UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13OR13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
_____________1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d)OR 15(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 (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 __20 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 July 31, 19971998
and the related Statements of Operations, Shareholders' Equity (Deficit) and
Statements of Cash Flows for the three month periods ended July 31, 19971998 and
19961997 were not audited; however, the financial statements for the three month
periods ending July 31, 19971998 and 19961997 reflect all adjustments (consisting only
of normal reoccurring adjustments) which are, in the opinion of management,
necessary to provide a fair statement of the results of operations for the
interim periods presented.
The financial statements for the fiscal year ended April 30, 1997,1998, were
not audited due to the Company's lack of available cash to pay for such audit;
however, the financial statements for the fiscal year ending April 30, 19971998
reflect all adjustments (consisting only of normal reoccurring adjustments)
which are, in opinion of management, necessary to provide a fair statement of
the results of operations for the period presented.
BIOSYNERGY, INC.
September 17, 1997
210, 1998
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
July 31, 19971998 April 30,1997
_____________ _____________30,1998
Unaudited Unaudited
_________ _________-------------- --------------
CURRENT ASSETS
Cash 22,830 12,42056,299 31,150
Accounts Receivable, Trade, Net of
Allowance for Uncollectible Accounts
of $500 at July 31, 19971998 and $500 at
April 30, 1997 78,257 61,0301998 73,228 75,955
Inventories (Notes 1 and 4) 47,113 45,95649,167 40,148
Prepaid Expenses 3,262 2,268
_________ __________3,903 3,792
Total Current Assets 301,500 291,795
_________ __________182,597 161,045
DUE FROM AFFILIATEAFFILIATES (Note 3) 161,320 161,320
_________ ___________318,718 311,556
PROPERTY AND EQUIPMENT
Equipment 161,320 161,320170,670 170,670
Leasehold Improvements 12,216 12,216
________ __________
173,536 173,53615,140 15,140
185,810 185,810
Less: Accumulated Depreciation and
Amortization ( 163,419)167,011) ( 163,010)
__________ ___________
10,117 10,526
__________ ___________165,897)
18,799 19,913
OTHER ASSETS
Patents, Net of Accumulated
Amortization (Note 1) 24,523 25,53321,715 22,553
Deposits 6,031 6,0515,995 5,995
Investment in Affiliated Company (Note 3) - -
_________ __________
30,554 31,554
_________ __________
493,633 455,579
_________ __________
---------27,710 28,548
547,824 521,062
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 19,603 12,8739,440 9,875
Accrued Executive Compensation 57,855 67,85624,616 37,355
Other Accrued Compensation 6,006 2,1377,836
Accrued Payroll Taxes 605 791599 254
Deferred Rent 1,759 1,7511,791 1,783
Other Accrued Expenses 1,868 1,736
___________ __________2,372 1,949
Total Current Liabilities 87,696 87,144
___________ __________46,654 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 July 31, 19961998 and at
April 30, 19961998 632,663 632,663
Additional paid-in capital 100 100
Accumulated Deficit (226,826) (264,328)
___________ __________
405,937 368,435
___________ __________
493,633 455,579
___________ __________
-----------(131,593) (164,977)
501,170 467,786
547,824 521,062
---------- ------------
The accompanying notes are an integral part of the financial statements.
3
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
Unaudited
Three Months Ended
July 31, Three Months
______________ ______________1998 1997
1996
______________ ______________-------------- -----------
REVENUES
Sales 146,703 142,361 132,598
Computer Rentals and Services 150 150
Other Income 711 800
3,986
_____________ ______________
143,311 136,734
_____________ ______________147,564 147,311
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 49,325 46,912 45,302
Research and Development 9,325 8,471
7,097
Marketing 15,431 12,269 14,596
General and Administrative 40,008 38,036 34,108
Interest Expense 91 121
155
____________ ______________114,180 105,809
101,258
____________ ______________
NET PROFITINCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 33,384 37,502
35,476
____________ ______________
------------INCOME TAXES 7,411 5,625
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS 25,973 31,877
EXTRAORDINARY ITEMS
Reduction of Income Taxes
arising from utilization of prior
years' Net Operating Losses
(Note 8) 7,411 5,625
NET INCOME (LOSS) 33,384 37,502
-------------- --------------
NET PROFITINCOME (LOSS) PER COMMON SHARE
(Note 6):
Before Extraordinary Items .002 .002
Extraordinary Items .001 .001
NET INCOME (LOSS) PER COMMON SHARE .003 .003
_____________ _____________
------------ ----------------------------- ---------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Note 6) 13,806,511 13,806,511
____________ ______________
------------ --------------
The accompanying notes are an integral part of the financial statements.
4
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 19971998
Unaudited
Additional
Common Stock Paid-in
________________________
Shares Amount Capital Deficit Total
___________ __________ _________ __________ _____---------------------------------------------------------
Balance, May 1,
19971998 13,806,511 632,663 100 (264,328) 368,435(164,977) 467,786
Net Profit (Loss) - - - 37,502 37,50233,384 33,384
Sale of Common
Stock - - - - __________ __________ __________ _________ ______-
Balance, July 31,
19971998 13,806,511 632,663 100 (226,826) 405,937
__________ __________ _________ __________ _______(131,593) 501,170
The accompanying notes are an integral part of the financial statements.
5
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
THREE MONTHS ENDED JULY 31,
___________________________
1996 1995
____________ ____________1998 1997
----------------------------
OPERATING ACTIVITIES:
Net Income (Loss) 33,384 37,502
Adjustments to Reconcile Net Cash Used for
35,476 24,202
Operating Activities:
Depreciation and Amortization 1,233 3,0031,952 1,419
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable ( 12,682) ( 2,717)2,727 (17,227)
(Increase) Decrease in Inventories 981 ( 3,393) ( 5,936)1,157)
(Increase) Decrease in Prepaid Expenses 815 ( 236)111) ( 994)
(Increase) Decrease in Deposits - 20
Increase (Decrease) in Accounts Payable
and Accrued Expenses ( 7,106) ( 5,516)
_____________ _________6,622) 552
Net Cash Provided (Used) by Operating
Activities 14,343 12,800
_____________ ________32,311 20,115
INVESTING ACTIVITIES:
(Increase) Decrease in Due From Affiliate ( 4,707)7,162) ( 4,556)
(Increase) Decrease in Equipment ( 85) -
______________ _________9,705)
Net Cash Provided (Used) by Investing
Activities ( 4,792)7,162) ( 4,556)
______________ _________9,705)
FINANCING ACTIVITIES:
Proceeds from Borrowing (Repayments) - ( 1,350)
____________ __________
Net Cash Provided (Used) by Financing
Activities - ( 1,350)
_____________ __________-
Increase (Decrease) in Cash and Cash
Equivalents 9,551 6,894
_____________ _________25,149 10,410
Cash and Cash Equivalents at Beginning
of Period 9,733 4,520
_____________ _________31,150 12,420
Cash and Cash Equivalents at End of Period 19,284 11,414
_____________ _________
------------- ---------56,299 22,830
The accompanying notes are an integral part of the financial statements.
6
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 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, 1998:
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 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%100%
Fred K. Suzuki,
Officer - - 35.6% -
Officer and Director
Lauane C. Addis,
Officer .1% .1% 32.7% -
Officer and Director
James F. Schembri,
Director - 12.9% - -
DirectorMary K. Friske, Officer - .1% .2% -
Laurence C. Mead,
Officer .1% .1% 2.9% -
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 commonstockthe 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
7
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 CompanyBiosynergy owned 130,403 shares of Stevia Company, Inc. Common Stock at July
31, 1996.1998, representing a .4% interest in Stevia. Although the Common Stock of
Stevia Company, Inc. can beis traded in the over-the-counter market, there is no
established public trading market for such common stockCommon Stock due to limited and
sporadic trades. As of July 31, 1998, the bid price of the common stock of
Stevia Company, Inc. Common
Stock had anwas estimated market price ofto be less than $.01 as of
July 31, 1996.per share.
Common offices are shared with Stevia Company, Inc. Intercompany charges for
shared expenses are made by whichever company incurs such charges.changes. Such
intercompany charges, together with funds advanced by Stevia in prior years,
have resulted in the following balances due from Stevia Company,
Inc.:balances:
April 30, 1998 - $298,335
July 31, 19961998 - $263,067
April 30, 1996 - $258,360$305,497
At April 30, 1996 and July 31, 1996,1998, the financial condition of Stevia Company, Inc. wasis such that
it is unlikely to be able to repay the CompanyBiosynergy during the currentnext 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 theApril
30:
April 30, 1998 - $13,221
July 31, 1998 - $13,221
The balances result from an allocation of common expenses offset by advances
received from time to time:time. At July 31, 1996 - $12,660
April 30, 1996 - $12,660
At April 30, 1996 and July 31, 1996,1998, the financial condition of F.K.
Suzuki International, Inc. wasis such that it is unlikely to be able to repay
the CompanyBiosynergy during the currentnext year without liquidating a portion of its assets.
See also Note 5.
4. Inventories:
Components of inventories are as follows:
8
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
[S] [C] [C]
April 30, 19961998 July 31, 1996
______________ _____________1997
Raw Materials $ 30,015 $ 32,480$31,789 $30,048
Work-in process 16,161 16,71216,049 15,496
Finished Goods 1,718 2,095
______________ _____________
$ 47,894 $ 51,287
______________ _____________
-------------- -------------2,310 3,623
--------------- -----------------
$50,148 $49,167
5. Common Stock:
As of July 31, 1996, under an employeeThe Company's stock incentive plan
adoptedis traded in 1983, stock optionsthe Over-The-Counter market. However, there
is no established public trading market due to limited and stock appreciation rights
for 131,500 shares of stock were granted to four advisors,
directors, officers, consultants, and/or employees of the
Company.sporadic trades.
The exercise price is $.05 per share. The Company
reserved 350,000 shares of itsCompany's common stock for this plan.
Under the plan,is not listed on a recognized market or 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.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 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
resultbalance of Mr. Suzuki agreeing to defer his salary whenSuzuki's deferred compensation was paid on May 7,
1998, and 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 1,122,263 shares of the Company's common stock
were subject to Mr. Suzuki's option at July 31, 1996.agreement expired by its terms.
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 companyCompany on an unsecured basis from time to time. The option
contains anti-dilutive provisions in the event of corporate
capital reorganizations. As of July 31, 1996, noNo
portion of this Option was exercised, and it 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.expired by its terms.
6. Income or (Loss) Per Share:Shares:
Net income or (loss) per common share is computed using the weighted average
number of common shares outstanding during the period, after giving effect to
stock splits. Fully
diluted earnings per share, assuming exerciseThe weighted average number of common shares outstanding were
13,806,511 at July 31, 1998 and April 30, 1998. The affect of conversion of
stock options ishas not been presented since exercise of the optionsas conversion would be anti-dilutive.
7. Lease Commitments:
In 1996 the Company entered into a new lease agreement for its current facilities
which expires January 31, 2001. The base rent under the lease, of which 15%
is allocated to Stevia Company, Inc., escalates over the life of the lease.
Total rent payments for each fiscal year are as follows:
Year ending April 30 Total Base Rent
____________________ _______________
1996 $11,00011,000
1997 $66,73366,733
1998 $68,20068,200
1999 $68,56768,567
2000 $69,30069,300
2001 $51,97551,975
Also included in the lease agreement are escalation clauses for the lessor's
increases in property taxes and other operating expenses. The lease can be
extended for an additional five year term.
10
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
8. Income Taxes:
At April 30, 1996,1998, net operating loss carryforwards were available and expire,
if not used, as follows:
Year Ending Net Operating
April 30, Losses
__________ _____________
1998----------- -------------
1999 $ 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
-----------1,869,860
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" for
the fiscal year ending April 30, 1994 as required by SFAS No. 109. The effect,
if any, of adopting Statement No. 109 on pre-taxpretax income from continuing
operations is not material. The companyCompany has elected not to retroactively
adopt the provisions allowed in SFAS No. 109;109, however all provisions of the
document have been applied since the beginning of fiscal year 1994.
9. Major Customers:
Shipments to one customer accounted foramounted to approximately 31.24%34.3% of sales during the
first quarter of Fiscal 1997. The1999. At July 31, 1998 there was an outstanding
account receivable from this customer was $27,892 at
July 31, 1996.of approximately $34,401.
10. Management's Plans:
In view of the fact the Company has incurred substantial
losses in prior years, managementManagement of the Company recognizes the Company's ability to continue as a
going concern is subject to continuedcontinuing sales performance and the ability of
the Company to raise money, when needed. Therefore,To this extent, management has
endeavored to introduce the Company's products in new markets and expand its
marketing efforts in the traditional medical market. Finally, management
intends to continue expandingpursuing 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 marketing efforts.
11business, 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.
Item 2. MANAGEMENT2.MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES/REVENUES
______________
For the three month period ending July 31, 19961998 ("1st Quarter"), the net sales
increased 14.43%3.05%, or $16,725,$4,342, as compared to net sales for the comparative
quarter ending in 1995.1997. This increase in sales is the result of a 16%an increase
in sales of HemoTempR II
along with a slight increase in other product sales as compared to the same quarter in 1995.1997. As of July
31, 1996,1998, the Company had no back orders.
In addition to the above, during the 1st Quarter the Company realized $150 of
income as a result of leasing a portion of its computer time to Stevia
Company, Inc., an affiliate, and $3,986$711 of miscellaneous revenues, primarily related to specialized
printing services provided on an "as needed" basis.revenues.
INCOME/LOSS
___________
The Company realized a net profit of $35,476$33,384 during the 1st Quarter as
compared to a net profit of $24,202$35,476 for the comparative quarter of the prior
year. The increasedecrease in incomenet profit is a result of improved 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.higher operating costs
discussed below.
As of April 30, 1996,1998, the Company has incurred net operating losses carryovers
aggregating $2,151,330.$1,869,860. As a result of net operating loss carryovers, no
income taxes were due for Fiscal 19961998 and will unlikely be due for Fiscal
1997.1999. 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 byof the Company during the 1st Quarter increased overall
by 9.19%7.91%, or $8,523,$8,371, as compared to the 1st Quarter in 1995,1997, primarily due to
an increase in the cost of
salessalaries and marketing expenses.raw materials.
COST OF SALES AND OTHER OPERATING CHARGES
_________________________________________-----------------------------------------
The cost of sales and other operating charges during the 1st Quarter increased
by $7,027$2,413 as compared to these expenses during the same quarter ending in
1995.1997. As a percentage of sales, the cost of sales and other operating charges
were 34.16%33.62% during the 1st Quarter and 33.03%32.95% for the comparative quarter
ending in 1995,1997, which did not materially affect the results of operations of
the Company. The overall increase in cost of sales and operating charges was
due primarily to an increase in sales on a
unit basis.
12salaries and raw materials.
RESEARCH AND DEVELOPMENT
________________________- -------------------------
Research and Development costs decreased $353,increased $854, or 4.74%10.08%, as compared to the
same quarter in 1995.1997. This decreaseincrease, due to an increase in salaries, was not
material to the operations of the Company. The Company intends 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 be offset by research revenues.
MARKETING
_________- ----------
Marketing costs for the 1st Quarter increased by $3,614$3,162 or 32.91%25.77%, as compared
to the quarter ending July 31, 1995.1997. This increase is a result of increased marketing activity such as
advertising, and an increase
in commissioned sales.salaries, higher commissions and new marketing materials. As financial
resources become available, the Company intends to further expand its marketing
budget.
GENERAL AND ADMINISTRATIVE
__________________________- ---------------------------
General and administrative costs decreasedincreased by $1,239,$3,928, or 3.5%11.52%, as compared
to the 1st quarter ending in 1995.1997. This decreaseincrease was not indicativeprimarily the result of
any material changesan increase in general and
administrative expenses.salaries.
ASSETS/LIABILITIES
__________________- ------------------
GENERAL
_______-------
Since April 30, 1996,1998, the Company's assets and liabilities have not materially
changed. The increase in current assets, primarily cash and accounts
receivable, is due to normal fluctuations, and is not indicative of any trend
in the operations of the Company.
DUE FROM AFFILIATES
___________________--------------------
The Company was owed $263,067$305,497 by Stevia Company, Inc. ("Stevia"), an
affiliate, and $12,660$13,221 by F.K. Suzuki International, Inc. ("FKSI"), an
affiliate, at July 31, 1996.1998. These affiliates owed $258,360$298,335 and $12,660$13,221 at
April 30, 1996,1998, respectively. These accounts primarily represent common
expenses which are charged by one company to the other for reimbursement.
These expenses include certain rent, salaries and benefits 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."
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 expenses incurred on behalf of Stevia
and FSKIFKSI until these affiliates are in a position to reimburse the Company.
CURRENT ASSETS/CURRENT LIABILITY RATIO
______________________________________- ----------------------------------------
The ratio of current assets to current liabilities, 13.91 to 1, has improved
compared to .793.02 to 1 at April 30, 1996. In view1998. Although the Company realized income
for the 1st Quarter, the Company used $7,162 of its cash to pay expenses
incurred by the Company's operating expenses, there is a risk thatCompany on behalf of Stevia and FKSI, which was not
reimbursed. To this extent, the Company's current asset/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, may not be adequatethe
Company's operations must remain profitable and the Company must curtail the
use of its current assets for the Company's current or future operating needs unless the Company's
sales remain at the present level or improve.benefit of Stevia and FKSI.
WORKING CAPITAL/LIQUIDITY
_________________________- --------------------------
During the 1st Quarter, the Company experienced an increase in working capital
of $31,917.$28,174. This is due to the increase in
profitcontinuing profitable operations of the
Company during the 1st QuarterQuarter.
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 corresponding
decrease in liabilities.
In viewsubstantial portion
of the fact thatCompany'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 July 31, 1998, the Company has incurred substantial
losses in prior years,had $182,597 of current assets available. Of
this amount, $49,167 was inventory and $73,228 was net trade receivables.
Management of the Company recognizesbelieves that it has sufficient working capital to
continue operations for the fiscal year ending April 30, 1999 provided the
Company's sales and ability to continue as a going concern is subject to
maintaining and improving sales, profitable operations,
collection ofcollect accounts receivable andare not adversely
affected. In the abilityevent the Company's sales decrease or the receivables of the
Company are impaired for any reason, it may be necessary to obtain additional
financing to cover working capital when needed,items and keep current trade accounts
payable, of which there is no assurance.
In this regard, the Company intends to continue expanding its
marketing 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 able to obtain a working line of credit
on acceptable 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.assurance.
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)
(11) Statement regarding computation of per share earnings- none.
(15) Letter dated September 11, 1996,10, 1998, 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 - 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.
15
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
___________________ ______________________________
Fred K. Suzuki
President, Chairman of the
Board, Chief Accounting
Officer and Treasurer
Date
___________________ ______________________________
Lauane C. Addis
Secretary, Corporate Counsel
and Director
16
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 September 13, 199610, 1998 /s/ FRED K. SUZUKI /s/
__________________ ___________________________________--------------------------------------
Fred K. Suzuki
President, Chairman of the Board,
Chief Accounting Officer and Treasurer
Date September 13, 199610, 1998 /s/ LAUANE C. ADDIS /s/
___________________ ___________________________________-------------------------------------
Lauane C. Addis
Secretary, Corporate Counsel and
Director
16
_________________________________________________________________
_________________________________________________________________
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 July 31, 19961998
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 on a principal place of business)
__________________________________
EXHIBITS
_________________________________________________________________
_________________________________________________________________
EXHIBIT INDEX
_____________
Page Number
Pursuant to
Sequential
Exhibit Numbering
Number Exhibit System
___________ _______ __________- ------- -------------- --------------
27 Financial Data Schedule E-1