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 JanuaryJuly 31, 1999
-------------
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 2821 pages contained in the sequential numbering system.
BIOSYNERGY, INC.
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 JanuaryJuly 31, 1999
and the related Statements of Operations, Shareholders' Equity (Deficit) and
Statements of Cash Flows for the three and nine month periods ended JanuaryJuly 31, 1999 and
1998 were not audited; however, the financial statements for the three and nine month
periods ending JanuaryJuly 31, 1999 and 1998 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, 1998,1999, 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, 19981999
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 5,September 7, 1999
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
January 31, 1999 April 30,1998
Unaudited Unaudited
------------------ ---------------
CURRENT ASSETS
Cash 65,637 31,150
Accounts Receivable, Trade, Net of
Allowance for Uncollectible Accounts
of $500 at January 31, 1999 and $500 at
April 30, 1998 74,641 75,955
Inventories (Notes 1 and 4) 46,660 50,148
Short Term Note Due from Affiliate (Note 3) 2,200 -
Prepaid Expenses 2,245 3,792
Total Current Assets 191,383 161,045
DUE FROM AFFILIATE (Note 3) 331,340 311,556
PROPERTY AND EQUIPMENT
Equipment 128,691 170,670
Leasehold Improvements 15,140 15,140
143,831 185,810
Less: Accumulated Depreciation and
Amortization ( 129,320) ( 165,897)
14,511 19,913
OTHER ASSETS
Patents, Net of Accumulated
Amortization (Note 1) 20,162 22,553
Deposits 5,995 5,995
Investment in Affiliated Company (Note 3) - -
26,157 28,548
563,391 521,062
--------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 9,695 8,875
Accrued Executive Compensation 24,616 37,355
Other Accrued Compensation 7,769 3,060
Accrued Payroll Taxes 594 254
Deferred Rent 1,807 1,783
Other Accrued Expenses 2,247 1,949
Total Current Liabilities 46,728 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, 1999 and at April 30, 1998 632,663 632,663
Additional paid-in capital 100 100
Accumulated Deficit (116,100) (164,977)
516,663 467,786
563,391 521,062
----------- ----------
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
July 31, 1999 April 30,1999
Unaudited Unaudited
------------- -------------
CURRENT ASSETS
Cash 79,218 319,508
Short-Term Investments (Note 4) 250,000 -
Accounts Receivable, Trade, Net of 76,353 76,649
Allowance for Uncollectible Accounts
of $500 at July 31, 1999 and $500 at
April 30, 1999
Inventories (Notes 1 and 5) 61,145 49,671
Note Receivable from Officer (Note 3) 8,000 8,000
Prepaid Expenses 5,316 10,314
Interest Receivable (Notes 3 and 4) 2,879 66
------- -------
Total Current Assets 482,911 464,208
------- -------
DUE FROM AFFILIATES (Note 3) 18,574 18,574
------- -------
PROPERTY AND EQUIPMENT
Equipment (Note 9) 103,598 102,497
Leasehold Improvements 15,140 15,140
------- -------
118,738 117,637
Less: Accumulated Depreciation and
Amortization (100,466) ( 99,018)
------- -------
18,272 18,619
------- -------
OTHER ASSETS
Deposits 5,995 5,995
------- -------
525,752 507,396
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 8,873 11,899
Other Accrued Compensation 8,060 4,230
Accrued Payroll Taxes 616 324
Deferred Rent 1,355 1,581
Other Accrued Expenses 1,817 2,128
------ ------
Total Current Liabilities 20,721 20,162
------ ------
COMMITMENTS AND CONTINGENCIES (Note 8) - -
------ ------
SHAREHOLDERS' EQUITY (Note 6)
Common Stock, No Par Value; 20,000,000 Shares
Authorized, Issued: 13,806,511 Shares
at July 31, 1999 and at April 30, 1999 632,663 632,663
Additional paid-in capital 100 100
Accumulated Deficit (127,732) (145,529)
------- -------
505,031 487,234
------- -------
525,752 507,396
======= =======
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 1999 1998
--------------------- -------------------
REVENUES
Sales 131,704 129,139 409,332 403,014
Computer Rentals and Services 150 150 450 450
Other Income 879 762 2,365 2,192
132,733 130,051 412,147 405,656
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 50,863 47,164 144,800 144,720
Research and Development 11,636 8,230 33,081 23,364
Marketing 18,642 13,195 54,439 37,477
General and Administrative 46,787 41,200 130,769 115,868
Interest Expense - - 181 242
127,928 109,789 363,270 324,671
NET INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS 4,805 20,262 48,877 80,985
INCOME TAXES 721 3,039 7,332 15,246
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 4,084 17,223 41,545 65,739
EXTRAORDINARY ITEMS
Reduction of Income Taxes
arising from utilization of
prior Years' Net Operating
Losses (Note 8) 721 3,039 7,332 15,246
NET INCOME (LOSS) 4,805 20,262 48,877 80,985
NET INCOME (LOSS) PER
COMMON SHARE (Note 6):
Before Extraordinary Items .0003 .0012 .0030 .0048
Extraordinary Items .0000 .0002 .0005 .0011
NET INCOME (LOSS) .0003 .0014 .0035 .0059
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
(Note 6) 13,806,511 13,806,511 13,806,511 13,806,511
---------- ---------- ---------- ----------
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
Unaudited
Three Months Ended July 31
--------------------------
1999 1998
----------- ----------
REVENUES
Sales 132,342 146,703
Computer Rentals and Services 150 150
Other Income 712 711
Interest Income (Notes 3 and 4) 2,813 -
----------- ----------
135,867 147,564
----------- ----------
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 42,248 49,325
Research and Development 17,452 9,325
Marketing 14,125 15,431
General and Administrative 44,245 40,008
Interest Expense - 91
----------- ---------
118,070 114,180
----------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 17,797 33,384
INCOME TAXES 3,951 7,411
----------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 13,846 25,973
EXTRAORDINARY ITEMS
Reduction of Income Taxes
arising from utilization of prior
years' Net Operating Losses (Note 9) 3,951 7,411
---------- ----------
NET INCOME (LOSS) 17,797 33,384
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE (Note 7):
Before Extraordinary Items .001 .002
---------- ----------
Extraordinary Items .000 .001
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE .001 .003
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Note 7) 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, 1999
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) - - - 48,877 48,877
Balance, January 31,
1999 13,806,511 632,663 100 (116,100) 516,663
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 1999
Unaudited
Additional
Common Stock Paid-in
Shares Amount Capital Deficit Total
---------- ------- ------- --------- -------
Balance, May 1,
1999 13,806,511 632,663 100 (145,529) 487,234
Net Profit (Loss) - - - 17,797 17,797
Balance, July 31,
1999 13,806,511 632,663 100 (127,732) 505,031
---------- ------- ------- --------- -------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
THREE MONTHS ENDED JULY 31,
---------------------------
1999 1998
----------- ------------
OPERATING ACTIVITIES:
Net Income (Loss) 17,797 33,384
Adjustments to Reconcile Net Cash Used for
Operating Activities:
Depreciation and Amortization 1,448 1,952
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 296 2,727
(Increase) Decrease in Inventories ( 11,474) 981
(Increase) Decrease in Prepaid Expenses 4,998 ( 111)
Increase (Decrease) in Accounts Payable
and Accrued Expenses 559 ( 6,622)
--------- --------
Net Cash Provided (Used) by Operating
Activities 13,624 32,311
--------- --------
INVESTING ACTIVITIES:
Advances to Affiliated Companies (Note 3) - ( 7,162)
Short-Term Investment (Note 4) (250,000)
Retirement/Purchase of Equipment ( 1,101) -
Interest Receivable from Officer (Note 3) ( 202) -
Short-Term Investment Interest (Note 4) ( 2,611) -
--------- --------
Net Cash Provided by (Used In) Investing
Activities (253,914) ( 7,162)
FINANCING ACTIVITIES:
Net Cash Provided (Used) by Financing
Activities - -
Increase (Decrease) in Cash and Cash
Equivalents (240,290) 25,149
--------- --------
Cash and Cash Equivalents at Beginning
of Period 319,508 31,150
--------- --------
Cash and Cash Equivalents at End of Period 79,218 56,299
========= ========
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
------------------------------
OPERATING ACTIVITIES:
Net Income (Loss) 48,877 80,985
Adjustments to Reconcile Net Cash Used for
Operating Activities:
Depreciation and Amortization 5,732 4,602
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 1,314 (17,442)
(Increase) Decrease in Inventories 3,488 ( 3,139)
(Increase) Decrease in Prepaid Expenses 1,547 ( 3,554)
Increase (Decrease) in Accounts Payable
and Accrued Expenses ( 6,548) (28,585)
Net Cash Provided (Used) by Operating
Activities 54,410 32,867
INVESTING ACTIVITIES:
(Increase) Decrease in Due From Affiliate ( 19,784) ( 14,323)
(Increase) Decrease in Deposits - 56
(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 ( 19,923) ( 26,541)
FINANCING ACTIVITIES:
Net Cash Provided (Used) by Financing
Activities - -
Increase (Decrease) in Cash and Cash
Equivalents 34,487 6,326
Cash and Cash Equivalents at Beginning
of Period 31,150 12,420
Cash and Cash Equivalents at End of Period 65,637 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.products that utilize cholesteric liquid crystals.
3. Related Party Transactions:
The Company and its affiliates are related through common stock ownership as
follows as of JanuaryJuly 31, 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.
- ----------- ---------- ------------- ------
F.K. Suzuki International, Inc. 32.6% - 100%
Fred K. Suzuki, Officer - 35.6% -
Lauane C. Addis, Officer .1% 32.7% -
James F. Schembri, Director 12.9% - -
Mary K. Friske, Officer .1% .2% -
Laurence C. Mead, Officer .1% 4.0% - -------------------- ---------------------------------------------
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. ("Stevia"), which was
approximately 4.4% of the then outstanding common stock of Stevia Company, Inc.Stevia. 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. TheOn
April
16, 1999, Stevia was judicially dissolved and the remaining shares of Common
Stock of the Company owned 130,403held by Stevia (1,900,000 shares) were assigned to F.K.
Suzuki International, Inc. ("FKSI") for certain amounts payable by Stevia to
FKSI. The shares of Stevia Company, Inc. Common Stock at
January 31, 1999, representing a .4% interest in Stevia. Althoughheld by the Common
StockCompany are now
worthless.
Prior to the dissolution of Stevia, common offices, employees and certain
operating expenses were shared with Stevia. On April 16, 1999, inter-company
charges to Stevia for shares expenses aggregated $315,015. The Company
Inc. is tradeablereceived 93% of this amount, or $290,918, as its share of the Stevia
dissolution proceeds, resulting 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. Asloss of January 31,$24,097. Since April 16, 1999,
the bid price of theongoing common stock of Stevia Company, Inc.
was estimated to be zero.
Common offices areexpenses previously shared with Stevia Company, Inc. Intercompany charges for
shared expenses are made by whichever company incurs such charges. Such
intercompany charges, together with funds advancedhave been allocated
100% to Stevia in prior years,
have resulted in the following balances:
April 30, 1998 - $298,335
January 31, 1999 - $312,816
At January 31, 1999, the financial condition of Stevia Company, Inc. is such
that it is unlikely to be able to repay the Company duringas reflected on 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.Company's financial statements.
The following balances were due from F.K. Suzuki International, Inc.; at July
31, 1999:
April 30, 19981999 - $13,221
January$18,574
July 31, 1999 - $18,524$18,574
The balances result from an allocation of common expenses offset by advances
received from time to time. At JanuaryJuly 31, 1999, the financial condition of
F.K.
Suzuki International, Inc. is such that it is unlikely to be able to repay
the CompanyBiosynergy during the next year without liquidating a portion of its assets.
On April 1, 1999, the Company loaned $8,000 to its President, Fred K. Suzuki,
as an accommodation to Mr. Suzuki. The loan is evidenced by an unsecured
Promissory Note payable on demand with 10% interest on the unpaid balance.
As
of July 31, 1999, the principal balance of this Note was $8,000, and accrued
but unpaid interest aggregated $268.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
On August 31, 1998,4. Short-Term Investments:
The Company invested $250,000 of the proceeds received from the liquidation
of
Stevia described in Footnote 3 above in a 270-day Certificate of Deposit,
pending their use. The Company extended a lineis not registered under the Investment
Company
Act of credit1940 and therefore is limited to Stevia Company,
Inc.the types of $20,000 evidenced by a Note payable on or before December 31, 1998,investments which date has been extended to March 31, 1999,may be
made with 10% interestsuch proceeds. Income earned on the unpaid principal balance. ProceedsCertificate of this line of credit are intended toDeposit will be
used byto augment operating expenses. The funds invested in the Certificate of
Deposit and the remaining proceeds received upon the liquidation of Stevia
Company, Inc.have not been allocated or earmarked 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.any specific use.
5. Inventories:
Components of inventories are as follows:
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.April 30, 1999 July 31, 1999
-------------- -------------
Raw Materials $32,639 $37,001
Work-in process 6,634 12,820
Finished Goods 10,378 11,324
-------------- -------------
$49,671 $61,145
============== =============
6. 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 JanuaryJuly 31, 1999, no portion of this option washas been exercised.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
6.7. 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 JanuaryJuly 31, 1999 and April 30, 1998.1999. The affecteffect of conversion of
stock options has not been presented as conversion would be anti-dilutive.
7.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
8. 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.
8.9. Income Taxes:
At April 30, 1998,1999, 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----------
$1,192,189
==========
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.
9.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
10. Major Customers:
Shipments to one customer amounted to approximately 40.12%44% of sales during the
first quarter ending January 31, 1999.of Fiscal 2000. At JanuaryJuly 31, 1999 there was an outstanding
account receivable from this customer of approximately $37,981.
10.$38,774.
11. 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.products. Finally, management intends to continue pursuing financing
opportunities, if necessary.
11.Forward-Looking12. 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 JanuaryJuly 31, 1999 ("3rd1st Quarter"), the net
sales
increased 2%decreased 9.79%, or $2,565, and increased 1.57% or $6,318 during the nine
month period ending January 31, 1999,$14,361, as compared to net sales for the comparative
periodsquarter ending in 1998. This overall increasedecrease in sales is the result of increaseda decrease
in
sales of HemoTempR II Blood Temperature Monitors.as compared to the same quarter in 1998. As of JanuaryJuly
31,
1999, the Company also had no product$8,527 in back orders.
In addition to the above, during the 1st Quarter the Company realized $450$2,813
of interest income as aof the result of an investment of $250,000 in a 270-day
Certificate of Deposit and accrued interest due from Fred K. Suzuki,
President. See also "RELATED PARTY TRANSACTIONS" below. The Company also
had
$712 of other miscellaneous revenues primarily from leasing a portion of its
computer timestorage space to Stevia Company, Inc., an affiliate,
and $2,365 of miscellaneous income for the nine month period ending January
31, 1999.a third party.
INCOME/LOSS
- -----------
The Company realized a net profit of $4,805$17,797 during the 3rd1st Quarter as
compared to a net profit of $20,262$33,384 for the comparative quarter of the prior
year. The Company also realized a net profit of $48,877 for the nine month period ending
January 31, 1999 as compared to a net profit of $80,985 during the same period
in 1998. The decrease in net profit is due primarily to an increase in
marketing, research and development, and general and administrative expensesa result of lower sales
described below.above.
As of April 30, 1998,1999, the Company has incurred net operating losses/losses carryovers
aggregating $1,869,860.$1,192,189. As a result of net operating loss carryovers, no
income taxes were due for Fiscal 19981999 and will unlikely be due for Fiscal
1999.2000. 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 89 of the "FINANCIAL STATEMENTS."
BIOSYNERGY, INC
EXPENSES
- --------
GENERAL
- ------------------
The operating expenses incurred by the Company during the 3rd Quarter
increased overall by 16.52%, or $18,139, and increased by 11.89%, or $38,599
for the nine month period ending January 31, 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.
1st Quarter increased
overall
by 3.41%, or $3,890, as compared to the 1st quarter in 1998, primarily due to
an increase in Research and Development expenses and other expenses
previously
allocated to Stevia Company, Inc. ("Stevia"). See Footnote 3 of the
Financial
Statements and "RELATED PARTY TRANSACTIONS" below.
COST OF SALES AND OTHER OPERATING CHARGES
- ------------------------------------------------------------------------------------
The cost of sales and other operating charges during the 3rd1st Quarter
increaseddecreased
by $3,699 and increased by $80 during the nine month period ending January 31,
1999$7,077 as compared to these expenses during the same periodsquarter ending in
1998. As a percentage of sales, the cost of sales and other operating
charges
were 38.62%31.92% during the 3rd1st Quarter and 36.52%33.62% for the samecomparative quarter
ending in 1998, and 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. Although the cost of sales and operating
charges increased, the cost of sales and operating charges, as a percentage of
sales, haswhich did not materially changed duringaffect the last year, and is not expected to
materially change inresults of operations of
the foreseeable future.Company.
RESEARCH AND DEVELOPMENT
- -------------------------------------------------
Research and developmentDevelopment costs increased $3,406$8,127, or 41.39% during the 3rd
Quarter,87.15%, as compared to
the
same quarter in 1998. These costs increased by
$6,717 or 25.48% during the nine month period ending January 31, 1999 as
comparedThis increase is due to the same periodCompany's investigation of
certain compounds for use as bacteria growth retardant agents for use in 1998.food
and other products. These increases are primarilyexpenses include travel, laboratory supplies, and
legal and technical consulting expenses related to increases in salaries, purchases of laboratory equipment and product prototype
costs. These increased costs do not reflect changes inthese compounds.
Historically, the Company's
development policies. The Company intends to continue to direct research and development activities were limited
to the improvement of the current product line and development of products which
were natural extensions thereof. Recently the Company has been investigating
other products and accessories complimentary to its current product line and
to thoseentirely 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.technologies.
MARKETING
- ---------------------
Marketing costs for the 3rd1st Quarter increaseddecreased by $5,447$1,306 or 41.28%8.46%, as compared
to the quarter ending JanuaryJuly 31, 1998. This decrease is reflective of
non-reoccuring expenses incurred during the quarter ending July 31, 1998
and increased $16,962 or 45.26% during
the nine month period ending January 31, 1999 as compared to the same periodrather than a decrease in 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/entertainmentcurrent marketing expenses.
The Company intends to expand its marketing
budget as resources become available.
BIOSYNERGY, INC.
GENERAL AND ADMINISTRATIVE
- -------------------------------------------------------
General and administrative costs increased by $5,587,$4,237, or 13.56%10.59%, during the
3rd Quarter and increased by $14,901 or 12.86% during the nine month period
ending January 31, 1999, as compared
to the same periods1st quarter ending in 1998. The overallThis increase was primarily the result of
an increase in these costs was primarily related to increased
salaries and bonuses and the write-of of certain outdated computer equipment
retired during the 3rd Quarter.
rent which were previously allocated to Stevia.
See "RELATED PARTY TRANSACTIONS" below.
ASSETS/LIABILITIES
- --------------------------------------
GENERAL
-----------------
Since April 30, 1998,1999, the Company's assets and liabilities have not
materially
changed. The Company has experienced aninvested $250,000 of the proceeds received from Stevia
as
a result of its liquidation on April 16, 1999 in a 270-day Certificate of
Deposit. The increase in current assets, primarily cash and a
decrease in liabilitiesaccounts
receivable, is due to improved cash flow from operations.
DUE FROM AFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE
- ------------------------------------------------------normal fluctuations, and is not indicative of any trend
in the operations of the Company.
RELATED PARTY TRANSACTIONS
--------------------------
On April 16, 1999, Stevia was judicially dissolved. Prior to the dissolution
of Stevia, common offices, employees and certain operating expenses were
shared by the Company and Stevia. On April 16, 1999, inter-company charges
to
Stevia for shared expenses aggregated $315,015. The Stevia dissolution plan
called for each creditor to receive 93% of the amount owed in full
satisfaction of such amount. As a result, the Company received $290,918 as
its share of the Stevia dissolution proceeds. This resulted in a loss of
$24,097. The Company invested $250,000 of its share of the proceeds in a
270-day Certificate of Deposit.
The Company was owed $312,816 by Stevia Company, Inc. ("Stevia"), an
affiliate, and $18,524$18,574.35 by F.K. Suzuki International, Inc. ("FKSI"),
an affiliate, at JanuaryJuly 31, 1999. These affiliatesFKSI owed $298,335 and $13,221the same amount at April 30,
1998, respectively. These accounts1999.
This account primarily representrepresents common expenses which are charged by one companythe
Company to the otherFKSI for reimbursement. These expenses include rent, salaries and benefits for common employees,
insurancecertain office
expenses, general operating expenses and legal fees. See "Financial
Statements." These expenses are reviewed from timeincurred in the ordinary course of
business.
Although management believes it is cost effective to time to
determine if reallocation is appropriate. As a result of the increase in
amounts due from affiliates,share common expenses
with FKSI, the Company has reduced its own liquid
resources. See "FINANCIAL STATEMENTS."
On December 8, 1998, Stevia announced it filedthe amount of advances and common expenses
charged to FKSI until FKSI is in a complaint for judicial
dissolution inposition to reimburse the Illinois Circuit Court of Cook County, Chancery Division.
Lauane C. Addis, Secretary and General CounselCompany.
Collectability of the Company and Stevia
Company, Inc., was appointed interim receiver to sell certain assetsamounts due from FKSI cannot be assured without the
liquidation of Stevia, including its Pueblo, Colorado facility. Although the Company
anticipatesall or a portion of the proceeds from the liquidation of Stevia'sits 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 dateand thus such receivable 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 byclassified as a first mortgage on Stevia's Pueblo, Colorado facility.
The Balance due under the Note at January 31, 1999 was $2,200.non-current asset.
OTHER RELATED PARTY TRANSACTIONS
- -----------------------------------BIOSYNERGY, INC.
On November 12, 1998, the Company grantedentered into a stock option agreement with
Fred K. Suzuki, President, granting Mr. Suzuki 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 purchasean option price of $.025 per share.
The option is subject to several contingencies, including, but not limited
to,
shareholder approval. AsManagement believes the option has no value in excess
of January 31, 1999, no portionthe fair market value 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. AlthoughCompany's common stock, however, there was no
independent analysis of this transaction,transaction. The option contains anti-dilutive
provisions in the event of corporate capital reorganizations. As of April
30,
1999, no portion of this option had been exercised.
On April 1, 1999, the Company believesloaned $8,000 to its President, Fred K.
Suzuki.
The loan is evidenced by an unsecured note payable on demand with 10%
interest
on the purchase
priceunpaid balance. The entire principal balance and accrued interest of
$268 remained unpaid at July 31, 1999. The Company made this loan as an
accommodation to Mr. Suzuki. There has not been an independent evaluation of
the value of this loan to Mr. Suzuki, however, it is believed by management
that the interest charged Mr. Suzuki on this loan approximates fair market
value.interest.
CURRENT ASSETS/CURRENT LIABILITY RATIO
- -----------------------------------------------------------------------------
The ratio of current assets to current liabilities, 4.1023.31 to 1, has improved
compared to 3.0223.02 to 1 at April 30, 1998. Although the Company realized income
for the nine-month period ending January 31, 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's1999. Management believes it has
sufficient current assets were
converted to long-term receivables thereby reducingfor its current
assets/liabilities ratio. In order to continue to improveoperations during 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.ensuing year provided
there is no adverse material changes.
WORKING CAPITAL/LIQUIDITY
- ---------------------------------------------------
During the nine-month period ending January 31, 1999,1st Quarter, the Company experienced an increase in working
capital
of $36,886.$18,144. This is due to the continuing profitable operations of the
Company during the nine-month period January 31, 1999.1st Quarter.
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.
BIOSYNERGY, INC.
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 JanuaryJuly 31, 1999, the Company had $191,383$482,911 of current assets available.
Of
this amount, $46,660$61,145 was inventory, and $74,641$76,353 was net trade receivables.receivables, and
$329,218 was cash or short-term investments. Management of the Company
believes that it has sufficient working capital to continue operations for
the
fiscal year ending April 30, 19992000 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 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 filed as a part of this report:
(2) Plan of Acquisition, reorganization, arrangement, liquidation
or succession - none.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)
(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 November 12, 1998, between the
Company and Fred K. Suzuki P. E-1.(ii)
(b) Promissory Note dated April 1, 1999, payable to the Company by
Fred K. Suzuki (iii)
(11) Statement regarding computation of per share earnings -earnings- none.
(15) Letter dated March 5,September 7, 1999, regarding interim financial
informationinformation. (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.
(23) Consents of experts and counsel - none.
(24) Power of Attorney - none.
(27) Financial Data Schedule - P.E-8.P. E-1
(b) No Current Reports on Form 8-K8K 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,2-38015C, 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 Quarterly Report on Form
10Q for quarter ending January 31, 1999 filed with the Securities
and
Exchange Commission.
(iii) Incorporated by reference to the Company's Annual Report on Form 10K
for fiscal year ending April 30, 19901999 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.
>PAGE>
BIOSYNERGY, INC.
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,Date September 10, 1999 /s/ FRED K. SUZUKI /s/
Date --------------------- ----------------------------------------------------- ------------------------------------
Fred K. Suzuki
President, Chairman of the Board and
and Treasurer
Date September 10, 1999 /s/ LAURENCE C. MEAD /s/
------------------ ------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, and Chief Accounting
Officer
and Treasurer
MARCH 9,Date September 10, 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 OctoberJuly 31, 19981999
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 and telephone number of registrant's principal
executive office oron a 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-8
E-1