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
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(State or other jurisdiction 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 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
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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