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 OctoberJanuary 31, 19981999
OR

           [ ]     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             
     ----------------------------------------------------------------
     (State or other jurisdiction of          (I.R.S. Employer
     incorporation or organization)          Identification No.)

     1940 East Devon Avenue, Elk Grove Village, Illinois    60007   
  -------------------------------------------------------------------
  (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 OctoberJanuary 31, 19981999
and the related Statements of Operations, Shareholders' Equity (Deficit) and
Statements of Cash Flows for the three and sixnine month periods ended OctoberJanuary
31, 19981999 and 19971998 were not audited; however, the financial statements for the
three and sixnine month periods ending OctoberJanuary 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, 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, 1998
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.
December 10, 1998March 5, 1999


BIOSYNERGY, INC. BALANCE SHEET ASSETS OctoberJanuary 31, 19981999 April 30,1998 Unaudited Unaudited ---------------------------------- --------------- CURRENT ASSETS Cash 49,20865,637 31,150 Accounts Receivable, Trade, Net of Allowance for Uncollectible Accounts of $500 at OctoberJanuary 31, 19981999 and $500 at April 30, 1998 73,07874,641 75,955 Inventories (Notes 1 and 4) 53,60746,660 50,148 Short Term Note Due from Affiliate (Note 3) 2,200 - Prepaid Expenses 3,9782,245 3,792 Total Current Assets 182,071191,383 161,045 DUE FROM AFFILIATE (Note 3) 326,476331,340 311,556 PROPERTY AND EQUIPMENT Equipment 170,670128,691 170,670 Leasehold Improvements 15,140 15,140 185,810143,831 185,810 Less: Accumulated Depreciation and Amortization ( 168,125)129,320) ( 165,897) 17,68514,511 19,913 OTHER ASSETS Patents, Net of Accumulated Amortization (Note 1) 20,87820,162 22,553 Deposits 5,995 5,995 Investment in Affiliated Company (Note 3) - - 26,87326,157 28,548 553,105563,391 521,062 --------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable 8,9709,695 8,875 Accrued Executive Compensation 24,616 37,355 Other Accrued Compensation 3,7687,769 3,060 Accrued Payroll Taxes 324594 254 Deferred Rent 1,7991,807 1,783 Other Accrued Expenses 1,7702,247 1,949 Total Current Liabilities 41,247 43,27646,728 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 OctoberJanuary 31, 19981999 and at April 30, 1998 632,663 632,663 Additional paid-in capital 100 100 Accumulated Deficit (120,905) 164,977) 511,858(116,100) (164,977) 516,663 467,786 553,105563,391 521,062 ----------- ---------- The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC. STATEMENT OF OPERATIONS Unaudited Three Months Ended SixNine Months Ended OctoberJanuary 31, OctoberJanuary 31, 1999 1998 19971999 1998 1997 ----------- ----------- ----------- ------------------------------- ------------------- REVENUES Sales 130,926 131,513 277,629 273,874131,704 129,139 409,332 403,014 Computer Rentals and Services 150 150 300 300450 450 Other Income 775 630 1,486 1,431 131,851 132,293 279,415 275,605879 762 2,365 2,192 132,733 130,051 412,147 405,656 COST AND EXPENSES Cost of Sales and Other Operating Charges 44,612 50,644 93,937 97,55750,863 47,164 144,800 144,720 Research and Development 12,120 9,663 21,446 18,13411,636 8,230 33,081 23,364 Marketing 20,366 12,012 35,797 24,28118,642 13,195 54,439 37,477 General and Administrative 43,974 36,633 83,982 74,66846,787 41,200 130,769 115,868 Interest Expense 91 121- - 181 242 121,163 109,073 235,343 214,882127,928 109,789 363,270 324,671 NET INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 10,688 23,220 44,072 60,7234,805 20,262 48,877 80,985 INCOME TAXES 2,373 3,483 9,784 10,181721 3,039 7,332 15,246 INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 8,315 19,737 34,288 50,5424,084 17,223 41,545 65,739 EXTRAORDINARY ITEMS Reduction of Income Taxes arising from utilization of prior Years' Net Operating Losses (Note 8) 2,373 3,483 9,784 10,181721 3,039 7,332 15,246 NET INCOME (LOSS) 10,688 23,220 44,072 60,723 ------------ ------------- ----------- -----------4,805 20,262 48,877 80,985 NET INCOME (LOSS) PER COMMON SHARE (Note 6): Before Extraordinary Items .0006 .0014 .0025 .0037.0003 .0012 .0030 .0048 Extraordinary Items .0000 .0002 .0002 .0007 .0007.0005 .0011 NET INCOME (LOSS) .0008 .0016 .0032 .0044.0003 .0014 .0035 .0059 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 SIXNINE MONTHS ENDED OCTOBERJANUARY 31, 19981999 Unaudited Additional Common Stock Paid-in Shares Amount Capital Deficit Total ------- ------ ---------- ------- --------------------------------------------------------------- Balance, May 1, 1998 13,806,511 632,663 100 (164,977) 467,786 Net Profit (Loss) - - - 44,072 44,07248,877 48,877 Balance, OctoberJanuary 31, 19981999 13,806,511 632,663 100 (120,905) 511,858(116,100) 516,663 The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC. STATEMENTS OF CASH FLOWS Unaudited SIXNINE MONTHS ENDED JULYJANUARY 31, 1999 1998 1997 ------------- ------------------------------------------- OPERATING ACTIVITIES: Net Income (Loss) 44,072 60,72348,877 80,985 Adjustments to Reconcile Net Cash Used for Operating Activities: Depreciation and Amortization 3,903 2,7585,732 4,602 Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable 2,877 ( 7,096)1,314 (17,442) (Increase) Decrease in Inventories 3,488 ( 3,459) 1,7643,139) (Increase) Decrease in Prepaid Expenses 1,547 ( 186) ( 1,799)3,554) Increase (Decrease) in Accounts Payable and Accrued Expenses (12,029) (20,650)( 6,548) (28,585) Net Cash Provided (Used) by Operating Activities 35,178 35,70054,410 32,867 INVESTING ACTIVITIES: (Increase) Decrease in Due From Affiliate (Note 3) (14,920) ( 9,618) (Increase) Decrease in Short Term Note Due From Affiliate (Note 3)19,784) ( 2,200) -14,323) (Increase) Decrease in Deposits - 3956 (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 (17,120) ( 9,579)19,923) ( 26,541) FINANCING ACTIVITIES: Net Cash Provided (Used) by Financing Activities - - Increase (Decrease) in Cash and Cash Equivalents 18,058 16,12134,487 6,326 Cash and Cash Equivalents at Beginning of Period 31,150 12,420 Cash and Cash Equivalents at End of Period 49,208 28,54165,637 18,746 ----------- ---------------------- The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC. NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies: Inventories - Inventories are valued at the lower of cost using the FIFO (first-in, first-out) method or market (using net realizable value). Equipment and Leasehold Improvements - Equipment and leasehold improvements are stated at cost. Depreciation is 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 equipment are capitalized. Significant leasehold improvements are capitalized and amortized over the term of the lease. Research and Development, and Patents - Research and development expenditures are charged to operations as incurred. The cost of obtaining patents, primarily legal fees, are capitalized and amortized over the life of the respective patent on the straight-line method. 2. Company Organization and Description: Biosynergy, 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. 3. Related Party Transactions: The Company and its affiliates are related through common stock ownership as follows as of OctoberJanuary 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% -
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 OctoberJanuary 31, 1998,1999, representing a .4% interest in Stevia. Although the Common Stock of Stevia Company, Inc. is tradeable in the over-the-counter market, there is no established public trading market for such Common Stock due to limited and sporadic trades. Furthermore, on December 8, 1998, Stevia Company, Inc. announced it filed a Complaint for Judicial Dissolution. As of OctoberJanuary 31, 1998,1999, the bid price of the common stock of Stevia Company, Inc. was estimated to be zero. Furthermore, on December 8, 1998, Stevia Company, Inc. announced it had filed a Complaint for Judicial Dissolution. 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 byto Stevia in prior years, have resulted in the following balances: April 30, 1998 - $298,335 OctoberJanuary 31, 19981999 - $308,170$312,816 At OctoberJanuary 31, 1998,1999, the financial condition of Stevia Company, Inc. is such that it is unlikely to be able to repay the Company during the next 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.; April 30, 1998 - $13,221 OctoberJanuary 31, 19981999 - $18,306$18,524 The balances result from an allocation of common expenses offset by advances received from time to time. At OctoberJanuary 31, 1998,1999, the financial condition of F.K. Suzuki International, Inc. is such that it is unlikely to be able to repay the Company during the next year without liquidating a portion of its assets. 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 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 OctoberJanuary 31, 1998,1999, the balance due under the Note was $2,200. 4. Inventories: Components of inventories are as follows: April 30, 1998 October 31, 1998 Raw Materials $31,789 $33,144 Work-in process 16,049 11,670 Finished Goods 2,310 8,788 $50,148 $53,607
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 agreement expired by its terms. On November 12, 1998, the Company granted an option to its President, Fred K. Suzuki, to purchase all or a portion of 3,000,000 shares of the 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. BIOSYNERGY, INC. NOTES TO FINANCIAL STATEMENTS 6. Income or (Loss) Per 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. The weighted average number of common shares outstanding were 13,806,511 at OctoberJanuary 31, 19981999 and April 30, 1998. The affect of conversion of stock options has not been presented as conversion would be anti-dilutive. BIOSYNERGY, INC. NOTES TO FINANCIAL STATEMENTS 7. Lease Commitments: In 1996 the Company entered 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 11,000 1997 66,733 1998 68,200 1999 68,567 2000 69,300 2001 51,975 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, 1998, net operating loss carryforwards were available and expire, if not used, as follows: Year Ending Net Operating April 30, Losses ------------ --------------- 1999 $ 677,671 2000 455,166 2001 449,142 2002 132,470 2003 85,822 2004 41,176 2006 160 2007 28,253 --------------- $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" as required by SFAS No. 109. The effect, if any, of adopting Statement No. 109 on pretax income from continuing operations is not material. The Company has elected not to retroactively adopt the provisions allowed in SFAS No. 109, however all provisions of the document have been applied since the beginning of fiscal year 1994. BIOSYNERGY, INC. NOTES TO FINANCIAL STATEMENTS 9. Major Customers: Shipments to one customer amounted to approximately 37.1%40.12% of sales during the quarter ending OctoberJanuary 31, 1998.1999. At OctoberJanuary 31, 19981999 there was an outstanding account receivable from this customer of approximately $36,149.$37,981. 10. Management's Plans: Management of the Company recognizes the Company's ability to continue as a going concern is subject to continuing sales performance and the ability of the Company to raise money, when needed. 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 pursuing 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.MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SALES/REVENUES - --------------- For the three month period ending OctoberJanuary 31, 19981999 ("2nd3rd Quarter"), the net sales decreased .45%increased 2% or $587,$2,565, and increased 1.37%1.57% or $3,755$6,318 during the sixnine month period ending OctoberJanuary 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 OctoberJanuary 31, 1998,1999, the Company had no product back orders. In addition to the above, the Company realized $300$450 of income as a result of leasing a portion of its computer time to Stevia Company, Inc., an affiliate, and $1,486$2,365 of miscellaneous income for the sixnine month period ending OctoberJanuary 31, 1998.1999. INCOME/LOSS - ----------- The Company realized a net profit of $10,688$4,805 during the 2nd3rd Quarter as compared to a net profit of $23,220$20,262 for the comparative quarter of the prior year. The Company also realized a net profit of $44,072$48,877 for the sixnine month period ending OctoberJanuary 31, 19981999 as compared to a net profit of $60,723$80,985 during the same period in 1997.1998. The decrease in net profit is due primarily to an increase in marketing, and research and development, and general and administrative expenses described below. As of April 30, 1998, the Company has incurred net operating losses/carryovers aggregating $1,869,860. As a result of net operating loss carryovers, no income taxes were due for Fiscal 1998 and will unlikely be due for Fiscal 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 2nd3rd Quarter increased overall by 11.08%16.52%, or $12,090,$18,139, and increased by 9.52%11.89%, or $20,461$38,599 for the sixnine month period ending OctoberJanuary 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 2nd3rd Quarter decreasedincreased by $6,032$3,699 and decreasedincreased by $3,620$80 during the sixnine month period ending OctoberJanuary 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 34.07%38.62% during the 2nd3rd Quarter and 38.51%36.52% for the same quarter ending in 1997, compared to 35.62% in 1997,1998, and 33.84%35.37% during the sixnine month period ending OctoberJanuary 31, 1999 as compared to 35.91% for the same nine-month period ending in 1998. Although the cost of sales and operating charges decreased,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 $2,457$3,406 or 25.43%41.39% during the 2nd3rd Quarter, as compared to the same quarter in 1997.1998. These costs increased by $3,312$6,717 or 18.26%25.48% during the sixnine month period ending OctoberJanuary 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 reflect non-reoccurring expenses related to research for new technology applications, including prototype expenses, but 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 2nd3rd Quarter increased by $8,354$5,447 or 69.55%41.28%, as compared to the quarter ending OctoberJanuary 31, 1997,1998, and increased $11,516$16,962 or 47.43%45.26% during the sixnine month period ending OctoberJanuary 31, 19981999 as compared to the same period in 1997.1998. The additional expenses incurred by the Company during the comparative periods in 1998ending January 31, 1999 were related to the Company's participation in a trade showsshow, increased salaries, brochure reprints, and reprinting certain product information brochures.promotion/entertainment expenses. The Company intends to expand its marketing budget as resources become available. GENERAL AND ADMINISTRATIVE - ----------------------------- General and administrative costs increased by $7,341,$5,587, or 20.04%13.56%, during the 2nd3rd Quarter and increased by $9,314$14,901 or 12.47%12.86% during the sixnine month period ending OctoberJanuary 31, 1998,1999, as compared to the same periods in 1997.1998. The overall increase in these costs was primarily related to employment taxes due as a resultincreased salaries and bonuses and the write-of of certain outdated computer equipment retired during the payment of deferred compensation. Otherwise, there was no material change in the company's General and Administrative expenses.3rd Quarter. ASSETS/LIABILITIES - -------------------- GENERAL ---------- Since April 30, 1998, the Company's assets and liabilities have not materially changed. The Company has experienced an increase in current assets and a decrease in liabilities due to improved cash flow from operations. DUE FROM AFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE - ------------------------------------------------------ The Company was owed $308,170$312,816 by Stevia Company, Inc. ("Stevia"), an affiliate, and $18,306$18,524 by F.K. Suzuki International, Inc. ("FKSI"), an affiliate, at OctoberJanuary 31, 1998.1999. These affiliates owed $298,335 and $13,221 at April 30, 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. As a result of the increase in amounts due from affiliates, the Company has reduced its own liquid resources. See "FINANCIAL STATEMENTS." On December 8, 1998, Stevia announced it had 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 and Stevia Company, Inc., was appointed interim receiver to sell certain assets of Stevia, including 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 intended to be used by Stevia for expenses related to its dissolution. The Note is secured by a first mortgage on Stevia's Pueblo, Colorado facility. The Balance due under the Note at OctoberJanuary 31, 19981999 was $2,200. OTHER RELATED PARTY TRANSACTIONS - ----------------------------------- On November 12, 1998, the Company granted an option to its President, Fred K. Suzuki, to purchase all or a portion of 3,000,000 shares of the 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, 4.364.10 to 1, has improved compared to 3.02 to 1 at April 30, 1998. Although the Company realized income for the six-monthnine-month period ending OctoberJanuary 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 six-monthnine-month period ending OctoberJanuary 31, 1998,1999, the Company experienced an increase in working capital of $30,855.$36,886. This is due to the profitable operations of the Company during the six-monthnine-month period OctoberJanuary 31, 1998.1999. 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 Company 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 Company'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 its dealers except for exchange, but does guarantee the quality of its products to the end user. As of OctoberJanuary 31, 1998,1999, the Company had $182,071$191,383 of current assets available. Of this amount, $53,607$46,660 was inventory and $73,078$74,641 was net trade receivables. Management of the Company believes 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 collect accounts receivable are not adversely affected. In the event 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 items and keep current trade accounts payable, of which there can be no assurance. Except for its operating 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 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) (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) (b)Note, dated August 31, 1998, executed by Stevia Company, Inc., P. E-1 (iii) (c)Mortgage, dated August 31, 1998, executed by Stevia Company, Inc., (iii) (d)Stock Option Agreement, dated November 12, 1998, between the Company and Fred K. Suzuki P. E-5.E-1. (11) Statement regarding computation of per share earnings - none. (15) Letter dated December 10, 1998,March 5, 1999, regarding interim financial information (iii)(iv). (18) Letter regarding change in accounting principals - none. (19) Reports furnished to security holders - none. (22) Published report regarding matters submitted to vote of security holders - none. (24) Power of Attorney - none. (27) Financial Data Schedule - P.E-8. (b) No Current Reports on Form 8-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 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 Quarterly Report on Form 10Q for the 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 ------------------------------------------------------ ----------------------------------- Fred K. Suzuki President, Chairman of the Board, Chief Accounting Officer and Treasurer Date -------------------------------- 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 December 10, 1998 /s/ FRED K. SUZUKI /s/ ------------------------------- Fred K. Suzuki President, Chairman of the Board, Chief Accounting Officer and Treasurer Date December 10, 1998MARCH 9, 1999 /s/ LAUANE C. ADDIS /s/ -------------------------------Date -------------------- ------------------------------------ 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 October 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(b) Note- ---------- ------------------------------ ------------ 10(a) Stock Option Agreement dated August 31,November 12, 1998, executed by Steviabetween the Company Inc.and Fred K. Suzuki E-1 10(c) Mortgage, dated August 31, 1998, executed by Stevia Company, Inc. E-5 27 Financial Data Schedule E-8