-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jo/gxxkjQWDeWfypv+qWYDxSwSXXPaRQxW/LT0sM8WV5LAWO1ZP3rJKca9ihnxXy c80YTE0Rxy7452FuaHp+OQ== 0000897101-99-000387.txt : 19990415 0000897101-99-000387.hdr.sgml : 19990415 ACCESSION NUMBER: 0000897101-99-000387 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CELOX LABORATORIES INC CENTRAL INDEX KEY: 0000883720 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 363384240 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-19866 FILM NUMBER: 99593590 BUSINESS ADDRESS: STREET 1: 1311 HELMO AVE CITY: ST PAUL STATE: MN ZIP: 55128 BUSINESS PHONE: 6127301500 MAIL ADDRESS: STREET 1: 1311 HELMO AVE CITY: ST PAUL STATE: MN ZIP: 55128 FORMER COMPANY: FORMER CONFORMED NAME: CELOX CORPORATION DATE OF NAME CHANGE: 19930328 10QSB 1 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 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 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 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 CELOX LABORATORIES, INC. STATEMENT OF OPERATIONS (Unaudited)
- ------------------------------------------------------------------------------------------------------------ Three months ended Six months ended February 28, February 28, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------ 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 ============================================================================================================
See Notes to Financial Statements. 5 CELOX LABORATORIES, INC. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
- ------------------------------------------------------------------------------------------------------------- Common Stock Additional ------------------------- Paid-in Accumulated Shares Amount Capital Deficit Total - ------------------------------------------------------------------------------------------------------------- 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
See Notes to Financial Statements. 6 CELOX LABORATORIES, INC. STATEMENT OF CASH FLOWS (Unaudited)
- ----------------------------------------------------------------------------------------------------------- Six months ended February 28, ---------------------------- 1999 1998 - ----------------------------------------------------------------------------------------------------------- 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 ===========================================================================================================
See Notes to Financial Statements. 7 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 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 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 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 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 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 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 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 EX-27 2 ARTICLE 5 - FINANCIAL DATA SCHEDULE
5 6-MOS AUG-31-1999 FEB-28-1999 330,845 364,873 24,277 0 38,925 784,650 446,281 297,742 990,298 117,475 0 28,692 0 0 844,131 990,298 92,350 92,350 42,501 92,048 203,752 0 2,339 (181,180) 0 (181,180) 0 0 0 (181,180) (0.07) (0.07)
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