Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended 4/30/96
_______
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
___________ __________
Commission file number 0-12459
Biosynergy, Inc.
__________________________________________________________________
(Exact name of registrant as specified in its charter)
Illinois 36-2880990
__________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
___________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 956-0471
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registrant
NONE NONE
____________________________ ____________________________
Securities registered pursuant to section 12(g) of the Act:
Common Stock, No Par Value
___________________________________________________________________
(Title of class)
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
_______ _______
Page One of 47 pages contained in the sequential number system. The
Exhibit Index may be found on page E-1 of the sequential numbering
system.
1
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on April 30, 1996 was approximately $75,126.
The number of shares of common stock outstanding on April 30, 1995 was
13,806,511.
No documents have been incorporated by reference in this report except for
certain exhibits and schedules listed in Item 14.
Part I
______
Item 1. Description of Business
General Development of Business.
Biosynergy, Inc. (the "Company") was incorporated as an Illinois corpora-
tion on February 9, 1976. The Company was formed primarily for the purpose
of developing, manufacturing, and marketing products utilizing cholesteric
liquid crystals. The Company presently manufactures and markets disposable
medical, laboratory and industrial thermometric and thermographic choles-
teric liquid crystal devices.
Although the Company did not enter into any agreements materially affecting
its operations during Fiscal 1996, the Company experienced a small increase
in sales with a greater increase in profit. The Company realized a profit
of $92,197 for the fiscal year ending April 30, 1996. This is an increase
as compared to fiscal 1995 during which the Company realized a profit of
$47,824 and as compared to fiscal 1994 in which the Company realized a
profit of $24,513. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Effective March 31, 1996, the Company renewed its contract with the
American Association of Blood Banks ("AABB") Group Purchasing Program for a
period of two years. Under this Contract, AABB Member Institutions receive
discount pricing for the Company's HemoTempR II BMD and a HemoTempRII
Activator. See "Narative Description-Thermographic and Thermometric
devices and Accessories" and "Marketing and Distribution".
The Company continued to introduce its products directly to industrial
customers during Fiscal 1996. Although the Company did not make any
material sales to customers in the industrial markets, the Company submit-
ted various proposals to potential customers and presented the Company's
time/temperature technology to several pharmaceutical and medical compa-
nies. Although the ultimate results of these activities are not known,
Management believes there is a need for its products and technology in the
2
industrial markets. Except as stated above, there were no other signifi-
cant contracts or developments with regard to the Company's business during
the past fiscal year.
Financial Information About Industry Segments
_____________________________________________
The Company generated revenues from sales of twelve medical and laboratory
products in the medical and laboratory industry segment during the fiscal
years ended April 30, 1994, 1995 and 1996. For a description of these
products, see "Narrative Description of Business" below.
Below is a schedule which presents the sales for each product and the
percentage of the Company's total sales attributable to each product for
the fiscal years ending April 30, 1996, 1995 and 1994.
Fiscal Year Ending
April 30, 1996
_____________________________
Medical and Percentage
Laboratory Sales of of Total
Products Product Sales
_________________________ ______________ _____________
HemoTempR II BMD $365,243.30 80.3%
TempTrendR TI 34,174.90 7.6%
TempTrendR II TTD 18,422.50 4.1%
HemoTempR BMD 13,329.00 2.9%
LabTempR 20 ST 7,884.50 1.7%
HemoTempR II Activator 6,423.00 1.4%
LabTempR 40 ST 4,587.00 1.0%
Vena-VueR VAD 2,000.00 0.4%
Miscellaneous (1) 1,487.45 0.3%
StaFreezR FTI 1,232.00 0.3%
______________ _____________
$454,783.65(3) 100.0%
Fiscal Year Ending
April 30, 1995
______________________________
Medical and Percentage
Laboratory Sales of of Total
Products Product Sales
_________________________ ______________ _____________
HemoTempR II BMD $354,572.32 80.0%
TempTrendR TI 30,733.00 6.9%
HemoTempR BMD 18,266.00 4.1%
TempTrendR II TTD 18,165.00 4.1%
LabTempR 20 ST 6,870.50 1.5%
LabTempR 40 ST 6,815.50 1.5%
Vena-VueR VAD 5,110.00 1.2%
StaFreezR FTI 2,087.00 .5%
Miscellaneous (1) 717.50 .2%
______________ _____________
$443,337.32(3) 100.0%
3
Fiscal Year Ending
April 30, 1994
_____________________________
Medical and Percentage
Laboratory Sales of of Total
Products Product Sales
_________________________ ______________ _____________
HemoTempR II BMD $259,173.60 64.2%
TempTrendR TI 96,533.00 23.9%
TempTrendR II TTD 18,880.50 4.7%
HemoTempR BMD 10,846.00 2.7%
LabTempR 20 ST 8,995.50 2.2%
LabTempR 40 ST 3,697.00 .9%
Vena-VueR VAD 3,320.00 .8%
StaFreezR FTI 2,326.00 .6%
Miscellaneous (1)(2) 191.00 -
______________ _____________
$403,962.60(3) 100.0%
_______________
[FN]
(1) Includes sales of LabTempR 60, TempTrendR Peds, Tempa.SlideTM and
special order thermometric and thermographic consumer and laboratory
products.
(2) Represents less than .1% of total sales.
(3) Includes discounts and returns.
See "Information About Foreign and Domestic Operations and Export Sales".
See also "Selected Financial Data" and "Financial Statements and Supplemen-
tary Data" for the operating profit and loss and identifiable assets
related to the Company's operations in its industry segment.
Narrative Description of Business.
As described in "General Development of Business", the Company is presently
engaged in the business of developing, manufacturing, and marketing
disposable thermometric and thermographic temperature indicators for the
medical and laboratory and industrial markets. Further information about
this business segment and proposed products of the Company are described
below.
Thermographic and Thermometric Devices and Accessories.
During the fiscal year ending April 30, 1996 the Company manufactured and
marketed various medical, laboratory and consumer devices. These products
were sold to hospitals, clinical end-users, laboratories and product
dealers.
1. The HemoTempR Blood Monitoring Device ("BMD") is designed to be a human
blood bag temperature indicator. Human blood must be maintained, optimal-
ly, at 1-6o C., and not allowed to exceed 10o C. Since human blood is
always in short supply, it is critical that blood be maintained within
these specifications to avoid loss. HemoTempR BMD monitors the core
4
temperature of a blood bag from 1-12o C., and replaces the impractical
mercury susceptible to breakage. HemoTempR BMD once attached to the blood
bag is usable throughout the life of the blood.
2. HemoTempR II BMD (patented 1989) is designed to warn blood bank
personnel whenever the internal temperature of the blood bag has exceeded
10-11o C. HemoTempR II BMD has an irreversible indicator that is activated
when the tag is applied to the blood bag at approximately 4o C. After
being activated, the irreversible indicator remains blue colored for 72
hours unless the blood is warmed to a temperature of 10-11o C. or above, in
which case the indicator loses its blue color. The irreversible indicator
will not return to blue even if the blood is subsequently recooled,
indicating that the blood has been warmed. The reversible portion of the
indicator reversibly monitors temperatures from 1-9o C. HemoTempR II BMD
is non-reusable and must be replaced each time the blood bag is returned to
the blood bank and reissued.
3. HemoTempR II Activator, introduced during Fiscal 1995, is an electron-
ic, portable block model heater developed to provide a reliable source of
heat necessary to activate the Company's HemoTempR II BMD. The HemoTempR
II Activator has a thermostatic control to permit precise setting and
continuous control of temperatures in the range for activation of the
Company's HemoTempR II BMD. This device is intended by the Company to be
used with HemoTempR II BMD as a system for blood monitoring. This device
is the only product sold by the Company during Fiscal 1996 which is not
manufactured by the Company.
4. TempTrendR Temperature Indicator ("TI") is primarily used to monitor
the temperature of urine specimens collected for drug testing to detect
fraudulent urine specimens. Most common forms of drug testing require a
urine specimen. However, the test is valid only if a legitimate urine
specimen is collected which has not been altered by the subject to mask a
drug abuse problem. In order to eliminate altered or fraudulent urine
specimens in tests on federal employees, federal government guidelines
require that urine temperature be measured within four minutes of sample
collection, and that the temperature be 90.5-98.9o F. Temperature
measurements taken with TempTrendR TI are simply a matter of observing the
color illuminated number and recording the temperature. TempTrendR TI
also provides a non-invasive method of monitoring the actual surface
temperature trends of any body surface where temperature measurement is
important, such as near joints in rheumatoid arthritis and to assess blood
circulation.
5. TempTrendR II Temperature Trend Device ("TTD") is a second generation
temperature trend device which is correlated to internal body temperature
and provides a non-invasive, readily visible means of monitoring changes in
body temperature. TempTrendR II TTD will reflect oral temperatures such as
those taken by glass thermometers. TempTrendR II TTD is used intraopera-
tively to warn of developing hyper or hypothermic conditions. The
indicator is also excellent for monitoring a patient's temperature during
any type of transfusion procedure.
5
6. TempTrendR Peds Temperature Trend Device ("PEDS") is a temperature
trend device designed to measure the axillary (arm pit)temperature of
children at a glance. The indicator easily applies to the axillary skin
surface. Within seconds, by simply lifting the child's arm, the tempera-
ture can be read on the indicator. In many situations, axillary tempera-
ture measurement is preferred in children since it is less traumatic, is
more easily measured than oral or rectal temperatures, and the thermometer
may be left in the arm pit for periodic temperature monitoring.
7. LabTempR 20, LabTempR 40 and LabTempR 60 Surface Temperature Indicators
("STI") are designed to reversibly indicate the temperature of laboratory
materials which require specific storage or use temperatures. LabTempR 20
STI indicates temperatures between 0-21o C., LabTempR 40 STI monitors
temperatures between 19-21 and 24-41o C., while LabTempR 60 STI measures
temperatures between 40-60o C. These thermometers are designed to monitor
the temperature and changes in temperature of hundreds of laboratory
chemicals and supplies which require specific temperature conditions;
however, these thermometers are suitable for temperature measurement of any
surface.
8. Tempa.SlideTM Temperature Indicator ("SLTI") is amicroscope glass slide
temperature indicator. The SLTI helps the viewer read the optimum
temperature of a slide by indicating in large visible colors when the
desired slide temperature is reached. Tempa.SlideTM can be mounted on a
glass microscope slide and can be used continuously for over one year.
These thermometers are suitable for temperature monitoring of glass slides
during antibody/antigen tests when an optimum temperature of the cells and
protein must be maintained for accurate test results.
9. StaFreezR Freeze-Thaw Indicator ("FTI") is a freeze-thaw indicator
which will irreversibly indicate whether frozen material is warmed to
greater than -20o C. Once the frozen product exceeds -20o C., the liquid
crystal film will turn from blue to gray to black, and refreezing the
product at a lower temperature will not bring back the original frozen
state color.
10. The Vena-VueR Vein Assessment Device ("VAD") is designed to locate
good veins by assessing blood flow, and to assess vein depth, and size. It
is used primarily to minimize complications and reduce discomfort for
geriatric patients, obese patients, diabetic patients, burn patients, drug
addicts with sclerosed veins, shock patients with collapsed veins and long-
term hospitalized or cancer chemotherapy patients with severely damaged and
traumatized veins. However, Vena-VueR VAD is also useful in helping to
select the most patent and least traumatized veins for the purpose of any
venipuncture. Three efficacy medical publications have been written about
Vena-VueR VAD.
11. Specialty products include devices manufactured to the specification
and design of the customer, such as time/ temperature shipping labels for
food products under the tradename FoodGardeTM Time/Temperature Indicators
6
and liquid crystal thermometers for general purpose thermometry. The
Company anticipates continued manufacturing of these and additional
specialty products in the future.
The Company is also developing other devices. These include:
1. The Company has indefinitely delayed the development of the TempTrendR
II Irreversible TTD. TempTrendR II Irreversible TTD is a monitor specifi-
cally designed to indicate a history of fever level temperatures. This
irreversible indicator is intended to indicate if a patient's temperature
has reached 102o F. to 106o F. during a period of several hours.
2. The Company intends to market new irreversible time/ temperature
indicators which will be used as shipping labels, and in other forms, for
the frozen food packaging industry (under the tradename FoodGardeTM), the
pharmaceutical industry, and for other industries requiring careful
monitoring of refrigerated or frozen materials. The devices will have
irreversible color changes at various temperatures determined to be
critical by the end-user. Therefore, a purchaser, whether an individual
consumer or a merchant, will be able to instantaneously determine the
temperature history of the material. Although the liquid crystal formula-
tions are substantially completed, the Company is uncertain at this time
when these products will be sold.
3. During the past few years, the Company has become aware that a need
exists for a simple, inexpensive indicator to determine if sensitive
materials have been subjected to freezing temperatures. The Company is
continuing its investigation of the feasibility of such an indicator.
4. The Company has recently become aware that a need exists for products
to augment its current product line, such as the HemoTempR II Activator.
The Company is investigating the feasibility of additional products to
systematize the use of its thermometric and thermographic liquid crystal
devices as well as alternative technologies to supplement its current
product line. The results of such investigations are not predictable at
this time.
Manufacturing. Except for the HemoTempR II Activator, the Company manufac-
tures all of its products. The HemoTempR II Activator is manufactured
exclusively for the Company by an unrelated company on an as need basis.
Raw materials for the Company's other products are purchased on an as
needed basis, and assembly of the products is performed at the Company's
production facility. Some chemical converting and coating, plus die
cutting, which are capital intensive, are done by outside manufacturers on
an as needed basis. All outside manufacturing is done to specifications
set by the Company. There are, however, no commitments or firm agreements
for such outside manufacturers to provide services for the Company, and the
Company does not anticipate it will enter into any such agreements in the
foreseeable future.
7
The Company has twenty years of experience working with various liquid
crystal formulations and application methods. The Company maintains
complete records of manufacturing and quality assurance testing of all of
its products in compliance with Food and Drug Administration ("FDA")
regulations. All products are manufactured according to "good
manufacturing practices" (GMP) for medical devices.
Marketing and Distribution. The Company has traditionally targeted the
medical markets. While novel products, such as the Company's products,
enjoy the advantage of no initial competition, they also initially lack a
demonstrated market and acceptance by medical personnel. Furthermore, cost
savings programs and awareness have slowed down the introduction of new
products, particularly in the medical market. As a result, the time
required to achieve acceptance of the Company's medical products is
significantly increased, in Management's opinion.
Because of these conditions, the Company has been forced to rely heavily on
its own marketing and distribution efforts in the medical market, rather
than the use of the traditional medical product distributors, for a large
portion of its sales. Nevertheless, the Company's primary distributor in
the United States, Curtain Matheson Scientific, Inc. ("CMS"), and the
Company's other product distributors have increased their sales of the
Company's products throughout the United States during the past few years.
During Fiscal 1996, CMS accounted for 29.7% of the Company's sales.
Although it is difficult to predict the ultimate success of CMS and other
distributors in selling the Company's products, management believes this
trend will continue.
Effective March 31, 1996, the Company renewed its contract with the
American Association of Blood Banks ("AABB") Group Purchasing Program for
two-years. This amendment allows approximately 2,500 AABB Member Institu-
tions throughout the United States to purchase HemoTempR II blood bag
temperature indicators and HemoTempR II Activator at a discount. The
Company is required to pay a commission of 2% of all sales under this
contract to the AABB.
The Company continues to negotiate with various medical and laboratory
product companies for the distribution of its products under private labels
and to introduce its products in the industrial, pharmaceutical and
laboratory markets, the success of which cannot be assured. See "Thermo-
metric and Thermographic Devices."
At the present time, two employees are engaged on a part-time basis in
marketing the Company's products. Since Fiscal 1994, the Company has also
used the services of an in-house sales representative to do telemarketing
on a commission only basis. The Company does not have an outside sales
force. Since the Company markets its products to approximately 7,000
hospitals in the United States, hundreds of laboratories and industrial
end-users in the United States, and thousands of hospitals and laboratories
in foreign countries, it will continue to rely upon the marketing efforts
8
of independent dealers and sales representatives, and is therefore aggres-
sively seeking distributors for its products throughout the world. The
effect these independent dealers will have on revenues has not yet been
determined.
The Company is unaware of its current market share for its medical and
laboratory products, although the Company is currently collecting data to
be used in marketing studies in the future.
Sources and Availability of Raw Materials. In general, the Company
believes its sources and availability of raw materials to be satisfactory.
Presently, there are a limited number of domestic manufacturers of liquid
crystal chemicals. Although it is expected that these domestic manufactur-
ers will continue to supply the raw liquid crystals needed for the produc-
tion of the Company's products, which cannot be assured, if industrial
quantities of raw liquid crystals are unavailable from domestic sources,
the Company will need to import these materials from foreign suppliers, or,
as an alternative, manufacture such materials itself.
Patents and Trademarks. The Company has been granted or assigned five
United States and four foreign patents relating to liquid crystal technolo-
gy. These patents generally relate to liquid crystals or liquid crystal
dispersion processes. Specifically, these patents pertain to the venipunc-
ture method utilized by the Company's vein assessment device products (No.
4,175,543, expiration date November 27, 1996), the film application of
those products (No. 4,161,557, expiration date July 17, 1996), the material
and die composition of those products (No. 4,015,591, expired April 5,
1994), a liquid crystal film laminate (No. 4,015,591, expired April 5,
1994), a liquid crystal film laminate (No. 4,310,577, expiration date July
17, 1996), and a cholesteric liquid crystal formulations and temperature
monitoring means (No. 4,859,360, expiration date August 22, 2006).
The Company has received registered trademark protection on all product
names to date, excepting Tempa.SlideTM, FoodGardeTM and LaproVueTM. The
Company has retained, however, all the rights to the Temp.SlideTM,
FoodGardeTM and LaproVueTM common law trademark. Additional trademark
registrations will be applied for as needed.
Although patent and trademark protection is important, the Company believes
that no material adverse effects to the Company's operations will result in
the event that additional patents and/or trademarks are not obtained, or,
if attained, such patents and/or trademarks are held to be invalid.
Certain processes and chemical formulas will be maintained only as trade
secrets. Management feels that it will be difficult for potential competi-
tion to analyze or reproduce the secret processes and formulas without
substantial expenditures of capital and resources.
Seasonal Aspect of Business. The business of the Company is not seasonal.
Working Capital Items. 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
9
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.
As of April 30, 1996, the Company had $117,172 of current assets available.
Of this amount, $47,894 was inventory and $56,750 was net trade receiv-
ables. Management of the Company believes that it has sufficient working
capital to continue operation for the fiscal year ending April 30, 1997
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 will be neces-
sary to obtain additional financing to cover working capital items and keep
current trade accounts payable, of which there can be no assurance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Major Customers. CMS, the Company's primary independent product distribu-
tor, was directly responsible for 10% or more of the Company's net sales
during the fiscal year ending April 30, 1996. At April 30, 1996, CMS owed
the Company $19,442. Management believes the loss of this customer would
materially reduce the revenues of the Company until the Company could
retain the services of another major product distributor.
Backlogs. The Company did not have any material backlog of orders as of
April 30, 1996.
Government Contracts. The Company does not have a material portion of its
business that may be subject to renegotiation of profits or termination of
contracts or subcontracts at the election of any government entity.
Competition. The Company has no known commercial competitors of its
disposable vein assessment device or blood monitoring devices using liquid
crystal technology. Because of the Company's patent position, employment
agreements with former employees, and processing trade secrets, it does not
anticipate competition in these areas in the near future. In the area of
laboratory temperature monitoring, there are no other competitors who
market an infinitely thin liquid crystal temperature indicator. In the
area of a frozen food or drink safety indicator, there is no competition
known to the Company that utilizes liquid crystal technology. The Company
believes that the frozen food industry presently uses primarily physical
and organoleptic evaluation (e.g., evaluation of softness, texture, aroma,
taste and the like), as well as mercury thermometers to monitor freshness.
Labels containing wax encapsulated dyes with specific low melting points
10
and capillary action products produced by 3M under the tradename
MonitorMarkR and polymer/monomer indicators from Lifeline are also avail-
able.
The Company's HEMOTEMPR II BMD (blood bag temperature monitor) competes in
the medical market against Safe-T-Vue (MonoTech) and MonitorMark (3M).
Management of the Company believes that the MonoTech and 3M products are
technically inferior to HEMOTEMPR II BMD in that they provide only an
irreversible monitor with nothing to warn the user that blood is approach-
ing an unsafe temperature. In addition, the MonoTech product must be
refrigerated prior to use, and, because of their design, both products can
readily be dislodged from the blood bag. There is no known commercial
competitors of the Company's HemoTempR II Activator.
The Company's TempTrendR II and TempTrendR Peds compete in the medical
market against Temp-A-Strip (Johnson & Johnson), Stick-Temp (Trademark
Sales) and Temp-A-Dot (PyMaH Corp). Stick-Temp is distributed on a limited
basis and there is little information available concerning it. Management
of the Company believes that the Johnson & Johnson product is less techni-
cally advanced than the Company's TempTrendR TTD and is primarily distrib-
uted in the Consumer market. Temp-A-Dot is a wax impregnated strip of
paper inserted into the mouth to monitor core temperature. Although it is
reported to cost less than TempTrendR II thermometers, it has the disadvan-
tage of single reading, invasive methodology and cannot be used to monitor
temperature trends. None of the competitors have a thermometer designed
specifically for axillary temperature monitoring like the Company's
TempTrendR Peds. Recently, a few private label indicators have been
introduced to the market. These are manufactured by Dijinni Industries,
PyMaH Corporation, Hallcrest Products and American Thermometer, who compete
with the Company in the consumer market for forehead temperature indicators
and in the drug testing market for urine thermometers.
Other companies, such as Eurand American, are only involved in the manufac-
ture of liquid crystal raw materials and do not directly compete with the
Company for sale of medical, industrial or consumer products. Mercury and
electronic thermometers are used in several competitive applications. They
are generally more costly, non-disposable or not usable in most applica-
tions where liquid crystal thermometry and temperature indicators are
utilized.
Research and Development. During Fiscal 1996, 1995 and 1994, the Company
spent $27,995, $27,179 and $23,850, respectively, on Company-sponsored
research and development activities. All expenditures for research and
development are expensed currently with the exception of significant
equipment and set-up charges which are capitalized and depreciated or
amortized over their estimated useful life.
The Company is conducting research and development of products, which are
discussed under "Thermographic and Thermometric Devices." In this regard,
the Company may require financing to complete the development of these
products. The success of the Company in obtaining financing for research
11
and development will largely determine whether the Company will continue
the research and development for such products or expand its research and
development to other products.
Government Regulations. The Company does not currently plan to market
diagnostic or therapeutic products which are subject to stringent United
States Food and Drug Administration (FDA) review and pre-market approval in
the near future. Present commercial products of the Company are classified
by the FDA as Class I or Class II. These are subject only to general
regulations requiring that manufacturers adhere to certain guidelines to
provide reasonable assurance of utility, safety, and effectiveness. These
guidelines include labeling requirements, registration with the FDA as a
manufacturer, listing of devices in commercial distribution with the FDA,
notification to FDA of devices proposed to be marketed, conformance to
specified current good manufacturing practices in the manufacture of the
devices, conformance to certain record-keeping requirements, and, in the
case of Class II devices, conformance to certain performance standards. At
the present time, the Company believes that it is in compliance with
regulations set forth by the FDA.
Information About Foreign and Domestic Operations and Export Sales. The
Company had export sales of $16,956 during the last fiscal year, and export
sales of $13,115 and $5,884 during the fiscal years ending in 1995 and
1994, respectively. The Company also believes that some of its medical
devices were sold to distributors within the United States who resold the
devices in foreign markets. However, the Company does not have any
information regarding such sales, and such sales are not considered to be
material.
The Company does not rely on any foreign operations other than its dealers
and marketing representatives in their respective marketing areas. See
"Marketing and Distribution." It is anticipated export sales will continue
to be important to the Company although not material to operating revenues
or income of the Company. Foreign sales are contingent upon, among other
factors, foreign trade regulations, value of the United States Dollar and,
where required, government approval of the Company's products.
Environmental Protection Expenditures. The Company's operations are not
subject to any federal, state or local laws regulating the discharge of
materials into the environment which materially affect earnings or the
competitive position of the Company, although the Company is subject to
such laws. There were no material capital expenditures made during the
last fiscal year to comply with such laws, nor are any such expenditures
anticipated for Fiscal 1997.
Employees. The Company presently has five full-time employees comprised of
the President (who also presently serves as the Director of Marketing and
Technical Operations), two Vice Presidents and a manufacturing/packaging
employee. The Company also employs a secretary/receptionist. Certain
employees of the Company provide limited services, primarily bookkeeping
12
and clerical, for Stevia Company, Inc., an affiliate of the Company, on an
"as needed" basis, which is not expected to be a material portion of their
time.
Item 2. Properties
The Company's production facilities, research facilities, and administra-
tive offices are located at 1940 East Devon, Elk Grove Village, Illinois
60007, in a 10,400 square foot facility leased from an unaffiliated third
party. The Company sub-leases 1,560 square feet to Stevia Company, Inc.,
an affiliate. The lease for these facilities expires on January 31, 2001.
See footnote 9 of the "Financial Statements."
A majority of the Company's Elk Grove Village facility is currently in use;
however, Management believes this facility is adequate for its needs in the
foreseeable future. Located at the Company's facility is equipment
utilized for research, development, and manufacturing of the Company's
products.
Item 3. Legal Proceedings
There is no material litigation threatened or pending against the Company
or any of its properties.
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for Registrant's Common Stock and Related
Shareholder Matters.
Market Information. Although the common stock of the Company is traded
in the over-the-counter market, there is no established public trading
market due to limited and sporadic trades. Information regarding these
trades is compiled by the Stock Section of the National Daily Quotation
Service ("Pink Sheets") and selected broker-dealers trading such common
stock. These quotations do not necessarily reflect actual
transactions nor represent the actual value or trading price of the
Company's common stock. Such over-the-counter quotations reflect
inter-dealer prices, without retail markup, markdown, or commission.
Trading and pricing information for fiscal 1995 and 1996 was not
available to the Company, although the management of the Company does not
believe there were sufficient trades to establish a market for its common
stock.
Holders. As of April 30, 1996, there were approximately 860 shareholders
of record of the Company's common stock.
Dividends. The Company has never declared any dividends and does not
intend to do so until such time as the Company sustains a profitable status
and has provided for all of its capital requirements.
13
Item 6. Selected Financial Data
Fiscal Years Ending
______________________
1996 1995 1994 1993 1992
_______ ______ ________ ________ ________
Operating Revenues $454,784 $443,337 $403,963 $362,536 $229,571
Other Revenues 5,677 6,863 4,445 5,701 5,265
Net Income/(Loss) 92,197 47,824 24,513 17,691 ( 34,953)
after Taxes
Net Income/(Loss) .0066 .0035 .002 .001 ( .003)
per Share After
Taxes
Total Assets 428,331 409,320 395,722 354,836 310,417
Long Term Debt - - - - -
Stockholder Equity/
(Deficit) 279,472 187,275 139,451 114,938 91,247
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net Sales. Net sales for the fiscal year ending April 30, 1996
were $11,447, or 2.58%, higher than the previous fiscal year, and
$50,831, or 12.58, higher than the fiscal year ending in 1994. The
increase in sales during Fiscal 1996 was due to the growing
acceptance of the Company's HemoTempR II blood temperature indicators.
The Company experienced an increase of $106.71, or 3.01%, in sales of
its HemoTempR II product in Fiscal 1996 as compared to Fiscal 1995,
and an increase of $95,399, or 36.81%, in Fiscal 1995 as compared to
Fiscal 1994. The Company also had an increase in the sales of its
TempTrendR indicators in Fiscal 1996 of $3,442 or 11.20% as compared
to Fiscal 1995. However, sales of TemptrendR indicators decreased
approximately 68.16% due to the loss of one of its major customers
Timberline, Inc., during the 3rd Quarter of Fiscal 1994.
Other Revenues. During Fiscal 1996, the Company realized $5,677
of miscellaneous income. This income was primarily for leasing a
portion of its computer time to Stevia Company, Inc., an affiliate,
sub-leasing a portion of the Company's storage space to a
non-affiliate, contract printing for a non-affiliate and interest
income. The Company also realized $12,780 in extraordinary income
due to the write-off of certain accounts payable.
Costs and Expenses. Costs and expenses for the fiscal year ending
April 30, 1996 decreased by $21,333 compared to the fiscal year ending
in 1995, and decreased by $2,851 as compared to the fiscal year ending
in 1994. The decrease in costs and expenses for Fiscal 1996 was
generally related to reduced general and administrative cost and
interest expense. The decrease in general and administrative expenses
is due to the resignation of the Company's bookkeeper in May, 1995
and the related reduction in employee costs. The bookkeeping duties
are now shared by the Company's Vice President - Administration
and Vice President/Manufacturing/Manager of Financial and Product
Development at no additional cost to the Company.
The decrease in General and Administrative expenses is also due
to recharacterization of certain expenses to marketing as a result
of increased marketing activities, which did not result in an overall
decrease in operating expenses. Generally, with the exception of the
decrease in General and Administrative employee salary and related
expenses, the overhead expenses of the Company have remained constant.
In order for the Company to continue without materially altering its
present operations, the overall operating costs and expenses for the
ensuing fiscal year are expected to be similar to those of the last
fiscal year.
Cost of Sales. As a percentage of net sales, the cost of sales was 35.81%
for the fiscal year ending April 30, 1996, 39.98% for the fiscal year
ending in 1995 and 40.70% for the fiscal year ending in 1994. The Company
expects that the cost of sales as a percentage of net sales will remain
below 50% over the next fiscal year in the absence of a material decrease
in sales.
Research and Development Expenses. Research and development expenses
increased during the fiscal year ending in 1996 by $816, or 3.0%, as
compared to the fiscal year ending in 1995, and increased by $4,145, or
17.38%, as compared to the fiscal year ending in 1994. For the past
several years, the Company's research and development activities were
limited to improvement of the current product line and development of
products which were natural extensions thereof. Recently, however, the
Company has noted there appears to be a need for other products and
accessories complimentary to its current product line. These products
would also help systematize the use of the Company's current products. As
an example, the Company developed the HemoTempR II Activator. See "Narra-
tive Description of Business - Thermographic and Thermometric Devices and
Accessories." Although the Company intends to continue to improve its
current product line, the Company is also investigating the possibility of
developing other products using technologies other than liquid crystal
technology to augment its current product line. Although it is not
anticipated that the development of such products will materially increase
the Company's research and development expenses, there is insufficient
information available to determine the extent the Company will be required
to allocate its resources to develop these products. In addition, the
Company will continue to develop products pursuant to contracts with
unrelated entities. The increase in research and development costs as a
result of such development contracts will be directly related to the
revenues derived therefrom.
Marketing Expenses. The Company's marketing expenses were $45,685 in 1996
and $35,854 in 1995, as compared to $21,844 for the fiscal year ending in
1994. The Company increased its marketing activities during Fiscal 1994
and 1995, and continued this trend in Fiscal 1996. Certain general and
administrative expenses, primarily employee costs, have been reallocated to
the Marketing Department to reflect the increasing marketing activities.
Subject to availability of resources, the Company intends to further expand
its marketing activities, although it is not anticipated that the marketing
expenses for Fiscal 1997 will materially increase.
15
General and Administrative Expenses. The Company's general and administra-
tive costs decreased by $13,951 as compared to the 1995 fiscal year, and
decreased by $25,051 as compared to the fiscal year ending in 1994. The
primary reason for the decrease is due to the resignation of the Company's
bookkeeper in May, 1995 and the resulting decrease in employee expenses.
See "Cost and Expenses" above. Finally, the Company has reallocated a
portion of its general and administrative expenses to marketing (see
"Marketing Expenses" above) resulting in a decrease in general and adminis-
trative expenses for 1995 and 1996. Management of the Company has general-
ly stabilized general and administrative expenses over the past three
years. Except for extraordinary items, it is unlikely general and adminis-
trative expenses will materially change in the near future.
Net Income/Loss. The Company experienced a net income of $92,197, an
improvement of $44,373 over Fiscal 1995, and an improvement of $67,684 over
Fiscal 1994. The increase in net income is primarily due to an increase in
net sales, extraordinary income items, and reduced expenses. See "Net
Sales", "Other Revenues", and "Costs and Expenses" above. Management
realizes that the profitability of the Company depends upon achieving and
maintaining sales of the Company's products. To this extent, the Company
has continued its efforts to improve sales. However, there can be no
assurance the Company will be able to continue to increase or maintain the
current level of net sales, on which the profitability of the Company is
contingent.
As of April 30, 1996, the Company had net operating loss carryovers
aggregating $2,151,330. Therefore, no income taxes are due for Fiscal
1995. 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 did 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 10 to the Financial Statements for the
year ending April 30, 1995. See "Financial Statements."
Assets. Since April 30, 1995, the Company's assets have increased
by $19,011. This is primarily due to increases in amounts Due From
Affiliates (see below). Other changes in specific assets do not reflect
changes outside the ordinary course of business.
The Company was owned $258,360 by Stevia Company, Inc. ("Stevia"), an
affiliate, and $12,660 by F.K. Suzuki International, Inc. ("FKSI"), an
affiliate, at April 30, 1996. These affiliates owed $237,595 and $12,409
at April 30, 1995, respectively. These accounts primarily represent common
expenses which are charged by one company to the other for reimbursement.
These expenses include certain rent, salaries for common employees,
insurance and employee benefits, and legal fees. See "Financial State-
ments." These expenses are incurred in the ordinary course of business.
As a result of the increase in amounts due from affiliates, the Company has
reduced its owns liquid resources. Although management believes it is cost
effective to share common expenses with its affiliates, the Company has
reduced the amount of advances and common expenses charged to Stevia and
FKSI until these affiliates are in a position to reimburse the Company.
16
Collectibility of the amounts due from the affiliates cannot be assured
without the liquidation of all or a portion of their assets, and thus such
receivables have been classified as non-current assets.
Liabilities. The Company's overall liabilities have decreased by $73,186
since April 30, 1995. This is primarily due to improved cash flow from
operations. See also "Assets" and "Liquidity and Capital Resources."
Current Assets/Liabilities Ration. The ratio of current assets to current
liabilities, .79 to 1, has increased from .50 to 1 at April 30, 1995.
Although the Company realized income in Fiscal 1996, the Company used
$21,014 of its cash to pay expenses incurred by the Company on behalf of
Stevia and
FKSI, which were not reimbursed. Thus, 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 must curtail the use of its current assets for the benefit of
Stevia and FKSI. Although Management of the Company believes this is
possible, there is a risk the Company's current asset/liability ratio may
not be adequate for the Company's future needs.
Liquidity and Capital Resources. During the fiscal year ending April 30,
1996, the Company had an increase in net working capital of $78,606. The
increase in net working capital is primarily due to improved cash flow from
operations which was used to retire company debt.
In view of the fact that the Company has incurred substantial losses in
prior years, Management of the Company recognizes the Company's ability to
continue as a going concern is subject to maintaining and improving sales,
the collection of accounts receivable and the ability of the company to
raise money, when needed, of which there is no assurance. To this end,
Management is attempting to introduce the Company's products in markets not
previously recognized as viable markets. Finally, Management intends to
continue to seek financing opportunities. Although the Company intends to
seek out financing, there can be no assurance the Company will be able to
find any additional financing or a working line of credit on acceptable
terms. Irrespective of the Company's working capital deficit, the Company
has not been refused goods or services from any of its vendors.
Since the Company does not have an operating line of credit, the Company's
President, Fred K. Suzuki, has made loans to the Company in the past for
working capital purposes. See "Certain Relationships and Related Party
Transactions." There can be no assurance such loans will be available in
the future or on terms acceptable to the Company.
Due to the limited availability of cash to the Company during the fiscal
years ending April 30, 1994, 1995 and 1996 and the inability of the company
to borrow the funds required, the Company chose not to have its financial
statements audited. The cost of such an audit would be approximately
$15,000 per year.
17
During Fiscal 1994, the employees of the Company agreed to defer a portion
of their compensation to improve the Company's cash flow available for
other operating expenses. As of April 30, 1996, only Fred K. Suzuki,
President, was continuing to defer compensation under this plan, and all
previously deferred compensation under this plan was paid except for a
portion of the deferred compensation payable to Fred K. Suzuki and Laurence
Mead, Vice President-Manufacturing.
Except for its operating capital needs, the Company does not have any other
material contingencies for which it must provide.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is set forth in pages F-1 to F-12.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
The information contained in items 10, 11, 12, and 13 is the same informa-
tion to be included in the Registrant's definitive proxy statement, if any,
to be filed with the Commission, and is included herein for convenience
only.
Item 10. Directors and Executive Officers of the Registrant.
The executive officers and directors of the Company are:
Positions Served in
Name Age with Company Office Since
_____ ___ _____________ ____________
Fred K. Suzuki 66 President, Treasurer, February, 1976 (1)
Director of Research
and Development,
Director of Marketing
and Sales, and Chairman
of the Board of Directors
Mary K. Friske 36 Vice President - September, 1993
Administration,
Manager of Sales
Laurence Mead 34 Vice President - April, 1994
Manufacturing,
Manager of Financial
and Product Development
18
Lauane C. Addis 40 Corporate Counsel, February, 1984
Secretary and December, 1985
Director February, 1987
James F. Schembri 61 Director November, 1990
_______________
[FN]
(1) Mr. Suzuki did not serve as President from August 1982 through February
1983. Prior to October, 1984, Mr. Suzuki served as Treasurer of the
Company, and was once again appointed Treasurer on June 30, 1991.
As an incentive for his investment in the Company, the Board of Directors
agreed to nominate James F. Schembri as a candidate for election to the
Board of Directors of the Company. Other than the foregoing, there are no
arrangements or understandings between any of the directors or officers of
the Company and any other person pursuant to which any director or officer
was or is to be selected as a director or officer.
The term of office for the members of the Board of Directors extends to the
next regular meeting of shareholders or until they resign, and until their
successors are duly elected. The term of office for the officers of the
Company extends until they resign, are not re-elected by the Board of
Directors, or are otherwise replaced by the Board of Directors of the
Company.
Family Relationships.
Lauane C. Addis is the son-in-law of Fred K. Suzuki. Otherwise, there is
no family relationship between any director, executive officer, or person
nominated or chosen by the Company to become a director or executive
officer.
Involvement in Certain Legal Proceedings.
None of the officers or directors are or have been involved in any legal
proceedings which are material to an evaluation of the ability or integrity
of same.
Business Experience.
Certain information regarding the business experience of the directors,
officers, significant employees and consultants of the Company are set
forth below:
FRED K. SUZUKI, Jr., Chairman of the Board, President, Treasurer, Director
of Research and Development and Director of Marketing and Sales. Mr.
Suzuki is founder of the Company and has served as President of the Company
since its inception in 1976 to August 1982 and from February 1983 to the
present. He has served as Chairman of the Board of Directors of the
Company since its inception to the present, and as Treasurer from its
inception to October, 1984 and from July, 1991 to the present. Mr. Suzuki
is also President and Chairman of the Board of Directors of F.K. Suzuki
19
International, Inc. ("FKSI"), President and Chairman of the Board of
Directors of Stevia Company, Inc. ("Stevia"), President and Chairman of the
Board of Directors of Medlab Products, Inc. ("Medlab"), affiliates of the
Company. Mr. Suzuki is the sole owner, President and Director of Suzuki
International, Inc. ("SI"). FKSI is a holding company of Medlab, Stevia,
and the Company. As such, it has no other business operations. See
"Security Ownership of Certain Beneficial Owners and Management." Medlab
is a dormant company, organized to develop, manufacture, and market
scientific products. Stevia is in the business of developing, manufactur-
ing, and marketing natural sweeteners and other products derived from
Stevia rebaudiana plant. SI is in the business of marketing various
products. Mr. Suzuki has developed several patents or patents pending for
clinical instruments and has licensed them to unaffiliated corporations.
These patents do not inure to the benefit of the Company. Mr. Suzuki has
developed several patents in the area of Diterpene glycosides, chemistry
derived from the Stevia rebaudiana plant. Mr. Suzuki also holds patents in
the area of liquid crystal chemistry and has patents pending in the area of
liquid crystal technology. Mr. Suzuki attended Roosevelt University from
1951 to 1954, where he studied Chemistry and Biology.
MARY K. FRISKE, Vice President - Administration and Manager of Sales. Ms.
Friske joined the office staff in July, 1983. Ms. Friske served as an
Executive Secretary for several years and was promoted to Office Manager in
1989. In September, 1993, Ms. Friske was appointed Vice President -
Administration and Manager of Sales. Ms. Friske also provides services on
an as-needed basis for an affiliate of the Company, Stevia Company, Inc.
Ms. Friske received here bachelor of Science degree in May, 1981 from
Eastern Illinois University where she majored in Personnel Management.
LAURENCE MEAD, Vice president - Manufacturing and Manager of Financial and
Product Development. Mr. Mead joined the production department of the
Company in 1980, and has served as the Company's Production Manager since
1984. In April, 1984, Mr. Mead was appointed Vice President - Manufactur-
ing and Manager of Financial and Product Development. Mr. Mead received
his Bachelor of Science degree in August, 1992 from Roosevelt University
where he majored in Accounting.
LAUANE C. ADDIS, Secretary, Corporate Counsel, and Director. Mr. Addis
joined the Company in February, 1984 as its Vice President - Finance and
Chief Financial Officer on a part-time basis and was employed in the
equivalent capacity on a part-time basis by Stevia Company, Inc., an
affiliate of the Company, and as a self-employed attorney. From December,
1985 thru June, 1991, Mr. Addis served as Executive Vice President, Chief
Operating Officer, Chief Financial Officer, and Treasurer of the Company.
In July, 1991, Mr. Addis resigned from these positions to return to the
full-time private practice of law. Mr. Addis is also the Secretary and a
director of Stevia Company, Inc. and an officer and director of FKSI, an
affiliate of the Company. Mr. Addis is currently a member of the law firm,
Katz, Karacic, Helmin & Addis, P.C., Chicago, Illinois. Mr. Addis graduat-
ed from Andrews University with a B.A. in History and Business Administra-
tion in June 1978. He received his Doctor of Jurisprudence from Baylor
20
University in 1981 and his Master of Laws in taxation from the University
of Denver in 1982. Mr. Addis is a member of the Colorado, Illinois and
Texas Bar Associations.
JAMES F. SCHEMBRI, Director. Mr. Schembri was elected to the Board of
Directors on November 15, 1990. Mr. Schembri is the founder and President
of a manufacturers representative firm, Automatic Controls Company, located
in Detroit, Michigan, with offices in Cleveland and Cincinnati, Ohio, and
Louisville, Kentucky. Mr. Schembri is one of the founders and president of
Fenton Systems, of Burton, Michigan. Fenton Systems is a systems integra-
tor in the materials handling field. Mr. Schembri serves as Chief Finan-
cial Officer for both Fenton Systems and Automatic Controls Company. In
addition to these activities, Mr. Schembri also is founder and President of
Wickfield Leasing Company which leases automobiles and office equipment.
Mr. Schembri is also the Vice President and Chief Financial Officer of
Midwest Valve Services. Mr. Schembri is a director of Automatic Controls,
Fenton Systems, Wickfield Leasing Company, and Midwest Valve Services. Mr.
Schembri received his Bachelor of Science Degree in Mechanical Engineering
from University of Detroit in June, 1957.
Item 11. Executive Compensation.
The following summary compensation table sets forth a summary of compensa-
tion for services in all capacities to the Company during the fiscal years
ended April 30, 1996, 1995 and 1994 paid to the Chief Executive Officer.
None of the Company's other executive officers received annual salaries and
bonuses for such fiscal years exceeding $100,000.
Summary Compensation Table
__________________________
Annual Compensation Long Term Compensation/Awards
___________________ _____________________________
Name and Other
Principal Annual All Other
Position Year Salary Bonus Compensation (1) Options (#) Compensation
__________ ____ ______ _____ ____________ ___________ ____________
Fred K. Suzuki 1996 $47,525 - (2) - $1,342(3)
President, 1995 $44,196 - (2) - $2,140(3)
Chairman of 1994 $43,788 - (2) - $3,542(3)
the Board and
Chief Executive
Officer
_______________
(1) No executive officer received perquisites in excess of the lesser of
$50,000 or 10% of the aggregate of such officer's salary and bonus.
21
(2) In addition, salary of $8,411, $6,970, and $5,000 was accrued but not
paid during Fiscal 1994, 1995 and 1996 respectively.
(3) Interest on loans made by Mr. Suzuki to the Company, aggregating
$3,542, $2,140 and $1,342 was paid or accrued in 1994, 1995, and 1996
respectively. See "Certain Relationships and Related Party Transactions."
All officers and directors are reimbursed for out-of-pocket expenses
incurred in connection with the Company's business. Messrs. Suzuki, Addis
and Schembri, are not remunerated in their capacities as directors. See,
however, "Certain Relationships and Related Party Transactions."
The Company does not have any pension or profit sharing plans in effect for
the benefit of its employees, including its officers and directors. Such
plans may be adopted in the future if deemed in the best interests of the
Company by its Board of Directors.
Stock Options
During the fiscal year ended in 1983, the Company adopted a special
incentive plan for personnel of the Company pursuant to which certain key
individual employees, consultants, officers and directors of the Company
could be granted stock options and/or stock appreciation rights pursuant to
the option agreements. Employees, officers, directors and consultants of
the Company are eligible under the stock incentive plan based upon the
successful achievement of specific goals and upon other relevant factors,
as determined by the Company's Board of Directors. The period for granting
options under the stock incentive plan expired on May 19, 1989. An
aggregate of 350,000 shares were reserved for issuance under the stock
incentive plan, of which 131,500 shares were subject to options at April
30, 1996. These shares will be made available for purchase to option
holders at the fair market value, if any, of the Company's common stock on
the date such option or appreciation right were granted. If the fair
market value of the Company's common stock cannot be determined, the
exercise price will be determined by the Company's Board of Directors on
the date of the granting of the options or appreciation rights. The
exercise price is $.05 per share for all of the 131,500 shares.
During Fiscal 1996, no stock options were granted to the Chief Executive
Officer or the Company's four other most highly compensated executive
officers (other than the Chief Executive Officer) whose total annual salary
and bonus for fiscal year 1996 exceeded $100,000, and such officers did not
exercise any options during fiscal year 1996. The following table sets
forth the aggregate value as of April 30, 1996 of unexercised options held
by such individuals.
22
Aggregated Option Exercises in Last Fiscal Year
_______________________________________________
and Fiscal Year-End Option Values
_________________________________
Number of Value of
Unexercised Unexercised
Options at in-the-Money
Shares Fiscal Year Options at
Acquired End (#) Fiscal Year-End
on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
____ ____________ ____________ _____________ _____________
Fred K.
Suzuki - - 43,250/0 (1) $0/0
President
and - - 1,233,800/0 (2) $0/0
Chairman of
the Board - - 3,000,000/0 (3) $0/0
__________
(1) As of April 30, 1996, the option granted to Fred K. Suzuki was
exercisable to the extent of 100%. The exercise price for the option was
the estimated fair market value of the Company's Common Stock on the date
of the grant.
(2) Effective January 31, 1990, the Company entered into an agreement with
Fred K. Suzuki pursuant to which the Company granted an option to convert
all or a portion of Mr. Suzuki's accrued but unpaid compensation into
shares of the Company's no par value common stock at a conversion rate of
$0.05 per share. At April 30, 1996, the total deferred compensation
payable to Mr. Suzuki was $61,690, thereby entitling Mr. Suzuki to convert
such deferred compensation into 1,233,800 shares of the Company's common
stock. This option has no value in excess of the fair market value of the
Company's Common Stock. This option is conditioned upon the Company having
sufficient liquid assets to pay all employee taxes due at the time the
conversion. This option may be exercised until the optionee is no longer
owed accrued but unpaid salary. The accrued but unpaid salary arose as a
result of Mr. Suzuki's agreement to defer salary when the Company was not
financially able to pay salaries on a regular basis. This option contains
non-dilutive provisions in the event of corporate capital reorganizations.
(3) On August 1, 1993, the Company entered into a Stock Option Agreement
with Fred K. Suzuki, President, granting Mr. Suzuki an option to purchase
3,000,000 shares of Company's common stock at an option price of $0.025 per
share. This Stock Option Agreement was granted to Mr. Suzuki in consider-
ation of his loaning money to the Company on an unsecured basis from time
to time. This option has no value in excess of the fair market value of
the Company's common stock. The option contains anti-dilutive provisions
in the event of corporate capital reorganizations. As of April 30, 1996,
no portion of this Option has been exercised.
23
Compensation Committee. The Company does not have a Compensation Committee
of its Board of Directors. The Board of Directors makes all decisions
concerning the President's compensation including, but not limited to, the
granting of options to acquire common stock of the Company. The President
of the Company, Fred K. Suzuki, has the sole authority, as granted by the
Board of Directors, to make compensation decisions for other employees
of the Company other than the granting of Options to acquire the common
stock of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of April 30, 1996, as to the
voting securities of the Company owned by the officers and directors of the
Company and by each person who owns of record, or is known by the Company
to own beneficially, more than 5% of any class of voting securities.
Amount and Nature
Name and Address of Beneficial Percent of
Title of Class of Beneficial Owner Ownership (1) Class
______________ ___________________ _________________ __________
Common Stock Fred K. Suzuki 4,497,146 shares 32.57%
710 S. Kennicott of record and
Arlington Heights, beneficial (2)
Illinois 60005
Common Stock F.K. Suzuki Inter- 2,597,146 shares 18.81%
national, Inc. record and bene-
1940 E. Devon Ave. ficial
Elk Grove Village, IL
60007
Common Stock Stevia Company, Inc. 1,900,000 shares 13.76%
1940 E. Devon Ave. of record and
Elk Grove Village, IL beneficial (3)
60007
Common Stock Lauane C. Addis 4,506,146 shares 32.64%
1819 Orleans Circle record and bene-
Elk Grove Village, IL ficial (3)
60007
Common Stock James F. Schembri 1,785,500 shares 12.93%
19115 W. Eight Mile Rd. of record and
Detroit, MI 48219 beneficial (4)
Common Stock Mary K. Friske (5) 1,000 shares of .01%
940 Bradley Court record and
Palatine, IL 60074 beneficial
24
Common Stock Laurence C. Mead (6) 1,250 shares of .01%
7820 Northway Drive record and
Hanover Park, IL 60103 beneficial
Common Stock All directors and 6,293,896 45.59%
officers as a
group (5 members)
_______________
[FN]
(1) The above table does not include options to acquire 131,500 shares of
the Company's common stock by the officers an directors as a group
pursuant to a stock incentive plan adopted during the fiscal year
ending in 1983. (See "Stock Options" above). See also Footnotes 2
and 3 below.
(2) Fred K. Suzuki is President of F.K. Suzuki International, Inc.
("FKSI") and owns 35.6% of the outstanding common stock of FKSI. Mr.
Suzuki is also President and Chairman of the Board of Stevia Company,
Inc. ("Stevia") of which FKSI owns 55.84% of its outstanding common
stock. Mr. Suzuki does not personally hold of record any shares of
the company's common stock; however he is deemed to be beneficial
owner by reason of voting and disposition control 4,497,146 shares
which includes 2,597,146 shares which are owned by FKSI and 1,900,000
shares owned by Stevia. The above table does not include an option
granted to Mr. Suzuki to convert all or a portion of his deferred
salary into shares of the Company's common stock at a conversion rate
of $.05 per share, an option to acquire 43,250 shares pursuant to the
Company's Stock Incentive Plan, or an option to acquire 3,000,000
shares of the Company's common stock at $0.025 per share. See "Execu-
tive Compensation" and "Certain Relationships and Related Party
Transactions."
(3) Mr. Addis personally owns 9,000 shares of the outstanding Common Stock
of the Company. In addition, Mr. Addis owns 32.7% of the outstanding
Common Stock of FKSI, which owns 55.84% of the outstanding Common
Stock of Stevia and 18.95% of the Common Stock of the Company. Mr.
Addis is also an officer and director of Stevia which owns 1,900,000
shares of the Company's Common Stock. Mr. Addis is therefore deemed
to be beneficial owner by reason of voting and disposition control of
2,597,146 shares owned by FKSI, and is deemed to be the beneficial
owner by reason of voting and disposition control over 1,900,000
shares owned by Stevia. Mr. Addis also is the grantee of an option to
acquire 43,250 shares pursuant to the Company's stock incentive plan
for $.05 per share.
(4) Included in the shares owned beneficially by Mr. Schembri are 91,000
shares held in trust for the benefit of Mr. Schembri, 31,000 shares
held in Individual Retirement Accounts for the benefit of Mr.
Schembri, 8,000 shares owned by Midwest Valve Services, of which Mr.
Schembri has sole dispositive and voting control, and 500,000 shares
owned in joint tenancy with Mr. Schembri's son.
25
(5) In addition to the Shares of outstanding common stock of the Company
owned by Mary K. Friske, she also owns 200 shares, or approximately
.2%, of the outstanding common stock of FKSI, which owns 55.84% of the
outstanding common stock of Stevia and 18.95% of the common stock of
the Company.
(6) In addition to the common stock of the Company owned by Laurence C.
Mead, he also owns 2,900 shares, or approximately 2.9%, of the out-
standing common stock of FKSI, which owns 55.84% of the outstanding
common stock of Stevia and 18.95% of the common stock of the Company.
Changes in Control
The Company does not know of any arrangements, the operation of which may
at a subsequent date result in a change in control in the Company nor has a
change in the control of the Company occurred during the last fiscal year.
Item 13. Certain Relationships and Related Party Transactions.
____________________________________________________
During the fiscal year ending April 30, 1996, the Company shared common
areas and office space with an affiliate, Stevia Company, Inc. ("Stevia").
It is believed by management that by sharing common areas and office space
with Stevia, expenses will be reduced and kept at minimum levels. It is
anticipated by the Company that they will continue to share common areas
and office space with Stevia in the future. The Company and Stevia
reimburse each other for such common area expenses as appropriate. As of
April 30, 1996, Stevia owed $258,360 to the Company in connection with the
shared common area expenses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Effective January 31, 1990, the Company entered into an agreement with Fred
K. Suzuki, President, pursuant to which the Company granted an option to
convert all or a portion of Mr. Suzuki's accrued but unpaid compensation
into shares of the Company's no par value common stock at a conversion rate
of $0.05 per share. At April 30, 1996, the total deferred compensation
payable to Mr. Suzuki was $61,690, thereby entitling Mr. Suzuki to convert
such deferred compensation into 1,233,800 shares of the Company's common
stock. The option is conditioned upon the Company having sufficient liquid
assets to pay all employee taxes due at the time of conversion. The option
is exercisable until Mr. Suzuki's is no longer owed accrued salary. The
accrued but unpaid salary arose as a result of Mr. Suzuki's agreement to
defer salary when the Company was not financially able to pay salaries on a
regular basis. The option contains non-dilutive provisions in the event of
corporate capital reorganizations.
On August 1, 1993, the Company entered into a Stock Option Agreement with
Fred K. Suzuki, President, granting Mr. Suzuki an option to purchase
3,000,000 shares of the Company's common stock at an option price of $0.025
per share. This Stock Option Agreement was granted to Mr. Suzuki in
consideration of his loaning money to the Company on an unsecured basis
26
from time to time. The option contains anti-dilutive provisions in the
event of corporate capital reorganizations. As of April 30, 1996, no
portion of this Option has been exercised.
Lauane C. Addis, Secretary and Director, as a member of the law firm of
Katz, Karacic, Helmin & Addis, P.C., has represented the Company with
respect to the preparation and filing of this Report. Mr. Addis, and other
members of Katz, Karacic, Helmin & Addis, P.C., perform other legal
services for the Company from time to time, and it is anticipated such
services will be performed by Mr. Addis and other members of Katz, Karacic,
Helmin & Addis, P.C., in the future. During Fiscal 1996, the Company paid
$9,801 in legal fees to Katz, Karacic, Helmin & Addis, P.C., some of which
inured to the benefit of Mr. Addis in the form of salary and bonuses. Mr.
Addis is an officer, director and major shareholder of the Company, and is
also the son-in-law of Fred K. Suzuki, President and Chairman of the Board
of Directors. See "Directors and Executive Officers of the Registrant" and
"Security Ownership of Certain Beneficial Owners and Management."
During the fiscal year ending April 30, 1994, Fred K. Suzuki, President,
made various loans to the Company for working capital purposes. At April
30, 1995, the following loans by Mr. Suzuki were outstanding: a) $12,100
unsecured note bearing interest at 11.5% and is due on demand, and the
balance of this note at April 30, 1995 was $8,700; and b) $7,587.75
unsecured note which bears interest of 10% and is due on demand, and the
balance of this note at April 30, 1995 was $7,587.75. Both of these loans
were repaid during Fiscal 1996. See "Financial Statements and Supplementa-
ry Data" for additional information regarding such loans. There has been
no independent assessment of the fair market value of the interest charged
by Mr. Suzuki.
Except with regard to the above, there were no other material transactions
involving management of the Company or any third party during the last
fiscal year which accrued to the benefit of officers or directors of the
Company.
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
The following financial statements, schedules and exhibits are filed as a
part of this report:
(a) (1) Financial statements.
Balance sheet for the fiscal years ending April 30, 1995 and 1996.
Statements of operations for the fiscal years ending April 30,
1994, 1995 and 1996.
Statements of Shareholders' Equity (Deficit) for the fiscal years
ended April 30, 1994, 1995 and 1996.
27
Statements of Cash Flows of the Company for fiscal years ending
April 30, 1994, 1995 and 1996.
Notes to financial statements.
(a) (2) List of Financial Statement Schedules:
The following financial schedules for the fiscal years ending April
30, 1996, 1995 and 1994 are submitted herewith:
Schedule I - Marketable Securities - Other Investments - P. S-1.
Schedule V - Property, Plant and Equipment - P. S-2.
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment - P. S-3.
Schedule VIII - Valuation and Qualifying Accounts - P. S-4.
Schedule X - Supplementary Income Statement
Information - P. S-5.
Except as listed above, there are no financial statement schedules
required to be filed by Item 8 of this Form 10-K except for those otherwise
shown on the financial statements or notes thereto contained in this
report.
(b) Reports on Form 8K. No current reports on Form 8K were filed during
the last quarter covered by this report.
(c) The Following Exhibits are Filed as a Part of this Report:
3. a. Articles of Incorporation and By-Laws (1)
4. Instruments Defining the Rights of Security Holders, Including
Indentures - none.
9. Voting Trust Agreements - none.
10. Material Contracts
(a) Deferred Compensation Option Agreement, dated January 31,
1990, between the Company and Fred K. Suzuki (2)
(b) Stock Option Agreement, dated August 1, 1993, between the
Company and Fred K. Suzuki (3)
(c) Promissory Note dated March 2, 1993, in the amount of $12,100
payable to Fred K. Suzuki.(3)
(d) Promissory Note dated July 1, 1993, in the amount of $7,587.75
payable to Fred K. Suzuki. (3)
28
11. Statement Regarding Computation of Earnings Per Share - none.
12. Statements Regarding Computation of Ratios - none.
13. Annual Report to Security Holders - none.
16. Letter Regarding Change in Certifying Accountants - none.
18. Letter Regarding Change in Accounting Principles - none.
19. Previously Unfiled Documents - none.
22. Subsidiaries of Registrant - none.
23. Published Report Regarding Matters Submitted to Vote of Security
Holders - none.
24. Consent of Experts and Counsel - none.
25. Power of Attorney - none.
27. Financial Data Schedule - P. E-1.
28. Additional Exhibits - none.
29. Information From Reports Furnished to State Insurance Regulatory
Agencies. N/A
_______________
[FN]
(1) Incorporated by reference to a Registration Statement filed on Form S-
18 with the Securities and Exchange Commission, 1933 Act Registration
Number 2-83015C, under the Securities Act of 1933, as amended, and Incorpo-
rated 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.
(2) 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.
(3) Incorporated by reference to the Company's Annual Report on Form 10K
for fiscal year ending April 30, 1994 filed with the Securities and
Exchange Commission.
29
SIGNATURES
__________
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, duly authorized.
REGISTRANT: BIOSYNERGY, INC.
________________________________ _________________
Fred K. Suzuki, Chairman of the Date
Board of Directors and President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant in the capacities on the dates indicated.
________________________________ _________________
Fred K. Suzuki, Chairman of the Date
Board of Directors, President,
Treasurer and Chief Accounting
Officer
________________________________ _________________
Lauane C. Addis, Corporate Date
Counsel, Secretary and Director
30
BIOSYNERGY, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
Board of Directors and Shareholders
Biosynergy, Inc.
Elk Grove Village, Illinois
The accompanying balance sheet of BIOSYNERGY, INC. at April 30, 1995
and 1994, and the related statements of operations, shareholders' equity
and cash flows for the fiscal years ending April 30, 1996, 1995 and 1994
were not audited due to the Company's lack of available cash to pay for
such audit; however, the financial statements for the fiscal years ending
April 30, 1995, 1994 and 1993 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.
The financial statements for the fiscal year ending April 30, 1991
were examined by the Company's accountants, KPMG Peat Marwick and BDO
Seidman, respectively, and they expressed qualified opinions on them in
their report dated June 7, 1991. These opinions were qualified as to the
Company's ability to continue as a going concern. The Company's accoun-
tants have not performed any auditing procedures since June 7, 1991.
BIOSYNERGY, INC.
August 2, 1996
BIOSYNERGY, INC.
BALANCE SHEET
April 30,
________________________
1996 1995
_________ _________
Unaudited Unaudited
_________ _________
ASSETS
______
CURRENT ASSETS
Cash 9,733 4,520
Accounts Receivable, Trade, Net of
Allowance for Doubtful Accounts of
$500 in 1996 and 1995 56,750 58,152
Inventories 47,894 44,947
Prepaid Expenses 2,795 4,133
_________ _________
Total Current Assets 117,172 111,752
_________ _________
Due From Affiliates (Note 3) 271,020 250,006
Equipment and Leasehold Improvements:
Equipment 154,036 154,036
Leasehold Improvements 12,216 12,216
_________ _________
166,252 166,252
Less: Accumulated Depreciation and
Amortization 162,063 159,919
_________ _________
4,189 6,333
_________ _________
OTHER ASSETS
Patents, Net of Accumulated Amortization 29,805 34,725
Deposits 6,145 6,504
Investment in Affiliated Company (Note 3) - -
_________ __________
35,950 41,229
_________ __________
428,331 409,320
========= ==========
The accompanying notes are an integral part of the financial statements.
F-2
April 30,
________________________
1996 1995
_________ _________
Unaudited Unaudited
_________ _________
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 46,422 66,863
Notes Payable - Officer (Notes 3 and 5) - 16,288
Accrued Executive Compensation 99,435 97,768
Other Accrued Compensation 1,102 5,567
Accrued Payroll Taxes (Includes penalties
and interest of $8,444 at April 30, 1995
and $0 at April 30, 1996) - 26,758
Deferred Rent 317 2,774
Other Accrued Expenses 1,583 6,027
_________ _______
Total Current Liabilities 148,859 222,045
COMMITMENTS AND CONTINGENCIES (Note 9) - -
SHAREHOLDERS' EQUITY (DEFICIT) (Notes 3,
6 and 7)
Common Stock, No Par Value, 20,000,000
Shares Authorized as of April 30, 1995
and 1996;
13,806,511 Issued and Outstanding
as of April 30, 1995 and 1996 632,663 632,663
Additional Paid in Capital 100 100
Accumulated Deficit since July 31, 1985
in connection with Quasi-Reorganization (353,291) (445,488)
__________ __________
279,472 187,275
428,331 409,320
__________ __________
---------- ----------
The accompanying notes are an integral part of the financial statements.
F-3
BIOSYNERGY, INC.
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30,
______________________________________
1996 1995 1994
_____________ _____________ _________
Unaudited Unaudited Unaudited
_____________ _____________ _________
REVENUES
Net Sales 454,784 443,337 403,963
Interest Income 1,453 41 47
Computer Rentals and Services 600 600 600
Other Income 3,624 6,222 3,798
_____________ ____________ __________
460,461 450,200 408,408
_____________ ____________ __________
COST AND EXPENSES
Cost of sales and other
operating charges 162,864 177,262 164,415
Research and Development 27,995 27,179 23,850
Marketing 45,685 35,854 21,844
General and Administrative 143,293 156,244 167,344
Interest Expense 2,206 5,837 6,442
_____________ ___________ ___________
381,044 402,377 383,895
_____________ ___________ ___________
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS 79,417 47,824 24,513
INCOME TAXES 26,438 11,218 5,046
_____________ ___________ ___________
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 52,979 36,606 19,467
_____________ ___________ ___________
EXTRAORDINARY ITEMS
Reduction of Income Taxes arising from
Utilization of prior years'- Net
Operating Losses (Note 10) 26,438 11,218 5,046
Write Off Accounts Payable 12,770 - -
_____________ ___________ ___________
39,718 11,218 5,046
_____________ ___________ ___________
NET INCOME (LOSS) 92,197 47,824 24,513
_____________ ___________ ___________
------------- ----------- -----------
INCOME (LOSS) PER COMMON SHARE
(Note 8):
Before Extraordinary Items .0038 .0027 .0014
_____________ __________ ____________
Extraordinary Items .0028 .0008 .0004
_____________ ___________ ___________
NET INCOME (LOSS) .0066 .0035 .0018
_____________ __________ ____________
------------- ---------- ------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,806,511 13,806,511 13,806,511
_____________ ___________ ___________
------------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-4
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED APRIL 30, 1996, 1995 AND 1994
Common Stock Additional
____________________ Paid-In
Shares Amount Capital Deficit Total
__________ ________ ___________ _________ _____
BALANCE,
May 1, 1993 13,806,511 632,663 100 ( 517,825) 114,938
__________ ________ __________ __________ _______
(Unaudited) ---------- -------- ---------- ---------- -------
NET INCOME - - - 24,513 24,513
__________ ________ __________ __________ _______
BALANCE,
April 30, 1994 13,806,511 632,663 100 ( 493,312) 139,451
(Unaudited) __________ ________ __________ __________ _______
---------- -------- ---------- ---------- -------
NET INCOME - - - 47,824 47,824
__________ ________ __________ __________ _______
BALANCE,
April 30, 1995
(Unaudited) 13,806,511 632,663 100 ( 445,488) 187,275
__________ ________ ___________ __________ _______
---------- -------- ----------- ---------- -------
NET INCOME - - - 92,197 92,197
__________ ________ ___________ __________ _______
BALANCE,
April 30, 1996 13,806,511 626,663 100 ( 353,291) 279,472
(Unaudited) __________ ________ ___________ __________ _______
---------- -------- ----------- ---------- -------
The accompanying notes are an integral part of the financial statements.
F-5
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOW
YEAR ENDED APRIL 30,
_____________________________
1996 1995 1994
_________ _________ _________
Unaudited Unaudited Unaudited
_________ _________ _________
OPERATING ACTIVITIES:
Net Income (Loss)
Adjustments to Reconcile Net Cash Provided 92,197 47,824 24,513
By (Used In) Operating Activities:
Depreciation and Amortization 7,063 9,330 10,764
Changes in Assets and Liabilities:
Accounts Receivable, Net 1,402 (17,403) ( 7,306)
Inventories and Prepaid Expenses ( 1,609) 12,115 2,733
Accounts Payable and Accrued Expenses (56,898) (22,112) 32,655
_________ _________ _________
Net Cash Provided By (Used In) Operating
Activities 42,155 29,754 56,903
INVESTING ACTIVITIES:
Advances to Affiliated Companies (Note 3) (21,014) (18,245) (46,223)
Purchase of Equipment - ( 1,049) -
Deposits 360 - -
________ _________ _________
Net Cash Provided By (Used In) Investing
Activities (20,654) (19,294) (46,223)
FINANCING ACTIVITIES:
Net Proceeds from Borrowing (Repayments) (16,288) (12,114) (15,292)
_________ _________ ________
Net Cash Provided By (Used In) Financing
Activities (16,228) (12,114) (15,292)
Increase (Decrease) in Cash and Cash
Equivalents 5,213 ( 1,654) ( 4,612)
_________ _________ ________
Cash and Cash Equivalents at Beginning
of Year 4,520 6,174 10,786
Cash and Cash Equivalents at End of Year 9,733 4,520 6,174
_________ __________ ______
SUPPLEMENTAL DISCLOSURE:
Cash Paid for Interest 5,231 1,547 3,449
_________ __________ _______
--------- ---------- -------
The accompanying notes are an integral part of the financial statements.
F-6
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 capital-
ized and amortized over the term of the lease.
Research and Development, and Patents - Research and development expendi-
tures 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 thermo-
graphic 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 April 30, 1996:
F-7
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
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.
_____________________ _________ __________ _____________ ______
Stevia Company, Inc. - 13.8% - -
Biosynergy, Inc. .4% - - -
F.K. Suzuki
International, Inc. 55.8% 18.8% - 100.0%
Fred K. Suzuki, Officer - - 35.6% -
Lauane C. Addis,
Officer .1% .1% 32.7% -
James F. Schembri, - 12.9% - -
Director
Mary K. Friske, Officer - .1% .2% -
Laurence C. Mead, Officer .1% .1% 2.9% -
Upon the completion of the Company's public offering on July 7, 1983, the
Company issued 2,000,000 shares of its no par value common stock, repre-
senting 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.
Biosynergy owned 130,403 shares of Stevia Company, Inc. Common Stock at
April 30, 1996, representing a .4% interest in Stevia. Although the Common
Stock of Stevia Company, Inc. is traded in the over-the-counter market,
there is no established public trading market for such Common Stock due to
limited and sporadic trades. As of April 30, 1996, the bid price of the
common stock of Stevia Company, Inc. was approximately $.001 per share.
Common offices are shared with Stevia Company, Inc. Intercompany charges
for shared expenses are made by whichever company incurs such changes.
Such intercompany charges, together with funds advanced by Stevia in prior
years, have resulted in the following balances at April 30:
April 30, 1996 - $258,360
April 30, 1995 - $237,597
At April 30, 1996, the financial condition of Stevia Company, Inc. was such
that it is unlikely to be able to repay Biosynergy during the next year
without liquidating a portion of its assets.
F-8
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The following balances were due from F.K. Suzuki International, Inc. at
April 30:
April 30, 1996 - $12,660
April 30, 1995 - $12,409
The balances result for an allocation of common expenses offset by advances
received from time to time. At April 30, 1996, the financial condition of
F.K. Suzuki International, Inc. was such that it unlikely to be able to
repay Biosynergy during the next year without liquidating a portion of its
assets.
During the fiscal year ending April 30, 1994, Fred K. Suzuki, President of
the Company, made several loans to the Company. These loans were repaid
during Fiscal 1996. See Note 5 for a description of such loans.
See also Note 6.
4. Inventories:
Components of inventories are as follows:
April 30, 1996 April 30, 1995
______________ ______________
Raw Materials $30,015 $29,395
Work-in process 16,161 12,136
Finished Goods 1,718 3,416
_____________ ______________
------------- --------------
$47,894 $44,947
_____________ ______________
------------- --------------
5. Notes Payable:
Notes payable consists of the following:
. $12,100 unsecured note payable to Fred K. Suzuki, President of the
Company. The note bears interest at 11.5%, and is due on demand. The
balance of this note at April 30, 1995 was $8,700. This note was
repaid on December 8, 1995.
. $7,587.75 unsecured note payable to Mr. Suzuki. This note bears
interest at 10%, and is due on demand. This note represents an
advance to the Company for expenses incurred, including legal fees,
for the settlement of a lawsuit. The expenses of this lawsuit were
equally divided between the Company, Mr. Suzuki, Stevia Company, Inc.
and F.K. Suzuki International, Inc., affiliates of the Company. The
balance of this note at April 30,1995 was $7,587.75. This note was
repaid on March 15, 1996.
F-9
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
6. Common Stock:
The Company's stock is traded in the Over-The-Counter market. However,
there is no established public trading market due to limited and sporadic
trades. The Company's common stock is not listed on a recognized market or
stock exchange.
As of April 30, 1996, under an employee stock incentive plan, stock options
and stock appreciation rights which are exercisable for 131,500 shares of
stock were granted to five advisors, directors, officers, consultants,
and/or employees of the Company. The exercise price is $.05 per share for
these shares. The Company has reserved 350,000 shares of its common stock
for this plan. The period for granting options under this plan expired May
19, 1989.
Effective January 31, 1990, the Company entered into an agreement with its
President, Fred K. Suzuki, pursuant to which the Company granted an option
to convert all or a portion of his accrued but unpaid compensation into
shares of the Company's no par value common stock at a conversion rate of
$.05 per share. The option is conditioned upon the Company having suffi-
cient liquid assets to pay all employee taxes due at the time of the
conversion. The option may be exercised until the optionee is no longer
owed accrued but unpaid salary. The accrued but unpaid salary arose as a
result of the individual agreeing to defer salaries when the Company was
not financially able to pay salaries on a regular basis. The options
contain non-dilutive provisions in the event of corporate capital reorgani-
zations. At April 30, 1996, an aggregate of 1,233,800 shares of the
Company's common stock was subject to Mr. Suzuki's option.
On August 1, 1993, the Company entered into a Stock Option Agreement with
Fred K. Suzuki, President, granting Mr. Suzuki an option to purchase
3,000,000 shares of the Company's common stock at an option price of $0.025
per share. This Stock Option Agreement was granted to Mr. Suzuki in
consideration of his loaning money to the Company on an unsecured basis
from time to time. The option contains anti-dilutive provisions in the
event of corporate capital reorganizations. As of April 30, 1996, no
portion of this Option has been exercised.
7. Quasi-Reorganization:
On July 31, 1985, the Company effected a Quasi-Reorganization which
resulted in the elimination of $1,976,417 of accumulated deficit at the
date of reorganization and a decrease of $1,976,417 in the amount of common
stock outstanding.
F-10
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
8. 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 April 30, 1996, 1995 and 1994. The affect
of conversion of stock options has not been presented as conversion would
be anti-dilutive.
9. Lease Commitments:
In 1996 the Company entered a new lease agreement for its current facili-
ties 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. Rent
expense was $46,784, $49,490 and $50,140 for the fiscal years ending on
April 30, 1996, 1995 and 1994, respectively. The lease can be extended for
an additional five year term.
10. Income Taxes:
At April 30, 1996, net operating loss carryforwards were available and
expire, if not used, as follows:
Year Ending Net Operating
April 30, Losses
____________ ______________
1998 $281,470
1999 677,671
2000 455,166
2001 449,142
2002 132,470
2003 85,822
2004 41,176
2006 160
2007 28,253
____________ _____________
$2,151,330
_____________
-------------
F-11
BIOSYNERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" for fiscal year ending April 30,
1995 and 1994 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 provi-
sions allowed in SFAS No. 109, however all provisions of the document have
been applied since the beginning of fiscal year 1994.
11. Major Customers:
Shipments to one customer amounted to approximately 29.70% of sales in
Fiscal 1996. At April 30, 1995 there was an outstanding accounts receiv-
able from this customer of approximately $19,442.
12. Management's Plans:
In view of the fact the Company has incurred substantial losses in prior
years, management of the Company recognizes the Company's ability to
continue as a going concern is subject to 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 to new
markets and expand its marketing efforts in the traditional medical market.
Finally, management intends to continue pursuing financing opportunities,
including selling its common stock to private investors, if necessary.
F-12
BIOSYNERGY, INC.
SCHEDULE I
Marketable Securities - Other Investments
Amount at
which each
Portfolio
of Equity
Number of Security
Shares or Issues and
Units - Market Each Other
Name of Principal Value of Security
Issuer and Amount of Each Issue Issue Carried
Title of Bonds and Cost of at Balance in the
each Issue Notes Each Issue Sheet Date Balance Sheet (1)
____________ __________ __________ __________ _________________
Stevia Co., 130,403 --- 130 ---
April 30, Inc., Common
1995 Stock
_________
Stevia Co., 130,403 --- 130 ---
April 30, Inc., Common
1996 Stock
_________
_______________
(1) Balance Sheet caption - Investment in Affiliated Company.
S-1
BIOSYNERGY, INC.
SCHEDULE V
Property, Plant and Equipment
Additions Other
to Cost Retirements Charges
Balance at _________ ___________ _______ Balance
Classifi- Beginning at end
cation of Year Amount Amount Amount of Year
___________ __________ ______ ______ ______ _______
Year
Ending
April 30,
1996/1995
__________
Equipment 154,036 --- --- --- 154,036
Leasehold
Improve-
ments 12,216 --- --- --- 12,216
___________
TOTAL 165,252 --- --- --- 166,252
___________ _______
----------- ------- ------- ------- -------
S-2
BIOSYNERGY, INC.
SCHEDULE VI
Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Additions
Balance at Charged to Balance
Beginning Costs and Other Changes at End
Description of Year Expenses Retirements Description Amount of Year
___________ __________ __________ ___________ ___________ ______ _______
Year Ending
April 30,
1995
___________
Equipment 148,230 1,348 --- --- 149,578
Leasehold
Improve-
ments 7,835 2,506 --- --- 10,341
________ ________ _______
TOTAL 156,065 4,910 --- --- 159,919
________ ________ _______
-------- -------- ------------ ------ -------
Year Ending
April 30,
1996
___________
Equipment 149,578 269 --- --- 149,847
Leasehold
Improve-
ments 10,341 1,875 --- --- 12,216
________ ________ _______
TOTAL 159,919 2,144 --- --- 162,063
________ ________ _______
-------- -------- ------------ ------ -------
S-3
BIOSYNERGY, INC.
SCHEDULE VIII
Valuation and Qualifying Accounts
Additions Deductions
_____________________ _________________
Balance
Year at Begin- Charged to Balance
Ending ning of Costs and Descrip- at End
April 30, Description Year Expenses Other tion Amount Year
_________ ___________ _________ ___________ ________ _________ _______ _______
Uncollect-
1994 Allowance ible Accts.
For Un- written
collectible off
Accounts 500 386 --- 386 500
1995 Allowance
For Un-
collectible
Accounts 500 --- --- --- --- 500
1996 Allowance
For Un-
collectible
Accounts 500 --- --- --- --- 500
S-4
BIOSYNERGY, INC.
SCHEDULE X
Supplementary Income Statement Information
Charged to Costs
Item and Expenses
____ ________________
Year Ending
April 30, 1994 1. Maintenance and Repairs 4,704
______________
2. Depreciation and Amortization
Depreciation of Equipment 2,317
Amortization of Patent Expense 5,942
Amortization of Leasehold Improvements 2,506
5. Advertising Costs 2,576
Year Ending
April 30, 1995 1. Maintenance and Repairs $4,012
______________
2. Depreciation and Amortization
Depreciation of Equipment 1,348
Amortization of Patent Expense 5,476
Amortization of Leasehold Improvements 2,506
5. Advertising Costs 2,490
Year Ending
April 30, 1996 1. Maintenance and Repairs $4,371
______________
2. Depreciation and Amortization
Depreciation of Equipment 269
Amortization of Patent Expense 4,919
Amortization of Leasehold Improvements 1,875
5. Advertising Costs 3,568
S-5
____________________________________________________________________________
____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
Annual Report Pursuant to Section 13 or 15(d)
of
THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ending April 30, 1996
Commission File Number - 0-12459
BIOSYNERGY, INC.
________________________________________________
(Exact name of registrant as specified in charter)
1940 East Devon Avenue
Elk Grove Village, IL 60007
(847) 593-0226
(Address and telephone number of registrant's
principal executive office on a principal place
of business)
________________________________________________
EXHIBITS
___________________________________________________________________________
___________________________________________________________________________
EXHIBIT INDEX
_____________
Page Number
Pursuant to
Sequential
Exhibit Numbering
Number Exhibit System
________ __________ ____________
27 Financial Data Schedule E-1