UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 19981999
OR
[ ]TRANSITION] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number 0-12459
Biosynergy, Inc.
(Exact name of registrant as specified in its charter)
Illinois 36-2880990
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(State or other jurisdiction of(I.R.S.of (I.R.S. Employer
incorporation or organization)Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 956-0471
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------
Number of shares outstanding of common stock as of the close of the
period covered by this report: 13,806,511
Page 1 of the 1828 pages contained in the sequential numbering system.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Board of Directors and Shareholders
Biosynergy, Inc.
Elk Grove Village, Illinois
The accompanying Balance Sheet of BIOSYNERGY, INC. as at January 31, 19981999
and the related Statements of Operations, Shareholders' Equity (Deficit) and
Statements of Cash Flows for the three and nine month periods ended January
31, 19981999 and 19971998 were not audited; however, the financial statements for the
three and nine month periods ending January 31, 19981999 and 19971998 reflect all
adjustments (consisting only of normal reoccurring adjustments) which are, in
the opinion of management, necessary to provide a fair statement of the
results of operations for the interim periods presented.
The financial statements for the fiscal year ended April 30, 1997,1998, were
not audited due to the Company's lack of available cash to pay for such audit;
however, the financial statements for the fiscal year ending April 30, 19971998
reflect all adjustments (consisting only of normal reoccurring adjustments)
which are, in opinion of management, necessary to provide a fair statement of
the results of operations for the period presented.
BIOSYNERGY, INC.
March 9, 19985, 1999
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
January 31, 19981999 April 30,199730,1998
Unaudited Unaudited
------------------ ---------------
CURRENT ASSETS
Cash 18,746 12,42065,637 31,150
Accounts Receivable, Trade, Net of
Allowance for Uncollectible Accounts
of $500 at January 31, 19981999 and $500 at
April 30, 1997 78,472 61,0301998 74,641 75,955
Inventories (Notes 1 and 4) 49,095 45,95646,660 50,148
Short Term Note Due from Affiliate (Note 3) 2,200 -
Prepaid Expenses 5,822 2,2682,245 3,792
Total Current Assets 152,135 121,674191,383 161,045
DUE FROM AFFILIATE (Note 3) 306,118 291,795331,340 311,556
PROPERTY AND EQUIPMENT
Equipment 128,691 170,670 161,320
Leasehold Improvements 15,140 12,21615,140
143,831 185,810 173,536
Less: Accumulated Depreciation and
Amortization ( 164,783)129,320) ( 163,010)
21,027 10,526165,897)
14,511 19,913
OTHER ASSETS
Patents, Net of Accumulated
Amortization (Note 1) 22,704 25,53320,162 22,553
Deposits 5,995 6,0515,995
Investment in Affiliated Company (Note 3) - -
28,699 31,584
507,979 455,57926,157 28,548
563,391 521,062
--------- ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 10,103 12,8739,695 8,875
Accrued Executive Compensation 24,616 37,355 67,856
Other Accrued Compensation 6,880 2,1377,769 3,060
Accrued Payroll Taxes 559 791594 254
Deferred Rent 1,775 1,7511,807 1,783
Other Accrued Expenses 1,887 1,7362,247 1,949
Total Current Liabilities 58,559 87,14446,728 53,276
COMMITMENTS AND CONTINGENCIES (Note 7) - -
SHAREHOLDERS' EQUITY (Note 5)
Common Stock, No Par Value; 20,000,000 Shares
Authorized, Issued: 13,806,511
Shares at January 31, 19981999 and at April 30, 19971998 632,663 632,663
Additional paid-in capital 100 100
Accumulated Deficit (183,343) (264,328)
449,420 368,435
507,979 455,579(116,100) (164,977)
516,663 467,786
563,391 521,062
----------- ----------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
Unaudited
Three Months Ended Nine Months Ended
January 31, January 31,
1999 1998 19971999 1998
1997--------------------- -------------------
REVENUES
Sales 131,704 129,139 115,625409,332 403,014 380,661
Interest Income - 20 - 54
Computer Rentals and Services 150 150 450 450
Other Income 879 762 7722,365 2,192
6,669132,733 130,051 116,567412,147 405,656 387,834
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 50,863 47,164 48,176144,800 144,720 138,198
Research and Development 11,636 8,230 7,941 26,364 23,41433,081 23,364
Marketing 18,642 13,195 12,52554,439 37,477 39,814
General and Administrative 46,787 41,200 35,281130,769 115,868 107,293
Interest Expense -- 39- - 181 242
343127,928 109,789 103,962363,270 324,671 309,062
NET INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS 4,805 20,262 12,60548,877 80,985 78,772
INCOME TAXES 721 3,039 1,8917,332 15,246 14,693
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 4,084 17,223 10,71441,545 65,739 64,079
EXTRAORDINARY ITEMS
Reduction of Income Taxes
arising from utilization of
prior Years' Net Operating
Losses (Note 8) 721 3,039 1,8917,332 15,246 14,693
NET INCOME (LOSS) 4,805 20,262 12,60548,877 80,985 78,772
NET INCOME (LOSS) PER
COMMON SHARE (Note 6):
Before Extraordinary Items .0003 .0012 .0007.0030 .0048 .0046
Extraordinary Items .0000 .0002 .0001 .0011.0005 .0011
NET INCOME (LOSS) .0003 .0014 .0008.0035 .0059 .0057
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
(Note 6) 13,806,511 13,806,511 13,806,511 13,806,511
------------- -------------- ----------- --------------------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JANUARY 31, 19981999
Unaudited
Additional
Common Stock Paid-in
Shares Amount Capital Deficit Total
---------------------------------------------------------
Balance, May 1,
19971998 13,806,511 632,663 100 (264,328) 368,435(164,977) 467,786
Net Profit (Loss) - - - 80,985 80,98548,877 48,877
Balance, January 31,
19981999 13,806,511 632,663 100 (183,343) 449,420(116,100) 516,663
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
NINE MONTHS ENDED JANUARY 31,
1999 1998
1997------------------------------
OPERATING ACTIVITIES:
Net Income (Loss) 48,877 80,985 78,772
Adjustments to Reconcile Net Cash Used for
Operating Activities:
Depreciation and Amortization 5,732 4,602 3,419
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 1,314 (17,442) (10,750)
(Increase) Decrease in Inventories 3,488 ( 3,139) 7,191
(Increase) Decrease in Prepaid Expenses 1,547 ( 3,554) ( 535)
Increase (Decrease) in Accounts Payable
and Accrued Expenses ( 6,548) (28,585) (54,316)
Net Cash Provided (Used) by Operating
Activities 54,410 32,867 23,781
INVESTING ACTIVITIES:
(Increase) Decrease in Due From Affiliate ( 14,323)19,784) ( 15,197)14,323)
(Increase) Decrease in Deposits - 56
19(Increase) Decrease Short Term Note
Affiliate (Note 3) 2,200 -
(Increase) Decrease Equipment 2,061 ( 9,350) -
(Increase) Decrease Leasehold Improvements ( - ) ( 2,924) -
Net Cash Provided (Used) by Investing
Activities (26,541) ( 15,178)19,923) ( 26,541)
FINANCING ACTIVITIES:
Net Cash Provided (Used) by Financing
Activities - -
Increase (Decrease) in Cash and Cash
Equivalents 34,487 6,326 8,603
Cash and Cash Equivalents at Beginning
of Period 31,150 12,420 9,733
Cash and Cash Equivalents at End of Period 65,637 18,746
18,336
------------ ----------------------- ----------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1.Summary1. Summary of Significant Accounting Policies:
Inventories-InventoriesInventories - Inventories are valued at the lower of cost or market
using the FIFO
(first-in, first-out) method.method or market (using net realizable value).
Equipment and Leasehold Improvements-EquipmentImprovements - Equipment and Leaseholdleasehold improvements
are stated at cost. Depreciation and amortization areis computed primarily on the straight-line
method over the estimated useful lives of the respective assets. Repairs and
maintenance are charged to expense as incurred; renewals and betterments which
significantly extend the useful lives of existing property and
equipment are capitalized.
Significant leasehold improvements are capitalized and amortized over the term
of the lease.
Research and Development, and Patents-ResearchPatents - Research and development expenditures
are charged to operations as incurred. The cost of obtaining patents,
primarily legal fees, are capitalized and amortized over seventeen yearsthe life of the
respective patent on the straight-line method.
2. Company Organization and Description:
The CompanyBiosynergy, Inc. (Company) was incorporated under the laws of the State of
Illinois on February 9, 1976. It is primarily engaged in the development and
marketing of medical, consumer and industrial thermometric and thermographic
products that utilize cholesteric liquid crystals.products.
3. Related Party Transactions:
The Company and its affiliates are related through common stock ownership as
follows as of January 31, 1998:1999:
S T O C K O F A F F I L I A T E S
F.K. Suzuki
Stevia Biosynergy International Medlab
Stock Owner Company Inc. Inc. Inc.
- -------------------- ---------------------------------------------
Stevia Company, Inc. - 13.8% - -
Biosynergy, Inc. .4% - - -
F.K. Suzuki International, Inc. 55.8% 18.8% - 100%
Fred K. Suzuki, Officer - - 35.6% -
Lauane C. Addis, Officer .1% .1% 32.7% -
James F. Schembri, Director - 12.9% - -
Mary K. Friske, Officer - .1% .2% -
Laurence C. Mead, Officer .1% .1% 2.9% -
13.8% - -
Biosynergy, Inc. .4% - - -
F.K. Suzuki
International, Inc. 55.8% 18.8% - 100.0%
Fred K. Suzuki, - - 35.6% -
Officer and Director
Lauane C. Addis, .1% .1% 32.7% -
Officer and Director
James F. Schembri, - 12.9% - -
Director
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
Upon the completion of the Company's public offering on July 7, 1983, the
Company issued 2,000,000 shares of its no par value common stock, representing
19% of the outstanding common stock of the Company, in exchange for 1,058,181
shares of the common stock of Stevia Company, Inc., which was approximately
4.4% of the then outstanding common stock of Stevia Company, Inc. The common
stock of Stevia Company, Inc. had no book value at the time of the exchange
and, as a consequence, the Company recorded the exchange at zero dollar value.
The Company owned 130,403 shares of Stevia Company, Inc. Common Stock at
January 31, 1998.1999, representing a .4% interest in Stevia. Although the Common
Stock of Stevia Company, Inc. can be
tradedis tradeable in the over-the-counter market,
there is no established public trading market for such common stockCommon Stock due to
limited and sporadic trades. Furthermore, on December 8, 1998, Stevia
Company, Inc. Common Stock had an estimated
market price of less than $.01 asannounced it filed a Complaint for Judicial Dissolution. As of
January 31, 1998.1999, the bid price of the common stock of Stevia Company, Inc.
was estimated to be zero.
Common offices are shared with Stevia Company, Inc. Intercompany charges for
shared expenses are made by whichever company incurs such charges. Such
intercompany charges, together with funds advanced to Stevia in prior years,
have resulted in the following balances due
from Stevia Company, Inc.:balances:
April 30, 1998 - $298,335
January 31, 19981999 - $293,197
April 30, 1997 - $278,874$312,816
At April 30, 1997 and January 31, 1998,1999, the financial condition of Stevia Company, Inc. wasis such
that it is unlikely to be able to repay the Company during the currentnext year
without liquidating a portion of its assets. On December 8, 1998, Stevia
Company, Inc. announced it had filed a complaint for judicial dissolution in
the Circuit Court of Cook County, Chancery Division. Lauane C. Addis,
Secretary and General Counsel of the Company and Stevia Company, Inc., was
appointed interim receiver to sell certain assets of Stevia Company, Inc. It
is uncertain the amount, if any, of the proceeds from the sale of such assets
will be used to satisfy the unpaid intercompany charges owed to the Company.
The following balances were due from F.K. Suzuki International, Inc.
at the dates indicated based on the;
April 30, 1998 - $13,221
January 31, 1999 - $18,524
The balances result from an allocation of common expenses offset by advances
received from time to time:time. At January 31, 1998 - $12,921
April 30, 1997 - $12,921
At April 30, 1997 and January 31, 1998,1999, the financial condition of
F.K. Suzuki International, Inc. wasis such that it is unlikely to be able to
repay the Company during the currentnext year without liquidating a portion of its
assets.
See also
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
On August 31, 1998, the Company extended a line of credit to Stevia Company,
Inc. of $20,000 evidenced by a Note 5.payable on or before December 31, 1998,
which date has been extended to March 31, 1999, with 10% interest on the
unpaid principal balance. Proceeds of this line of credit are intended to be
used by Stevia Company, Inc. for expenses related to its dissolution. The
Note is secured by a first mortgage on a processing facility in Pueblo,
Colorado owned by Stevia Company, Inc. At January 31, 1999, the balance due
under the Note was $2,200.
4. Inventories:
Components of inventories are as follows:
January 31, 1998 April 30, 1997
Raw Materials $ 33,995 $ 30,583
Work-in process 8,390 10,257
Finished Goods 6,710 5,116
$ 49,095 $ 45,956
---------- ------------
5.Common
April 30, 1998 January 31, 1999
-------------- ------------------
Raw Materials $31,789 $27,933
Work-in process 16,049 11,624
Finished Goods 2,310 7,103
$50,148 $46,660
5. Common Stock:
The Company's stock is traded in the Over-The-Counter market. However, there
is no established public trading market due to limited and sporadic trades.
The Company's common stock is not listed on a recognized market or stock
exchange.
Effective January 31, 1990, the Company entered into an agreement with its
President, Fred K. Suzuki, pursuant to which the Company granted an option to
convert all or a portion of his accrued but unpaid compensation into shares of
the Company's no par value common stock at a conversion rate of $.05 per
share. The balance of Mr. Suzuki's deferred compensation was paid on May 7,
1998, and the option is
conditioned uponagreement expired by its terms.
On November 12, 1998, the Company having sufficient liquid assetsgranted an option to pay
all employee taxes due at the time of the conversion. The option
may be exercised until Mr. Suzuki is no longer owed accrued but
unpaid salary. The accrued but unpaid salary arose as a result of
Mr. Suzuki agreeing to defer his salary when the Company was not
financially able to pay salaries on a regular basis. The option
contains anti-dilutive provisions in the event of corporate capital
reorganizations. An aggregate of 60,000 shares of the Company's
common stock were subject to Mr. Suzuki's option at January 31,
1998.
On August 1, 1993, the Company entered into a Stock Option Agreement
withits President, Fred K.
Suzuki, President, granting Mr. Suzuki an option to purchase all or a portion of 3,000,000 shares of the Company's
common stock at an optiona purchase price of $0.025$.025 per share. This Stock Option Agreement was granted
to Mr. Suzuki in consideration of his loaning money to the Company
on an unsecured basis from time to time. The option contains anti-
dilutive provisions in the event of corporate capital
reorganizations.is subject to
several contingencies including, but not limited to, shareholder approval. As
of January 31, 1998,1999, no portion of this option has beenwas exercised.
The Company's common stock is traded in the over-the-counter market.
However, there is no established public trading market for such
common stock due to limited and sporadic trades. The Company's
common stock is not listed on a recognized market
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
6. Income or stock exchange.
6.Income (Loss) Per Share:Shares:
Net income or (loss) per common share is computed using the weighted average
number of common shares outstanding during the period, after giving effect to
stock splits. Fully diluted earnings per share,
assuming exerciseThe weighted average number of common shares outstanding were
13,806,511 at January 31, 1999 and April 30, 1998. The affect of conversion
of stock options ishas not been presented since
exercise of the optionsas conversion would be anti-dilutive.
7. Lease Commitments:
In 1997,1996 the Company entered into a new lease agreement for its current facilities
which expires January 31, 2001. The base rent under the lease, of which 15%
is allocated to Stevia Company, Inc., escalates over the life of the lease.
Total rent payments for each fiscal year are as follows:
Year ending April 30 Total Base Rent
--------------------- ---------------
1996 $11,00011,000
1997 $66,73366,733
1998 $68,20068,200
1999 $68,56768,567
2000 $69,30069,300
2001 $51,97551,975
Also included in the lease agreement are escalation clauses for the lessor's
increases in property taxes and other operating expenses. The lease can be
extended for an additional five year term.
8. Income Taxes:
At April 30, 1997,1998, net operating loss carryforwards were available and expire,
if not used, as follows:
Year EndingNetEnding Net Operating
April 30, Losses
1998$ 193,062------------ ---------------
1999 $ 677,671
2000 455,166
2001 449,142
2002 132,470
2003 85,822
2004 41,176
2006 160
2007 28,253
$ 2,062,922---------------
$1,869,860
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" for the fiscal year
ending April 30, 1994 as required by SFAS No. 109. The effect,
if any, of adopting Statement No. 109 on pre-taxpretax income from continuing
operations is not material. The Company has elected not to retroactively
adopt the provisions allowed in SFAS No. 109;109, however all provisions of the
document have been applied since the beginning of fiscal year 1994.
9. Major Customers:
Shipments to one customer accounted foramounted to approximately 27.36%40.12% of sales during
the 3rd Quarter of Fiscal 1998 and 31.19% of sales
during the nine month periodquarter ending January 31, 1998. The1999. At January 31, 1999 there was an
outstanding account receivable from this customer was $27,687 at January 31,
1998.of approximately $37,981.
10. Management's Plans:
Management of the Company recognizes the Company's ability to continue as a
going concern is subject to continuedcontinuing sales performance and the ability of
the Company to raise money, when needed. Therefore,To this extent, management has
endeavored to introduce the Company's products in new markets, expand its
marketing efforts in the traditional medical market and introduce new products
which compliment its product line. Finally, management intends to continue
expanding the
Company's marketing efforts and to seek outpursuing financing opportunities, if necessary.
11.Forward-Looking Statements:
This report may contain statements which, to the extent they are not
recitations of historical fact, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve risks and
uncertainties. Actual results may differ materially from such forward-looking
statements for reasons including, but not limited to, changes to and
developments in the legislative and regulatory environments effecting the
Company's business, the impact of competitive products and services, changes
in the medical and laboratory industries caused by various factors, as well as
other factors as set forth in this report. Thus, such forward-looking
statements should not be relied upon to indicate the actual results which
might be obtained by the Company. No representation or warranty of any kind
is given with respect to the accuracy of such forward-looking information.
The forward-looking information has been prepared by the management of the
Company and has not been reviewed or compiled by independent public
accountants.
BIOSYNERGY, INC.
Item 2. MANAGEMENT2.MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES/REVENUES
- ---------------
For the three month period ending January 31, 19981999 ("3rd Quarter"), the net
sales increased 11.68%2% or $13,514,$2,565, and increased 5.87%1.57% or $22,353$6,318 during the nine
month period ending January 31, 1998,1999, as compared to net sales for the
comparative periods ending in 1997.1998. This overall increase in sales is the
result of increased sales of HemoTempR II Blood Temperature Monitors. As of
January 31, 1998,1999, the Company had no product back orders.
In addition to the above, the Company realized $450 of income as a result of
leasing a portion of its computer time to Stevia Company, Inc., an affiliate,
and $2,192$2,365 of miscellaneous income for the nine month period ending January
31, 1998.1999.
INCOME/LOSS
- -----------
The Company realized a net profit of $20,262$4,805 during the 3rd Quarter as compared
to a net profit of $12,605$20,262 for the comparative quarter of the prior year. The
companyCompany also realized a net profit of $80,985$48,877 for the nine month period ending
January 31, 19981999 as compared to a net profit of $78,772$80,985 during the same period
in 1997.1998. The overall increasedecrease in net profit is due primarily to an increase in
sales.marketing, research and development, and general and administrative expenses
described below.
As of April 30, 1997,1998, the Company has incurred net operating losseslosses/carryovers
aggregating $2,062,922.$1,869,860. As a result of net operating loss carryovers, no
income taxes were due for Fiscal 19971998 and will unlikely be due for Fiscal
1998.1999. See "FINANCIAL STATEMENTS" for the effect of the net operating loss
carryforwards on the Company's income tax position. The Tax Reform Act of
1986 will not alter the Company's net operating loss carryforward position,
and the net operating loss carryforwards will be available and expire, if not
used, as set forth in Footnote 8 of the "FINANCIAL STATEMENTS."
EXPENSES
GENERAL
- -----------
The operating expenses incurred by the Company during the 3rd Quarter
increased overall by 5.60%16.52%, or $5,827,$18,139, and increased by 5.05%11.89%, or $15,609$38,599
for the nine month period ending January 31, 1998.1999. An explanation of each
category of expenses is included to assist the reader in reviewing the
operations of the Company during the periods indicated.
COST OF SALES AND OTHER OPERATING CHARGES
- -------------------------------------------
The cost of sales and other operating charges during the 3rd Quarter decreasedincreased
by $1,012$3,699 and increased by $6,522$80 during the nine month period ending January 31,
19981999 as compared to the same periods in 1997.1998. As a percentage of sales, the
cost of sales and other operating charges were 36.52%38.62% during the 3rd Quarter
and 41.66%36.52% for the same quarter ending in 1997. For the nine month period, cost of sales1998, and other operating
charges were 35.91% in 1998 compared to 36.30%35.37% during the nine
month period ending January 31, 1999 as compared to 35.91% for the same
nine-month period ending in 1998. The increase inAlthough the cost of sales and operating
charges was due to an increase in salaries and related employee
expenses. Otherwise,increased, the cost of sales and operating charges, as a percentage of
sales, has not materially changed during the last year, and is not expected to
materially change in the foreseeable future.
RESEARCH AND DEVELOPMENT
- -------------------------
Research and development costs increased $289$3,406 or 3.64%41.39% during the 3rd
Quarter, as compared to the same quarter in 1997.1998. These costs increased by
$2,950$6,717 or 12.60%25.48% during the nine month period ending January 31, 19981999 as
compared to the same period in 1997.1998. These increases are primarily related to
increases in salaries, purchases of laboratory equipment and product prototype
costs. These increased costs do not reflect changes in the Company's
development policies. The Company intends to continue to direct research and
development to the improvement of its current product line and to those new
products which are natural expansions of the current product line. The
Company may also increase its research and development activities to fulfill
research and development contracts for the development of products
specifically designed for a customer, which will generally be offset by
research revenues.
MARKETING
- ------------
Marketing costs for the 3rd Quarter increased by $670$5,447 or 5.35%41.28%, as compared
to the quarter ending January 31, 1997,1998, and decreased $2,337increased $16,962 or 5.87%45.26% during
the nine month period ending January 31, 19981999 as compared to the same period
in 1997.1998. The additional expenses incurred by the Company during the
comparative periods ending January 31, 1999 were related to the Company's
participation in a trade show, increased salaries, brochure reprints, and
promotion/entertainment expenses. The Company intends to expendexpand its marketing
budget as resources become available.
GENERAL AND ADMINISTRATIVE
- -----------------------------
General and administrative costs increased by $5,919,$5,587, or 16.78%13.56%, during the
3rd Quarter and increased by $8,575$14,901 or 7.99%12.86% during the nine month period
ending January 31, 1998,1999, as compared to the same periods in 1997.1998.
The overall increase is duein these costs was primarily related to an increase inincreased
salaries and related employee expensesbonuses and writeoffthe write-of of non-collectable receivables.
These changes are not indicative of any trend, but only representative
of normal fluctuations in general and administrative expenses.
ASSETS/LIABILITIES
GENERAL
Incertain outdated computer equipment
retired during the 3rd Quarter, the Company invested $9,350 on die Cutting Equipment.
All manufacturing ofQuarter.
ASSETS/LIABILITIES
- --------------------
GENERAL
----------
Since April 30, 1998, the Company's cholesteric liquid crystal products
are now done at the Company's facilities in Elk Grove Village, Illinois.assets and liabilities have not materially
changed. The Company also invested $2,924 in leasehold improvements for the new
equipment. The Company alsohas experienced an increase in current assets and a
decrease in liabilities due to improved cash flow.flow from operations.
DUE FROM AFFILIATESAFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE
- ------------------------------------------------------
The Company was owed $293,197$312,816 by Stevia Company, Inc. ("Stevia"), an
affiliate, and $12,921$18,524 by F.K. Suzuki International, Inc. ("FKSI"), an
affiliate, at January 31, 1998.1999. These affiliates owed $278,874$298,335 and $12,921$13,221 at
April 30, 1997,1998, respectively. These accounts primarily represent common
expenses which are charged by one company to the other for reimbursement.
These expenses include rent, salaries and benefits for common employees,
insurance and legal fees. These expenses are reviewed from time to time to
determine if reallocation is appropriate. See "FINANCIAL STATEMENTS." These expenses are incurred in the ordinary
course of business. As a result of the increase in
amounts due from affiliates, the Company has reduced its own liquid
resources. TheSee "FINANCIAL STATEMENTS."
On December 8, 1998, Stevia announced it filed a complaint for judicial
dissolution in the Illinois Circuit Court of Cook County, Chancery Division.
Lauane C. Addis, Secretary and General Counsel of the Company intendsand Stevia
Company, Inc., was appointed interim receiver to reverse this trend by restricting the advances to and
common expenses incurred on behalfsell certain assets of
Stevia, and FSKI until these
affiliatesincluding its Pueblo, Colorado facility. Although the Company
anticipates a portion of the proceeds from the liquidation of Stevia's assets
will be used to repay the intercompany charges, it is uncertain how much, if
any, of the unpaid intercompany charges will be repaid.
In this regard, on August 31, 1998, the Company extended a line of credit to
Stevia of $20,000 evidenced by a Note payable on or before December 31, 1998,
which due date has been extended to March 31, 1999, with interest at 10% on
the unpaid principal balance. The proceeds from this line of credit are
inintended to be used by Stevia for expenses related to its dissolution. The
Note is secured by a positionfirst mortgage on Stevia's Pueblo, Colorado facility.
The Balance due under the Note at January 31, 1999 was $2,200.
OTHER RELATED PARTY TRANSACTIONS
- -----------------------------------
On November 12, 1998, the Company granted an option to reimburseits President, Fred K.
Suzuki, to purchase all or a portion of 3,000,000 shares of the Company.Company's
common stock at a purchase price of $.025 per share. The option is subject to
several contingencies including, but not limited to, shareholder approval. As
of January 31, 1999, no portion of this option was exercised.
During the 3rd Quarter, the Company purchased a microscope from its President,
Fred K. Suzuki, for the purchase price of $1,500. Although there was no
independent analysis of this transaction, the Company believes the purchase
price approximates market value.
CURRENT ASSETS/CURRENT LIABILITY RATIO
- ---------------------------------------
The ratio of current assets to current liabilities, 2.604.10 to 1, has improved
compared to 1.403.02 to 1 at April 30, 1997. Management believes1998. Although the Company's current asset/current liability ratio will be adequateCompany realized income
for the Company's current and foreseeable future operating needs provided
sales remain at the present level or improve.
WORKING CAPITAL/LIQUIDITY
During the nine monthnine-month period ending January 31, 1998,1999, the Company used $14,920 of
its cash to pay expenses incurred by the Company on behalf of Stevia and FKSI,
which was not reimbursed. To this extent, the Company's current assets were
converted to long-term receivables thereby reducing its current
assets/liabilities ratio. In order to continue to improve the current
asset/liability ratio, the Company's operations must remain profitable and the
Company. See "DUE FROM AFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE" above.
WORKING CAPITAL/LIQUIDITY
- --------------------------
During the nine-month period ending January 31, 1999, the Company experienced
an increase in working capital of $59,046.$36,886. This is due to the continuing profitsprofitable
operations of the Company during the nine monthnine-month period ending January 31, 19981999.
The Company has attempted to conserve working capital whenever possible. To
this end, the Company attempts to keep inventory at minimum levels. The
Company believes that it will be able to maintain adequate inventory to supply
its customers on a timely basis by careful planning and forecasting demand for
its products. However, the useCompany is nevertheless required, as is customary
in the medical and laboratory markets, to carry inventory to meet the delivery
requirements of customers and thus, inventory represents a substantial portion
of the cash flowCompany's current assets.
The Company presently grants payment terms to customers and dealers of 30
days. The Company will not accept returns of products from operationsits dealers except
for exchange, but does guarantee the quality of its products to reduce
liabilities.the end user.
As of January 31, 1999, the Company had $191,383 of current assets available.
Of this amount, $46,660 was inventory and $74,641 was net trade receivables.
Management of the Company recognizesbelieves that it has sufficient working capital to
continue operations for the fiscal year ending April 30, 1999 provided the
Company's sales and ability to continue
as a going concern is subject to maintaining and improving sales,
profitable operations, collection ofcollect accounts receivable andare not adversely
affected. In the abilityevent the Company's sales decrease or the receivables of the
Company are impaired for any reason, it may be necessary to obtain additional
financing to cover working capital when needed,items and keep current trade accounts
payable, of which there is no
assurance. The Company intends to continue expanding its marketing
efforts in the medical market and new markets. If necessary, Management
will seek out financing opportunities, including selling its common stock
to private investors. The Company does not have a working line of
credit, and there can be no assurance, nor is it anticipated, that the
Company will be able to obtain a working line of credit on acceptable
terms in the near future. The Company has not been refused goods or
services from any of its vendors.assurance.
Except for its operating working capital needs, the Company has no material
contingencies for which it must provide.
BIOSYNERGY, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K.
(a) The following exhibits are included herein pursuant to Section 601:filed as a part of this report:
(2) Plan of Acquisition, reorganization, arrangement, liquidation or
succession - none.
(3) Articles of Incorporation and By-laws (i)By-laws(i)
(4) Instruments defining rights of security holders, including
indentures - none.
(10) Material Contracts
(a)Deferred Compensation Option Agreement, dated January 31,
1990, between the Company and Fred K. Suzuki (ii)Suzuki(ii)
(b)Note, dated August 31, 1998, executed by Stevia Company,
Inc. (iii)
(c)Mortgage, dated August 31, 1998, executed by Stevia Company,
Inc. (iii)
(d)Stock Option Agreement, dated August 1, 1993,November 12, 1998, between the
Company and Fred K. Suzuki (iii)P. E-1.
(11) Statement regarding computation of per share earnings - none.
(15) Letter dated March 9, 1998,5, 1999, regarding interim financial information.information
(iv).
(18) Letter regarding change in accounting principlesprincipals - none.
(19) ReportReports furnished to securityholderssecurity holders - none.
(22) Published report regarding matters submitted to vote of securityholders - none.
(23) Consents of experts and counselsecurity
holders - none.
(24) Power of Attorney - none.
(27) Financial Data Schedule - P. E-1P.E-8.
(b) No Current Reports on Form 8K8-K were filed during the period
covered by this Report.
____________________________
[FN]
(i)Incorporated by reference to a Registration Statement filed on Form S-18
with the Securities and Exchange Commission, 1933 Act Registration
Number 2-38015C,3-28015C, under the Securities Act of 1933, as amended, and
Incorporated by reference, with regard to Amended By-Laws, to the
Company's Annual Report on Form 10K for fiscal year ending April 30,
1986 filed with the Securities and Exchange Commission.
(ii)Incorporated by reference to the Company's Annual Report on Form 10K for
fiscal year ending April 30, 1990 filed with the Securities and Exchange
Commission.
(iii)Incorporated by reference to the Company's AnnualQuarterly Report on Form 10K10Q
for fiscal year ending April 30, 1994 filed with the Securities and Exchange Commission.quarterly period ended October 31, 1998.
(iv)This exhibit is included in this report as a part of the Financial
Statements, and is incorporated by reference herein.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Biosynergy, Inc.
MARCH 9, 1999 /s/ FRED K. SUZUKI /s/
Date March 9, 1998--------------------- -----------------------------------
Fred K. Suzuki
President, Chairman of the Board,
Chief Accounting Officer and Treasurer
MARCH 9, 1999 /s/ LAUANE C. ADDIS /s/
Date March 9, 1998-------------------- ------------------------------------
Lauane C. Addis
Secretary, Corporate Counsel and
Director
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Biosynergy, Inc.
Date March 9, 1998 /s/ FRED K. SUZUKI /s/
Fred K. Suzuki
President, Chairman of the Board,
Chief Accounting Officer and Treasurer
Date March 9, 1998 /s/ LAUANE C. ADDIS /s/
Lauane C. Addis
Secretary, Corporate Counsel and
Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of
THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ending JanuaryOctober 31, 1998
Commission File Number: 0-12459
BIOSYNERGY, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
1940 East Devon Avenue
Elk Grove Village, IL 60007
(847) 956-0471
Address(Address and telephone number of registrant's principal executive office or
principal place of business)
---------------------------------------------------------------------------
EXHIBITS
BIOSYNERGY, INC.
EXHIBIT INDEX
Page Number
Pursuant to
Sequential
Exhibit Numbering
Number Exhibit System
- ---------- ------------------------------ ------------
10(a) Stock Option Agreement dated
November 12, 1998, between the
Company and Fred K. Suzuki E-1
27 Financial Data Schedule E-1E-8
BIOSYNERGY, INC.