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 September 30, 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 [X] No [ ]

The number of shares outstanding of the Registrant's Common Stock as of October
15, 2004, 30,509,700 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 - September 30, 2004 (unaudited) and
             December 31, 2003..............................................  3

             Statements of Operations - Three Months and Nine Months
             Ended September 30, 2004 and 2003 (unaudited)..................  4

             Statements of Cash Flows- Nine Months Ended
             September 30, 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................................ 12

   Item 3.   Controls and Procedures........................................ 19


   PART II OTHER INFORMATION

   Item 1.   Legal Proceedings.............................................. 20
   Item 2.   Changes In Securities.......................................... 20
   Item 3.   Defaults Upon Senior Securities................................ 20
   Item 4.   Submission Of Matters To A Vote Of Security Holders............ 20
   Item 5.   Other Information.............................................. 20
   Item 6.   Exhibits ...................................................... 20

   Signatures............................................................... 21

Certifications

                                       2
<PAGE>


Item 1. Financial statements

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     September 30, 2004         December 31, 2003
                                                                        (Unaudited)
                                                                   ----------------------      -------------------
<S>                                                                <C>                         <C>
                           Assets

Current assets:
       Cash and cash equivalents                                   $            18,714         $           24,182
       Accounts receivable, less allowance for
                                                                               320,121                    197,114
              doubtful accounts $5,000 for both periods
       Royalty receivable                                                           -                       9,078
       Subscriptions receivable                                                     -                       2,000
       Inventories                                                             126,603                     71,589
       Other current assets                                                     68,590                     31,004
                                                                   -------------------         ------------------
              Total current assets                                             534,028                    334,967


Property and equipment, less accumulated
       depreciation of $511,300 (2004) and $490,562(2003)                       55,665                     52,044
Equipment under construction                                                   537,250                    169,750
Patents and trademarks, less accumulated
       amortization of $112,623(2004) and $105,146 (2003)                       62,727                     56,494
Deferred costs, less accumulated amortization of
       $120,301 (2004) and $56,402 (2003)                                      191,699                    255,598
Deposits                                                                           800                        800
                                                                   -------------------         ------------------
                                                                   $         1,382,169         $          869,653
                                                                   ===================         ==================

         Liabilities and Stockholders' Deficit

Current liabilities:
       Notes payable - shareholders                                $           224,902         $          254,461
       Accounts payable                                                         88,416                    131,671
       Accounts payable-equipment                                               85,000                         -
       Accrued expenses                                                        451,933                    414,051
       Payroll and payroll taxes payable                                       166,738                     85,712
                                                                   -------------------         ------------------
              Total current liabilities                                      1,016,989                    885,895

Long-term debts:
       Notes payable - shareholders                                          1,998,889                  1,370,000
                                                                   -------------------         ------------------

              Total liabilities                                              3,015,878                  2,255,895
                                                                   -------------------         ------------------

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:
              30,509,700 shares for both periods                                30,509                     30,509
       Additional paid-in capital                                           42,073,056                 42,073,056
       Accumulated deficit                                                 (43,737,274)               (43,489,807)
                                                                   -------------------         ------------------
          Total shareholders' deficit                                       (1,633,709)                (1,386,242)
                                                                   -------------------         ------------------
                                                                   $         1,382,169         $          869,653
                                                                   ===================         ==================
</TABLE>


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

                                       3
<PAGE>

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



<TABLE>
<CAPTION>
                                                                Three months ended                 Nine months ended
                                                                    September 30,                     September 30,
                                                         ----------------------------------   --------------------------------
                                                                 2004              2003              2004           2003
                                                         ----------------  ----------------   ---------------  --------------
<S>                                                      <C>                <C>               <C>               <C>
       Revenues:
                                                         $       392,915    $      145,494    $    1,048,474    $     447,610
           Royalty Income                                           -                 -                  922            1,852
                                                         ----------------   ---------------   ---------------   --------------
                                                                 392,915           145,494         1,049,396          449,462

       Cost of products sold                                     128,987            96,927           370,251          188,247
                                                         ----------------   ---------------   ---------------   --------------

       Gross profit                                              263,928            48,567           679,145          261,215
                                                         ----------------   ---------------   ---------------   --------------

       Operating expenses:
           Research and development expense                       35,925           170,928           400,925          620,928
           Selling, general and administrative
               expense                                           136,845           101,897           288,905          460,003
                                                         ----------------   ---------------   ---------------   --------------
                                                                 172,770           272,825           689,830        1,080,931

           Income(loss)from operations                            91,158          (224,258)          (10,685)        (819,716)

       Interest (expense)                                        (80,299)         (125,950)         (236,782)        (361,888)
       Other income (expense)                                          -             4,416                 -           11,166
                                                         ----------------   ---------------  ----------------   --------------
       Net income (loss)
             before income taxes                                  10,859          (345,792)         (247,467)      (1,170,438)

           Income taxes                                                -                 -                 -                -
                                                         ----------------   ---------------  ----------------   --------------
           Net income (loss) to common
               stockholders                              $        10,859    $     (345,792)   $     (247,467)   $  (1,170,438)
                                                         ================   ===============  ================   ==============

       Basic net income(loss)                            $          0.00    $        (0.01)   $        (0.01)           (0.04)
                                                         ================   ===============  ================   ==============
           per share


       Shares used in basic net income (loss) per
       share   calculations                                   30,509,700        30,429,491        30,509,700       26,491,762
                                                         ================   ===============   ===============   =============

       *Diluted net income (loss)per share               $          0.00    $        (0.01)   $        (0.01)   $       (0.04)
                                                         ================   ===============   ===============   =============

       Shares used in diluted net
       income(loss) per share calculations                    34,799,497        30,429,491        30,509,700       26,491,762
                                                         ================   ===============   ===============   =============
</TABLE>


* For the three-month period ended September 30, 2003, and for the nine-month
periods ended September 30, 2004 and 2003, respectively, the computation of
diluted (loss) per share excludes the effect of outstanding common stock options
and warrants representing 4,289,797 common shares, as their inclusion would have
been anti-dilutive.

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

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                      Nine months ended
                                                                                        --------------------------------------
                                                                                                      September 30,
                                                                                             2004                     2003
                                                                                        ---------------          -------------
<S>                                                                                     <C>                      <C>
Cash Flows From Operating Activities:
       Net (loss)                                                                       $      (247,467)         $  (1,170,438)
       Adjustments to reconcile net (loss) to net cash
              (used) in operating activities:
          Depreciation and amortization                                                          28,215                 26,993
          Amortization of deferred costs                                                         63,899                 51,884
          Write off of accounts receivable                                                            -                120,033
          Stock issued for consulting services                                                        -                123,000
          Beneficial conversion feature of convertible debts                                          -                198,353

       Changes in current assets and liabilities:
          Accounts receivable                                                                  (123,007)                 5,402
          Royalty receivable                                                                      9,078                  8,148
          Subscription receivable                                                                 2,000                      -
          Inventory                                                                             (55,014)                (8,336)
          Other current assets                                                                  (37,586)                (9,513)
          Accounts payable and accrued expenses                                                 222,756                124,636
          Other current liabilities                                                              81,026                      -
                                                                                        ----------------         --------------
              Net cash (used) in operating activities                                           (56,100)              (529,838)
                                                                                        ----------------         --------------
Cash Flows From Investing Activities:
       Acquisitions of property and equipment                                                  (391,859)              (142,340)
       Acquisitions of patents and trademarks                                                   (13,710)                     -
                                                                                         ---------------         --------------
                Net cash (used) in investing activities                                        (405,569)             (142,340)
                                                                                         ---------------         --------------
Cash Flows From Financing Activities:
       Proceeds from shareholders loans                                                       1,335,858              1,570,100
       Repayment of shareholders loans and capital lease                                                              (878,498)
                                                                                        ----------------         --------------
              Net cash provided by financing activities                                         456,201                691,602
                                                                                         ---------------         --------------
       Net (decrease)increase  in cash and cash equivalents                                      (5,468)                19,424

       Cash and cash equivalents, beginning of period                                            24,182                  1,900
                                                                                         ---------------         --------------
       Cash and cash equivalents, end of period                                          $       18,714          $      21,324
                                                                                         ===============         ==============
Supplemental Disclosure of Cash Flow Information:
       Cash paid during the period for interest                                          $          124          $           -
       Cash paid during the period for taxes                                             $        1,428          $           -

Supplemental Disclosure of Non-Cash Information:
       Conversion of shareholder loans into common stock                                 $            -          $     382,500
       During the nine month period ended September 30, 2004, accrued
          interest of $143,104 for shareholder's loans was added to
          the loan balance as principal.                                                 $      143,129                      -

       During the nine month period ended September 30, 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
                               SEPTEMBER, 30, 2004
                                   (Unaudited)

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 and nine
month periods ended September 30, 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 and nine month periods ended
September 30, 2004 and 2003 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
                               SEPTEMBER, 30, 2004
                                   (Unaudited)

1.   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 $43,737,274 at
September 30, 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. Substantial
additional financing will be required in 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.

2.       STOCK-BASED COMPENSATION PLANS

As of September 30, 2004, the Company has two stock option plans, a "1992 Plan",
under which 350,000 shares of its common stock have been reserved for issuance,
and a "1994 Plan", under which 350,000 shares of its common stock have been
reserved for issuance. The Company accounts for the plan under the recognition
and measurement principles of APB Opinion No. 25, accounting for stock Issued to
Employees, and related Interpretations. For the quarter and nine month periods
ended September 30, 2004 and 2003, there would be no effect in the net income
and earnings per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation,
to stock-based employee compensation, as no options were granted nor vested
during those periods.

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:

                                  September 30, 2004         December 31, 2003

          Raw materials             $       91,323           $         55,157
          Finished goods                    35,280                     16,432
                                    --------------           ----------------
                                    $      126,603           $         71,589
                                    ==============           ================

                                       7
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER, 30, 2004
                                   (Unaudited)

4.       OTHER CURRENT ASSETS

The Company has paid $50,000 for the construction of a dry room at one of its
contract manufacturers and has accounted for it as a prepaid asset. The Company
has no lease on these premises. The Company will amortize this cost pursuant to
the terms of its manufacturing agreement with this contract manufacturer. The
Company expects to have its Equipment-under-construction completed, delivered
and placed in service in the dry room in January 2005.

5. EQUIPMENT UNDER CONSTRUCTION

In 2004, the Company entered into agreements with a vendor to have custom
assembly machinery built. To date the Company has been charged $537,250 towards
this construction of which there remains a balance due of $85,000, to this
vendor. Progress payments remaining on this agreement, for work to be completed
during the fourth quarter of 2004, is also $85,000. The Company expects to be
invoiced for this amount in December 2004.

6. ACCRUED EXPENSES

                                    September 30, 2004        December 31, 2003
                                    ------------------        -----------------
   Accrued interest                   $      172,759            $     143,104
   Accrued legal expense                     237,825                  237,825
   Other accrued liabilities                  41,349                   33,122
                                      --------------            -------------
                                      $      451,933            $     414,051
                                      ==============            =============

7. 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 in US dollars by
geographic area:

                                              Three months ended
                                                 September 30,
                                     ----------------------------------
                                          2004                2003
                                     ------------         ------------
       United States                 $    182,136         $    141,994
       United Kingdom                     163,932                    -
       Africa                              44,650                    -
       Others                               2,197                3,500
                                     ------------         ------------
                                     $    392,915         $    145,494
                                     ============         ============

                                       8
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER, 30, 2004
                                   (Unaudited)


         GEOGRAPHIC AREA INFORMATION (CONTINUED)

                                              Nine months ended
                                                 September 30,
                                     ----------------------------------
                                          2004                2003
                                     ------------         ------------
       United States                 $    529,956         $    189,764
       United Kingdom                     371,932              239,979
       Africa                             111,550                    -
       Others                              35,036               17,867
                                     ------------         ------------
                                     $  1,048,474         $    447,610
                                     ============         ============

8.       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
September 30, 2004, net deferred costs were $191,699 which are being amortized
over the life of the loan.

9.       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 previously issued
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 $198,353, for the
nine month periods ended September 30, 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 September 30, 2004, this loan has been
paid off.

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 the 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 September 30, 2004, the loan
balance to this shareholder on this loan aggregated $129,050.

During 2004, this shareholder loaned the Company an additional $208,278. The
loan is to be repaid within one year and bears no interest and has no conversion
features. If the loan is repaid after one year, the Company agreed to repay such
borrowed funds with accrued interest at 12% per annum from the date of the loan
origination.

Resonance Limited, a shareholder is owed $16,624. The loan bears no interest and
is due on demand.


                                       9
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER, 30, 2004
                                   (Unaudited)



9.       FINANCING FROM SHAREHOLDERS (CONTINUED)

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 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 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 September 30, 2004, the loan balance to the second shareholder aggregated
$1,869,839.


10.       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 vest immediately and 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.

There were no Shareholders' transactions that occurred in the third quarter of
2004.


11.       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.

                                       10
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER, 30, 2004
                                   (Unaudited)

11.      CONTINGENCIES (CONTINUED)

LITIGATION (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

For the nine months ended September 30, 2004, sales to three customers were in
excess of 10% of the Company's total sales. Sales to these customers were
approximately $376,000, $337,000 and $193,000 and the corresponding accounts
receivable at September 30, 2004 from these customers were approximately
$114,000, $99,000 and $107,000.

For the nine months ended September 30, 2003, sales to three customers were in
excess of 10% of the Company's total sales. Sales to these customers were
approximately $240,000, $138,000 and $49,000 and the corresponding accounts
receivable at September 30, 2003 from these customers were approximately
$89,000, $40,000 and $26,000.


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


12.      NASD BULLETIN BOARD LISTING

As of July 2004, the Company's common stock resumed trading on the NASD Bulletin
Board market with the symbol "SVAD". Prior to such date, the Company's stock had
traded on the OTC "Pink Sheets".


13.      INCOME TAXES

The Company is in a net deferred tax asset position since it 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 of 100% of 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 2022. The Internal Revenue Code rules under Section 382 could significantly
limit the future use of these losses based on ownership changes and the value of
the Company's stock.

                                       11
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 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.

                                       12
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 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.

                                       13
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 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 the fourth quarter 2004 and consider its
sale to be a core component of our future business.

The Company expects to introduce a Tuberculosis test in our patented format
during the fourth quarter 2004.

The Company has incurred significant operating losses since its inception,
resulting in an accumulated deficit of $43,737,274 at September 30, 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 and nine months ended September 30, 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.


                                       14
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 2004

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

Results of Operations

Third Quarter and First Nine Months of 2004 Compared to Third Quarter and First
Nine Months of 2003

Revenues: The Company's revenues consist of product sales and royalties.
Revenues increased 170% to $392,915 in the third quarter of 2004 from $145,494
in the third quarter of 2003 and increased 133% to $1,049,396 in the first nine
months of 2004 from $449,462 in the first nine months of 2003. The Company's
distributors have noticed greater customer demand for the Company's products and
have been increasing their purchase orders. The Company is continuing to seek
new markets and sales opportunities for its products.

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

The Company had three customers that accounted for 86% of product sales (36%,32%
and 18%) during the first nine months of 2004 and these customers accounted for
99% of product sales during the first nine months of 2003. The loss of these
customers could have a material adverse effect on the Company.

Cost of products sold: Costs of products sold increased to $128,987 (33% of
product sales) in the third quarter of 2004 from $96,927 (67% of product sales)
in the third quarter of 2003 and increased to $370,251 (35% of product sales) in
the first nine months of 2004 from $188,247 (42% of product sales) in the first
nine months of 2003 due to increased sales activity. The Company benefited in
the third quarter 2004 from a reduction in contract manufacturer pricing and the
allocation of fixed manufacturing costs over greater sales.

Research and development expenses: Research and development expenses decreased
to $35,925 in the third quarter of 2004 from $170,928 in the third quarter of
2003 and decreased to $400,925 in the first nine months of 2004 from $620,928 in
the first nine months of 2003.

The decrease is due to:
     o   The completion of the Hema-Strip(TM) HIV test clinical trials
     o   Lower costs associated with the process for FDA approval of the
         Hema-Strip(TM) HIV test

Selling, general and administrative expenses: Selling, general and
administrative expenses increased 34% to $136,845 in the third quarter of 2004
from $101,897 in the third quarter of 2003 and decreased 37% to $288,905 in the
first nine months of 2004 from $460,003 in the first nine months of 2003,
primarily as a result of a reduction in consulting fees incurred.

Income (Loss) from operations: The income from operations for the third quarter
of 2004 of $91,158 reflects an increase of income of $315,416 from the $224,258
loss reported for the third quarter of 2003; and the loss from operations for
the first nine months of 2004 of $10,685 reflects a 99% decrease from the
$819,716 loss reported for the first nine months of 2003. The Company achieved
greater sales and lower cost of goods sold during the third quarter of 2004.

Interest expense: Interest expense decreased to $80,299 in the third quarter of
2004 from $125,950 in the third quarter of 2003 and decreased to $236,782 in the
first nine months

                                       15
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 2004

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

RESULTS OF OPERATIONS (CONTINUED)

of 2004 from $361,888 in the first nine months of 2003, due to interest expense
related to the conversion feature of convertible debt as well as new financing
received in 2003 from a shareholder.

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

                                 September 30, 2004           December 31, 2003
                                 ------------------           -----------------
Cash and cash equivalents           $   18,714                   $   24,182
Working capital deficit               (482,961)                    (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
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 $198,353, for the nine month periods ended
September 30, 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 September 30, 2004, this loan has been paid off.

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 the 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 September 30, 2004, the loan
balance to this shareholder on this loan aggregated $129,050.

                                       16
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 2004

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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

In the second quarter of 2004, this shareholder loaned the Company an additional
$208,278. The loan is to be repaid within one year and bears no interest and has
no conversion features. If the loan is repaid after one year, the Company agreed
to repay such borrowed funds with accrued interest at 12% per annum from the
date of the loan origination.

Resonance Limited, a shareholder is owed $16,624. The loan bears no interest and
is due on demand.

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 September 30, 2004, the loan balance to the second shareholder aggregated
$1,869,839.

Cash used in operating activities in the first nine months of 2004 was $56,100.
This was primarily a result of a net loss of $247,467 and an increase in
accounts receivable of $123,007, offset by an increase in accounts payable and
accrued expenses of $222,756.

Cash used in investing activities in the first nine months of 2004 was $405,569.
This represents additional acquisitions of property and equipment in the period.

Cash provided by financing activities in the first nine months of 2004 was
$456,201. 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.

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.

                                       17
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 2004

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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

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                    $  224,902
                        1-3 years                  $1,998,889
                        4-5 years                           -
                        >5 years                            -
                                                   ----------
                                                   $2,223,791

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. The Company's significant operating losses and capital
requirements raise substantial doubt about the Company's ability to continue as
a going concern.

                                       18
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 2004

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.


                                       19
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 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

(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 September 30,
      2004.


                                       20
<PAGE>
                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               September 30, 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:  November 11, 2004               /s/ LEO EHRLICH
                                    --------------------------------------------
                                    Leo Ehrlich
                                    President & Chief Financial Officer
                                    (Duly Authorized Officer)


                                       21