible.

As of March 31, 2004 and 2003, the loan balance to this shareholder on this loan
aggregated $157,602 and $689,535,  respectively. Had the stockholders elected to
convert this loan into common stock as of March 31, 2004, it would result in the
issuance by the Company of 110,598 shares of common stock.

Per a promissory  note dated January 2004,  Helenka  Bodner agreed to advance or
cause to be advanced  to the Company  from time to time,  through  December  31,
2005, up to the sum of an additional  $1,000,000 at the interest rate of 12% per
annum in order to complete the process for the FDA approval of the HemaStrip HIV
Rapid.  Once the entire amount has been advanced under this note, any additional
funds will be subject to same terms as the $1,500,000 convertible note mentioned
above.  The shareholder  reserves the right to demand payment in full or in part
at anytime after December 31, 2005.

                                       8
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004


7. FINANCING FROM A SHAREHOLDER (CONTINUED)

As of March  31,  2004,  the  loan  balance  to this  shareholder  on this  loan
aggregated $172,500.

Per a  promissory  note dated  February  2003,  a second  shareholder  agreed to
advance  in total or in  installments,  up to the  amount of  $1,000,000  to the
Company.  In November 2003, another agreement was executed with this shareholder
to cause  another  advance  in  total or in  installments  up to the  amount  of
$500,000 to the Company. 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 March 31,  2004 and  2003,  the loan  balance  to the  second  shareholder
aggregated $1,594,500 and 125,000, respectively.

8. SHAREHOLDERS' TRANSACTIONS

In March 2004,  the  Company's  Board of  Directors  authorized  the issuance of
warrants and options to C. Ravad, an unrelated outside  consultant,  to purchase
3,250,000  shares of its common  stock,  as  compensation  for past  services he
rendered in introducing the Company's  products to  international  distributors.
The warrants are  exercisable  at a price of $.01 per share and were issued when
the market price of our common stock was $1.05. The warrants expire December 31,
2013.  Based upon the market  value of the common stock on the date of issuance,
discounted 30% for its restriction,  the Company  recorded a consulting  expense
and related  additional  paid-in  capital of $2,388,750 in the December 31, 2003
audited financial statements.

9. CONTINGENCIES

LITIGATION

In  February  1998,  Lealos v.  Saliva  Diagnostic  Systems,  Inc.  was filed in
Superior  Court in Clark  County in the State of  Washington  by Ronald  Lealos,
former President and CEO of the Company.  The complaint  alleged that Mr. Lealos
was entitled to certain cash payments and benefits under an employment agreement
whereby  he  would  serve as the  Company's  president,  and that the  Company's
failure to make such payments and grant such benefits  constituted  anticipatory
breach and breach of that  contract.  The complaint  sought damages in excess of
$1,000,000.  In addition,  the  complaint  alleged  that the Company  wrongfully
rescinded options to purchase 38,500 shares of common stock in breach of a stock
option  agreement  with Mr. Lealos.  The Company  denied all  allegations of the
complaint and filed a counterclaim  for Mr.  Lealos'  wrongful  conduct  seeking
damages of  approximately  $1,500,000.  On January 15, 2000, the Company and Mr.
Lealos  settled the claim for $246,000 paid and payable as follows:  $72,095 was
paid on January  15,  2000,  $11,048 was paid on February  15,  2000;  $6,000 is
payable on the 15th of each month for thirteen additional months beginning March
15, 2000, plus $5,048 payable on the 15th of each month for nineteen  additional
months  beginning March 15, 2000. The Company had already paid $156,381  towards
this  settlement  agreement when the Company  ceased making  payments due to the
alleged  actions of Ronald Lealos and his attorneys.  Lealos,  in 2002,  filed a
motion in New York State seeking summary  judgement in the amount of $148,206.02
plus interest.  In a ruling dated March 21, 2003, the court denied Lealos motion
for summary judgement. The Company has made additional accruals or contingencies
for  interest  or legal fees due to Lealos,  however,  should  this matter go to
trial, the Company will vigorously defend its position.

                                       9
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004


9. CONTINGENCIES (CONTINUED)

During 2003,  the Company's  counsel  notified  Chembio  Diagnostic  Systems Inc
("CDS"),  its  former  contract  manufacturer,  of its  intent  to file a patent
infringement  lawsuit.  In March 2004,  an action was commenced in Federal Court
whereby CDS is  attempting to  invalidate  the  Company's  patent for its unique
rapid test format.  The Company had  authorized an independent  patent  validity
search and no  objections  to its patent  were  found.  The  Company  intends to
vigorously defend its intellectual property and is proceeding with a countersuit
against Chembio for monetary damages.

ECONOMIC DEPENDENCY

The Company had two customers  that  accounted for 69% of product sales (35% and
34%) during the first quarter of 2004 and one of these  customers  accounted for
84% of  product  sales  during  the  first  quarter  of 2003.  The loss of these
customers could have a material adverse effect on the Company.

                                       10
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004

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.  Other  than sales of the
Company's  collection devices, the Company has not yet commenced any significant
product commercialization.

The Company no longer has its own manufacturing plant and relies entirely on its
vendors to produce its products.  The Company  believes that it has successfully
transferred  its technology to these  vendors,  but  significant  start-up costs
associated with producing its product line are still likely to be incurred.

In May 2002 the Company received its Investigational Device Exemption (IDE) from
the U.S.  Food and Drug  Administration  (FDA)  for  approval  of its  Rapid HIV
Hema-Strip  Test. Upon termination of all business  relationships  with its then
contract manufacturer,  Chembio Diagnostic Systems, the Company needed to file a
new IDE with the FDA.  A new IDE was  received  in  November  2003.  This is the
initial  step  towards  FDA  approval  to market and sell the test in the United
States.  After conferring with representatives of the FDA's Center for Biologics
Evaluation and Research (CBER),  the Company decided to begin its filing using a
modular  pre-market  approval (PMA) application  approach.  Instead of beginning
filing after all the  clinicals  are  completed,  the modular  method allows the
Company to begin its filings  concurrent with its U.S. clinical studies.  Should
the Company receive PMA approval,  it will file for a CLIA (Clinical  Laboratory
Improvements Amendments) waiver.

The IDE is only the first step in 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,  ability,  or that the product  will
perform adequately to complete the application process.

                                       11
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


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

GENERAL (CONTINUED)

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,  assembly, regulatory compliance
and  documentation  of the Company's  HIV test devices.  The Company has already
completed  transferring  its  technology  to ABMC.  Based on the  results of the
Hema-Strip  HIV Test  clinical  trials  completed  in March  2004,  the  Company
believes  the  product's  performance  meets  the  necessary  criteria  for U.S.
approval.

A Certificate  of  Exportability  was issued by the FDA in October 2003 allowing
the resumption of the Company's HIV diagnostics export sales.

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. 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.  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.

We are committed to and focused on the completion of the necessary  requirements
towards obtaining U.S. Food and Drug Administration  (FDA) marketing approval of
our rapid  Hema-Strip(TM)  HIV diagnostic  tests in the United  States.  We have
already  completed the required  clinical trials and had begun in March 2004 the
submission  of  application  modules  for FDA  approval.  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 a  significant
competitive  advantage in the market for rapid HIV testing in the United  States
and internationally.

We believe that the immediate  international  focus for  Hema-Strip(TM) HIV test
should be on the African  continent  where  international  donors  have  pledged
funding to fight the AIDS epidemic.  We have sold the  HemaStrip(TM) HIV test to
international  donors including  projects funded by the U.S. Centers for Disease
Control (CDC), USAID, UKAID, Population Services Intl., and others.

Concerning the long term growth of the  Hema-Strip(TM) HIV test, we believe that
sales of HIV rapid tests will eventually be approved for over-the-counter  (OTC)
sales,  and be as easy to  purchase  as home  pregnancy  tests.  If this were to
occur, we believe the test's  performance,  design,  and ease of use will have a
competitive  advantage  over many of the existing  technologies  and  platforms.
There can be no assurance that any of the Company's products not yet approved or
cleared will be approved or cleared for marketing by the FDA or that if approved
it would be allowed for sale as an OTC product.

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

                                       12
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004

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

GENERAL (CONTINUED)

We have not sold our FDA approved Stat  Simple(TM) H. Pylori test since 2000. We
expect to  reintroduce  the product in 2004 and  consider  its sale to be a core
component  of  our  future  business.  We  are  in  discussions  with  potential
distributors for the domestic market.

The Company  expects to  introduce  at least one new test in this format  during
2004.

The Company has  incurred  significant  operating  losses  since its  inception,
resulting in an  accumulated  deficit of  $43,638,087  at March 31,  2004.  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 fund
the Company's operations through 2004.  Substantial additional financing will be
required in 2004. The Company's  significant  operating  losses and  significant
capital  requirements  raise  substantial  doubt about the Company's  ability to
continue as a going concern.  There can be no assurance that the Company will be
able to obtain the  additional  capital  resources  necessary  to  continue  its
business,  or that such financing will be available on  commercially  reasonable
terms or at all.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The  preparation of financial  statements and related  disclosures in conformity
with  accounting  principles  generally  accepted in the United States  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
quarterly  period  ended  March 31,  2004,  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, 2003.

RESULTS OF OPERATIONS

First Quarter of 2004 Compared to First Quarter of 2003

REVENUES:  The  Company's  revenues  consist  of  product  sales and  royalties.
Revenues  decreased 2% to $281,119 in the first quarter of 2004 from $287,024 in
the first quarter of 2003.

During  the  first  quarters  of 2004 and  2003,  the  Company's  revenues  were
primarily generated from sales of its patented saliva collection devices.

The Company had two customers  that  accounted for 69% of product sales (35% and
34%) during the first quarter of 2004 and one of these  customers  accounted for
84% of  product  sales  during  the  first  quarter  of 2003.  The loss of these
customers could have a material adverse effect on the Company.

                                       13
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


COST OF PRODUCTS  SOLD:  Costs of products  sold  increased  to $73,317  (26% of
product  sales) in the first quarter of 2004 from $66,699 (23% of product sales)
in the first  quarter  of 2003.  The  increase  was due to the  greater  startup
production costs associated with the change in our contract manufacturer.

RESEARCH AND DEVELOPMENT  EXPENSES:  Research and development expenses increased
to $210,000 in the first  quarter of 2004 from  $175,000 in the first quarter of
2003.

The increase is due to:

      o     expenses incurred with the Hema-Strip(TM)HIV test clinical trials
      o     the filing costs associated with the application for FDA approval of
            the Hema-Strip(TM) HIV test

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES:   Selling,   general   and
administrative  expenses  decreased  75% to $73,159 in the first quarter of 2004
from $297,252 in the first quarter of 2003, primarily as a result of a reduction
in consulting fees incurred.

LOSS FROM OPERATIONS:  The loss from operations for the first quarter of 2004 of
$75,357  reflects a 70% decrease  from the $251,927  loss reported for the first
quarter of 2003.

INTEREST EXPENSE:  Interest expense decreased to $72,923 in the first quarter of
2004 from $152,799 in the first quarter of 2003.  This decrease is primarily due
to non-cash  expenses  recorded in 2003 in connection with the issuance of stock
and warrants as compensation for financing services.

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 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 $44 million,  which is available to
offset  future  taxable  income,  if any,  expiring  through the year 2024.  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.

LIQUIDITY AND CAPITAL RESOURCES

                                        March 31, 2004     December 31, 2003
                                       ----------------    -----------------
Cash and cash equivalents                $   38,479          $   24,182
Working capital deficit                    (402,289)           (550,928)

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 and
preferred  stock,  the  exercise of common  stock  purchase  warrants  and stock
options and loans.

Pursuant to an agreement  dated  October 1999 and later amended as to amount and
expiration  date,  Helenka Bodner,  agreed to advance or cause to be advanced to
the Company  from time to time,  through  December  31,  2004,  up to the sum of
$1,500,000.  In  consideration  for the above,  the Company agreed to repay such
borrowed funds with accrued  interest at 12% per annum, six months from the date
of the loan or upon demand,  at the option of the lender.  Pursuant to the terms
of the loan  instrument,  the loan is convertible,  at the option of the holder,
into Common  Stock of the Company  upon terms  similar to the Series B Preferred
Stock (i.e. 75% of the closing bid price for the five prior days of conversion).
In  accordance  with  EITF  Issue  98-5,  the  Company  has  evaluated  that the
convertible  debt has a beneficial  conversion  feature as the exercise price is

                                       14
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


less than the fair value of the Company's common stock on the measurement  date.
Accordingly,  the Company has recognized this beneficial  conversion  feature by
charging interest expense of $-0- and $118,053 for the three month periods ended
March 31, 2004 and 2003,  respectively;  and  corresponding  additional  paid-in
capital account.  The conversion  feature inherent in the convertible  debts was
recognized at the commitment date since they were immediately convertible.

Per a promissory  note dated January 2004,  Helenka  Bodner agreed to advance or
cause to be advanced  to the Company  from time to time,  through  December  31,
2005, up to the sum of an additional  $1,000,000 at the interest rate of 12% per
annum in order to complete the process for the FDA approval of the HemaStrip HIV
Rapid.  Once the entire amount has been advanced under this note, any additional
funds will be subject to same terms as the $1,500,000 convertible note mentioned
above.  The shareholder  reserves the right to demand payment in full or in part
at anytime after December 31, 2005.

As of March  31,  2004,  the  loan  balance  to this  shareholder  on this  loan
aggregated $172,500.

Per a  promissory  note dated  February  2003,  a second  shareholder  agreed to
advance  in total or in  installments,  up to the  amount of  $1,000,000  to the
Company.  In November 2003, another agreement was executed with this shareholder
to cause  another  advance  in  total or in  installments  up to the  amount  of
$500,000 to the Company. 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 March 31,  2004 and  2003,  the loan  balance  to the  second  shareholder
aggregated $1,594,500 and 125,000, respectively.

Cash  used in  operating  activities  in the  first  three  months  of 2004  was
$103,891.  This was  primarily  a result of a net loss of  $148,280  during  the
period, offset by certain non-cash charges.

Cash  used in  investing  activities  in the  first  three  months  of 2004  was
$130,312.  This represents additional  acquisitions of property and equipment in
the period.

Cash  provided by  financing  activities  in the first three  months of 2004 was
$248,500.  This was primarily a result of  additional  net  borrowings  from two
shareholders.

In March 2004,  the  Company's  Board of  Directors  authorized  the issuance of
warrants and options to C. Ravad, an unrelated outside  consultant,  to purchase
3,250,000  shares of its common  stock,  as  compensation  for past  services he
rendered in introducing the Company's  products to  international  distributors.
The warrants are  exercisable  at a price of $.01 per share and were issued when
the market price of our common stock was $1.05. The warrants expire December 31,
2013.  Based upon the market  value of the common stock on the date of issuance,
discounted 30% for its restriction,  the Company  recorded a consulting  expense
and related  additional  paid-in  capital of $2,388,750 in the December 31, 2003
audited financial statements.

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.

                                       15
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


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.

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 Debt Payments
              ---------------------------------  -----------------------------
              <1 year                                     $  174,226
              1-3 years                                           --
              4-5 years                                    1,767,000
              >5 years                                            --
                                                          ----------
                                                          $1,941,226
                                                          ==========

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

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE OF 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
president  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)].  Based on
this evaluation, our president and chief financial officer has concluded that as
of the  date of the  evaluation  our  disclosure  controls  and  procedures  are
effective to ensure that all material  information  required to be filed in this
report has been made known to him.

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.

                                       16
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During 2003, the Company's  counsel notified  Chembio  Diagnostic  Systems,  its
former  contract  manufacturer,  of its  intent  to file a  patent  infringement
lawsuit. In March 2004, an action was commenced in Federal Court whereby Chembio
is  attempting  to  invalidate  the  Company's  patent for its unique rapid test
format.  The Company had authorized an independent patent validity search and no
objections to its patent were found.  The Company  intends to vigorously  defend
its intellectual  property and is proceeding with a countersuit  against Chembio
for monetary damages.

The Company had stopped making payments on its January 2000 settlement agreement
with Ronald  Lealos.  In a ruling dated March 21, 2003,  the court denied Lealos
motion for summary  judgment.  Should this matter go to trial,  the Company will
vigorously defend its position. The Company has retained legal counsel.

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

(a)   Certification of President and Chief Financial Officer Pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.

      Certification  of President  and Chief  Financial  Officer  Pursuant to 18
      U.S.C. ss.1350.

(b)   Earnings per share - See Exhibit 11

(c)   Reports on Form 8-K No reports on Form 8-K were filed  during the  quarter
      ended March 31, 2004.

                                       17
<PAGE>

                        SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 MARCH 31, 2004


                                   SIGNATURES

Pursuant  to the  requirements  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.

                                    Saliva Diagnostic Systems, Inc.
                                    --------------------------------------------
                                    (Registrant)

Date:  June 2, 2004                 /s/ LEO EHRLICH
                                    --------------------------------------------
                                    Leo Ehrlich
                                    President & Chief Financial Officer
                                    (Duly Authorized Officer)

                                       18