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 MAY 31, 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
JUNE 30, 1999 WAS 2,909,169.
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
May 31, 1999
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION Page
<S> <C> <C>
ITEM 1. Financial Statements
Balance Sheet as of August 31, 1998
and May 31, 1999 3
Statement of Operations -- Three months ended May 31,
1999 and May 31, 1998, and nine months
ended May 31, 1999 and May 31, 1998 5
Statement of Changes in Shareholders' Equity
for the year ended August 31, 1998 and the
nine months ended May 31, 1999 6
Statement of Cash Flows -- Nine months ended
May 31, 1999 and May 31, 1998 7
Notes to Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 9
PART II -- OTHER INFORMATION 14
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CELOX LABORATORIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
May 31, August 31,
ASSETS 1999 1998
----------- ---------
(Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 237,350 $ 350,120
Certificates of deposit 364,873 459,436
Trade receivables 27,802 18,849
Officer note receivable 10,168 0
Accrued interest receivable 16,154 10,560
Inventories 49,702 45,075
Prepaid expenses 3,074 1,830
--------- -----------
Total current assets 709,123 885,870
--------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Laboratory and production equipment 219,724 219,724
Office furniture and equipment 93,360 88,131
Leasehold improvements 138,426 138,426
--------- -----------
451,510 446,281
Less accumulated depreciation (309,576) (274,597)
--------- -----------
141,934 171,684
OTHER ASSETS
Patents, net 56,233 58,860
--------- -----------
TOTAL ASSETS $ 907,290 $ 1,116,414
========= ===========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
CELOX LABORATORIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
May 28, August 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 17,256 $ 10,326
Accrued liabilities 30,592 27,746
Bank note payable - current 76,751 82,139
----------- -----------
Total current liabilities 124,599 120,211
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 29,092 27,442
Additional contributed capital 5,312,486 5,254,736
----------- -----------
5,341,578 5,282,178
Accumulated deficit (4,558,887) (4,285,975)
----------- -----------
Total shareholders' equity 782,691 996,203
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 907,290 $ 1,116,414
=========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Net sales $56,826 $61,648 $149,176 $222,441
Cost of products sold 22,505 28,878 65,006 105,808
- -----------------------------------------------------------------------------------------
GROSS MARGIN 34,321 32,770 84,170 116,633
- -----------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 39,056 39,435 132,147 69,853
Marketing and sales 34,835 31,335 89,082 138,183
Administration 58,575 45,806 164,536 184,183
- -----------------------------------------------------------------------------------------
Total operating expenses 132,466 116,576 385,765 392,219
OPERATING LOSS (98,145) (83,806) (301,595) (275,586)
OTHER INCOME (EXPENSE)
Interest and investment income 7,112 8,130 23,667 35,388
Other income 375 1,003 8,429 6,492
Interest expense (1,074) (1,189) (3,413) (4,723)
- -----------------------------------------------------------------------------------------
Total other income, net 6,413 7,944 28,683 37,157
NET LOSS ($91,732) ($75,862) ($272,912) ($238,429)
=========================================================================================
BASIC AND DILUTED LOSS PER
COMMON SHARE ($0.03) ($0.03) ($0.10) ($0.09)
- -----------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,895,691 2,742,836 2,795,689 2,742,373
=========================================================================================
</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 165,000 1,650 57,750 59,400
Net loss for the period (272,912) (272,912)
- ---------------------------------------------- -----------------------------------------------------------
BALANCE AT MAY 31, 1999 2,909,169 $29,092 $5,312,486 ($4,558,887) $782,691
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
CELOX LABORATORIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
May 31,
------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ($272,912) ($162,567)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 37,606 23,205
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (8,953) (32,913)
Accrued interest receivable (5,594) 9,192
Inventories (4,627) (5,818)
Prepaid expenses (1,244) (2,705)
Officer note receivable (10,168) 0
Increase (decrease) in:
Accounts payable 6,930 (13,605)
Accrued liabilities 2,846 3,300
- --------------------------------------------------------------------------------------------------------
Net cash used in operating activities (256,116) (181,911)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of bank certificates of deposit, net 94,563 85,752
Investment in ViaStemTM patent 0 (31,455)
Proceeds from investor settlement receivable 0 15,807
Capital expenditures (5,229) (11,215)
- --------------------------------------------------------------------------------------------------------
Net cash from investing activities 89,334 58,889
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
Issuance of common stock 59,400 0
Principal payments on bank note payable (5,388) (8,062)
- --------------------------------------------------------------------------------------------------------
Net cash from(used in) financing activities 54,012 (8,062)
Net decrease in cash
and cash equivalents (112,770) (131,084)
CASH AND CASH EQUIVALENTS:
Beginning of period 350,120 408,274
- --------------------------------------------------------------------------------------------------------
End of period $ 237,350 $ 277,190
========================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
CELOX LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- MAY 31, 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 - 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
As of May 31,1999 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 D - 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 E - 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 212,000 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.
8
<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 two cell freezing
solutions, Cellvation(TM) and a newly introduced product, pZerve(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 an enzyme such as 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. The Company intends to obtain IN VITRO
diagnostic status for HemaPro(TM). pZerve(TM) was introduced in 1999 and is used
primarily for cryopreserving human cells. pZerve(TM) is used as a research
product only, it is not for human use. An additional proposed clinical product,
ViaStem(TM), has completed 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 several of 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.
In February, 1999 the Company announced the formation of Protide
Pharmaceuticals, Inc., (Protide), a wholly owned subsidiary. Celox owns all of
the four million outstanding shares of Protide. Protide was formed in connection
with the further development of ViaStem(TM) and other clinically related cell
therapy and transfusion products.
9
<PAGE>
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.
c. DISTRIBUTION/MARKETING
The Company has a non-exclusive world-wide distribution agreement with ICN
Pharmaceuticals, Inc. (NYSE:ICN), 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 Company's basal media and balanced salt solutions 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 (NASDAQ:SIAL), St. Louis, MO. 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 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.
10
<PAGE>
The Company also anticipates that certain of its computer hardware will not
be year 2000 compliant. As a result, in fiscal 1999, capital expenditures will
include replacement computers. 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.
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.
RESULTS OF OPERATIONS
During the quarter ended May 31, 1999, the Company had net sales of $56,826
which was a decrease of $4,822 or 8% from $61,648 reported in the same quarter
for the prior year. For the nine months ended May 31, 1999 net sales totaled
$149,176 versus $222,441 for the nine months ended May 31, 1998. This represents
a decrease of 33% from the previous period. The decreases between years for both
the quarter and the nine month period results primarily from the amount and
timing of custom orders as well as orders received from distributors and
customers. In addition the Company has discontinued some products.
The Company had a net loss of $91,732 for the quarter ended May 31, 1999
compared to a net loss of $75,862 for the same period in the previous year. For
the nine month period, a net loss of $272,912 was incurred in fiscal 1999 as
compared to a net loss of $238,429 in fiscal 1998. On a per share basis, the
loss for the current quarter equaled 3 cents versus a 3 cent loss in the
comparable period in fiscal 1998. For the nine months ended May 31, 1999 the net
loss per share was 10 cents. The loss reported for in the comparable period in
fiscal 1998 was 9 cents.
The cost of products sold was 40% of net sales for the three months ended
May 31, 1999, as compared to 47% of net sales for the three months ended May 31,
1998. For the nine month period ending May 31, 1999, cost of products sold was
44% 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 $98,145 was generated for the quarter ended May 31,
1999 compared to an operating loss of $83,806 for the same period in the
previous year. For the nine months ended May 31, 1999 the Company had an
operating loss of $301,595 versus an operating loss of $275,586 for the nine
months ended May 31, 1998. The increase between years for the three month
reporting period resulted from increased administrative and marketing and sales
expenses offset by modest decrease research and development expense as compared
to the previous year. The increase for the nine months ended May 31, 1999 as
compared to the nine months ended May 31, 1998 results from a decrease in sales
which is partially offset by decreased operating expenses.
11
<PAGE>
The Company received interest and investment income of $7,112 during the
quarter ended May 31, 1999 as compared to $8,130 in the prior year. For the nine
month reporting period in fiscal 1999 interest and investment income in the
amount of $23,667 was received as compared to $35,388 for the prior nine 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 nine 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 increased $15,890 (14%) to $132,466 from $116,576 for
the quarter ended May 31, 1999 as compared to the prior year and decreased by
$6,454 (2%) to $385,765 from $392,219 for the nine months ended May 31, 1999
compared to the comparable period in the prior fiscal year. The increase for the
three month reporting period as compared to the prior fiscal year results from
higher marketing and sales costs which fluctuate based on timing of promotional
activities, as well as increased general and administrative expenses. For the
nine months ended May 31, 1999 the decrease between reporting periods results
from lower marketing and sales expenses as well as lower administrative expenses
offset by increased research and development expenses.
Research and development costs decreased by $379 (1%) to $39,056 from
$39,435 in the current quarter as compared to the previous fiscal year. For the
nine month period ended May 31, 1999 research and development costs increased
$62,294 to $132,147 from $69,853 in the previous fiscal year. The increase for
the nine month reporting period 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. The Company expects the costs of
research and development to fluctuate based on the status of preclinical and
clinical trials for ViaStem(TM) .
Marketing expenses increased by $3,500 (11%) to $34,835 from $31,335 for
the quarter ended May 31, 1999 as compared to the previous year. For the nine
months ended May 31, 1999 marketing expenses decreased by $49,101 (36%) to
$89,082 from $138,183 in fiscal 1998. The increase for the current quarter as
compared to the previous year results primarily from market analysis costs
associated with ViaStem(TM). The decrease for the nine month period 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 increased by $12,769 (28%) for the quarter ended
May 31, 1999 compared to the previous fiscal year to $58,575 from $45,806.
Administrative expenses decreased by $19,647 (11%) in the nine months ended May
31, 1999 to $164,536 from $184,183 in the comparable period in fiscal 1998. The
increase for the three month reporting period is due to the timing of legal
expenditures connected with the introduction of new products and certain matters
related to ViaStem(TM). The decrease between years for the nine month reporting
period is due to reduced salaries and related payroll taxes.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital resources on hand at May 31, 1999 include cash and short-term
investments of $602,223 and net working capital of $584,524. This represents a
decrease of $207,333 (26%) in cash and short-term investments and a decrease of
$181,135 (24%) in net working capital as compared to August 31, 1998.
The Company is leasing approximately 9,500 square feet of office,
laboratory and warehouse space in St. Paul, MN under a seven year lease. The
Company moved into the new facility during March, 1997. 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.
Through the nine months ended May 31, 1999 the Company has raised $59,400
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 were sold 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 remainder 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 $20,000 during the balance
of fiscal 1999 on capital expenditures. Through May 31, 1999 the Company has
made capital expenditures in the amount of $5,229. 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 May 31, 1999 together with
revenues from product sales, will be sufficient to meet its cash requirements
for the near future.
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 obtain FDA approval for its
clinical products as well as the ability to execute its business plan.
13
<PAGE>
PART II -- OTHER INFORMATION
ITEM I. -- LEGAL PROCEEDINGS
In fiscal 1995 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.
The Company is not presently involved in any other 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
14
<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: July 12, 1999 By: /S/ Milo R. Polovina
-----------------------------------------
Milo R. Polovina, President & CEO
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883720
<NAME> CELOX LABORATORIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> MAY-28-1999
<CASH> 237,350
<SECURITIES> 364,873
<RECEIVABLES> 27,802
<ALLOWANCES> 0
<INVENTORY> 49,702
<CURRENT-ASSETS> 709,123
<PP&E> 451,510
<DEPRECIATION> 309,576
<TOTAL-ASSETS> 907,290
<CURRENT-LIABILITIES> 124,599
<BONDS> 0
0
0
<COMMON> 29,092
<OTHER-SE> 782,691
<TOTAL-LIABILITY-AND-EQUITY> 907,290
<SALES> 149,176
<TOTAL-REVENUES> 149,176
<CGS> 65,006
<TOTAL-COSTS> 154,088
<OTHER-EXPENSES> 296,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,413
<INCOME-PRETAX> (272,912)
<INCOME-TAX> 0
<INCOME-CONTINUING> (272,912)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (272,912)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
