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, 1999 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, SAINT PAUL, MINNESOTA 55128
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code: (651) 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, 1999 WAS 2,869,169.
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, 1999
PART I -- FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Balance Sheet as of August 31, 1998
and February 28, 1999 3
Statement of Operations -- Three months ended February
28, 1999 and February 28, 1998, and six months ended
February 28, 1999 and
February 28, 1998 5
Statement of Changes in Shareholders' Equity
for the year ended August 31, 1998 and the
six months ended February 28, 1999 6
Statement of Cash Flows -- Six months ended
February 28, 1999 and February 28, 1998 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 15
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CELOX LABORATORIES, INC.
BALANCE SHEET
February 29, August 31,
ASSETS 1999 1998
----------- -----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 330,845 $ 350,120
Certificates of deposit 364,873 459,436
Trade receivables 24,277 18,849
Officer note receivable 10,466 0
Accrued interest receivable 12,936 10,560
Inventories 38,295 45,075
Prepaid expenses 2,958 1,830
----------- -----------
Total current assets 784,650 885,870
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Laboratory and production equipment 219,724 219,724
Office furniture and equipment 88,131 88,131
Leasehold improvements 138,426 138,426
----------- -----------
446,281 446,281
Less accumulated depreciation (297,742) (274,597)
----------- -----------
148,539 171,684
OTHER ASSETS
Patents, net 57,109 58,860
----------- -----------
TOTAL ASSETS $ 990,298 $ 1,116,414
=========== ===========
See Notes to Financial Statements.
3
<PAGE>
CELOX LABORATORIES, INC.
BALANCE SHEET
February 28, August 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
----------- -----------
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable $ 8,624 $ 10,326
Accrued liabilities 30,873 27,746
Bank note payable - current 77,978 82,139
----------- -----------
Total current liabilities 117,475 120,211
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 28,692 27,442
Additional contributed capital 5,311,286 5,254,736
----------- -----------
5,339,978 5,282,178
Accumulated deficit (4,467,155) (4,285,975)
----------- -----------
Total shareholders' equity 872,823 996,203
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 990,298 $ 1,116,414
=========== ===========
See Notes to Financial Statements.
4
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 28,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 43,809 $ 56,296 $ 92,350 $ 160,793
Cost of products sold 20,104 28,126 42,501 76,930
- ------------------------------------------------------------------------------------------------------------
GROSS MARGIN 23,705 28,170 49,849 83,863
- ------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 47,673 14,198 93,091 30,418
Marketing and sales 29,604 61,405 54,247 106,848
Administration 50,041 60,037 105,961 138,377
- ------------------------------------------------------------------------------------------------------------
Total operating expenses 127,318 135,640 253,299 275,643
OPERATING LOSS (103,613) (107,470) (203,450) (191,780)
OTHER INCOME (EXPENSE)
Interest and investment income 7,572 12,762 16,555 27,258
Other income 150 1,239 8,054 5,489
Interest expense (1,156) (1,701) (2,339) (3,534)
- ------------------------------------------------------------------------------------------------------------
Total other income, net 6,566 12,300 22,270 29,213
NET LOSS ($ 97,047) ($ 95,170) ($ 181,180) ($ 162,567)
============================================================================================================
BASIC AND DILUTED LOSS PER
COMMON SHARE ($ 0.04) ($ 0.03) ($ 0.07) ($ 0.06)
- ------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,742,447 2,742,169 2,742,307 2,742,169
============================================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1997 2,742,169 $ 27,422 $ 5,251,756 ($3,983,371) $ 1,295,807
Options exercised 2,000 20 2,980 3,000
Net loss for the year (302,604) (302,604)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1998 2,744,169 $ 27,442 $ 5,254,736 ($4,285,975) $ 996,203
Shares issued in
private placement 125,000 1,250 56,550 57,800
Net loss for the period (181,180) (181,180)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 28, 1999 2,869,169 $ 28,692 $ 5,311,286 ($4,467,155) $ 872,823
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six months ended
February 28,
----------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ($ 181,180) ($ 162,567)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 24,896 23,205
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (5,428) (32,913)
Accrued interest receivable (2,376) 9,192
Inventories 6,780 (5,818)
Prepaid expenses (1,128) (2,705)
Officer note receivable (10,466) 0
Increase (decrease) in:
Accounts payable (1,702) (13,605)
Accrued liabilities 3,127 3,300
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (167,477) (181,911)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of bank certificates of deposit, net 94,563 85,752
Investment in ViaStem(TM) patent 0 (31,455)
Proceeds from investor settlement receivable 0 15,807
Capital expenditures 0 (11,215)
- -----------------------------------------------------------------------------------------------------------
Net cash from investing activities 94,563 58,889
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
Issuance of common stock 57,800 0
Principal payments on bank note payable (4,161) (8,062)
- -----------------------------------------------------------------------------------------------------------
Net cash used in financing activities 53,639 (8,062)
Net decrease in cash
and cash equivalents (19,275) (131,084)
CASH AND CASH EQUIVALENTS:
Beginning of period 350,120 408,274
- -----------------------------------------------------------------------------------------------------------
End of period $ 330,845 $ 277,190
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
CELOX LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 1999
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, 1998 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 INVESTMENTS
As of February 28,1999 the Company had investments of $364,873 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 5.6%, is tied to the
certificate of deposit rate. The loan was renewed for a one-year term in
February, 1999.
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 28,1999 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 227,000 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
a. BACKGROUND AND PRODUCTS
Celox Laboratories, Inc. ("Celox" or the "Company") is a cell technology
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.
The Company markets over 30 different products. The Company's proprietary
products consist of six different serum-free supplements: TCM(TM), TM-235(TM),
TCH(TM), Nephrigen(TM), HemaPro(TM) and VaxMax(TM)and a cell freezing medium,
Cellvation(TM). VaxMax(TM), introduced in September of 1993, was developed
specifically for use in the production of veterinary vaccines. Nephrigen(TM) was
introduced in fiscal 1998 and is a serum-free growth medium developed
specifically for the culturing of Human Embryonic Kidney (293) cells. As part of
the Nephrigen(TM) system, the Company also introduced a non-enzymatic
dissociation solution that is used instead of trypsin. HemaPro(TM) was also
introduced in fiscal 1998 and is a low protein, serum-free medium for clonogenic
assays or EX VIVO expansion of human progenitor cells. An additional proposed
product, ViaStem(TM), continues to undergo further analysis in preclinical
testing. This product was developed to improve the preservation of critical
cells (e.g., stem cells), which are required for bone marrow transplantation.
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.
The Company also manufactures eleven basal media formulations, a series of
buffered saline solutions, other cell biology reagents, and a variety of custom
formulations.
b. VIASTEM(TM)
In March 1995, the Company filed a patent application for ViaStem(TM) with
the U.S. Patent and Trademark Office. The Company received the U.S. Patent in
early December 1996. This patent provides protection of the Company's
ViaStem(TM) technology through March of 2015. A second U.S. Patent was received
in August, 1998. This second patent broadened the patented uses of ViaStem(TM)
in bone marrow transplantation and related therapies. The Company has also filed
the documents needed for an International Patent Application as required by the
Patent Cooperation Treaty. In October, 1998 the Company received notice from the
New Zealand and Australia Patent Office that a patent on ViaStem(TM) had been
granted by each of the respective countries. In March, 1999 the Company received
notice from the Japan Patent Office that a patent had been granted in Japan.
Initial reports from other countries that have reviewed the International Patent
Application have been positive. Due to the unique nature of ViaStem(TM)and its
applications, the Company pursued the patent process for this product.
10
<PAGE>
c. DISTRIBUTION/MARKETING
The Company has a non-exclusive world-wide distribution agreement with ICN
Pharmaceuticals, Inc., Costa Mesa, CA. Under the agreement, ICN is marketing
Celox' TCM(TM), TCH(TM), TM-235(TM) serum replacement products as well as
Cellvation(TM). 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. 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.
In 1997, the Company began providing its proprietary products to Sigma
Chemical Company under a private label distribution agreement.
In 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' 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.
The Company also has distribution of its products in Japan through
Funakoshi Co., LTD, a well established Japanese distributor.
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 has been evaluating its reliance on both internal and external
systems with respect to the Year 2000 issues. The Company does not anticipate
any disruption to its internal manufacturing processes. However, there can be no
assurance that all Company vendors will be Year 2000 compliant. The Company
intends to utilize a select number of vendors in order to minimize this
potential problem.
The Company has determined that some of the older financial reporting
systems software recognizes the use of "00" to represent the year 1900 rather
than 2000. In order to correct these problems, it will be necessary for the
Company to purchase commercially available upgrades of the current systems. The
Company also anticipates that certain of its computer hardware will not be year
2000 compliant. As a result, in fiscal 1999, capital expenditures may include
replacement computers.
At this time, Year 2000 issues are not expected to materially affect the
Company's products, services or competitive condition, based on the current
evaluations. The anticipated cost to the Company to become Year 2000 compliant
is $20,000 or less.
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. In Fiscal 1998, the Company
received a final payment of $22,446 plus interest. The total payments received
exceeded the estimated recovery of $133,000 and the excess was credited to other
income. In September, 1998 a final check in the amount of $5,682 was received.
This payment represented a residual distribution of unclaimed funds and money
previously reserved for potential income tax liability on behalf of the
settlement fund.
A separate Class Action lawsuit against the Fund's auditors, KPMG Peat
Marwick, has been certified by the Court. The Company is a member of the Class
identified by the lawsuit, but it has not directly participated in the
litigation. The Company expects the attorneys for the plaintiffs will continue
to pursue this litigation in the federal court in Minneapolis. The ultimate
amount of the proceeds, if any, that the Company may receive as a result of this
matter is uncertain.
During the quarter ended February 28, 1999, the Company had net sales of
$43,809 which was a decrease of $12,487 or 22% from $56,296 reported in the same
quarter for the prior year. For the six months ended February 28, 1999 net sales
totaled $92,350 versus $160,793 for the six months ended February 28, 1998. This
represents a decrease of 43% from the previous period. The decreases between
years for both the quarter and the six month period results primarily from the
timing of orders received from distributors and customers.
The Company had a net loss of $97,047 for the quarter ended February 28,
1999 compared to a net loss of $95,170 for the same period in the previous year.
For the six month period, a net loss of $181,180 was incurred in fiscal 1999 as
compared to a net loss of $162,567 in fiscal 1998. On a per share basis, the
loss for the current quarter equaled 4 cents versus a 3 cent loss in the
comparable period in fiscal 1998. For the six months ended February 28, 1999 the
net loss per share was 7 cents. The loss reported for in the comparable period
in fiscal 1998 was 6 cents.
The cost of products sold was 46% of net sales for the three months ended
February 28, 1999, as compared to 50% of net sales for the three months ended
February 28, 1998. For the six month period ending February 28, 1999, cost of
products sold was 46% compared to 48% during the comparable period in the
previous fiscal year. The decrease for both of the reporting periods in fiscal
1999 results from strict cost controls over labor, raw materials and other
production costs. The mix of products sold also impacts the cost of sales
comparisons.
An operating loss of $103,613 was generated for the quarter ended February
28, 1999 compared to an operating loss of $107,470 for the same period in the
previous year. For the six months ended February 28, 1999 the Company had an
operating loss of $203,450 versus an operating loss of $191,780 for the six
months ended February 28, 1998. The decrease between years for the three month
reporting period resulted from reduced administrative and marketing and sales
expenses offset by increased research and development expense as compared to the
previous year. The increase for the six months ended February 28, 1999 as
compared to the six months ended February 28, 1998 results from a decrease in
sales which is partially offset by decreased operating expenses.
12
<PAGE>
The Company received interest and investment income of $7,572 during the
quarter ended February 28, 1999 as compared to $12,762 in the prior year. For
the six month reporting period in fiscal 1999 interest and investment income in
the amount of $16,555 was received as compared to $$27,258 for the prior six
month period. 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 the six month period compared to
the previous year results from reduced investment balances as the Company uses
capital in its operations, as well as lower effective interest rates received on
bank certificates of deposit.
Operating expenses decreased $8,322 (8%) to $127,318 from $135,640 for the
quarter ended February 28, 1999 as compared to the prior year and decreased by
$22,344 (8%) to $253,299 from $275,643 for the six months ended February 28,
1999 compared to the comparable periods in the prior fiscal year. The decrease
for both the three month and six month reporting periods as compared to the
prior fiscal year results from lower marketing and sales costs which fluctuate
based on timing of promotional activities, as well as lower general and
administrative expenses. Some of the reduction in these areas was offset, in
part, by increased research and development expenditures.
Research and development costs increased by $33,475 (235%) to $47,673 from
$14,198 in the current quarter as compared to the previous fiscal year. For the
six month period ended February 28, 1999 research and development costs
increased $62,673 to $93,091 from $30,418 in the previous fiscal year. The
increase for both of the reporting periods results from the timing of
expenditures in the areas of salaries and wages, professional fees and
preclinical testing incurred in connection with ViaStem(TM) product. In
February, 1999 the Company announced encouraging results from the preclinical
studies on ViaStem(TM). The Company expects the costs of research and
development to fluctuate based on the status of preclinical trials for
ViaStem(TM).
Marketing expenses decreased by $31,801 (52%) to $29,604 from $61,405 for
the quarter ended February 28, 1999 as compared to the previous year. For the
six months ended February 28, 1999 marketing expenses decreased by $52,601 (49%)
to $54,247 from $106,848 in fiscal 1998. The decrease for both of the reporting
periods is attributable to the amount and timing of catalog costs and other
marketing and promotional expenditures between years. This decrease was
partially offset by fees paid to a medical marketing and communications firm
that performed a market study on issues relating to bone marrow transplantation.
The Company expects that marketing and sales expenses will trend higher during
subsequent quarters as new studies, programs and advertising materials are
developed.
Administrative expenses decreased by $9,996 (17%) for the quarter ended
February 28, 1999 compared to the previous fiscal year to $50,041 from $60,037.
Administrative expenses decreased by $32,416 (23%) in the six months ended
February 28, 1999 to $105,961 from $138,377 in the comparable period in fiscal
1998. The decrease between years for both of the reporting periods is due to
reduced salaries and related payroll taxes and reduced legal expenditures.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital resources on hand at February 28, 1999 include cash and short-term
investments of $695,718 and net working capital of $667,175. This represents a
decrease of $113,838 (14%) in cash and short-term investments and a decrease of
$98,484 (13%) in net working capital as compared to August 31, 1998.
The lease for the Company's previous facility terminated in October, 1996.
A new facility has been completed in Saint Paul, Minnesota. The Company is
leasing approximately 9,500 square feet of office, laboratory and warehouse
space in this facility under a seven year lease. The Company moved into the new
facility during March, 1997. In the interim, the Company had leased office and
warehouse space on a month-to-month basis. As partial payment for tenant
improvements in the new facility, the Company borrowed $100,000 from a local
bank. The loan is secured by a certificate of deposit at the bank. The interest
rate for this loan (currently at 5.6%) is tied to the certificate of deposit
rate. The loan was renewed for a one year term with a maturity in February,
2000. The balance of the tenant improvements over this amount was paid with
Company funds.
In the second quarter of fiscal 1999 the Company raised $57,800 in
additional capital by selling 55,000 units at $1.00 per unit to five accredited
investors through a private placement. Each unit consisted of one share of
common stock and a warrant to purchase an additional two shares of common stock
at an exercise price of $0.04 per share. The units sold were at a premium to the
share price on the OTC Bulletin Board at the time of the placement. The
additional funds raised will be primarily used for advancing ViaStem(TM) through
the necessary testing before FDA approval can be obtained. The Company is
considering additional financing during the second half of fiscal 1999, subject
to prevailing market conditions. 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 for ViaStem(TM).
The Company anticipates spending approximately $60,000 during the balance
of fiscal 1999 on capital expenditures. Through February 28, 1999 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, as well as computer and software upgrades.
The Company believes that its capital resources on hand at February 28,
1999 together with revenues from product sales, will be sufficient to meet its
cash requirements for the near future.
14
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. -- LEGAL PROCEEDINGS
The Company is not presently involved in any material legal proceedings.
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
27 Financial Data Schedule
(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 12, 1999 By: /S/ Milo R. Polovina
-----------------------------------------
Milo R. Polovina, President & CEO
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 330,845
<SECURITIES> 364,873
<RECEIVABLES> 24,277
<ALLOWANCES> 0
<INVENTORY> 38,925
<CURRENT-ASSETS> 784,650
<PP&E> 446,281
<DEPRECIATION> 297,742
<TOTAL-ASSETS> 990,298
<CURRENT-LIABILITIES> 117,475
<BONDS> 0
<COMMON> 28,692
0
0
<OTHER-SE> 844,131
<TOTAL-LIABILITY-AND-EQUITY> 990,298
<SALES> 92,350
<TOTAL-REVENUES> 92,350
<CGS> 42,501
<TOTAL-COSTS> 92,048
<OTHER-EXPENSES> 203,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,339
<INCOME-PRETAX> (181,180)
<INCOME-TAX> 0
<INCOME-CONTINUING> (181,180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181,180)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
