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, 2005

     [ ] 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.)

                                1 Clarks Hill Rd.
                              Framingham, MA. 01702
              -----------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (508) 872-2625
                 -----------------------------------------------
                 (Issuer's telephone number including area code)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  12
months (or for such shorter period that the Registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days: Yes [X] No []

The number of shares outstanding of the Registrant's Common Stock as of November
10, 2005, 31,769,491 shares.

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


<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                                   FORM 10-QSB
                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                     PAGE
<S>                                                                                                                  <C>
   PART I FINANCIAL INFORMATION

   Item 1.         Financial Statements

                   Balance sheets - September 30, 2005 (unaudited) and
                   December 31, 2004....................................................................................3

                   Statements of Operations - Three Months and Nine Months Ended
                   September 30, 2005 and 2004 (unaudited)..............................................................4

                   Statements of Cash Flows- Nine Months Ended
                   September 30, 2005 and 2004 (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............................................................................................21

   Signatures..........................................................................................................22

   Certifications......................................................................................................23
</TABLE>


<PAGE>

   PART I FINANCIAL INFORMATION
         ITEM 1. FINANCIAL STATEMENTS

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                             SEPTEMBER 30, 2005    DECEMBER 31, 2004
                                                                                                 (UNAUDITED)
                                                                                                -------------        -------------
<S>                                                                                          <C>                   <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                                                        $     20,861      $    148,630
Accounts receivable, net of allowance for doubtful accounts of $107,477 and $ 55,495                  120,353           248,279
Inventories                                                                                            70,313           102,027
                                                                                                 ------------      -------------
Total current assets                                                                                  211,527           498,936

Property and equipment, net of accumulated depreciation of $549,038 and $518,675                      104,345            73,269
Equipment under construction                                                                          664,401           603,111
Patents and trademarks, net of accumulated amortization of $123,109 and $115,220                       55,757            62,046
Deferred costs, less accumulated amortization of $229,744 and $141,600                                242,256           170,400
Deposits                                                                                               13,500               800
                                                                                                 ------------      -------------
 TOTAL ASSETS                                                                                    $  1,291,786      $  1,408,562
                                                                                                 ============      =============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Bank overdraft                                                                                   $         --      $     26,953
Note payable - shareholders                                                                             6,624           243,398
Accounts payable                                                                                       70,911           129,222
Customer advances                                                                                         455            18,465
Accrued expenses                                                                                      262,700           356,081
Accrued payroll expense to officers                                                                   180,818           161,250
Payroll and payroll taxes payable                                                                      62,415            70,078
Debentures payable                                                                                    241,667
                                                                                                 ------------      -------------
Total current liabilities                                                                             825,590         1,005,447

LONG-TERM DEBT
Debentures payable                                                                                  1,208,333                --
Note payable - shareholder                                                                          1,932,099         2,069,839
                                                                                                 ------------      -------------
TOTAL LIABILITIES                                                                                   3,966,022         3,075,286
                                                                                                 ------------      -------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT:
Series 1998-B Convertible Preferred Stock: 1,645 shares authorized, none issued and
     outstanding                                                                                           --                --
Common stock, $.001 par value, 50,000,000 shares authorized, issued and outstanding:
     31,769,491 shares (2005) and 30,509,491 (2004)                                                    31,769            30,509
Additional paid-in capital                                                                         43,368,096        42,073,056
Less: Deferred compensation                                                                          (722,720)               --
Accumulated deficit                                                                               (45,351,381)      (43,770,289)
                                                                                                 ------------      -------------
TOTAL SHAREHOLDERS' DEFICIT                                                                        (2,674,236)       (1,666,724)
                                                                                                 ------------      -------------
 TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                                     $  1,291,786      $  1,408,562
                                                                                                 ============      =============
</TABLE>


        The accompanying notes are an integral part of these statements.



                                       3
<PAGE>

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


<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED SEPTEMBER 30,    NINE MONTHS ENDED SEPTEMBER 30,
                                                          ------------------------------      ------------------------------
                                                              2005              2004              2005              2004
                                                          ------------      ------------      ------------      ------------
<S>                                                       <C>               <C>               <C>               <C>
REVENUES:
Product Sales                                             $    204,846      $    392,915      $    645,853      $  1,048,474
Royalty Income                                                      --                --               546               922
                                                          ------------      ------------      ------------      ------------
                                                               204,846           392,915           646,399         1,049,396
COST OF PRODUCTS SOLD                                           75,500           128,987           226,240           370,251
                                                          ------------      ------------      ------------      ------------
Gross profit                                                   129,346           263,928           420,159           679,145
                                                          ------------      ------------      ------------      ------------
OPERATING EXPENSES:
Research and development                                       102,449            35,925           264,005           400,925
Selling, general and administrative                            247,058           136,845           910,951           288,905
Stock based compensation and employment recruiting
expense-non cash                                                92,586                --           501,580                --
                                                          ------------      ------------      ------------      ------------
                                                               442,093           172,770         1,676,536           689,830
                                                          ------------      ------------      ------------      ------------
(Loss) income from operations                                 (312,747)           91,158        (1,256,37)           (10,685)

INTEREST EXPENSE                                              (113,859)          (80,299)         (324,715)         (236,782)
                                                          ------------      ------------      ------------      ------------
NET (LOSS) INCOME TO COMMON STOCKHOLDERS                  $   (426,606)     $     10,859       $(1,581,09)      $   (247,467)
                                                          ============      ============      ============      ============
NET  LOSS PER SHARE:
BASIC AND DILUTED                                         $      (0.01)     $      (0.00)     $      (0.05)     $      (0.01)
                                                          ============      ============      ============      ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED                                            31,720,57         30,509,70         31,335,93        30,509,700
                                                          ============      ============      ============      ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                                                     ----------------------------
                                                                                        2005             2004
                                                                                     -----------      -----------
<S>                                                                                 <C>               <C>
OPERATING ACTIVITIES:
Net loss                                                                             $(1,581,092)     $  (247,467)
Adjustments to reconcile net loss to net cash  (used in) operating activities:
Depreciation and amortization                                                             38,252           28,215
Bad debt expense                                                                          51,982               --
Amortization of deferred costs                                                            88,144           63,899
Warrants issued for recruiting services                                                  280,000               --
Amortization of options granted to employees                                             221,580               --
Changes in assets and liabilities:
Accounts receivable                                                                       75,944         (123,007)
Royalty receivable                                                                            --            9,078
Subscription receivable                                                                       --            2,000
Inventories                                                                               31,714          (55,014)
Other current assets                                                                     (12,700)         (37,586)
Accounts payable, accrued payroll expense to officers and accrued expenses                70,976          303,782
                                                                                     -----------      -----------
Net cash used in operating activities                                                   (735,200)         (56,100)
                                                                                     -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                                     (122,729)        (391,859)
Acquisitions of patents and trademarks                                                    (1,600)         (13,710)
Deferred finance cost                                                                   (160,000)              --
                                                                                     -----------      -----------
Net cash used in investing activities                                                   (284,329)        (405,569)
                                                                                     -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft                                                                           (26,953)              --
Proceeds from shareholder loans                                                           30,000        1,335,858
Proceeds from issuance of debentures                                                   1,510,000               --
Repayments of shareholder loans                                                         (623,287)        (879,657)
Proceeds from issuance of common stock                                                     2,000               --
                                                                                     -----------      -----------
Net cash provided by financing activities                                                891,760          456,201
                                                                                     -----------      -----------
NET  DECREASE  IN CASH AND CASH EQUIVALENTS                                             (127,769)          (5,468)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           148,630           24,182
                                                                                     -----------      -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                             $    20,861      $    18,714
                                                                                     ===========      ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest                                             $        --      $       124
Cash paid during the period for taxes                                                $       830      $     1,428

SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
During the nine month  periods ended  September 30, 2005 and 2004,  the previous
year's balance of accrued interest of $228,773 and $68,265,  respectively, for a
shareholder's loan was added to the loan balance as principal                        $   228,773      $   143,128

During the nine month  period ended  September  30,  2005,  1,000,000  shares of
common stock were issued for a warrant conversion at $.01 per share. Payment due
of $10,000 was offset to a note payable to this stockholder                          $    10,000      $        --

During the nine month period ended  September  30,  2005,  550,000  options were
granted to each of two employees and recorded as Additional paid in capital and
deferred compensation cost                                                           $   944,300      $        --

Conversion of debentures payable into common stock                                   $    60,000      $        --
</TABLE>


        The accompanying notes are an integral part of these statements.



                                       5
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005

1.  DESCRIPTION OF BUSINESS/BASIS OF PRESENTATION

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

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

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

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



                                       6
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005


2.       SUBSTANTIAL DOUBT REGARDING ABILITY TO CONTINUE AS A GOING CONCERN

Significant operating losses - accumulated deficit:

Since July 1990, the Company has been engaged almost exclusively in research and
development activities focused on developing proprietary saliva based collection
devices  and rapid  assays  for  infectious  diseases.  Other  than sales of the
Company's  collection devices, the Company has not yet commenced any significant
product commercialization. The Company has incurred significant operating losses
since its  inception,  resulting in an  accumulated  deficit of  $45,351,381  at
September  30, 2005.  Such losses are  expected to continue for the  foreseeable
future and until  such time,  if ever,  as the  Company is able to attain  sales
levels sufficient to support its operations.  There can be no assurance that the
Company  will  achieve or  maintain  profitability  in the  future.  Substantial
additional financing will be required in future periods.

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

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION:

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

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

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




                                       7
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

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

4. 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:


<TABLE>
<CAPTION>
                                          SEPTEMBER 30, 2005    December 31, 2004
                                          ------------------    -----------------
<S>                                          <C>                    <C>
Raw materials                                $ 66,793               $ 87,407
Finished goods                                  3,520                 14,620
                                             --------               --------
                                             $ 70,313               $102,027
                                             ========               ========
</TABLE>

5. ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                          SEPTEMBER 30, 2005    December 31, 2004
                                          ------------------    -----------------
<S>                                          <C>                    <C>
Accrued interest                             $260,817               $228,773
Accrued legal expense                              --                112,500
Other accrued liabilities                       1,883                 14,808
                                             --------               --------
                                             $262,700               $356,081
                                             ========               ========
</TABLE>

6. 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:

<TABLE>
<CAPTION>
                        FOR THE THREE MONTHS               FOR THE NINE MONTHS
                         ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                     ---------------------------       ---------------------------
                           2005             2004             2005             2004
                     ----------       ----------       ----------       ----------
<S>                  <C>              <C>              <C>              <C>
United States        $      600       $  182,136       $  152,098       $  529,956
United Kingdom          147,373          163,932          376,777          371,932
Africa                   12,932           44,650           61,670          111,550
Other                    43,941            2,197           55,308           35,036
                     ----------       ----------       ----------       ----------
                     $  204,846       $  392,915       $  645,853       $1,048,474
                     ==========       ==========       ==========       ==========
</TABLE>




                                       8
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005


7.  DEFERRED COSTS

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

8.  DEBENTURE PAYABLE

On January 19, 2005, the Company's board  authorized the issuance of up to three
million  dollars  of  convertible  debentures  to be repaid in twelve  quarterly
installments  commencing April 1, 2006. The debentures carry an interest rate of
9% per annum and are convertible  into common stock at the lower of 66.6% of the
valuation of the Company's next raise of equity or $1 per share. As of September
30,  2005,  the  Company  had not  closed  the  entire  funding  but had sold an
aggregate of $1,510,000 in  convertible  debentures.  During  September  2005, a
debenture in the amount of $60,000 was  converted  into 60,000  shares of common
stock, resulting in the balance of outstanding debentures payables to be reduced
to $1,450,000.

9.  STOCK-BASED COMPENSATION

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

The Company has elected to account for its stock-based  compensation plans using
APB 25. The Company has computed,  for pro forma disclosure purposes,  the value
of options granted for the three and nine month periods ended September 30, 2005
and 2004 using the Black-Scholes pricing model:

<TABLE>
<CAPTION>
                                                         Three months ended September 30    Nine months ended September 30
                                                           ----------------------------      ----------------------------
                                                               2005             2004             2005             2004
                                                           -----------      -----------      -----------      -----------
<S>                                                        <C>              <C>              <C>              <C>
Net (loss) income to common shareholders
    As reported                                            $  (426,606)     $    10,859      $(1,581,092)     $  (247,467)
Add: Stock-based employee compensation expense
included in reported net loss, net of related  tax
affects                                                         92,586               --          221,580               --
Deduct: Total stock-based employee compensation
expense  determined  under fair value based method for
all awards, net of related tax affects
                                                               (90,428)              --         (213,266)              --
                                                           -----------      -----------      -----------      -----------
    Pro forma                                              $  (424,448)     $    10,859      $(1,572,778)     $  (247,467)
                                                           ===========      ===========      ===========      ===========
Basic and diluted net loss per share
    As reported                                            $     (0.01)     $     (0.00)     $     (0.05)     $     (0.01)
    Pro forma                                                    (0.01)           (0.00)           (0.05)           (0.01)
</TABLE>




                                       9
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005


9.  STOCK-BASED COMPENSATION (CONTINUED)

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

The  effects  of  applying  SFAS 123  (revised  2004)  in the  above  pro  forma
disclosures are not indicative of future amounts as future amounts are likely to
be affected  by the number of grants  awarded  and since  additional  awards are
generally  expected to be made at varying  prices.  The Company  will adopt SFAS
123(R ) as required as of January 1, 2006.

10. FINANCING FROM SHAREHOLDERS

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

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

In January 2005, 200,000 warrants  exercisable at a price of $.01 per share were
issued as payment for services  rendered to the  Company.  Based upon the market
value  of the  common  stock  on the date of  issuance,  discounted  30% for its
restriction,  the Company  recorded an expense  and related  additional  paid-in
capital of $280,000.  These warrants, as well as additional warrants exercisable
into 1,000,000  shares  previously  issued  exercisable at $.01 per share,  were
converted  during  March 2005 into common  stock,  resulting  in the issuance of
1,200,000 common shares during this period.

11. SHAREHOLDERS' EQUITY TRANSACTIONS

For the nine month period ended  September 30, 2005,  550,000 stock options were
granted to each of two employees per  employment  agreements.  Of these options,
100,000 are vested  immediately and are exercisable from September 1, 2005 until
September 1, 2015 and the  remaining  options are vested in three equal  amounts
annually,  commencing  on  October 1, 2005.  On the date of grant,  the  Company
recorded an increase in deferred  compensation  of $1,190,000 and  corresponding
increase in additional  paid-in capital.  The  compensation  cost related to the
options is being deferred over a two-year  employment  period.  An adjustment of
$221,580 to the  selling,  general and  administrative  expense was  recorded to
recognize the compensation expense for the period ended September 30, 2005.

During  September  2005,  a  convertible  debenture in the amount of $60,000 was
converted  into common stock,  resulting in the issuance of 60,000 common shares
during this period. (See Note 8).



                                       10
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005


12.  CONTINGENCIES

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

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

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

Legal Matters

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

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

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

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

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

Economic Dependency

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

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

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



                                       11
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005

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

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

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

GENERAL

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

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

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

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

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



                                       12
<PAGE>
                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005

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

GENERAL (CONTINUED)

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

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

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

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

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

The Company has  incurred  significant  operating  losses  since its  inception,
resulting in an accumulated  deficit of $45,351,381 at September 30, 2005.  Such
losses are expected to continue for the foreseeable  future and until such time,
if ever, as the Company is able to attain sales levels sufficient to support its
operations.

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



                                       13
<PAGE>
                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

RESULTS OF OPERATIONS

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

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

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

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

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

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

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



                                       14
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005


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

RESULTS OF OPERATIONS (CONTINUED)

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

The increase in the third quarter is due to:

      o     additional HIV test clinical trial costs which amounted to $9,942 in
            the third quarter of 2005
      o     additional  consulting  costs  associated  with  the  Food  and Drug
            Administration  PMA  submissions.  These  consultant  costs  totaled
            $92,507 in the third quarter of 2005.

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

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES:   Selling,   general   and
administrative  expenses  increased 81% to $247,058 in the third quarter of 2005
from $136,845 in the third quarter of 2004 and increased 215% to $910,951 in the
first nine months of 2005 from $288,905 in the first nine months of 2004.  These
increases are due to significantly greater expenses for consulting,  recruitment
expenses, bad debt expense, and payroll.

STOCK  BASED  COMPENSATION  AND  EMPLOYMENT  RECRUITING  EXPENSE-NON  CASH:  The
increase in non-cash  expenses of $92,586  incurred in the third quarter of 2005
and of $501,580  incurred in the first nine months of 2005,  was  attributed  to
amortization  of options  granted to two new  employees  and  non-cash  expenses
associated with the issuance of shares and/or warrants for services. The Company
had not  incurred  similar  expenses in the first  quarter and in the first nine
months of 2004.

LOSS FROM OPERATIONS:  The loss from operations for the third quarter of 2005 of
$312,747  reflects  a  significant  increase  in loss  from the  $91,158  income
reported for the third  quarter of 2004;  and the loss from  operations  for the
first nine months of 2005 of  $1,256,377  reflects a 11,658%  increase  from the
$10,685  loss  reported for the first nine months of 2004.  Decreased  sales and
greater expenses in 2005 contributed to the Company's increased loss.

INTEREST EXPENSE: Interest expense increased to $113,859 in the third quarter of
2005 from $80,299 in the third  quarter of 2004 and increased to $324,715 in the
first nine months of 2005 from  $236,782 in the first nine months of 2004 due to
increased borrowings associated with the convertible debentures in 2005.

INCOME  TAXES.  The  Company is in a net  deferred  tax asset  position  and has
generated net operating  losses to date. No provision for or benefit from income
taxes has been  recorded  in the  accompanying  statements  of  operations.  The
Company will continue to provide a full valuation allowance for its deferred tax
assets until it becomes more likely than not, in management's  assessment,  that
the  Company's  deferred  tax assets  will be  realized.  The  Company has a net
operating loss carryforward of approximately $45 million,  which is available to
offset future taxable income, if any, expiring in various years through the year
2025.  The Internal  Revenue Code rules under Section 382 could limit the future
use of these losses based on  ownership  changes and the value of the  Company's
stock.



                                       15
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005


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

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                            SEPTEMBER 30, 2005      December 31, 2004
                                            ------------------      -----------------
<S>                                             <C>                   <C>
Cash and cash equivalents                       $  20,861             $ 148,630
Working capital (deficit)                        (614,063)             (506,511)
</TABLE>

Net cash  used in  operating  activities  in the first  nine  months of 2005 was
$735,200.  Net cash used in the first nine months of 2004 was $56,100.  In 2005,
the increase in cash used in operations was primarily due to the increase of the
net loss $1,581,092 (2005) and $247,467 (2004). The following expenses increased
in the first nine months of 2005 when compared to the first nine months of 2004:

      o     Legal and accounting costs
      o     Expenses recorded for beneficial  conversion features of convertible
            debt, and
      o     Stock and warrant issuance costs
      o     Consulting expenses
      o     Payroll expenses

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

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

Our cash requirements depend on numerous factors,  including product development
activities,  penetration  of the direct sales market,  market  acceptance of our
products,  and effective management of accounts receivable.  We expect to devote
capital  resources  to improve our sales and  marketing  efforts,  continue  our
product  development,  expand  manufacturing  capacity and continue research and
development  activities.  We will examine other growth opportunities,  including
strategic  alliances,  and we expect  any such  activities  will be funded  from
existing cash as well as funds provided from debenture offerings in 2005.

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

On January 19, 2005 the Company's  board  authorized the issuance of up to three
million dollars of convertible  debentures.  These  debentures  mature March 31,
2009 and carry an interest rate of 9% per year and are  convertible  into common
stock at the lower of 66.6% of the  valuation  of the  Company's  next  raise of
equity or $1 per share. As of September 30, 2005, the Company had not closed the
entire   funding  but  had  sold  an  aggregate  of  $1,510,000  in  convertible
debentures.  During  September  2005,  a debenture  in the amount of $60,000 was
converted  into  60,000  shares of common  stock,  resulting  in the  balance of
outstanding debentures payables to be reduced to $1,450,000.



                                       16
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005


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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Per a promissory note dated February 2003, Jules Nordlicht, agreed to advance in
total or in  installments,  up to the amount of  $1,000,000  to the Company.  In
November 2003 and August 2004, agreements were executed with this shareholder to
cause  additional  advances  in total or in  installments  up to the  amount  of
$2,500,000 to advance the process of the FDA approval.  In consideration for the
financing, the Company agreed to repay such borrowed funds with accrued interest
at 12% per annum and the  shareholder  reserves  the right to demand  payment in
full or in part at anytime after December 31, 2006. As of September 30, 2005 the
loan balance to this shareholder  aggregated  $1,932,099 which is reflected as a
long term liability.  An additional  amount of $180,805 of interest on this note
has been  incurred  during the first nine months of 2005 and remains  owed as of
September 30, 2005.

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

In January 2005, 200,000 warrants  exercisable at a price of $.01 per share were
issued as payment for services  rendered to the  Company.  Based upon the market
value  of the  common  stock  on the date of  issuance,  discounted  30% for its
restriction,  the Company  recorded an expense  and related  additional  paid-in
capital of $280,000.

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

In March of 2005,  550,000  stock  options  were  granted to an employee  per an
employment agreement.  Of these options,  100,000 are vested immediately and are
exercisable  from  September 1, 2005 until  September 1, 2015 and the  remaining
options are vested in three equal  amounts  annually,  commencing  on October 1,
2005.  On the date of grant,  the  Company  recorded  an  increase  in  deferred
compensation  of  $614,250  and  corresponding  increase in  additional  paid-in
capital.  The  compensation  cost related to the options is been deferred over a
two-year  employment  period. An adjustment of $127,898 in selling,  general and
administrative  expense was recorded to recognize the  compensation  expense for
the period ended September 30, 2005.

In May of 2005,  550,000 stock  options were granted to another  employee per an
employment agreement.  Of these options,  100,000 are vested immediately and are
exercisable  from  September 1, 2005 until  September 1, 2015 and the  remaining
options are vested in three equal  amounts  annually,  commencing  on October 1,
2005.  On the date of grant,  the  Company  recorded  an  increase  in  deferred
compensation  of  $575,750  and  corresponding  increase in  additional  paid-in
capital.  The compensation  cost related to the options is being deferred over a
two-year  employment  period.  An adjustment of $93,682 in selling,  general and
administrative  expense was recorded to recognize the  compensation  expense for
the period ended September 30, 2005.

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

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.



                                       17
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005


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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

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

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

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



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<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005

ITEM 3.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period  covered by this  report,  we  evaluated,  under the
supervision and with the  participation  of our management,  including our Chief
Executive Officer and Chief Financial  Officer,  the effectiveness of the design
and operation of our  "disclosure  controls and  procedures"  [as defined in the
Securities  Exchange Act of 1934,  Rules 13a - 15(e) and 15d - 15(e)].  Based on
this  evaluation,  our CEO and CFO  have  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 them.

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, 2005

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

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

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

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

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.  OTHER INFORMATION

None



                                       20
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005

ITEM 6. EXHIBITS

EXHIBIT
-------
    11       Earnings per share

  31.1       Certification of Chief Executive Officer required by Rule 13a-14(a)
             or Rule  15d-14(a)  under the  Securities  Exchange Act of 1934, as
             amended.

  31.2       Certification of Chief Financial Officer required by Rule 13a-14(a)
             or Rule  15d-14(a)  under the  Securities  Exchange Act of 1934, as
             amended.

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

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



                                       21
<PAGE>

                         SALIVA DIAGNOSTIC SYSTEMS, INC.
                               SEPTEMBER 30, 2005


                                   SIGNATURES

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

Dated:   November 15, 2005

                                                 SALIVA DIAGNOSTIC SYSTEMS, INC.

                                                    /S/
                                                    ----------------------------
                                                    Steve M. Peltzman
                                                    Chief Executive Officer

                                                    /S/
                                                    ----------------------------
                                                    Leo Ehrlich
                                                    Chief Financial Officer



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