U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) Quarterly report under Section 13 of 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended FEBRUARY 28, 1997 or
() Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________.
Commission file number 0-19866
CELOX LABORATORIES, INC.
(Exact name of small business issuer
as specified in its charter)
MINNESOTA 36-3384240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1311 HELMO AVENUE, OAKDALE MN 55128
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code: (612) 730-1500
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the past 12 months (or
for such shorter periods that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes __X__ No ____
State the number of shares outstanding of each the issuer's classes of common
equity, as of the latest practicable date.
THE NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OUTSTANDING ON
MARCH 31, 1997 WAS 2,742,169.
Transitional small business format disclosure:
Yes ____ No __X__
Table of Contents
CELOX LABORATORIES, INC.
Report on Form 10-QSB
for fiscal quarter ended
February 28, 1997
PART I -- FINANCIAL INFORMATION Page
----
ITEM 1. Financial Statements
Balance Sheet as of August 31, 1996
and February 28, 1997 3
Statement of Operations -- Three months ended
February 28, 1997 and February 29, 1996, and
six months ended February 28, 1997 and
February 29, 1996. 5
Statement of Changes in Shareholders' Equity
for the year ended August 31, 1996 and the
six months ended February 28, 1997 6
Statement of Cash Flows -- Six months ended
February 28, 1997 and February 29, 1996 7
Notes to Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 10
PART II -- OTHER INFORMATION 14
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CELOX LABORATORIES, INC.
BALANCE SHEET
February 28, August 31,
ASSETS 1997 1996
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 625,281 $ 420,222
Certificates of deposit 737,213 968,663
Trade receivables 42,034 91,802
Investor settlement receivable -- current 0 57,328
Accrued interest receivable 5,343 19,002
Inventories 48,430 74,372
Prepaid expenses 6,658 814
----------- -----------
Total current assets 1,464,959 1,632,203
----------- -----------
INVESTOR SETTLEMENT RECEIVABLE 22,446 22,446
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Laboratory and production equipment 204,882 204,882
Office furniture and equipment 78,764 78,764
Leasehold improvements 0 64,390
----------- -----------
283,646 348,036
Less accumulated depreciation (207,405) (254,432)
----------- -----------
76,241 93,604
----------- -----------
TOTAL ASSETS $ 1,563,646 $ 1,748,253
=========== ===========
CELOX LABORATORIES, INC.
BALANCE SHEET
February 28, August 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 10,937 $ 29,748
Accrued liabilities 51,726 33,452
----------- -----------
Total current liabilities 62,663 63,200
----------- -----------
DEFERRED RENT 0 773
SHAREHOLDERS' EQUITY
Common stock 27,422 27,422
Additional contributed capital 5,251,756 5,251,756
----------- -----------
5,279,178 5,279,178
Accumulated deficit (3,778,195) (3,594,898)
----------- -----------
Total Shareholders' Equity 1,500,983 1,684,280
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,563,646 $ 1,748,253
=========== ===========
See Notes to Financial Statements.
<TABLE>
<CAPTION>
CELOX LABORATORIES, INC.
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 40,032 $ 134,874 $ 125,737 $ 249,232
Cost of products sold 22,227 54,697 61,894 110,221
- -------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 17,805 80,177 63,843 139,011
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 14,448 41,238 34,242 79,526
Marketing and sales 44,789 51,487 75,129 123,488
Administration 93,613 82,030 174,629 153,783
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 152,850 174,755 284,000 356,797
OPERATING LOSS (135,045) (94,578) (220,157) (217,786)
OTHER INCOME
Interest and investment income 16,245 29,898 35,819 70,921
Other income 0 0 1,041 0
Investment gain 0 12,350 0 27,750
- -------------------------------------------------------------------------------------------------------------------
Total other income 16,245 42,248 36,860 98,671
NET LOSS ($ 118,800) ($ 52,330) ($ 183,297) ($ 119,115)
===================================================================================================================
LOSS PER COMMON SHARE ($ 0.04) ($ 0.02) ($ 0.07) ($ 0.04)
===================================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,742,169 2,742,169 2,742,169 2,742,169
===================================================================================================================
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CELOX LABORATORIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Unrealized
--------------------- Paid-in Accumulated Gain on Inv.
Shares Amount Capital Deficit Avail. for Sale Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1994 2,764,669 $27,647 $5,268,681 ($2,864,260) 0 $2,432,068
Common stock repurchased (22,500) (225) (16,925) (17,150)
Unrealized gains for the period 38,798 38,798
Net loss for the period (346,614) (346,614)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1995 2,742,169 $27,422 $5,251,756 ($3,210,874) $38,798 $2,107,102
Net changes in unrealized gains for
the year (38,798) (38,798)
Net loss for the period (384,024) (384,024)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1996 2,742,169 $27,422 $5,251,756 ($3,594,898) $0 $1,684,280
Net loss for the period (183,297) (183,297)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 28, 1997 2,742,169 $27,422 $5,251,756 ($3,778,195) $0 $1,500,983
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CELOX LABORATORIES, INC.
STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------
Six months ended
February 28, February 29,
1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ($183,297) ($119,115)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 17,363 23,735
Deferred rent expense (773) (2,313)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 49,768 (82,955)
Accrued interest receivable 13,658 12,764
Inventories 25,942 (4,719)
Prepaid expenses (5,845) (834)
Officer note receivable 0 4,000
Increase (decrease) in:
Accounts payable (18,811) 8,150
Accrued liabilities 18,275 (1,492)
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (83,720) (162,779)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity (Purchase) of bank certificates of deposit 231,450 (767,784)
Proceeds from sale of short-term investments held for sale 0 692,042
Proceeds from investor settlement receivables 57,329 0
Purchase of equipment 0 (12,841)
- -----------------------------------------------------------------------------------------------------------
Net cash from (used for) investing activities 288,779 (88,583)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 205,059 (251,362)
CASH AND CASH EQUIVALENTS:
Beginning of period 420,222 919,404
- -----------------------------------------------------------------------------------------------------------
End of period $ 625,281 $ 668,042
===========================================================================================================
See Notes to Financial Statements.
</TABLE>
CELOX LABORATORIES, INC,
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation have been
included.
The organization and business of the Company, accounting policies followed
by the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's August 31, 1996 Form 10-KSB.
This quarterly report should be read in connection with such annual report.
NOTE B -- CASH AND CASH EQUIVALENTS
For purposes of reporting the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
NOTE C -- SHORT-TERM INVESTMENTS
The Company had invested excess cash in the Piper Jaffray Institutional
Government Income Portfolio Fund (Piper Fund). During the quarter ended February
29, 1996, the Company sold all remaining shares in this Fund.
As an alternative to the Piper Fund, the Company has utilized Bank
Certificates of Deposit. As of February 28, 1997 the Company had investments of
$737,213 in Certificates of Deposit. Certificates of deposit are made only with
the highest rated banks and less than $100,000 is deposited at any one bank. The
Company also utilizes a money market fund, which is restricted by its charter to
Tier 1 instruments, for a portion of its investments.
NOTE D -- REPURCHASE OF COMMON STOCK
Effective July 30, 1993, the Board of Directors authorized the repurchase
of up to 300,000 shares of the Company's common stock in open market
transactions at prices not to exceed $1.75 per share. At February 28, 1997 the
Company had repurchased 136,700 shares at prices ranging from $0.85 to $1.58 per
share.
NOTE E -- FACILITY LEASE AGREEMENT
The Company's new facility is located at 1311 Helmo Avenue in Oakdale,
Minnesota. A new Lease Agreement was executed on December 6, 1996 and calls for
the lease of 9,500 square feet of office, laboratory and warehouse space. The
term of the lease is seven (7) years with an option to renew for extended
periods. Base rent for each of the seven (7) years is $73,725 plus charges for
common area maintenance and other tenant expenses. The initial lease payment
commenced April 1, 1997.
NOTE F -- LOSS PER COMMON SHARE
Loss per share is computed based upon the weighted average number of common
shares outstanding during the period. The Company has determined that under the
modified treasury stock method, there would be no change in earnings per share
due to outstanding common stock equivalents. Fully diluted and primary loss per
share are the same amounts for each of the periods presented.
NOTE G -- RECLASSIFICATION
Certain 1996 amounts have been reclassified to conform with the 1997
presentation. These reclassifications had no effect on net income (loss) as
previously reported.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Celox Laboratories, Inc. ("Celox" or the "Company") is a biotechnology
company formed in 1985 that researches, develops, manufactures and markets cell
biology products used in the propagation of cells derived from mammals,
including humans, and other species. These specialized cell growth products are
used primarily in academic, pharmaceutical, diagnostic and other commercial
laboratories to improve the growth condition, productivity and quality of
cell-derived medical and other biological products such as vaccines, monoclonal
antibodies, interferons and human growth factor. The Company focuses primarily
on solving the fundamental problems associated in culturing cells with the use
of serum, which is derived from the whole blood of animals and humans. The
Company's research activities have resulted in proprietary technology which has
been used to commercialize its non-serum growth media, cell freezing solutions
and other cell biology products.
Celox currently manufactures and markets over 30 products. Celox's
proprietary products consist of four serum replacement products, TCM,
TM-235(TM), TCH(TM), and VaxMax(TM) and a cell freezing medium, Cellvation(TM).
VaxMax(TM) was developed specifically for use in the production of veterinary
vaccines.
Celox also manufactures ten basal media formulations, a series of buffered
salt solutions, other cell biology reagents and a variety of custom
formulations.
An additional proposed product, ViaStem(TM), continues to undergo further
analysis in pre-clinical testing. This product was developed to improve the
preservation of critical cells (e.g. stem cells) which are required for bone
marrow transplantation. Other potential applications for ViaStem(TM) include the
preservation of umbilical cord blood and platelets. Currently, Memorial Blood
Centers of Minnesota and the University of Cincinnati's Hoxworth Blood Center
will be providing additional pre-clinical data on ViaStem(TM).
During the quarter ended November 30, 1996, the Company received notice
from the United States Patent and Trademark Office (USPTO) that a patent for
ViaStem(TM) would be issued in early December, 1996. The actual patent was
received by the Company in the first week of December. The Company has also
filed the documents needed for an International Patent Application as required
by the Patent Cooperation Treaty.
During February, 1996 the Company entered into an agreement with the
Department of the Army, Walter Reed Army Institute of Research (WRAIR) that
provides for a Cooperative Research and Development Agreement for Material
Transfer which encompasses the Company's ViaStem(TM) product.
The Company has received its first Drug Master File classification from the
Food and Drug Administration (FDA) for TCM. This classification will expedite
the FDA approval process for customers who want to use the Company's TCM product
in the manufacture of drugs or drug substances for human use. The Company is in
the process of gaining similar status for its other proprietary products.
In April, 1994, the Company entered into an agreement with American Type
Culture Collection (ATCC), Rockville, MD, the world's largest public archive of
living biological cultures and genetic materials. ATCC serves the international
scientific community by acquiring, preserving and distributing strains of the
most diverse collection of organisms and derivative biological materials in the
world. Under the agreement, ATCC will distribute cell lines adapted to the
Company's non-serum products as well as other associated products worldwide.
Orders for growth media under this agreement have continued during the current
fiscal year.
During July of 1995, the Company completed a non-exclusive world-wide
distribution agreement with ICN Pharmaceuticals, Inc., Costa Mesa, CA. Under the
agreement, ICN is marketing Celox's TCM, TCH(TM), TM-235(TM) serum replacement
products as well as Cellvation(TM). Initial orders under this agreement were
shipped in the last quarter of Fiscal 1995. Additional orders have been received
during the first six months of this fiscal year.
The Company has also entered into an agreement with ICN to provide the rest
of the Company's products (except for ViaStem(TM)) to ICN for worldwide
distribution. The first shipment of these additional products will occur in the
third quarter of this fiscal year.
ICN manufactures and markets a broad range of prescription and
over-the-counter pharmaceuticals, medical diagnostic products and biotechnology
research products in North and Latin America, Eastern and Western Europe and the
Pacific Rim countries.
Beginning in fiscal 1997, the Company is providing its proprietary products
to Sigma Chemical Company under a private label distribution agreement. The
first shipment under this agreement occurred during the quarter ended November
30, 1996.
RESULTS OF OPERATIONS
The Company had recorded an Investor Settlement Receivable in the amount of
$133,000 on the Balance Sheet in order to reflect the expected settlement
proceeds from a class action lawsuit which was brought on behalf of investors in
the Piper Fund. In December, 1995, the District Court Judge approved the Class
Action Settlement. Payments from the Piper Fund have been received in accordance
with the schedule agreed upon in the settlement. As of February 28, 1997 the
Investor Settlement Receivable is $22,446.
A separate Class Action lawsuit against the Fund's auditors, KPMG Peat
Marwick, has been certified by the Court.
During the quarter ended February 28, 1997, the Company had net sales of
$40,032 which was a decrease of $94,842 or 70% from $134,874 reported in the
same quarter for the prior year. For the six months ended February 28, 1997 net
sales totaled $125,737, versus $249,232 for the six months ended February 29,
1996. This represents a decrease of 50% from the previous period. The decrease
between years for the quarter results primarily from the timing of orders
received from a large manufacturer. In addition, the Company was forced to lease
temporary office space while it awaited completion of its new facility, which
encountered lengthy construction delays and as a result products for sale could
not be manufactured during the quarter. Product sales for the quarter ended
February 28, 1997 were limited to inventory on hand. Both of these factors also
contributed to the decline between years for the comparable six month period.
The Company had a net loss of $118,800 for the quarter ended February 28,
1997 compared to a net loss of $52,330 for the same period in the previous year.
For the six month period, a net loss of $183,297 was incurred in fiscal 1997 as
compared to a net loss of $119,115 in fiscal 1996. On a per share basis, the
loss for the current quarter equaled 4 cents versus a 2 cent loss in the
comparable period in fiscal 1996. For the six months ended February 28, 1997 the
net loss per share was 7 cents compared to a net loss of 4 cents per share in
the prior year.
The cost of products sold was 56% of net sales for the three months ended
February 28, 1997, as compared to 41% of net sales for the three months ended
February 29, 1996. For the six month period, cost of products sold was
49%compared to 44% during the same period in the previous fiscal year. The
increase in the cost of sales for each of the respective reporting periods is
due primarily to lower sales volume to cover fixed manufacturing costs. The mix
of proprietary products versus standard formulations will also affect
comparisons between periods. Labor, raw materials and other production costs
have been consistently controlled in light of the decline in sales for the
periods.
An operating loss of $135,045 was generated for the quarter ended February
28, 1997 compared to an operating loss of $94,578 for the same period in the
previous year. For the six months ended February 28, 1997 the Company had an
operating loss of $220,157 versus a loss of $217,786 for the six months ended
February 29, 1996. The increase between years for both reporting periods is due
to a decline in sales. Operating expenses have decreased offsettting the decline
in sales.
The Company received interest and investment income of $16,245 during the
quarter ended February 28, 1997 as compared to $29,898 in the prior year.
Interest and investment income for the six month period was $35,819 in fiscal
1997 compared to $70,921 for the same period in 1996. Investment income is
derived primarily from the investment of the proceeds of the Company's March
1992 initial public offering. The decrease in investment income during the
quarter as compared to the previous year results from reduced investment
balances as the Company used capital in its operations as well as lower
effective interest rates resulting from a transfer of amounts from the Piper
Fund into bank certificates of deposit. Additionally, in the quarter ended
November 30, 1995, the Company received special one-time dividend paid out from
the Piper Fund which contributes to the variance for the six month comparison.
For both the quarter and the six months ended February 28, 1997 the Company
had no investment gains compared to investment gains of $12,350 and $27,750 for
the respective quarter and six month periods during the previous fiscal year. In
the prior year, gains were realized when shares of the Piper Jaffray fund were
sold.
As was disclosed in previous sections of this Form 10-QSB, Piper Jaffray
and the Class Action Plantiffs have agreed to settle a lawsuit which was brought
against the Piper Fund by investors. A lawsuit filed against the Fund's
auditors, KPMG Peat Marwick, is still being pursued by investors other than the
Company. The Company has not filed a lawsuit nor has it declined if it will join
in any future class actions, but has not eliminated these options as a
possibility in the future.
Operating expenses decreased $21,905 (13%) to $152,850 from $174,755 for
the quarter ended February 28, 1997 and decreased by $72,797 (20%) to $284,000
from $356,797 for the six months ended February 28, 1997 compared to the
comparable periods in the prior fiscal year. The decrease for both the three and
six month periods as compared to the prior year is due to the timing and amount
of research and development expenditure as well as reduced marketing and sales
expenses offset by higher administrative expenditures.
Research and development costs decreased by $26,790 (65%) to $14,448 from
$41,238 in the current quarter as compared to the previous fiscal year. For the
comparative six month periods, research and development expenses decreased by
$45,284 (57%) to $34,242 from $79,526. The decrease for both of the reporting
periods results from the timing of expenditures in the areas of salaries and
wages and patent expenses incurred in connection with ViaStem(TM) product. The
Company expects the costs of research and development to fluctuate based on the
status of pre-clinical trials for ViaStem(TM) .
Marketing expenses decreased by $6,698 (13%) to $44,789 from $51,487 for
the quarter ended February 28, 1997 and by $48,359 (39%) to $75,129 from
$123,488 for the six months then ending as compared to the comparable periods in
fiscal 1996. The decreases are attributed to the amount and timing of
advertising, promotional materials and trade show expenses between years. The
Company has instituted a focused advertising and marketing strategy and
therefore expects that marketing and sales expenses will increase during
subsequent quarters as programs and advertising materials are developed.
Administrative expenses increased by $11,583 (14%) for the quarter ended
February 28, 1997 compared to the previous fiscal year to $93,613 from $82,030.
For the six months ended February 28, 1997 administrative expenses increased by
$20,846 (14%) to $174,629 from $153,783 in the prior year. The increase between
years is primarily due to moving expenses incurred as part of the Company's move
to the new facility as well as increased legal expenditures.
LIQUIDITY AND CAPITAL RESOURCES
Capital resources on hand at February 28, 1997 include cash and short-term
investments of $1,362,494 and net working capital of $1,402,296. This represents
a decrease of $26,391 (2%) in cash and short-term investments and a decrease of
$166,707 (11%) in net working capital as compared to August 31, 1996.
The lease for the Company's previous facility terminated in October, 1996.
A new facility has been completed in Oakdale, Minnesota, a suburb of St. Paul.
The Company has leased approximately 9,500 square feet of office, laboratory and
warehouse space in this facility during March 1997. In the interim, the Company
had leased office and warehouse space on a month-to-month basis.
The Company anticipates spending approximately $175,000 in fiscal 1997 on
capital expenditures. Through February 28, 1997 the Company has not made any
capital expenditures. The majority of the planned expenditures will be used to
fund additional sales, research and development, manufacturing growth and
specialized tenant improvements. It is anticipated that the tenant improvements
will be financed through a local financial institution.
The Company believes that its capital resources on hand at February 28.
1997, together with revenues from product sales, will be sufficient to meet its
cash requirements for the near future.
PART II -- OTHER INFORMATION
ITEM I. -- LEGAL PROCEEDINGS
The Company is a member of the class in the KPMG Peat Marwick action as it
relates to their audit of the Piper Jaffray Institutional Government Income
Portfolio Fund, on whose behalf litigation has been commenced in federal
district court in Minneapolis. The Company has not directly participated in the
litigation and the Company does not believe any material developments in the
status of the litigation occurred during the quarter which is the subject of
this report.
The Company is a defendant in a wrongful termination lawsuit brought by a
former employee who was in the probationary period at the time of the
termination. The Company believes that the lawsuit is without merit. However, it
has participated in an arbitration hearing in order to bring closure to this
lawsuit. As of February 28, 1997, a final settlement document still has not been
executed.
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. -- (A) EXHIBITS
10.6 Lease Agreement with Oakdale Properties LLC located at 1311 Helmo
Avenue, Oakdale, Minnesota dated December 6, 1996.
(B) REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CELOX LABORATORIES, INC.
Dated: April 11, 1997 By: /s/ Milo R. Polovina
------------------------------
Milo R. Polovina, President &
Principal Financial Officer
Confidential Treatment Requested
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 625,281
<SECURITIES> 737,213
<RECEIVABLES> 42,034
<ALLOWANCES> 0
<INVENTORY> 48,430
<CURRENT-ASSETS> 1,464,959
<PP&E> 283,646
<DEPRECIATION> 207,882
<TOTAL-ASSETS> 1,563,646
<CURRENT-LIABILITIES> 62,663
<BONDS> 0
0
0
<COMMON> 27,422
<OTHER-SE> 1,473,561
<TOTAL-LIABILITY-AND-EQUITY> 1,563,646
<SALES> 125,737
<TOTAL-REVENUES> 125,737
<CGS> 61,894
<TOTAL-COSTS> 137,023
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (183,297)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,297)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
