UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR13OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OctoberJuly 31, 19961997
_____________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OR15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_______________ _______________________________ 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 and telephone number: (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 17__ 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
OctoberJuly 31, 19961997 and the related Statements of Operations,
Shareholders' Equity (Deficit) and Statements of Cash Flows for
the sixthree month periods ended OctoberJuly 31, 19961997 and 19951996 were not
audited; however, the financial statements for the sixthree month
periods ending OctoberJuly 31, 19961997 and 19951996 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,
1996,1997, 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, 19961997 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 6, 1996September 17, 1997
2
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
OctoberJuly 31, 19961997 April 30,199630,1997
_____________ _____________
Unaudited Unaudited
________________ _____________
ASSETS_________ _________
CURRENT ASSETS
Cash 14,402 9,73322,830 12,420
Accounts Receivable, Trade, Net of
Allowance for Uncollectible Accounts
of $433$500 at OctoberJuly 31, 19961997 and $500 at
April 30, 1996 77,760 56,7501997 78,257 61,030
Inventories (Notes 1 and 4) 47,420 47,89447,113 45,956
Prepaid Expenses 3,102 2,795
Due From Affiliates - Short Term Note (Note 3) 2,000 -3,262 2,268
_________ __________ ___________
Total Current Assets 144,684 117,172301,500 291,795
_________ __________ ___________
DUE FROM AFFILIATESAFFILIATE (Note 3) 281,099 271,020
__________161,320 161,320
_________ ___________
PROPERTY AND EQUIPMENT
Equipment 154,036 154,036161,320 161,320
Leasehold Improvements 12,216 12,216
________ __________
___________
166,252 166,252173,536 173,536
Less: Accumulated Depreciation and
Amortization ( 162,175)163,419) ( 162,063)163,010)
__________ ___________
4,077 4,18910,117 10,526
__________ ___________
OTHER ASSETS
Patents, Net of Accumulated
Amortization (Note 1) 27,563 29,80524,523 25,533
Deposits 6,126 6,1456,031 6,051
Investment in Affiliated Company (Note 3) - -
_________ __________
___________
33,689 35,950
463,549 428,33130,554 31,554
_________ __________
___________493,633 455,579
_________ __________
--------- ----------
3
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 28,224 46,42219,603 12,873
Accrued Executive Compensation 82,699 99,43557,855 67,856
Other Accrued Compensation 2,559 1,1026,006 2,137
Accrued Payroll Taxes 749 -605 791
Deferred Rent 1,268 3171,759 1,751
Other Accrued Expenses 2,411 1,583
_________ ________1,868 1,736
___________ __________
Total Current Liabilities 117,910 148,85987,696 87,144
___________ __________
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 OctoberJuly 31, 1996 and at April 30, 1996 632,663 632,663
________ ________
Additional paid-in capital 100 100
Accumulated Deficit (287,124) (353,291)
_________ _________
345,639 279,472
463,549 428,331
_________ _________(226,826) (264,328)
___________ __________
405,937 368,435
___________ __________
493,633 455,579
___________ __________
----------- ----------
The accompanying notes are an integral part of the financial
statements.
3
4
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
UNAUDITEDUnaudited
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBEREnded July 31, OCTOBER 31,
________________________ ____________________Three Months
______________ ______________
1997 1996
1995 1996 1995
___________ ___________ ___________ _______________________ ______________
REVENUES
Sales 132,439 120,813 265,036 236,686
Interest Income 34 - 34 54142,361 132,598
Computer Rentals and Services 150 150
300 300
Other Income 1,910 1,008 5,896 1,869
___________ ___________ ___________ _________
134,533 121,971 271,266 238,909
___________ ___________ ___________ _________800 3,986
_____________ ______________
143,311 136,734
_____________ ______________
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 44,720 42,044 90,022 80,31946,912 45,302
Research and Development 8,376 7,878 15,473 15,3288,471 7,097
Marketing 12,693 11,052 27,289 22,03412,269 14,596
General and Administrative 37,904 39,645 72,012 74,99338,036 34,108
Interest Expense 149 722 303 1,403
___________ __________ ___________ __________
103,842 101,341 205,099 194,077
___________ __________ ___________ __________
INCOME121 155
____________ ______________
105,809 101,258
____________ ______________
NET PROFIT (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEMS 30,691 20,630 66,167 44,832
INCOME TAXES 4,534 3,094 11,426 6,725
___________ __________ ___________ __________
INCOME (LOSS) BEFORE 26,157 17,536 54,741 38,107
___________ __________ ___________ __________
EXTRAORDINARY ITEMS
Reduction of Income Taxes
arising from utilization
of prior years' Net
Operating Losses (Note 8) 4,534 3,094 11,426 6,725
___________ ___________ ___________ _________37,502 35,476
____________ ______________
------------ --------------
NET INCOME (LOSS) 30,691 20,630 66,167 44,832
___________ ___________ ___________ _________
NET INCOMEPROFIT (LOSS) PER COMMON SHARE:SHARE (Note 6) Before Extraordinary
Items .0019 .0013 .0040 .0028
Extraordinary Items .0003 .0002 .0008 .0005
___________ ___________ ___________ _________
NET INCOME (LOSS) .0022 .0015 .0048 .0033
___________ ___________ ___________ _________.003 .003
_____________ _____________
------------ --------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Note 7)6) 13,806,511 13,806,511
13,806,511 13,806,511
__________ __________ __________ ______________________ ______________
------------ --------------
The accompanying notes are an integral part of the financial statements.
4
5
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
SIXTHREE MONTHS ENDED OCTOBERJULY 31, 19961997
Unaudited
Additional
Common Stock Paid-in
________________________
Shares Amount Capital Deficit Total
________________________ __________ _________ __________ _______ _____
Balance, May 1,
19961997 13,806,511 632,663 100 (353,291) 279,472(264,328) 368,435
Net Profit (Loss) - - - 66,167 66,16737,502 37,502
Sale of Common Stock - - - -
-
_____________ _________ ___________________ __________ __________ _________ ______
Balance, OctoberJuly 31,
1997 13,806,511 632,663 100 (287,124) 345,639
1995(226,826) 405,937
__________ __________ _________ __________ _______
The accompanying notes are an integral part of the financial statements.
5
6
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
SIXTHREE MONTHS ENDED OCTOBERJULY 31,
___________________________
1996 1995
_______________________________________ ____________
OPERATING ACTIVITIES:
Net Income (Loss)
66,167 44,832
Adjustments to Reconcile Net Cash Used for 35,476 24,202
Operating Activities:
Depreciation and Amortization 2,354 4,0731,233 3,003
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (21,010) (7,532)( 12,682) ( 2,717)
(Increase) Decrease in Inventories 474 (6,197)( 3,393) ( 5,936)
(Increase) Decrease in Prepaid Expenses (307) 1,417815 ( 236)
Increase (Decrease) in Accounts Payable
and Accrued Expenses (30,949) (16,296)( 7,106) ( 5,516)
_____________ _________ __________
Net Cash Provided (Used) by Operating
Activities 16,729 20,297
_________ __________14,343 12,800
_____________ ________
INVESTING ACTIVITIES:
(Increase) Decrease in Due From Affiliates
(Note 3)Affiliate ( 10,079) (10,735)4,707) ( 4,556)
(Increase) Decrease in Due From AffiliatesEquipment ( 85) -
Short Term Note (Note 3) (2,000) -
(Increase) Decrease in Deposits 19 1,009______________ _________ __________
Net Cash Provided (Used) by Investing
Activities (12,060) ( 9,726)4,792) ( 4,556)
______________ _________ __________
FINANCING ACTIVITIES:
Proceeds from Borrowing (Repayments) - (7,250)
_________( 1,350)
____________ __________
Net Cash Provided (Used) by Financing
Activities - (7,250)
_________( 1,350)
_____________ __________
Increase (Decrease) in Cash and Cash
Equivalents 4,669 3,3219,551 6,894
_____________ _________ __________
Cash and Cash Equivalents at Beginning
of Period 9,733 4,520
_____________ _________ __________
Cash and Cash Equivalents at End of Period 14,402 7,841
__________ __________19,284 11,414
_____________ _________
------------- ---------
The accompanying notes are an integral part of the financial statements.
6
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Inventories-Inventories are valued at the lower of cost or
market using the FIFO (first-in, first-out) method.
Equipment and Leasehold Improvements-Equipment and Leasehold
improvements are stated at cost. Depreciation and
amortization are computed primarily on the straight-line
method over the estimated useful lives of the financial statements.
7
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Inventories-Inventories are valued at the lower of cost or market
using the FIFO (first-in, first-out) method.
Equipment and Leasehold Improvements-Equipment and Leasehold
improvements are stated at cost. Depreciation and amortization
are computed primarily on the straight-line method over the
estimated useful lives of the respective assets. Repairs and
maintenance are charged to expense as incurred; renewals and
betterments which significantly extend the useful lives of
existing property and equipment are capitalized. Significant
leasehold improvements are capitalized and amortized over the
term of the lease.
Research and Development, and Patents-Research and development
expenditures are charged to operations as incurred. The cost of
obtaining patents, primarily legal fees, are capitalized and
amortized over seventeen years on the straight-line method.
2. Company Organization and Description:
The Company was incorporated under the laws of the State of
Illinois on February 9, 1976. It is primarily engaged in the
development and marketing of medical, consumer and industrial
thermometric and thermographic products that utilize cholesteric
liquid crystals.
3. Related Party Transactions:
The Company and its affiliates are related through common
stock ownership as follows as of Octoberrespective
assets. Repairs and maintenance are charged to expense as
incurred; renewals and betterments which significantly
extend the useful lives of existing property and equipment
are capitalized. Significant leasehold improvements are
capitalized and amortized over the term of the lease.
Research and Development, and Patents-Research and
development expenditures are charged to operations as
incurred. The cost of obtaining patents, primarily legal
fees, are capitalized and amortized over seventeen years on
the straight-line method.
2. Company Organization and Description:
The Company was incorporated under the laws of the State of
Illinois on February 9, 1976. It is primarily engaged in
the development and marketing of medical, consumer and
industrial thermometric and thermographic products that
utilize cholesteric liquid crystals.
3. Related Party Transactions:
The Company and its affiliates are related through common
stock ownership as follows as of July 31, 1996:
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.Inc
___________ _________________ __________ _____________ _______
______________ ______
Stevia Company, Inc. - 13.8% - -
Biosynergy, Inc. .4% - - -
F.K. Suzuki
International, Inc. 55.8% 18.8% - 100.0%
Fred K. Suzuki, - - 35.6% -
Officer and Director
Lauane C. Addis, .1% .1% 32.7% -
Officer and Director
James F. Schembri, - 12.9% - -
Director
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 in exchange for 1,058,181 shares of
common stockcommonstock of Stevia Company, Inc. The common stock of Stevia
Company, Inc.
87
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
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 OctoberJuly 31, 1996.
Although the Common Stock of Stevia Company, Inc. can be
traded in the over-the-counter market, there is no
established public trading market for such common stock due
to limited and sporadic trades. The market
price of Stevia Company, Inc. Common
Stock is unknown.had an estimated market price of less than $.01 as of
July 31, 1996.
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 in prior years, have
resulted in the following balances due from Stevia Company,
Inc.:
OctoberJuly 31, 1996 - $268,439$263,067
April 30, 1996 - $258,360
At April 30, 1996 and OctoberJuly 31, 1996, the financial condition
of Stevia Company, Inc. was such that it is unlikely to be
able to repay the Company during the current year without
liquidating a portion of its assets.
The following balances were due from F.K. Suzuki
International, Inc. at the dates indicated based on the
allocation of common expenses offset by advances received
from time to time:
OctoberJuly 31, 1996 - $12,660
April 30, 1996 - $12,660
At April 30, 1996 and OctoberJuly 31, 1996, the financial condition
of F.K. Suzuki International, Inc. was such that it is
unlikely to be able to repay the Company during the current
year without liquidating a portion of its assets.
On September 20, 1995, the Company loaned Stevia Company,
Inc. $3,000.00. This loan is evidenced by a promissory note
payable in two equal installments including interest at the rate
of 11.5% per annum.
See also Note 5.
4. Inventories:
Components of inventories are as follows:
98
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 October 31, 1996
_______________ ________________
Raw Materials $ 30,015 $ 28,369
Work-in process 16,161 16,967
Finished Goods 1,718 2,084
_______________ ________________
$ 47,894 $ 47,420
_______________ ________________
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
[S] [C] [C]
April 30, 1996 July 31, 1996
______________ _____________
Raw Materials $ 30,015 $ 32,480
Work-in process 16,161 16,712
Finished Goods 1,718 2,095
______________ _____________
$ 47,894 $ 51,287
______________ _____________
-------------- -------------
5. Common Stock:
AllAs of theJuly 31, 1996, under an employee stock incentive plan
adopted in 1983, stock options and stock appreciation rights
for 131,500 shares of stock were granted to four advisors,
directors, officers, consultants, andand/or employees of the
Company under the
Company's employee stock incentive plan expired on October 14,
1996.Company. The exercise price is $.05 per share. The Company had
reserved 350,000 shares of its common stock for this plan.
Under the plan, stock options may be granted with respect to
shares subject to expired stock options. As permitted in
the plan, the directors of the Company extended the
termination date of the plan from May 19, 1986 to December
31, 1989. No further action has been taken to extend the
term of the plan.
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 option is conditioned upon the
Company having sufficient liquid assets to pay all employee
taxes due at the time of the conversion. The option may be
exercised until Mr. Suzuki is no longer owed accrued but
unpaid salary. The accrued but unpaid salary arose as a
result of Mr. Suzuki agreeing to defer his salary when the
Company was not financially able to pay salaries on a
regular basis. The option contains anti-dilutive provisions
in the event of corporate capital reorganizations. An
aggregate of 966,8791,122,263 shares of the Company's common stock
were subject to Mr. Suzuki's option at OctoberJuly 31, 1996.
On August 1, 1993, the Company entered into a Stock Option
Agreement with Fred K. Suzuki, President, granting Mr.
Suzuki an option to purchase 3,000,000 shares of the
Company's common stock at an option price of $0.025 per
share. This Stock Option Agreement was granted to Mr.
Suzuki in consideration of his loaning money to the company
on an unsecured basis from time to time. The option
contains anti-dilutive provisions in the event of corporate
capital reorganizations. As of OctoberJuly 31, 1996, no portion of
this Option has been exercised.
9
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The Company's common stock is traded in the over-the-counter
market. However, there is no established public trading
market for such common stock due to limited and sporadic
trades. The Company's common stock is not listed on a
recognized market or stock exchange.
10
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
6. Income (Loss) Per Share:
Net income or (loss) per common share is computed using the
weighted average number of common shares outstanding during
the period, after giving effect to stock splits. Fully
diluted earnings per share, assuming exercise of outstanding
options, is not presented since exercise of the options
would be anti-
dilutive.anti-dilutive.
7. Lease Commitments:
In 1996, the Company entered into a new lease agreement for
its current facilities which expires January 31, 2001. The
base rent under the lease, of which 15% is allocated to
Stevia Company, Inc., escalates over the life of the lease.
Total rent payments for each fiscal year isare 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.
10
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
8. Income Taxes:
At April 30, 1996, net operating loss carryforwards were
available and expire, if not used, as follows:
Year Ending Net Operating
April 30, Losses
__________ _____________ _______________
1998 $ 281,470
1999 677,671
2000 455,166
2001 449,142
2002 132,470
2003 85,822
2004 41,176
2006 160
2007 28,253
______________ ________________________
$ 2,151,330
11
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS-----------
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes" for
the fiscal year ending April 30, 1994 as required by SFAS
No. 109. The effect, if any, of adopting Statement No. 109
on pre-tax 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. Major Customers:
Shipments to one customer accounted for approximately 31.63%31.24%
of sales during the six month period ending October 31, 1996.first quarter of Fiscal 1997. The
outstanding receivable from this customer was $31,852.15$27,892 at
OctoberJuly 31, 1996.
10. Management's Plans:
In view of the fact the Company has incurred substantial
losses in prior years, management of the Company recognizes
the Company's ability to continue as a going concern is
subject to continued sales performance and the ability of
the Company to obtain financing,raise money, when needed. To this extent,Therefore,
management intends to continue introducingexpanding the Company's
products to new
markets and expand its marketing efforts in the traditional
medical market.
12efforts.
11
Item 2. MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SALES/REVENUES
______________
For the three month period ending OctoberJuly 31, 1996 ("2nd1st Quarter"),
the net sales increased 9.62%14.43%, or $11,626, and
increased 11.98% or $28,350 during the six month period ending
October 31, 1996,$16,725, as compared to net
sales for the comparative periodsquarter ending in 1995. This increase
in sales is the result of increaseda 16% increase in sales of HemoTempR II
along with a variety ofslight increase in other product sales as compared
to the Company's products rather
than any single product.same quarter in 1995. As of OctoberJuly 31, 1996, the Company
had no material product back orders.
In addition to the above, during the 1st Quarter the Company
realized $300$150 of income as a result of leasing a portion of its
computer time to Stevia Company, Inc. ("Stevia"), an affiliate, and $5,896$3,986
of miscellaneous income, including contractrevenues, primarily related to specialized
printing and $34 of
interest income for the six month period ending October 31, 1996.services provided on an "as needed" basis.
INCOME/LOSS
___________
The Company realized a net profit of $30,691$35,476 during the 2nd1st
Quarter as compared to a net profit of $20,630$24,202 for the
comparative quarter inof the prior year. The Company also realized
a net profit of $66,167 for the six month period ending October
31, 1996, as compared to a net profit of $44,832 during the same
period in 1995. The increase in income is
a result of improved sales withput any material changes in operating expenses.sales. There can be no assurance however,
that the Company's sales will improve or stay at their present
level on which the profitability of the Company is dependent.
As of April 30, 1996, the Company has incurred net operating
losses aggregating $2,151,330. As a result of net operating loss
carryovers, no income taxes were due for Fiscal 1996 and will
unlikely be due for Fiscal 1997. 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 2nd1st
Quarter increased overall by 2.47%9.19%, or $2,501, and increased by
5.68% or $11,022 for the six month period ending October 31,
1996. These fluctuations were not material$8,523, as compared to the
operations1st Quarter in 1995, primarily due to an increase in the cost of
the Company or indicative of any unusual trends. An explanation
of each catagory of expenses is included to assist the reader in
reviewing the operations of the Company during the periods
indicated.
13
sales and marketing expenses.
COST OF SALES AND OTHER OPERATING CHARGES
_________________________________________
The cost of sales and other operating charges during the 2nd1st
Quarter increased by $2,676, and increased by $9,703 during the
six month period ending October 31, 1996$7,027 as compared to these expenses during
the same periodsquarter ending in 1995. As a percentage of sales, the
cost of sales and other operating charges were 33.77%34.16% during the
2nd1st Quarter and 34.8%33.03% for the samecomparative quarter ending in
1995, and 33.96%
duringwhich did not materially affect the six month period ending October 31, 1996 compared to
33.93% in 1995.results of operations
of the Company. The overall increase in cost of sales and
operating charges aswas due primarily to an increase in sales on a
percentage of sales, have not materially changed during the
last year, and are not expected to materially change in the
forseeable future.unit basis.
12
RESEARCH AND DEVELOPMENT
________________________
Research and Development costs increased by $498decreased $353, or 5.94% during
the 2nd Quarter,4.74%, as
compared to the same quarter in 1995. These
costs increased by $145 or .94% during the six month period
ending October 31, 1996 as compared to the same period in 1995.
These cost changes wereThis decrease was not
material to the operations of the Company and do not reflect changes in the Company's development
policies.Company. The Company intends to continue
to direct future research and development to the improvement of
its current product line and to those new products, the
development of which has already commenced, or those 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 for customers, which will gradually be offset by research
revenues.
MARKETING
_________
Marketing costs for the 2nd1st Quarter increased by $1,641$3,614 or
14.85%32.91%, as compared to the Quarterquarter ending OctoberJuly 31, 1995, and
increased $5,255 or 23.85% during the six month period ending
October 31, 1996 as compared to the same period in 1995. This
increase is a result of increased marketing activity such as
advertising, trade shows, direct mailings, and an increase in commissioned sales. As financial
resources become available, the Company intends to further expand
its marketing budget.
GENERAL AND ADMINISTRATIVE
__________________________
General and administrative costs decreased by $1,741,$1,239, or 4.39%
during the 2nd quarter and decreased by $2,981 or 3.97% during
the six month period ending October 31, 1996,3.5%, as
compared to the same period1st quarter ending in 1995. These decreases areThis decrease was
not indicative of any trend, but only representative of normal fluctuationsmaterial changes in general and
administrative expenses.
14
ASSETS/LIABILITIES
__________________
GENERAL
_______
Since April 30, 1996, 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.
DUE FROM AFFILIATES
___________________
The Company was owed $268,439$263,067 by Stevia Company, Inc. ("Stevia"),
an affiliate, and $12,660 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at OctoberJuly 31, 1996. These affiliates owed
$258,360 and $12,660 at April 30, 1996, respectively. These
accounts primarily represent common expenses which are charged by
one company to the other for reimbursement. These expenses
include certain rent, salaries for common employees, insurance
and employee benefits, and legal fees. Beginning May 1, 1994, a
greater portion of these common expenses were allocated to the
Company to reflect the decreasing activity of Stevia Company,
Inc. and the increased activity of the Company. These expenses
are reviewed from time to time to determine if reallocation is
appropriate. See "FINANCIAL STATEMENTS."Financial Statements." These expenses are
incurred in the ordinary course of business. As a result of the
increase in amounts due from affiliates, the Company has reduced
13
its own liquid resources. The Company intends to reverse this
trend by restricting the advances to and common expense charges toexpenses incurred
on behalf of Stevia and FSKI until these affiliates are in a
position to reimburse the Company.
CURRENT ASSETS/CURRENT LIABILITY RATIO
______________________________________
The ratio of current assets to current liabilities, 1.231 to 1, has
improved compared to .79 to 1 at April 30, 1996. In view of the
Company's operating expenses, there is a risk that the Company's
current asset/current liability ratio may not be adequate for the
Company's current or future operating needs unless the Company's
sales remain at the present level or improve.
WORKING CAPITAL/LIQUIDITY
_________________________
During the six month period ending October 31, 1996,1st Quarter, the Company experienced an increase in
working capital of $53,759.$31,917. This is due to the increase in
profit of the Company during the six month
period ending October 31, 19961st Quarter and the use of the cash flow from
operations to reducea corresponding
decrease in liabilities.
In view of the fact that the Company has incurred substantial
losses in prior years, Management of the Company recognizes the
Company's ability to continue as a going concern is subject to
maintaining and improving sales, profitable operations,
collection of accounts receivable, and the ability of the Company
to obtain capital, when needed, of which there is no assurance.
TheIn this regard, the Company intends to continue expanding its
marketing efforts
in the medical market and new markets. Management also intends
to continue seeking out financing opportunities, including
selling its common stock to private investors, if necessary.efforts. The Company does not have a working line of
credit, and there can be no assurance, nor is it anticipated,
that the Company will be 15
able to obtain a working line of credit
on acceptable terms.terms in the near future. Management will seek out
financing opportunities, if necessary. Irrespective of the
Company's past financial condition, the Company has not been
refused goods or services from any of its vendors.
Except for its operating working capital needs, the Company has
no material contingencies for which it must provide.
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)
14
(b) Stock Option Agreement, dated August 1, 1993,
between the Company and Fred K. Suzuki (iii)
(c) Installment Promissory Note dated September 20,
1996, in the principal amount(11) Statement regarding computation of $3,000 payable to the Company by
Stevia Company, Inc.per share earnings-
none.
(15) Letter dated December 6,September 11, 1996, regarding interim
financial information. (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 attached hereto as an Exhibit.- P. E-1
(b) No Current Reports on Form 8K were filed during the period
covered by this Report.
[FN]
____________________________________________
(i) Incorporated by reference to a Registration Statement
filed on Form S-18 with the Securities and Exchange
Commission, 1933 Act Registration Number 2-38015C,
under the Securities Act of 1933, as amended, and
Incorporated by reference, with regard to Amended By-Laws,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 Annual
Report on Form 10K for fiscal year ending April 30,
1994 filed with the Securities and Exchange Commission.
(iv) This exhibit is included in this report as a part of
the Financial Statements, and is incorporated by
reference herein.
1615
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, 1996
_________________ ______________________________________________________ ______________________________
Fred K. Suzuki
President, Chairman of the
Board, Chief Accounting
Officer and Treasurer
Date
December 10, 1996
_________________ ________________________________________________________ ______________________________
Lauane C. Addis
Secretary, Corporate Counsel
and Director
1716
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,September 13, 1996 /s/ FRED K. SUZUKI /s/
_________________ _______________________________________________ ___________________________________
Fred K. Suzuki
President, Chairman of the Board,
Chief Accounting Officer and
Treasurer
Date December 10,September 13, 1996 /s/ LAUANE C. ADDIS /s/
_________________ _______________________________________________ ___________________________________
Lauane C. Addis
Secretary, Corporate Counsel and
Director
1716
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
AnnualQuarterly Report Pursuant to Section 13 or 15(d)15 (d)
of
THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ending OctoberJuly 31, 1996
Commission File Number: 0-12459
BIOSYNERGY, INC.
_________________________________________________________________
(Exact name of registrant as specified in charter)
1940 East Devon Avenue
Elk Grove Village, IL 60007
(708) 593-0226(847) 956-0471
(Address and telephone number of registrant's principal
executive office on a principal place of business)
___________________________________________________________________
EXHIBITS
_________________________________________________________________
_________________________________________________________________
EXHIBIT INDEX
_____________
Page Number
Pursuant to
Sequential
Exhibit Numbering
Number Exhibit System
___________ _______ __________ __________ _______________
10(c) Promissory Note dated
September 20, 1996 E-1
27 Financial Data Schedule E-3E-1