UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2003
Commission File Number 0-12459
Biosynergy, Inc.
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(Exact name of registrant as specified in its charter)
Illinois
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(State or other jurisdiction of incorporation or organization)
36-2880990
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(I.R.S. Employer 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
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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
-------- ---------
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
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Number of shares outstanding of common stock as of the close of
the period covered by this report: 14,215,511
----------
BIOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Board of Directors and Shareholders
Biosynergy, Inc.
Elk Grove Village, Illinois
The accompanying Balance Sheet of BIOSYNERGY, INC. as at
January 31, 2003 and the related Statements of Operations,
Shareholders' Equity (Deficit) and Statements of Cash Flows for the
three and nine month periods ended January 31, 2003 and 2002 were
not audited; however, the financial statements for the three and
nine month periods ending January 31, 2003 and 2002 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,
2002, were not audited due to the Company's lack of resources to pay
for such audit; however, the financial statements for the fiscal
year ending April 30, 2002 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 17, 2003
BIOSYNERGY, INC.
BALANCE SHEET
ASSETS
January 31, 2003 April 30,2002
---------------- --------------
Unaudited Unaudited
---------------- --------------
CURRENT ASSETS
Cash 76,485 37,874
Short-Term Investments 250,000 275,016
Accounts Receivable, Trade, Net of 86,823 121,254
Allowance for Uncollectible Accounts
of $500 at January 31, 2003 and April 30, 2002
Inventories 59,992 59,629
Prepaid Expenses 21,602 13,768
Interest Receivable 4,063 815
---------------- --------------
Total Current Assets 498,965 508,356
---------------- --------------
DUE FROM AFFILIATES 19,649 19,432
---------------- --------------
PROPERTY AND EQUIPMENT
Equipment 133,872 132,556
Leasehold Improvements 15,140 15,140
---------------- --------------
149,012 147,696
Less: Accumulated Depreciation and Amortization (125,482) (116,928)
---------------- --------------
23,530 30,768
---------------- --------------
OTHER ASSETS
Patents Pending 21,479 11,989
Deposits 6,015 6,015
---------------- --------------
27,494 18,004
---------------- --------------
569,638 576,560
================ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 11,172 9,659
Other Accrued Compensation 4,786 7,501
Accrued Vacation 15,002 15,002
Accrued Payroll Taxes 412 651
Deferred Rent 3,080 2,750
Other Accrued Expenses 2,152 3,285
--------------- -------------
Total Current Liabilities 36,604 38,848
--------------- -------------
COMMITMENTS AND CONTINGENCIES - -
--------------- -------------
SHAREHOLDERS' EQUITY
Common Stock, No Par Value; 20,000,000 Shares
Authorized, Issued: 14,215,511 Shares
at January 31, 2003 and 14,075,511 Shares
at April 30, 2002 642,888 639,388
Additional paid-in capital 100 100
Accumulated Deficit (109,954) (101,776)
--------------- -------------
533,034 537,712
--------------- -------------
569,638 576,560
=============== =============
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended Nine Months Ended
------------------ -----------------
January 31, January 31,
------------------ -----------------
2003 2002 2003 2002
--------- -------- -------- --------
REVENUES
Sales 155,673 141,382 500,294 425,992
Other Income 479 480 1,518 1,544
Interest Income 234 1,694 4,478 7,679
--------- -------- -------- --------
156,386 143,556 506,290 435,215
--------- -------- -------- --------
COST AND EXPENSES
Cost of Sales and Other
Operating Charges 60,632 50,558 163,485 143,849
Research and Development 35,614 31,763 105,144 92,827
Marketing 21,216 21,227 62,022 54,036
General and Administrative 69,438 64,557 183,817 170,382
--------- -------- -------- --------
186,900 168,105 514,468 461,094
--------- -------- -------- --------
NET INCOME (LOSS) (30,514) (24,549) (8,178) (25,879)
========= ======== ======== ========
NET LOSS PER COMMON
SHARE OUTSTANDING: (.0021) (.0017) (.0006) (.0018)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 14,215,511 14,075,511 14,156,826 14,068,686
---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JANUARY 31, 2003
Unaudited
Additional
Common Stock Paid-in
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, May 1, 2002 14,075,511 639,388 100 (101,776) 537,712
Issuance of Stock 140,000 3,500 - - 3,500
Net Loss - - - (8,178) (8,178)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 2003 14,215,511 642,888 100 (109,954) 533,034
----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
NINE MONTHS ENDED JANUARY 31,
-----------------------------
2003 2002
------------ ------------
OPERATING ACTIVITIES:
Net Income (Loss) (8,178) (25,879)
Adjustments to Reconcile Net Loss to Net Cash Provided by
(Used in) Operating Activities:
Depreciation and Amortization 8,554 781
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 34,431 13,308
(Increase) Decrease in Inventories (363) 4,075
(Increase) Decrease in Prepaid Expenses (7,834) 7,671
(Increase) Decrease Business Advance - (144)
Increase (Decrease) in Accounts Payable
and Accrued Expenses (2,244) (2,776)
------------ ------------
Net Cash Provided by (Used in) Operating Activities 24,366 (11,114)
------------ ------------
INVESTING ACTIVITIES:
(Increase) Decrease in Advance to Affiliated
Companies (Note 3) (217) (299)
(Increase) Decrease in Patents Pending (9,490) (6,444)
(Increase) Decrease in Short-Term Investment 25,016 (3,091)
(Increase) Decrease in Short-Term Investment Interest (3,248) 6,536
(Increase) Decrease in Retirement of Equipment (1,316) (2,688)
------------ -----------
Net Cash Provided by (Used in) Investing Activities 10,745 (5,986)
------------ -----------
FINANCING ACTIVITIES:
Exercise of Stock Option by Officer 3,500 6,725
------------ -----------
Net Cash Provided by (Used in) Financing Activities 3,500 6,725
------------ -----------
Increase (Decrease) in Cash and Cash Equivalents 38,611 (10,375)
Cash and Cash Equivalents, at Beginning of Period 37,874 64,828
------------ -----------
Cash and Cash Equivalents, at End of Period 76,485 54,453
============ ===========
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Inventories - Inventories are valued at the lower of cost using the
FIFO (first-in, first-out) method or market (using net realizable
value).
Equipment and Leasehold Improvements - Equipment and leasehold
improvements are stated at cost. Depreciation is computed primarily
on the straight-line method over the estimated useful lives of the
respective assets. Repairs and maintenance are charged to expense
as incurred; renewals and betterments which significantly extend the
useful lives of existing equipment are capitalized. Significant
leasehold improvements are capitalized and amortized over the term
of the lease.
Research and Development, and Patents - Research and development
expenditures are charged to operations as incurred. The cost of
obtaining patents, primarily legal fees, are capitalized and
amortized over the life of the respective patent on the
straight-line method.
2. Company Organization and Description:
Biosynergy, Inc. (Company) was incorporated under the laws of the
State of Illinois on February 9, 1976. It is primarily engaged in
the development, manufacture 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 January 31, 2003:
S T O C K O F A F F I L I A T E S
F.K.
Suzuki
Biosynergy International Medlab
Stock Owner Inc. Inc. Inc.
- ------------------------------- ---------- ------------- ------
F.K. Suzuki International, Inc. 31.6% - 100%
Fred K. Suzuki, Officer 2.9% 35.6% -
Lauane C. Addis, Officer .1% 32.7% -
James F. Schembri, Director 12.6% - -
Mary K. Friske, Officer .1% .2% -
Laurence C. Mead, Officer .1% 4.0% -
The following balances were due from F.K. Suzuki International,
Inc., an affiliate, at January 31, 2003:
April 30, 2002 - $19,432
January 31, 2003 - $19,649
The balances result from an allocation of common expenses offset by
advances received from time to time. At January 31, 2003, the
financial condition of F.K. Suzuki International, Inc. is such that
it is unlikely to be able to repay Biosynergy during the next year
without liquidating a portion of its assets.
4. Short-Term Investments:
In May, 2002, the Company invested $250,000 in a 270-day Certificate
of Deposit at an interset rate of 2.2%, pending their use. The
Company is not registered under the Investment Company Act of 1940
and therefore is limited to the types of investments which the
Company may make. The funds invested in the Certificate of Deposit
have not been allocated or earmarked for any specific use.
5. Inventories:
Components of inventories are as follows:
April 30, 2002 January 31, 2003
-------------- ----------------
Raw Materials $35,953 $36,633
Work-in process 5,429 7,931
Finished Goods 18,247 15,428
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$59,629 $59,992
======= =======
6. Goodwill and Other Intangible Assets
The Company adopted Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December 15,
2001. SFAS 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, SFAS 142 includes provisions
for the reclassification of certain existing recognized intangible
assets as goodwill, reassessment of the useful lives of existing
recognized intangible assets, reclassification of certain intangible
assets out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future
impairments of goodwill. The adoption of SFAS No. 141 and 142 did
not have an impact on the Company's financial position or results
of operations, as the Company does not currently hold any goodwill
and only has other intangibles consisting of unamortized patent
pending costs.
7. Recent Accounting Pronouncements:
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or disposal of Long-Lived Assets," effective for years
beginning after December 15, 2001. The new rules for long-lived
assets to be disposed by sale excludes the allocation of goodwill to
be tested for impairment of such assets, establishes a primary asset
approach to be used for the estimation of future cash flows and
allows for probability-weighted future cash flow estimation for
impairment testing. The adoption of SFAS No. 144 did not have an
impact on the company's financial position or results of operation.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement
addresses financial accounting and reporting for costs associated
with exit or disposal activities. SFAS 146 became effective in the
quarter ending January 31, 2003. The adoption of SFAS 146 is not
expected to have a material impact on the Company's cash flows,
financial position or results of operations.
In November 2002, the FASB issued Interpretation 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". Interpretation 45
requires a guarantor to include disclosure of certain obligations
and, if applicable, at the inception of the guarantee, recognize a
liability for the fair value of other certain obligations undertaken
in issuing a guarantee. The recognition requirement is effective
for guarantees issued or modified after December 31, 2002 and is not
expected to have a material impact on the Company. The Company
adopted the disclosure requirements of Interpretation 45 effective
December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This
Statement, which is effective for years beginning after December 15,
2002 amends Statement No. 123, "Accounting for Stock-Based
Compensation," and provides alternative methods of transition for a
voluntary change to the fair value-based method of accounting for
stock-based employee compensation. In addition, Statement 148
amends the disclosure requirements of Statement No. 123 regardless
of the accounting method used to account for stock-based
compensation. The Company is still currently assessing the impact
of the adoption of SFAS 148 may have upon the disclosures of the
Company. Therefore, no pro forma disclosures are presented as to
which compensation cost would have been derived using the fair
value-based method of accounting to measure compensation expense for
its stock option plan. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method.
8. 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.
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. On May 9,
2001, this option was exercised to the extent of 269,000 shares
resulting in additional paid-in-capital of $6,725. This option was
to expire on November 12, 2001. However, effective November 12,
2001, the Company extended the option to Mr. Suzuki to purchase all
or a portion of the remaining 2,731,000 shares of the Company's
common stock at a purchase price of $.025 per share to November 12,
2004. The extended option remains subject to several contingencies,
including, but not limited to, shareholder approval. On September
30, 2002, this option was exercised to the extent of 140,000 shares
resulting in additional paid-in-capital of $3,500.
9. 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, and also computed using the average
number of common shares outstanding during the period after giving
effect to the number of shares of common stock equivalents which
would have been outstanding after exercise of stock options to
officers. The calculation of net income (loss) per common share and
common share equivalent is as follows:
Three Months Ending Nine Months Ending
January 31, January 31,
2003 2002 2003 2002
------------ ---------- ---------- -----------
Net Loss (27,429) (25,549) (5,092) (25,879)
Weighted Average Shares Outstanding
Shares of Common Stock Outstanding 14,215,511 14,075,511 14,156,826 14,068,686
Common Share Equivalents -
Options to Officers - - - -
----------- ----------- ---------- -----------
Total Weighted Shares 14,215,511 14,075,511 14,156,826 14,068,686
Net Income (Loss) per Common share
and Common Share Equivalent (.0016) (.0015) (.0003) (.0015)
The number of common shares outstanding were 14,215,511 at January
31, 2003 and 14,075,511 at April 30, 2002. The effect of conversion
of stock options has not been presented as conversion would be
anti-dilutive; however, there has been no independent evaluation of
this transaction to determine if the option price is less than the
market price for the shares.
10. Lease Commitments:
In January, 2001, the Company entered a five year extension of the
lease agreement for its current facilities which expires January 31,
2006. The base rent under the lease escalates over the life of the
lease. Total rent payments for each fiscal year are as follows:
Year ending April 30 Total Base Rent
-------------------- ---------------
2001 17,875
2002 72,000
2003 73,500
2004 74,100
2005 75,900
2006 56,925
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.
11. Income Taxes:
At April 30, 2002, net operating loss carryforwards were available
and expire, if not used, as follows:
Year Ending Net Operating
April 30, Losses
----------- -------------
2003 85,822
2004 41,176
2006 160
2007 28,253
2017 11,373
--------
$166,784
12. Major Customers:
Shipments to one customer amounted to approximately 43.12% of sales
during the quarter ending January 31, 2003. At January 31, 2003
there was an outstanding account receivable from this customer of
approximately $50,224.
13. Correction of Accounting Error:
The Company did not accrue for vacation expense covered by employees
during fiscal 2002 and 2003. Beginning retained earnings as of May
1, 2002 has been decreased by $15,002 and accrued vacation has been
established by a like amount to account for this oversight.
14 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 and introduce new products.
Finally, management intends to continue pursuing financing
opportunities, if necessary.
15 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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES/REVENUES
For the three month period ending January 31, 2003 ("3rd Quarter"),
the net sales increased 10.11%, or $14,291, and increased 17.45% or
$74,302 during the nine month period ending January 31, 2003, as
compared to net sales for the comparative periods ending in 2002.
This overall increase in sales is generally the result of increased
sales of HemoTempR II Blood Temperature Monitors which accounts for
approximately 85% of the Company's sales. As of January 31, 2003,
the Company had $23,269 in product back orders.
In addition to the above, the Company realized $4,478 of interest
income as a result of a short term investment of $250,000 in a
270-day Certificate of Deposit. The interest rate for this
Certificate of Deposit is 2.2%. The Company also had $1,518 of
miscellaneous income for the nine month period ending January 31,
2003 primarily from leasing a portion of its storage space to a
third party.
INCOME/LOSS
The Company realized a net loss of $30,514 during the 3rd Quarter as
compared to a net loss of $24,549 for the comparative quarter of the
prior year. The Company also realized net loss of $8,178 for the
nine month period ending January 31, 2003 as compared to a net loss
of $25,879 during the same period in 2002. The overall decrease in
net losses is due to increased sales described above. A
non-reoccuring write-down in inventory explained below also
contributed to net loss during the 3rd Quarter. As of April 30,
2002, the Company has net operating losses/carryovers aggregating
$166,784. As a result of net operating loss carryovers, no income
taxes were due for Fiscal 2002 and will unlikely be due for Fiscal
2003. 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 9 of the "FINANCIAL STATEMENTS."
EXPENSES
GENERAL
The operating expenses of the Company during the 3rd Quarter
increased overall by 11.18%, or $18,795, and increased by 11.58%, or
$53,374 for the nine month period ending January 31, 2003. An
explanation of each category of expenses is included to assist the
reader in reviewing the operations of the Company during the periods
indicated.
COST OF SALES AND OTHER OPERATING CHARGES
The cost of sales and other operating charges during the 3rd Quarter
increased by $10,074 during the 3rd Quarter and increased by $19,636
during the nine month period ending January 31, 2003 as compared to
the same periods in 2002. As a percentage of sales, the cost of
sales and other operating charges were 38.94% during the 3rd Quarter
compared to 35.76% for the same quarter ending in 2002, and 32.67%
during the nine month period ending January 31, 2003 as compared to
33.77% for the same nine-month period ending in 2002. Although the
cost of sales and operating charges have fluctuated during the nine
month period ending January 31, 203, the cost of sales and operating
charges, as a percentage of sales, has not materially changed during
the current year, and is not expected to materially change in the
foreseeable future. Further, the Company wrote down defective
inventory of approximately $4,000 during the 3rd Quarter resulting
in an increase in costs of good sold.
RESEARCH AND DEVELOPMENT
Research and Development costs increased $3,851 or 12.12% during the
3rd Quarter, as compared to the same quarter in 2002. These costs
increased by $12,317 or 13.27% during the nine month period ending
January 31, 2003 as compared to the same period in 2002. This
increase is due to the Company's investigation of certain compounds
for use in foods and other products. These expenses include travel,
laboratory supplies, legal and technical consulting expenses related
to these compounds.
MARKETING
Marketing costs for the 3rd Quarter decreased by $11 or .06%, as
compared to the quarter ending January 31, 2003, and increased
$7,986 or 14.78% during the nine month period ending January 31,
2003 as compared to the same period in 2002. These increases in
marketing expenses, primarily salaries and product brochures, are
not reflective of any new trends in the marketing activities of the
Company, but indicative of normal fluctuations.
GENERAL AND ADMINISTRATIVE
General and administrative costs increased by $4,881, or 7.56%, as
compared to the 3rd Quarter and increased by $13,435 or 7.89% during
the nine month period ending January 31, 2003, as compared to the
same periods in 2002. These increased costs were primarily the
result of an increase in group health insurance and legal fees
related to new reporting requirements under the Securities Act of 1934.
ASSETS/LIABILITIES
GENERAL
Since April 30, 2002 the Company's assets have decreased by $6,922
and liabilities have increased by $2,244he change in assets,
primarily cash and accounts receivable, is due to the Company's
current loss situation.
PATENTS PENDING
On August 9, 2002, the Company filed a patent application with the
U.S. Patent and Trademark Office, U.S. Serial Number 60/402,188,
titled "Eggshell Microbial Agent and Method of Use." This patent is
a result of the Company's investigation and development of bacterial
retardant agents conducted over the past 3 years.
RELATED PARTY TRANSACTIONS
The Company was owed $19,649 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at January 31, 2003. FKSI owed $19,432 at
April 30, 2002. This account primarily represents common expenses
which are charged by the Company to FKSI for reimbursement. These
expenses include certain office expenses, general operating expenses
and legal fees. See "Financial Statements." These expenses are
incurred in the ordinary course of business. Although management
believes it is cost effective to share common expenses with FKSI,
the Company has reduced the amount of advances and common expenses
charged to FKSI until FKSI is in a position to reimburse the
Company. Collectability of the amounts due from FKSI cannot be
assured without the liquidation of all or a portion of its assets,
and thus such receivable has been classified as a non-current asset.
On November 12, 1998, 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 $.025 per share. The option is subject to
several contingencies, including, but not limited to, shareholder
approval. Management believes the option has no value in excess of
the fair market value of the Company's common stock, however, there
was no independent analysis of this transaction. The option
contains anti-dilutive provisions in the event of corporate capital
reorganizations. Mr. Suzuki exercised this option to the extent of
269,000 shares on May 9, 2001.
Effective November 12, 2001, the Company extended the option to Mr.
Suzuki to purchase all or a portion of the remaining 2,731,000
shares of the Company's common stock at a purchase price of $.025
per share. The extended option is subject to several contingencies,
including, but not limited to, shareholder approval and expires
November 12, 2004. On September 30, 2002, Mr. Suzuki exercised this
option to the extent of 140,000 shares. Options for a total of
409,000 shares have now been exercised out of the original 3,000,000
shares.
CURRENT ASSETS/CURRENT LIABILITY RATIO
The ratio of current assets to current liabilities, 13.63 to 1, has
remained substantially constant compared to 13.09 to 1 at April 30,
2002. Management believes it has sufficient current assets for the
current year provided there is no adverse material changes in
operations
WORKING CAPITAL/LIQUIDITY
During the nine-month period ending January 31, 2003, the Company
experienced a decrease in working capital of $7,147. This is due to
the loss position of the Company during the nine-month period ending
January 31, 2003 and the use of funds to prosecute patents, the cost
of which has been capitalized.
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 anticipates an increase in accounting and legal fees due
to new reporting requirements adopted by the Securities and Exchange
Commission. The Company also intends to fully audit its financial
statements for the fiscal year ending April 30, 2003.
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 January 31, 2003, the Company had $498,965 of current assets
available. Of this amount, $59,992 was inventory and $86,823 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, 2003 provided the Company's sales and ability
to collect accounts receivable are not adversely affected. In the
event the Company's sales decrease, expenses increase 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement
addresses financial accounting and reporting for costs associated
with exit or disposal activities. SFAS 146 became effective in the
3rd Quarter. The adoption of SFAS 146 is not expected to have a
material impact on the Company's cash flows, financial position or
results of operations.
In November 2002, the FASB issued Interpretation 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". Interpretation 45
requires a guarantor to include disclosure of certain obligations
and, if applicable, at the inception of the guarantee, recognize a
liability for the fair value of other certain obligations undertaken
in issuing a guarantee. The recognition requirement is effective
for guarantees issued or modified after December 31, 2002 and is not
expected to have a material impact on the Company. The Company
adopted the disclosure requirements of Interpretation 45 effective
December 31, 2002.
In December 2002, the FASB issued SFAS 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS 148
amends certain provisions of SFAS 123 and is effective for fiscal
years ending after December 15, 2002. The Company is currently
assessing the impact of adoption of SFAS 148.
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,
risks inherit in marketing new products, 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 representative 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company has not entered into any transactions using derivative
financial instruments, nor has the Company invested in any
instruments or securities which are subject to market fluctuations
which could adversely affect the financial condition or operations
of the Company.
(a) The management of the Company has prepared and is
responsible for the integrity of the information presented in this
Quarterly Report for the period ending January 31, 2003, including
the Company's financial statements. These statements have been
prepared in conformity with generally accepted accounting principals
and include, where necessary, informed estimates and judgments by
management.
(b) Within the 90 days prior to the date of filing this Form
10-Q, the Company carried out an evaluation, under the supervision
and with the participation of the Company's management, including
the Company's Chief Executive Officer along with the Company's Chief
Accounting Officer, of the effectiveness of the design and operation
fo the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Company's
Chief Executive Officer along with the Company's Chief Accounting
Officer concluded that the Company's disclosure controls and
procedures are effective in timely altering them to material
information relation to the Company required to be included in the
Company's periodic SEC filings.
(c) The Company maintains systems of accounting and internal
controls, policies and procedures designed to provide assurance that
assets are property accounted for, as well as to ensure that the
financial records are reliable for preparing financial statements.
The systems are augmented by qualified personnel and are reviewed on
a periodic basis. There have been no significant changes in the
Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date the
Company carried out its evaluation.
(d) The Company has an Audit Committee that meets periodically
with management to review the manner in which they are performing
their responsibilities and to discuss auditing, internal accounting
controls and financial reporting matters. It is the opinion of the
Audit Committee that such controls, policies and procedures are
effective to ensure that material information regarding the Company
is presented in this Quarterly Report.
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) Stock Option Agreement, dated November 12,
2001, between the Company and Fred K. Suzuki (ii)
(11) Statement regarding computation of per share earnings- none.
(15) Letter dated March 11, 2003, regarding interim financial
information. (iii)
(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 - none.
(99) Additional Exhibits
(a) Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350 filed herewith
(b) Certification of Chief Accounting Officer pursuant to
18 U.S.C. Section 1350 filed herewith
(b) No Current Reports on Form 8K were filed during the period
covered by this Report.
- ----------------------------
(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, 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, 2002 filed
with the Securities and Exchange Commission.
(iii) This exhibit is included in this report as a part of the
Financial Statements, and is incorporated by reference
herein.
BIOSYNERGY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Biosynergy, Inc.
Date March 17, 2003 /s/ Fred K. Suzuki
-------------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman
of the Board, President and Treasurer
Date March 17, 2003 /s/ Laurence C. Mead
-------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, and Chief Accounting Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Fred K. Suzuki, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Biosynergy, Inc., registrant;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:
a. Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a. All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weakness in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: March 17, 2003
--------------
/s/ Fred K. Suzuki
--------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer, President and Treasurer
CERTIFICATION OF CHIEF ACCOUNTING OFFICER
I, Laurence C. Mead, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Biosynergy, Inc., registrant;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:
a. Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a. All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weakness in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: March 17, 2003
--------------
/s/ Laurence C. Mead
----------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, and Chief Accounting Officer