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, 1998 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, ST. PAUL 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 15, 1998 WAS 2,742,169.
Transitional small business format disclosure:
Yes _____ No __X__
1
<PAGE>
Table of Contents
CELOX LABORATORIES, INC.
Report on Form 10-QSB
for fiscal quarter ended
February 28, 1998
PART I -- FINANCIAL INFORMATION Page
----
ITEM 1. Financial Statements
Balance Sheet as of August 31, 1997
and February 28, 1998 3
Statement of Operations -- Three months ended
February 28, 1998 and February 28, 1997, and
six months ended February 28, 1998 and
February 28, 1997. 5
Statement of Changes in Shareholders' Equity
for the year ended August 31, 1997 and the
six months ended February 28, 1998 6
Statement of Cash Flows -- Six months ended
February 28, 1998 and February 28, 1997 7
Notes to Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II -- OTHER INFORMATION 15
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CELOX LABORATORIES, INC.
BALANCE SHEET
February 28, August 31,
ASSETS 1998 1997
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 277,190 $ 408,274
Certificates of deposit 651,367 737,119
Trade receivables 59,475 26,562
Investor settlement receivable -- current 6,639 22,446
Accrued interest receivable 7,764 16,956
Inventories 52,673 46,855
Prepaid expenses 3,763 1,058
----------- -----------
Total current assets 1,058,871 1,259,270
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Laboratory and production equipment 206,730 204,882
Office furniture and equipment 88,131 78,764
Leasehold improvements 115,558 115,558
----------- -----------
410,419 399,204
Less accumulated depreciation (251,387) (229,010)
----------- -----------
159,032 170,194
----------- -----------
OTHER ASSETS
Patents, net 49,416 18,789
----------- -----------
TOTAL ASSETS $ 1,267,319 $ 1,448,253
=========== ===========
See Notes to Financial Statements.
3
<PAGE>
CELOX LABORATORIES, INC.
BALANCE SHEET
February 28, August 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 12,716 $ 26,321
Accrued liabilities 34,546 31,246
Bank note payable 86,817 94,879
----------- -----------
Total current liabilities 134,079 152,446
----------- -----------
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 (4,145,938) (3,983,371)
----------- -----------
Total shareholders' equity 1,133,240 1,295,807
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 1,267,319 $ 1,448,253
=========== ===========
See Notes to Financial Statements.
4
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 28,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Net sales $ 56,296 $ 40,032 $ 160,793 $ 125,737
Cost of products sold 28,126 22,227 76,930 61,894
- -----------------------------------------------------------------------------------------------------------
GROSS MARGIN 28,170 17,805 83,863 63,843
- -----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 14,198 14,448 30,418 34,242
Marketing and sales 61,405 44,789 106,848 75,129
Administration 60,037 93,613 138,377 174,629
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 135,640 152,850 275,643 284,000
OPERATING LOSS (107,470) (135,045) (191,780) (220,157)
OTHER INCOME
Interest and investment income 12,762 16,245 27,258 35,819
Other income 1,239 0 5,489 1,041
Interest expense (1,701) 0 (3,534) 0
- -----------------------------------------------------------------------------------------------------------
Total other income, net 12,300 16,245 29,213 36,860
NET LOSS ($ 95,170) ($ 118,800) ($ 162,567) ($ 183,297)
===========================================================================================================
BASIC LOSS PER COMMON SHARE ($ 0.03) ($ 0.04) ($ 0.06) ($ 0.07)
DILUTED LOSS PER COMMON SHARE ($ 0.03) ($ 0.04) ($ 0.06) ($ 0.07)
- -----------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,742,169 2,742,169 2,742,169 2,742,169
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Common Stock Additional
------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31,1996 2,742,169 $27,422 $5,251,756 ($3,594,898) $1,684,280
Net loss for the period (388,473) (388,473)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31,1997 2,742,169 $27,422 $5,251,756 ($3,983,371) $1,295,807
Net loss for the period (162,567) (162,567)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 28,1998 2,742,169 $27,422 $5,251,756 ($4,145,938) $1,133,240
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Six months ended
February 28, February 28,
1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ($162,567) ($183,297)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 23,205 17,363
Deferred rent expense 0 (773)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (32,913) 49,768
Accrued interest receivable 9,192 13,658
Inventories (5,818) 25,942
Prepaid expenses (2,705) (5,845)
Increase (decrease) in:
Accounts payable (13,605) (18,811)
Accrued liabilities 3,300 18,275
- ------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (181,911) (83,720)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of bank certificates of deposit, net 85,752 231,450
Investment in ViaStem(TM) patent (31,455) 0
Proceeds from investor settlement receivable 15,807 57,329
Capital expenditures (11,215) 0
- ------------------------------------------------------------------------------------------------------------
Net cash from investing activities 58,889 288,779
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on bank note payable (8,062) 0
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (8,062) 0
Net increase (decrease) in cash
and cash equivalents (131,084) 205,059
CASH AND CASH EQUIVALENTS:
Beginning of period 408,274 420,222
- ------------------------------------------------------------------------------------------------------------
End of period $ 277,190 $ 625,281
============================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
CELOX LABORATORIES, INC,
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 1998
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, 1997 Form 10-KSB.
This quarterly report should be read in connection with such annual report.
NOTE B - FORWARD LOOKING INFORMATION
Information contained in this Form 10-QSB contains " forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may", "will", "expect", "plan", "anticipate", "estimate" or "continue" or
the negative thereof or other variations thereon or comparable terminology.
There are certain important factors that could cause results to differ
materially from those anticipated by some of these forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty. The factors, among others, that could cause actual results to
differ materially include the Company's ability to execute its business plan.
NOTE C - 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.
8
<PAGE>
NOTE D - SHORT-TERM INVESTMENT
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 28,1998 the Company had investments of
$651,367 in Certificates of deposit. Certificates of deposit are made only with
the highest rated banks. The Company also utilizes a money market fund, which is
restricted by its charter to Tier 1 instruments, for a portion of its
investments. At times throughout the year, the Company's cash, cash equivalents
and certificates of deposit in financial institutions may exceed FDIC insurance
limits. The Company has not experienced any losses in such accounts.
NOTE E - NOTES PAYABLE BANK
During April, 1997 the Company borrowed $100,000 from a local bank with the
proceeds used for financing a portion of the tenant improvements in the
Company's new facility. The loan is secured by a certificate of deposit at this
bank. The interest rate for this loan, currently 7.5%, is tied to the
certificate of deposit rate. The loan was renewed in February, 1998.
NOTE F - 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 28,1998 the
Company had repurchased 136,700 shares at prices ranging from $0.85 to $1.58 per
share.
NOTE G - LOSS PER COMMON SHARE
Basic loss per share is computed based upon the weighted average number of
common shares outstanding during the period. Stock options for 244,000 shares
were not included in the computation of diluted loss per share as the results
were antidilutive. Implementation of SFAS No. 128 in fiscal 1998 had no effect
on previously reported EPS.
9
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Celox Laboratories, Inc. ("Celox" or the "Company") is a cell therapy
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),
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 regents and a variety of custom
formulations.
The Company will introduce a new product in the third quarter of this
fiscal year. The product is a complete serum-free growth medium for human
embryonic kidney cells. These cells are frequently used by researchers and
manufacturers for growth of adenovirus as well for drug discovery and drug
delivery systems.
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. The Company has received indications from a
number of countries that a patent will be issued for ViaStem(TM) by their
respective patent offices.
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.
10
<PAGE>
The Company has received its first Drug Master File classification from
the Food and Drug Administration (FDA) for TCM(TM). This classification will
expedite the FDA approval process for customers who want to use the Company's
TCM(TM) 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(TM), 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 occurred in fiscal
1997.
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.
During November 1997 the Company entered into a non-exclusive distribution
agreement with TaKaRa Shuzo Co., Ltd., Biomedical Group, Kyoto,Japan. Under the
agreement, TaKaRa will initially market Celox's proprietary product
Cellvation(TM). TaKaRa's Biomedical Group leads the industry in several areas
owing to the international scope of its research operations which span from the
People's Republic of China to North America and Europe. TaKaRa will market
Cellvation(TM) in Japan, Taiwan, Korea, and People's Republic of China.
YEAR 2000 ISSUES
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000. The
Year 2000 issue affects virtually all companies and organizations.
Management is currently evaluating its reliance on both internal and external
systems with respect to the Year 2000 issues. At this time, Year 2000 issues are
not expected to materially affect the Company's products, services or
competitive condition.
11
<PAGE>
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, 1998 the
Investor Settlement Receivable is $6,639.
During the quarter ended February 28, 1998, the Company had net sales of
$56,296 which was an increase of $16,264 or 41% from $40,032 reported in the
same quarter for the prior year. For the six months ended February 28, 1998 net
sales totaled $160,793, versus $125,737 for the six months ended February 28,
1997. This represents an increase of 28% from the previous period. The increase
in between years for the quarter results from a combination of increased
interest in the Company's serum replacement products along with the amount and
timing of distributors orders. The increase for the six months is due to the
aforementioned interest in serum replacements as well as orders from a large
manufacturer.
The Company had a net loss of $95,170 for the quarter ended February 28,
1998 compared to a net loss of $118,800 for the same period in the previous
year. For the six month period, a net loss of $162,567 was incurred in fiscal
1998 as compared to a net loss of $183,297 in fiscal 1997. On a per share basis,
the loss for the current quarter equaled 3 cents versus a 4 cent loss in the
comparable period in fiscal 1997. For the six months ended February 28, 1998 the
net loss per share was 6 cents compared to a net loss of 7 cents per share in
the prior year.
The cost of products sold was 50% of net sales for the three months ended
February 28, 1998, as compared to 55% of net sales for the three months ended
February 28, 1997. For the six month period, cost of products sold was 48%
compared to 49% during the same period in the previous fiscal year. The decrease
in the cost of sales for each of the respective reporting periods is due
primarily to increased 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 also been consistently controlled.
An operating loss of $107,470 was generated for the quarter ended February
28, 1998 compared to an operating loss of $135,045 for the same period in the
previous year. For the six months ended February 28, 1998 the Company had an
operating loss of $191,780 versus a loss of $220,157 for the six months ended
February 28, 1997. The decrease between years for both reporting periods is due
to an increase in sales, and reduced operating expenses.
12
<PAGE>
The Company received interest and investment income of $12,762 during the
quarter ended February 28, 1998 as compared to $16,245 in the prior year.
Interest and investment income for the six month period was $27,258 in fiscal
1998 compared to $35,819 for the same period in 1997. 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 well as for the six month period, 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.
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 $17,210 (11%) to $135,640 from $152,850 for
the quarter ended February 28, 1998 and decreased by $8,357 (3%) to $275,643
from $284,000 for the six months ended February 28, 1998 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 administrative
expenditures offset by higher marketing and sales expense.
Research and development costs decreased by $250 (2%) to $14,198 from
$14,448 in the current quarter as compared to the previous fiscal year. For the
comparative six month periods, research and development expenses decreased by
$3,824 (11%) to $30,418 from $34,242. 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). Both the three month and six
month reporting periods were also impacted by the capitalization of previously
expensed patent costs associated with the international patent on ViaStem(TM).
Marketing expenses increased by $16,616 (37%) to $61,405 from $44,789 for
the quarter ended February 28, 1998 and by $31,719 (42%) to $106,848 from
$75,129 for the six months then ending as compared to the comparable periods in
fiscal 1997. The increases are attributed to the amount and timing of
advertising, and promotional materials between years. As was disclosed in
previous Company filings, the Company had instituted a focused advertising and
marketing strategy and therefore marketing and sales expenses were expected to
increase as programs and advertising materials were developed.
Administrative expenses decreased by $33,576 (36%) for the quarter ended
February 28, 1998 compared to the previous fiscal year to $60,037 from $93,613.
For the six months ended February 28, 1998 administrative expenses decreased by
$36,252 (21%) to $138,377 from $174,629 in the prior year. The decrease between
years is primarily due to moving expenses incurred in fiscal 1997 as part of the
Company's move to the new facility as well as a reduction in salary expense and
related payroll taxes in the current fiscal year.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital resources on hand at February 28, 1998 include cash and short-term
investments of $928,557 and net working capital of $924,792. This represents a
decrease of $216,836 (19%) in cash and short-term investments and a decrease of
$182,032 (16%) in net working capital as compared to August 31, 1997.
The lease for the Company's previous facility terminated in October, 1996.
A new facility has been completed in St. Paul, Minnesota. 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 $50,000 in fiscal 1998 on
capital expenditures. Through February 28, 1998 the Company has made capital
expenditures, in the amount of $11,215. The majority of the planned expenditures
will be used to fund additional sales, research , development and manufacturing
growth.
The Company believes that its capital resources on hand at February 28,
1998, together with revenues from product sales, will be sufficient to meet its
cash requirements for the near future. The Company intends to raise additional
capital during the third quarter of this fiscal year through a private
placement, subject to the prevailing market conditions. The additional funds
raised will be primarily used for advancing ViaStem(TM) through the necessary
testing required before FDA approval can be obtained. There is no guarantee
however, that the Company will be able to successfully raise these additional
funds. In addition there can be no assurance that the Company will be able to
obtain the necessary FDA approvals.
14
<PAGE>
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. The Company expects that attorneys for the Plantiffs in this action
will appeal the decision of the federal court in Minneapolis to grant partial
summary judgement to KPMG Peat Marwick.
On November 21,1996, the Company filed a lawsuit in Hennepin County Court,
in the State of Minnesota, against its former landlord claiming, among other
things, that the landlord repeatedly violated the terms of the lease agreement.
Subsequently, the former landlord filed a countersuit which alleged the Company
failed to leave the leased premises in the condition required by the lease.
During March, 1998 the parties reached an out of court settlement of this
lawsuit. Settlement amounts are immaterial to the financial statements.
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
Exhibit 27
(B) REPORTS ON FORM 8-K
None
15
<PAGE>
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 7, 1998 By: /s/ Milo R. Polovina
---------------------------------
Milo R. Polovina, President &
Principal Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883720
<NAME> CELOX LABORATORIES INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 277,190
<SECURITIES> 651,367
<RECEIVABLES> 59,475
<ALLOWANCES> 0
<INVENTORY> 52,673
<CURRENT-ASSETS> 1,058,871
<PP&E> 410,419
<DEPRECIATION> 251,387
<TOTAL-ASSETS> 1,267,319
<CURRENT-LIABILITIES> 134,079
<BONDS> 0
0
0
<COMMON> 27,422
<OTHER-SE> 1,105,818
<TOTAL-LIABILITY-AND-EQUITY> 1,267,319
<SALES> 160,793
<TOTAL-REVENUES> 160,793
<CGS> 76,930
<TOTAL-COSTS> 183,778
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (162,567)
<INCOME-TAX> 0
<INCOME-CONTINUING> (162,567)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (162,567)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
