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 January 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 956-0471
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------
Number of shares outstanding of common stock as of the close of the
period covered by this report: 13,806,511
Page 1 of the 28 pages contained in the sequential numbering system.
<PAGE>
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 January 31, 1999
and the related Statements of Operations, Shareholders' Equity (Deficit) and
Statements of Cash Flows for the three and nine month periods ended January
31, 1999 and 1998 were not audited; however, the financial statements for the
three and nine month periods ending January 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, were
not audited due to the Company's lack of available cash to pay for such audit;
however, the financial statements for the fiscal year ending April 30, 1998
reflect all adjustments (consisting only of normal reoccurring adjustments)
which are, in opinion of management, necessary to provide a fair statement of
the results of operations for the period presented.
BIOSYNERGY, INC.
March 5, 1999
<PAGE>
<TABLE>
<CAPTION>
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
January 31, 1999 April 30,1998
Unaudited Unaudited
------------------ ---------------
<C> <S> <S>
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
--------- ----------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<C> <S> <S>
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
----------- ----------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
Unaudited
Three Months Ended Nine Months Ended
January 31, January 31,
1999 1998 1999 1998
--------------------- -------------------
<C> <S> <S>
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
---------- ---------- ---------- ----------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JANUARY 31, 1999
Unaudited
Additional
Common Stock Paid-in
Shares Amount Capital Deficit Total
---------------------------------------------------------
<C> <S> <S> <S> <S> <S>
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
<FN>
The accompanying notes are an integral part of the financial statements.<PAGE>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
NINE MONTHS ENDED JANUARY 31,
1999 1998
------------------------------
<C> <S> <S>
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
----------- ----------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Inventories - Inventories are valued at the lower of cost using the FIFO
(first-in, first-out) method or market (using net realizable value).
Equipment and Leasehold Improvements - Equipment and leasehold improvements
are stated at cost. Depreciation is computed primarily on the straight-line
method over the estimated useful lives of the respective assets. Repairs and
maintenance are charged to expense as incurred; renewals and betterments which
significantly extend the useful lives of existing equipment are capitalized.
Significant leasehold improvements are capitalized and amortized over the term
of the lease.
Research and Development, and Patents - Research and development expenditures
are charged to operations as incurred. The cost of obtaining patents,
primarily legal fees, are capitalized and amortized over the life of the
respective patent on the straight-line method.
2. Company Organization and Description:
Biosynergy, Inc. (Company) was incorporated under the laws of the State of
Illinois on February 9, 1976. It is primarily engaged in the development and
marketing of medical, consumer and industrial thermometric and thermographic
products.
3. Related Party Transactions:
The Company and its affiliates are related through common stock ownership as
follows as of January 31, 1999:
<TABLE>
<CAPTION>
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.
- -------------------- ---------------------------------------------
<C> <S> <S> <S> <S>
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% -
</TABLE>
<PAGE>
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
Upon the completion of the Company's public offering on July 7, 1983, the
Company issued 2,000,000 shares of its no par value common stock, representing
19% of the outstanding common stock of the Company, in exchange for 1,058,181
shares of the common stock of Stevia Company, Inc., which was approximately
4.4% of the then outstanding common stock of Stevia Company, Inc. The common
stock of Stevia Company, Inc. had no book value at the time of the exchange
and, as a consequence, the Company recorded the exchange at zero dollar value.
The Company owned 130,403 shares of Stevia Company, Inc. Common Stock at
January 31, 1999, representing a .4% interest in Stevia. Although the Common
Stock of Stevia Company, Inc. is tradeable in the over-the-counter market,
there is no established public trading market for such Common Stock due to
limited and sporadic trades. Furthermore, on December 8, 1998, Stevia
Company, Inc. announced it filed a Complaint for Judicial Dissolution. As of
January 31, 1999, the bid price of the common stock of Stevia Company, Inc.
was estimated to be zero.
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 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 during the next year
without liquidating a portion of its assets. On December 8, 1998, Stevia
Company, Inc. announced it had filed a complaint for judicial dissolution in
the Circuit Court of Cook County, Chancery Division. Lauane C. Addis,
Secretary and General Counsel of the Company and Stevia Company, Inc., was
appointed interim receiver to sell certain assets of Stevia Company, Inc. It
is uncertain the amount, if any, of the proceeds from the sale of such assets
will be used to satisfy the unpaid intercompany charges owed to the Company.
The following balances were due from F.K. Suzuki International, Inc.;
April 30, 1998 - $13,221
January 31, 1999 - $18,524
The balances result from an allocation of common expenses offset by advances
received from time to time. At January 31, 1999, the financial condition of
F.K. Suzuki International, Inc. is such that it is unlikely to be able to
repay the Company during the next year without liquidating a portion of its
assets.
<PAGE>
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
On August 31, 1998, the Company extended a line of credit to Stevia Company,
Inc. of $20,000 evidenced by a Note payable on or before December 31, 1998,
which date has been extended to March 31, 1999, with 10% interest on the
unpaid principal balance. Proceeds of this line of credit are intended to be
used by Stevia Company, Inc. for expenses related to its dissolution. The
Note is secured by a first mortgage on a processing facility in Pueblo,
Colorado owned by Stevia Company, Inc. At January 31, 1999, the balance due
under the Note was $2,200.
4. Inventories:
Components of inventories are as follows:
<TABLE>
<CAPTION>
April 30, 1998 January 31, 1999
-------------- ------------------
<C> <S> <S>
Raw Materials $31,789 $27,933
Work-in process 16,049 11,624
Finished Goods 2,310 7,103
$50,148 $46,660
</TABLE>
5. Common Stock:
The Company's stock is traded in the Over-The-Counter market. However, there
is no established public trading market due to limited and sporadic trades.
The Company's common stock is not listed on a recognized market or stock
exchange.
Effective January 31, 1990, the Company entered into an agreement with its
President, Fred K. Suzuki, pursuant to which the Company granted an option to
convert all or a portion of his accrued but unpaid compensation into shares of
the Company's no par value common stock at a conversion rate of $.05 per
share. The balance of Mr. Suzuki's deferred compensation was paid on May 7,
1998, and the option agreement expired by its terms.
On November 12, 1998, the Company granted an option to its President, Fred K.
Suzuki, to purchase all or a portion of 3,000,000 shares of the Company's
common stock at a purchase price of $.025 per share. The option is subject to
several contingencies including, but not limited to, shareholder approval. As
of January 31, 1999, no portion of this option was exercised.
<PAGE>
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
6. Income or (Loss) Per Shares:
Net income or (loss) per common share is computed using the weighted average
number of common shares outstanding during the period, after giving effect to
stock splits. The weighted average number of common shares outstanding were
13,806,511 at January 31, 1999 and April 30, 1998. The affect of conversion
of stock options has not been presented as conversion would be anti-dilutive.
7. Lease Commitments:
In 1996 the Company entered a new lease agreement for its current facilities
which expires January 31, 2001. The base rent under the lease, of which 15%
is allocated to Stevia Company, Inc., escalates over the life of the lease.
Total rent payments for each fiscal year are as follows:
Year ending April 30 Total Base Rent
--------------------- ---------------
1996 11,000
1997 66,733
1998 68,200
1999 68,567
2000 69,300
2001 51,975
Also included in the lease agreement are escalation clauses for the lessor's
increases in property taxes and other operating expenses. The lease can be
extended for an additional five year term.
8. Income Taxes:
At April 30, 1998, net operating loss carryforwards were available and expire,
if not used, as follows:
Year Ending Net Operating
April 30, Losses
------------ ---------------
1999 $ 677,671
2000 455,166
2001 449,142
2002 132,470
2003 85,822
2004 41,176
2006 160
2007 28,253
---------------
$1,869,860
<PAGE>
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" as required by SFAS No. 109. The effect,
if any, of adopting Statement No. 109 on pretax income from continuing
operations is not material. The Company has elected not to retroactively
adopt the provisions allowed in SFAS No. 109, however all provisions of the
document have been applied since the beginning of fiscal year 1994.
9. Major Customers:
Shipments to one customer amounted to approximately 40.12% of sales during
the quarter ending January 31, 1999. At January 31, 1999 there was an
outstanding account receivable from this customer of approximately $37,981.
10. Management's Plans:
Management of the Company recognizes the Company's ability to continue as a
going concern is subject to continuing sales performance and the ability of
the Company to raise money, when needed. To this extent, management has
endeavored to introduce the Company's products in new markets, expand its
marketing efforts in the traditional medical market and introduce new products
which compliment its product line. Finally, management intends to continue
pursuing financing opportunities, if necessary.
11.Forward-Looking Statements:
This report may contain statements which, to the extent they are not
recitations of historical fact, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve risks and
uncertainties. Actual results may differ materially from such forward-looking
statements for reasons including, but not limited to, changes to and
developments in the legislative and regulatory environments effecting the
Company's business, the impact of competitive products and services, changes
in the medical and laboratory industries caused by various factors, as well as
other factors as set forth in this report. Thus, such forward-looking
statements should not be relied upon to indicate the actual results which
might be obtained by the Company. No representation or warranty of any kind
is given with respect to the accuracy of such forward-looking information.
The forward-looking information has been prepared by the management of the
Company and has not been reviewed or compiled by independent public
accountants.
<PAGE>
BIOSYNERGY, INC.
Item 2.MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES/REVENUES
- ---------------
For the three month period ending January 31, 1999 ("3rd Quarter"), the net
sales increased 2% or $2,565, and increased 1.57% or $6,318 during the nine
month period ending January 31, 1999, as compared to net sales for the
comparative periods ending in 1998. This overall increase in sales is the
result of increased sales of HemoTempR II Blood Temperature Monitors. As of
January 31, 1999, the Company had no product back orders.
In addition to the above, the Company realized $450 of income as a result of
leasing a portion of its computer time to Stevia Company, Inc., an affiliate,
and $2,365 of miscellaneous income for the nine month period ending January
31, 1999.
INCOME/LOSS
- -----------
The Company realized a net profit of $4,805 during the 3rd Quarter as compared
to a net profit of $20,262 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 expenses
described below.
As of April 30, 1998, the Company has incurred net operating losses/carryovers
aggregating $1,869,860. As a result of net operating loss carryovers, no
income taxes were due for Fiscal 1998 and will unlikely be due for Fiscal
1999. See "FINANCIAL STATEMENTS" for the effect of the net operating loss
carryforwards on the Company's income tax position. The Tax Reform Act of
1986 will not alter the Company's net operating loss carryforward position,
and the net operating loss carryforwards will be available and expire, if not
used, as set forth in Footnote 8 of the "FINANCIAL STATEMENTS."
EXPENSES
GENERAL
- -----------
The operating expenses incurred by the Company during the 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.
<PAGE>
COST OF SALES AND OTHER OPERATING CHARGES
- -------------------------------------------
The cost of sales and other operating charges during the 3rd Quarter increased
by $3,699 and increased by $80 during the nine month period ending January 31,
1999 as compared to the same periods in 1998. As a percentage of sales, the
cost of sales and other operating charges were 38.62% during the 3rd Quarter
and 36.52% for the same 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, has not materially changed during the last year, and is not expected to
materially change in the foreseeable future.
RESEARCH AND DEVELOPMENT
- -------------------------
Research and development costs increased $3,406 or 41.39% during the 3rd
Quarter, 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
compared to the same period in 1998. These increases are primarily related to
increases in salaries, purchases of laboratory equipment and product prototype
costs. These increased costs do not reflect changes in the Company's
development policies. The Company intends to continue to direct research and
development to the improvement of its current product line and to those new
products which are natural expansions of the current product line. The
Company may also increase its research and development activities to fulfill
research and development contracts for the development of products
specifically designed for a customer, which will generally be offset by
research revenues.
MARKETING
- ------------
Marketing costs for the 3rd Quarter increased by $5,447 or 41.28%, as compared
to the quarter ending January 31, 1998, and increased $16,962 or 45.26% during
the nine month period ending January 31, 1999 as compared to the same period
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/entertainment expenses. The Company intends to expand its marketing
budget as resources become available.
GENERAL AND ADMINISTRATIVE
- -----------------------------
General and administrative costs increased by $5,587, or 13.56%, 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 periods in 1998.
The overall 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.
<PAGE>
ASSETS/LIABILITIES
- --------------------
GENERAL
----------
Since April 30, 1998, the Company's assets and liabilities have not materially
changed. The Company has experienced an increase in current assets and a
decrease in liabilities due to improved cash flow from operations.
DUE FROM AFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE
- ------------------------------------------------------
The Company was owed $312,816 by Stevia Company, Inc. ("Stevia"), an
affiliate, and $18,524 by F.K. Suzuki International, Inc. ("FKSI"), an
affiliate, at January 31, 1999. These affiliates owed $298,335 and $13,221 at
April 30, 1998, respectively. These accounts primarily represent common
expenses which are charged by one company to the other for reimbursement.
These expenses include rent, salaries and benefits for common employees,
insurance and legal fees. These expenses are reviewed from time to time to
determine if reallocation is appropriate. As a result of the increase in
amounts due from affiliates, the Company has reduced its own liquid
resources. See "FINANCIAL STATEMENTS."
On December 8, 1998, Stevia announced it filed a complaint for judicial
dissolution in the Illinois Circuit Court of Cook County, Chancery Division.
Lauane C. Addis, Secretary and General Counsel of the Company and Stevia
Company, Inc., was appointed interim receiver to sell certain assets of
Stevia, including its Pueblo, Colorado facility. Although the Company
anticipates a portion of the proceeds from the liquidation of Stevia's assets
will be used to repay the intercompany charges, it is uncertain how much, if
any, of the unpaid intercompany charges will be repaid.
In this regard, on August 31, 1998, the Company extended a line of credit to
Stevia of $20,000 evidenced by a Note payable on or before December 31, 1998,
which due date has been extended to March 31, 1999, with interest at 10% on
the unpaid principal balance. The proceeds from this line of credit are
intended to be used by Stevia for expenses related to its dissolution. The
Note is secured by a first mortgage on Stevia's Pueblo, Colorado facility.
The Balance due under the Note at January 31, 1999 was $2,200.
<PAGE>
OTHER RELATED PARTY TRANSACTIONS
- -----------------------------------
On November 12, 1998, the Company granted an option to its President, Fred K.
Suzuki, to purchase all or a portion of 3,000,000 shares of the Company's
common stock at a purchase price of $.025 per share. The option is subject to
several contingencies including, but not limited to, shareholder approval. As
of January 31, 1999, no portion of this option was exercised.
During the 3rd Quarter, the Company purchased a microscope from its President,
Fred K. Suzuki, for the purchase price of $1,500. Although there was no
independent analysis of this transaction, the Company believes the purchase
price approximates market value.
CURRENT ASSETS/CURRENT LIABILITY RATIO
- ---------------------------------------
The ratio of current assets to current liabilities, 4.10 to 1, has improved
compared to 3.02 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's current assets were
converted to long-term receivables thereby reducing its current
assets/liabilities ratio. In order to continue to improve the current
asset/liability ratio, the Company's operations must remain profitable and the
Company. See "DUE FROM AFFILIATES/SHORT TERM NOTE DUE FROM AFFILIATE" above.
WORKING CAPITAL/LIQUIDITY
- --------------------------
During the nine-month period ending January 31, 1999, the Company experienced
an increase in working capital of $36,886. This is due to the profitable
operations of the Company during the nine-month period January 31, 1999.
The Company has attempted to conserve working capital whenever possible. To
this end, the Company attempts to keep inventory at minimum levels. The
Company believes that it will be able to maintain adequate inventory to supply
its customers on a timely basis by careful planning and forecasting demand for
its products. However, the Company is nevertheless required, as is customary
in the medical and laboratory markets, to carry inventory to meet the delivery
requirements of customers and thus, inventory represents a substantial portion
of the Company's current assets.
The Company presently grants payment terms to customers and dealers of 30
days. The Company will not accept returns of products from its dealers except
for exchange, but does guarantee the quality of its products to the end user.
<PAGE>
As of January 31, 1999, the Company had $191,383 of current assets available.
Of this amount, $46,660 was inventory and $74,641 was net trade receivables.
Management of the Company believes that it has sufficient working capital to
continue operations for the fiscal year ending April 30, 1999 provided the
Company's sales and ability to collect accounts receivable are not adversely
affected. In the event the Company's sales decrease or the receivables of the
Company are impaired for any reason, it may be necessary to obtain additional
financing to cover working capital items and keep current trade accounts
payable, of which there can be no assurance.
Except for its operating capital needs, the Company has no material
contingencies for which it must provide.
<PAGE>
BIOSYNERGY, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K.
(a) The following exhibits are filed as a part of this report:
(2) Plan of Acquisition, reorganization, arrangement, liquidation or
succession - none.
(3) Articles of Incorporation and By-laws(i)
(4) Instruments defining rights of security holders, including
indentures - none.
(10) Material Contracts
(a)Deferred Compensation Option Agreement, dated January 31,
1990, between the Company and Fred K. Suzuki(ii)
(b)Note, dated August 31, 1998, executed by Stevia Company,
Inc. (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.
(11) Statement regarding computation of per share earnings - none.
(15) Letter dated March 5, 1999, 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.
(24) Power of Attorney - none.
(27) Financial Data Schedule - P.E-8.
(b) No Current Reports on Form 8-K were filed during the period
covered by this Report.
____________________________
[FN]
(i)Incorporated by reference to a Registration Statement filed on Form S-18
with the Securities and Exchange Commission, 1933 Act Registration
Number 3-28015C, under the Securities Act of 1933, as amended, and
Incorporated by reference, with regard to Amended By-Laws, to the
Company's Annual Report on Form 10K for fiscal year ending April 30,
1986 filed with the Securities and Exchange Commission.
(ii)Incorporated by reference to the Company's Annual Report on Form 10K for
fiscal year ending April 30, 1990 filed with the Securities and Exchange
Commission.
(iii)Incorporated by reference to the Company's Quarterly Report on Form 10Q
for the quarterly period ended October 31, 1998.
(iv)This exhibit is included in this report as a part of the Financial
Statements, and is incorporated by reference herein.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Biosynergy, Inc.
MARCH 9, 1999 /s/ FRED K. SUZUKI /s/
Date --------------------- -----------------------------------
Fred K. Suzuki
President, Chairman of the Board,
Chief Accounting Officer and Treasurer
MARCH 9, 1999 /s/ LAUANE C. ADDIS /s/
Date -------------------- ------------------------------------
Lauane C. Addis
Secretary, Corporate Counsel and
Director
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of
THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ending October 31, 1998
Commission File Number: 0-12459
BIOSYNERGY, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
1940 East Devon Avenue
Elk Grove Village, IL 60007
(847) 956-0471
(Address and telephone number of registrant's principal executive office or
principal place of business)
---------------------------------------------------------------------------
EXHIBITS
<PAGE>
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
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT, effective this 12th day of November, 1998, is by and
between Biosynergy, Inc., an Illinois Corporation ("Grantor") and Fred K.
Suzuki ("Grantee").
WITNESSETH
1. Grant of Option. For valuable consideration, the receipt of which
is hereby acknowledged, Grantor hereby grants to Grantee the option ("Option")
to purchase all or a portion of 3,000,000 shares, as adjusted, of Grantor's
authorized but unissued no par common stock ("Shares") for the purchase price
of $.025 per Share, subject to the terms and conditions of this Agreement.
2. Exercise. The Option shall be exercisable after the effective
date of this Agreement and for a period of three years.
3. Exercise of Option. The Option may be exercised by Grantee
delivering notice to Grantor of Grantee's intent to exercise all or a portion
of the Option, in one or more transactions, with delivery of the purchase
price for the number of Shares purchased and a Stock Option Exercise Agreement
in form and substance as set forth in Exhibit A attached hereto. Grantor
shall, within a reasonable period of time after exercise of the Option,
deliver certificates evidencing the Shares purchased to Grantee.
4. Anti-Dilution Provision. In the event of a stock dividend, stock
split, merger or reclassification with respect to the Grantor's common stock
occurs during the one year period commencing on the effective date hereof, or
any extension thereof, the Option exercise price shall be proportionately
reduced or increased and the number of shares subject to the Option shall be
proportionately increased or decreased as appropriate to place the Grantee in
the same position as Grantee would have been if he had exercised the Option
immediately before the stock dividend, stock split, merger or
reclassification; provided, however, these adjustments shall not apply if the
adjustments will be less than $.001 per share.
5. Reservation of Shares. The Grantor shall reserve up to 3,000,000
shares of its authorized but unissued common stock for issuance and/or
delivery upon exercise of the Option. No fractional shares or script
representing fractional shares shall be issued upon exercise of the Option.
6. Violation of Law. The Option may not be exercised if its exercise
would violate any applicable state securities law, any registration under or
any requirements of the Securities Act of 1933, the Securities Exchange Act of
1934, the rules of an exchange on which the Shares are traded, any other law
of the State of Illinois, or any other federal law.
7. Unregistered Stock. Grantee acknowledges that the Shares are not
registered under the Securities Act of 1933, and that the Shares cannot be
transferred unless they are registered under the Act, or an exemption from
such registration is available and established to the satisfaction of the
Grantor and that any resale, transfer, or other distribution of the Shares may
only be made in conformity with Rule 144 of the Securities Act of 1933. The
Grantor may place a legend on the certificate or certificates evidencing the
Shares restricting the transfer of such Shares which may limit the ability of
Grantee to pledge, transfer or sell the Shares.
8. Invalidity of Transaction. In the event that the grant of the
Option or the transfer, sale or purchase of the Shares as provided herein
shall be determined to be invalid pursuant to any federal or state law, this
Agreement shall be null or void, and the parties hereto shall execute such
documents as may be necessary to reconvey the Shares, return to Grantee the
consideration for the Shares, and nullify this Agreement. In such event, the
parties shall incur the cost for such reconveyances as their interests may
appear.
9. Representations of Grantee. Grantee hereby represents and
warrants as follows: a) he can bear the economic risk of losing his entire
investment in Shares and can afford to hold the Shares for an indefinite
period of time; b) that he is an accredited investor as defined by the
Securities Act of 1933 and the regulations thereunder; c) he has received and
reviewed all documents, records and books pertaining to an investment in the
Shares which he deems necessary; d) he has had the opportunity to ask
questions of, and receive answers from, the officers and directors of the
Grantor concerning the terms of investment in the Shares and additional
information, to the extent it can be acquired without unreasonable effort or
expense, necessary to verify the accuracy of information provided by the
officers and directors of the Grantor; and e) that the Grantor has virtually
no profitable financial or operating history, and that Grantee understands the
Shares are a speculative investment which involves a high degree of risk of
loss by him of the entire investment in the Shares.
10. Restriction on Conveyances. During the term of this Agreement,
Grantor shall not issue, encumber, sell, transfer or otherwise convey the
Shares or any interest therein without the written consent of Grantee, which
may be withheld for any reason whatsoever.
11. Survival of Terms and Conditions. As mutually agreed by and
between the parties hereto, the terms and conditions herein contained shall
survive the exercise of the Option and shall extend to and be obligatory upon
the administrators, successors and assigns of the parties hereto.
<PAGE>
12. Shareholder Approval. Notwithstanding anything herein to the
contrary, this Agreement is specifically subject to approval by the
Shareholders of the Grantor. The Grantor shall submit this Agreement to the
Shareholders of the Grantor for approval at the next meeting of such
Shareholders. In the event this Agreement is not approved by the Shareholders
as aforesaid, the Grantor shall repurchase from the Grantee all Shares
purchased by the Grantee by exercise of the Option within 30 days after the
Shareholders fail to approve this Agreement. The repurchase price for the
Shares shall be the purchase price paid by Grantee upon exercise of the Option
as set forth in Section 1 above, plus 10% of such purchase price for each year
(prorated for partial years) the Grantee was the owner of the Shares,
determined as of the date the Shareholders fail to approve this Agreement. In
this respect, Grantee agrees, warrants and covenants not to sell, transfer or
encumber the Shares purchased upon exercise of the Option until this Agreement
has been approved by the Shareholders, except upon the prior written consent
of the Grantor.
13. Notices. All notices herein required shall be in writing and
shall be served on the parties at the addresses last known to the party giving
notice. The mailing of a notice by registered or certified mail, return
receipt requested, shall be sufficient legal service of process.
14. Text to Control. The headings of sections are included solely
for convenience of reference. If any conflict between any heading and the
text of this Agreement exists, the text shall control.
15. Severability. Except as provided in Section 8, if any provision
of this Agreement is declared by any court of competent jurisdiction to be
invalid for any reason, such invalidity shall not affect the remaining
provisions. On the contrary, such remaining provisions shall be fully
severable, and this Agreement shall be construed and enforced as if such
invalid provision had never been inserted in this Agreement.
16. Amendment. This Agreement may be amended, altered or revoked at
any time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed on the day and year first written above.
BIOSYNERGY, INC.
/s/ FRED K. SUZUKI /s/ 11/13/98 /s/ FRED K. SUZUKI /s/ 11/13/98
------------------------ ------------- ------------------------- -----------
Fred K. Suzuki Date Fred K. Suzuki, President Date
ATTEST:
/s/ LAUANE C. ADDIS /s/ 11/13/98
-------------------------- ----------
Lauane C. Addis, Secretary Date
<PAGE>
Exhibit A
STOCK OPTION EXERCISE AGREEMENT
Biosynergy, Inc.
1940 East Devon Ave.
Elk Grove Village, IL 60007
Gentlemen:
Pursuant to the Stock Option Agreement dated November 12, 1998 between
Biosynergy, Inc. (the "Company") and Fred K. Suzuki (the "Investor" or
"undersigned"), the Investor hereby exercises its option to
purchase shares of the Company's no par value common
stock ("Shares") at an option price of $.025 per share.
In connection with the issuance to the undersigned of Shares, the undersigned
hereby represent(s), understand(s) and acknowledge(s) that:
The Shares are not registered under the Securities Act of 1933, as amended
("1933 Act"), and that the sale to the undersigned is to be a private sale of
shares exempt under the applicable sections of the 1933 Act and/or applicable
rules and regulations promulgated thereunder; the undersigned is acquiring
such securities for investment for its own account, with no present intention
of dividing participation with others or selling or otherwise distributing
same; the Shares may be "Restricted Securities" as that term is defined in
Rule 144 as promulgated under the 1933 Act; if the Shares are restricted
securities they must be held indefinitely, unless they are registered under
the 1933 Act or an exception from such registration is available; the Shares
will contain substantially the following legend; "The securities represented
by this certificate may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Securities
Act of 1933 ("the Act"), or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the satisfaction of
the issuer. The presentation of this stock certificate to the transfer agent
after (two years after purchase) shall be deemed a representation by the
record holder that he/she has been the beneficial owner of the securities for
at least two years and has not entered into any short sale, put or other
option transaction which would toll the holding period under Rule 144(d) and
therefore is free to sell the securities under Rule 144(k), provided however,
that the record holder is not an affiliate of the Company, which is to be
established to the satisfaction of the issuer"; the above legend on the
certificate will limit its value, including its value as collateral; the
Company will instruct its transfer agent of (or if none, designate on the
Company's records) such restrictions of the transfer of the Shares; the
undersigned is aware that only the Company can file a Registration Statement
or a Form 1-A notification under regulation A under the 1933 Act and that the
Company has no obligation to do so or to take steps necessary to make Rule
144 available to the undersigned; the undersigned is knowledgeable and
experienced in venture capital investments in general and, in particular, in
venture capital investments similar in nature to a purchase of the Shares of
the Company; the undersigned has such knowledge and experience in financial
and business matters and is capable of evaluating the merits and financial
and business matters and is capable of evaluating the merits and risks of an
investment in the Company; the undersigned has relied upon the advice of
counsel, accountants or other consultants as deemed necessary with regard to
the tax aspects, risks and other operations involved in the purchase of the
Shares; the undersigned has made, or caused to be made, such investigation of
the Company, its management, its financial condition and its operations
considered necessary and appropriate to enable it to make an informed
decision regarding the purchase of the Shares; the undersigned has
been presented with an opportunity to ask questions and receive answers from
directors and officers of the Company relating to the business and operations
of the Company and to obtain any additional information necessary to verify
the accuracy of the information made available to them; he has been given the
Company's latest Form 10K and/or Form 10Q; the undersigned is therefore
satisfied as to the present status and condition of such matters; the
undersigned has been presented with and understood the Company's business
plan, including, among other things, the nature and business of the Company
and its method of operation, financial reports, management and risk factors
associated with the Company's business; the undersigned can bare the economic
loss of any investment with regard to the Shares and can afford to hold the
Shares for an indefinite period of time; the undersigned has sufficient liquid
assets to make this investment and provide for his needs; the undersigned is
aware that the Shares constitute a speculative investment which involves a
high degree of risk of loss of any investment, and there can be no guarantee
of the amount of the funds available for distribution on liquidation or for
any other type of consideration flowing to the undersigned from the Company as
a result of owning the Shares, including dividends; the undersigned
understands that there is no guarantee of any dividends ever being paid, and
that the payment of dividends is within the discretion of the Board of
Directors of the Company; the undersigned understands that no promises have
been made concerning the subject of the transfer of Shares by the Company; and
the acknowledges that it understands the meaning and legal consequences of the
representations and warranties contained in this letter agreement, that the
Company and its directors, officers and agents are relying on the accuracy of
the representations not be permitted to purchase any of the Shares offered
hereby if any representation or warranty were known to be false. Accordingly,
the undersigned hereby agrees to indemnify and hold harmless the Company and
each of their directors, officers and agents from and against any and all
loss, damage or liability, including attorney's fees due to or arising out of
a breach of any representation or warranty of the undersigned contained in
this Agreement.
<PAGE>
With such full understandings and acknowledgments, the undersigned does hereby
affirm the purchase of Shares, and delivers the purchase price of $ in
the form of advances to the company, with this Agreement. The undersigned
does further acknowledge the understanding of the terms and conditions of
this Agreement, and agrees to be bound thereby.
Sincerely,
- --------------------------------- ---------------------------------
Signature Signature (Co-owner, if any)
- --------------------------------- ---------------------------------
Print Name Print Name
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
Address Address (Residence)
- --------------------------------- ---------------------------------
Social Security Number Social Security Number
- --------------------------------- ---------------------------------
Telephone Telephone (Residence)
ACCEPTED THIS __________ DAY OF ________________, 199__.
BIOSYNERGY, INC. ATTEST:
By: _____________________________ ___________________________________
Fred K. Suzuki, President Lauane C. Addis, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF THE REGISTRANT FOR THE THREE MONTH PERIOD AND NINE MONTH PERIOD
ENDING JANUARY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> APR-30-1999 APR-30-1999
<PERIOD-END> JAN-31-1999 JAN-31-1999
<CASH> 65,637 65,637
<SECURITIES> 0 0
<RECEIVABLES> 74,641 74,641
<ALLOWANCES> 500 500
<INVENTORY> 46,660 46,660
<CURRENT-ASSETS> 191,383 191,383
<PP&E> 143,831 143,831
<DEPRECIATION> (129,320) (129,320)
<TOTAL-ASSETS> 563,391 563,391
<CURRENT-LIABILITIES> 46,728 46,728
<BONDS> 0 0
632,663 632,663
0 0
<COMMON> 0 0
<OTHER-SE> (116,100) (116,100)
<TOTAL-LIABILITY-AND-EQUITY> 563,391 563,391
<SALES> 131,704 409,332
<TOTAL-REVENUES> 132,733 412,147
<CGS> 50,863 144,800
<TOTAL-COSTS> 50,863 144,800
<OTHER-EXPENSES> 30,228 88,120
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 181
<INCOME-PRETAX> 4,805 48,877
<INCOME-TAX> 721 7,332
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 721 7,332
<CHANGES> 0 0
<NET-INCOME> 4,805 48,877
<EPS-PRIMARY> .001 .003
<EPS-DILUTED> .001 .003
</TABLE>
