UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJanuary 31, 20182022

[ ]☐         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to ___________

Commission file number0 -12459

Biosynergy, Inc.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X☒ No __☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes X☒ No __☐

Indicate by check mark whether the registrant is a large accelerated filing, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes __☐ No X☒

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of January 31, 2018:2022: 14,935,511

BIOSYNERGY, INC.

PART 1 – FINANCIAL INFORMATION

ITEMItem 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data

BALANCE SHEETS

Assets

Balance Sheets

The accompanying notes are an integral part of the financial statements.

ASSETSBIOSYNERGY, INC.

PART 1 – FINANCIAL INFORMATION

BALANCE SHEETS

Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

PART 1 – FINANCIAL INFORMATION

Statement of Operations

(Unaudited)

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

PART 1 – FINANCIAL INFORMATIONSTATEMENT OF STOCKHOLDERS’ EQUITY/LIQUIDATION REDEMPTION LIABILITY

ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATANINE MONTHS ENDED JANUARY 31, 2022

BALANCE SHEETS(Unaudited)

LIABILITIES AND SHAREHOLDERS EQUITY

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

PART 1 – FINANCIAL INFORMATIONSTATEMENT OF CASH FLOWS

ITEM 1 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA(Unaudited)

STATEMENTS OF INCOME

(unaudited)

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

STATEMENT OF SHAREHOLDERS EQUITY

Notes to Financial Statements

Nine Months Ended January 31, 20182022 and 2021

(Unaudited)

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

STATEMENT OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of the financial statements.

Note 1 - Company Organization and Description

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of normal recurring adjustments which are necessary for a fair presentation of the financial position and results of operations for the periods presented. The unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s April 30, 20172021 Annual Report on Form 10-K. The results of operations for the nine months ended January 31, 2018 are not necessarily indicative of the operating results for the full year.

Biosynergy, Inc. (the Company) was incorporated under the laws of the State of Illinois on February 9, 1976. It isPrior to selling substantially all of its assets as described below, it was primarily engaged in the development and marketing of medical, consumer and industrial thermometric and thermographic products that utilize cholesteric liquid crystals. The Company’s primary product, the HemoTemp^RHemoTemp® II Blood Monitoring Device, accounted for approximately 91.03%83.41% of the sales during the quarternine months ending January 31, 20182022 and 92.18%89.74% during the nine month periodmonths ending January 31, 2018.2021. The products are sold to hospitals, clinical end-users, laboratories and product dealers located throughout the United States.

Note 2 -2-Liquidation and Dissolution

On November 23, 2021 the Company entered into an Asset Purchase Agreement (the “Agreement”) with LCR Hallcrest, LLC (“Hallcrest”) for the sale of substantially all of the Company’s assets to Hallcrest (the “Transaction”). The Agreement contemplated the Transaction would be implemented through legal proceedings pursuant to 805 ILCS 5/12.05 et seq. of the Illinois Business Corporations Act (“BCA”). On November 24, 2021, Biosynergy filed a verified complaint (the “Complaint”) with the Circuit Court of Cook County, Illinois, Chancery Division, (the ”Court”), Case No. 2021CH05951 seeking a judicial dissolution and sale of Biosynergy’s assets pursuant to 805 ILCS 5/12.05 et seq. of the BCA. The complaint alleged that Biosynergy is a small publically traded company that has run out of viable options to continue in business for the benefit of its shareholders, or for the medical customers it serves.

On December 28, 2021, the Court entered an order finding that Biosynergy has established “dissolution is reasonably necessary because the business of the corporation can no longer be conducted to the general advantage of its shareholders.” The Court ordered Articles of Dissolution to be filed in accordance with BCA Section 12.20 and authorized and empowered Biosynergy to wind-down its business consistent with BCA Section 12.30. On January 18, 2022, the Company sold substantially all of its assets to Hallcrest, except for cash on hand and accounts receivable, and discontinued operations. Hallcrest paid a purchase price of $1,504,496 in cash for the assets (of which $150,000 was paid into an indemnification escrow account to be held for 6 months as security for damages caused by a breach of representations and warranties in the Agreement by the Company). The Company retained all liabilities consisting of trade payables, rent and utilities for its facility, and all transaction expenses related to the Transaction. The Company plans to change the name of the Company (as required under the Agreement) and file Articles of Dissolution prior to March 31, 2022. Shortly thereafter, the Company intends to deregister its common stock under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) and suspend its reporting obligations under Section 15(d) of the Exchange Act. The Company will distribute the proceeds from the sale of its assets and available cash less transaction expenses, income taxes and the expenses related to dissolving the Company to its shareholders after release of the funds in the indemnification escrow account described above.

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

Note 3 – Summary of Significant Accounting Policies

Liquidation Basis of Accounting

Contemporaneously with the intent to dissolve and sell the business, the Company adopted the liquidation basis of accounting effective on November 23, 2021. The liquidation basis of accounting will continue to be used by the Company until such time that the dissolution is completed and all net cash has been distributed to its shareholders.

Under the liquidation basis of accounting, the carrying amounts of assets as of the close of business on November 23, 2021, the date of the sale of the Company’s assets and cessation of business, were adjusted to their estimated net realizable values and liabilities, including the estimated costs associated with implementing the dissolution, were stated at their estimated settlement amounts.

Under the liquidation basis of accounting, the valuations of assets at their net realizable values and liabilities at their anticipated settlement amounts represent estimates, based on present facts and circumstances associated with carrying out the dissolution based on the assumptions set forth below. The actual values and costs associated with carrying out the dissolution and liquidation are expected to differ from the amounts shown herein because of the inherent uncertainty of the estimates. Such differences may be material. In particular, the estimates of the Company’s liquidation costs will vary with the length of time it takes to collect outstanding receivables and the cost to distribute available cash to its shareholders. Accordingly, it is not possible to predict the aggregate amount or timing of future distributions to shareholders, and no assurance can be given that the amount of liquidating distributions to be received will equal or exceed the estimate of amounts in liquidation presented in the accompanying Balance Sheets.

The estimated net costs to be incurred during liquidation, which are accrued, as of January 31, 2022 are as follows:

These estimates are based on assumptions regarding the ultimate timing of distributions to its shareholders, but does not include any legal expenses, if any, that the Company might incur as a result of any legal proceedings. These estimates are reviewed periodically and adjusted as projections and assumptions change.

Going Concern Basis of Accounting

For all periods prior to the plan to sell the Company’s assets on November 23, 2021, the Company’s financial statements are presented on the going concern basis of accounting. Such financial statements reflect the historical basis of assets and liabilities and historical results of operations for the period of May 1, 2021 to January 18, 2022.

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

Cash

The Company maintains all of its cash, including the cash proceeds from the sale of its assets, in various bank deposit accounts, which at times may exceed federally insured limits. No losses have been experienced on such accounts.

Receivables

Receivables are carried at original invoice less estimates made for doubtful receivables. Management determines the allowances for doubtful accounts by reviewing and identifying troubled accounts on a periodic basis and by using historical experience applied to an aging of accounts. A receivable is considered to be past due if any portion of the receivable balance is outstanding beyond the stipulated due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Inventories

Inventories are valued at the lower of cost or market using the FIFO (first-in, first-out) method.

Depreciation

Equipment and leasehold improvements are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Repairs and maintenance are charged to expense as incurred; renewals and betterments which significantly extend the useful lives of existing equipment are capitalized. Significant leasehold improvements are capitalized and amortized over the term of the lease; equipment is depreciated over three to ten years. Depreciation expense was $7,556$3,062 and $6,380$3,348 for the nine month periods ending January 31, 20182022 and 2017,2021, respectively.

Note 2 – Summary of Significant Accounting Policies (Continued)

Prepaid Expenses

Certain expenses, primarily insurance and income taxes, have been prepaid and will be used within one year.

Revenue Recognition

The Company recognizes netaccounts for revenue in accordance with Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)". The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized.

The components as it relates to the Company are as follows:

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

Shipping and Handling

Shipping and handling fees billed to customer, if any, are netted against the related costs which are included in cost of sales. The net cost is not material.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes related primarily to differences in the methods of accounting for patents, inventories, certain accrued expenses and bad debt expenses for financial and income tax reporting purposes. The deferred income taxes represent the future tax consequences of those differences, which will be taxable in the future.

The Company files tax returns in the U.S. federal jurisdiction and with the state of Illinois. Various tax years remain open to examinations, generally for three years after filing, although there are currently no ongoing tax examinations. Management’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.

The provision for income taxes consists of the following components for the nine month periods ended January 31:

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows:

Research and Development and Patents

Research and development expenditures arewere charged to operations as incurred. The costs of obtaining patents, primarily legal fees, arewere capitalized and, once obtained, were amortized over the life of the respective patent on the straight-line method.

Patent amortization expense for both the nine months ended January 31, 20182022 and 2017 was $6,514. 2021 were $9,096 and $10,233 respectively.

Patents related to products that have beenwere developed and were being marketed by the Company. Patents pending relate to products under development.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Per Common Share

Income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. When dilutive, stock options are included as share equivalents using the treasury stock method in the calculation ofBasic and diluted earnings per share. The Company has no outstanding options or other rights to acquire its unissued common shares.

Comprehensive Income

Components of comprehensive income include amounts that are included in the comprehensive income but are excluded from net income. During the three and nine month periods ending January 31, 2018 and 2017, there were no differences between the Company’s net income and comprehensive income.

Note 2 – Summary of Significant Accounting Policies (Continued)

Income Taxes

Income taxes are provided forper common share is the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes related primarily to differences in the methods of accounting for patents, inventories, certain accrued expenses and bad debt expenses for financial and income tax reporting purposes. The deferred income taxes represent the future tax consequences of those differences, which will be taxable in the future. The Company implemented ASU 2015-17 during the quarter ended October 31, 2017 on a retrospective basis, and has classified its net deferred tax liabilities as non-current.

The Company files tax returns in the U.S. federal jurisdiction and with the state of Illinois. Various tax years remain open to examinations, generally for three years after filed, although there are currently no ongoing tax examinations. Management’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. Among other provisions, the Act reduces the Federal statutory corporate income tax rate from 35% to 21%. This rate reduction has been applied in the provision for income tax calculation below and did not result in a material change to the deferred tax liability for the quarter ended January 31 2018.

The provision for income taxes consists of the following componentssame for the nine months ended January 31:

31, 2022 and 2021 as there are no common stock equivalents.

Fair Value of Financial Instruments

The Company evaluates its financial instruments based on current market interest rates relative to stated interest rates, length to maturity and the existence of readily determinable market prices. Based on the Company’s analysis, the fair value of financial instruments recorded on the balances sheets as of January 31, 2022 and April 30, 2021, approximates their carrying value.

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

Segments

Accounting standards have established annual reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. The Company’s operations were a single reportable segment and an international segment. The international segment operations are immaterial. See Note 7.

Note 4 – Inventories

The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate

Components of inventories are as follows:

Note 2 5 – Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements Common Stock

The FASB issues ASUsCompany’s common stock was traded in the over-the-counter market. However, there was no established public trading market due to amendlimited and sporadic trades. The Company’s common stock is not listed on a recognized market or stock exchange.

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2022 and 2021

Note 6 - Related Party Transactions

The Company and its affiliates are related through common stock ownership as follows as of January 31, 2022:

As of January 31, 2022 and April 30, 2021, $24,862 was due from F. K. Suzuki International, Inc. (FKSI). These balances result from an allocation of common expenses charged to FKSI prior to April 30, 2006 offset by advances received from time to time, and an advance of $5,163 in Fiscal 2020 for corporate compliance costs. No interest income is received or accrued by the authoritative literatureCompany. The financial condition of FKSI was such that it seemed unlikely to be able to repay the Company within the next year without liquidating a portion of its assets, including a portion of its ownership in Accounting Standards Certification (ASC). There have beenthe Company. As a numberresult, the receivable balance was reclassified as a contra equity account. Once the cash assets of ASUsthe Company are distributed to date that amend the original textshareholders, FKSI will be able to repay the advances.

A board member provided a variety of ASCs. Those ASUs issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicablelegal services to the Company or (iv) are not expectedin his capacity as a partner in a law firm. Fees for such legal services were approximately $142,400 and $7,982 for the nine months ended January 31, 2022 and 2021 respectively.

BIOSYNERGY, INC.

Notes to have a significant impact on the Company.Financial Statements

Nine Months Ended January 31, 2022 and 2021

Note 7 – Lease Commitments

On February 25, 2016, the FASB issued Topic 842, its highly-anticipated leasing standard for both lessees and lessors.Leases. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. GAAP. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. At inception, a lessee must classify all leases as either finance or operating. The Company intends to adopt Topic 842 upon extension of the current lease for its facilities in Elk Grove Village or upon entering into a new lease agreement for alternative facilities on or about May 1, 2018. The Company is investigating the effect of adoption of Topic 842 on its results of operations and financial condition. However, it is not anticipated that adoption of Topic 842 will have a material impact on the results of operations or financial condition of the Company.

In May 2014, the Financial Accounting Standard Board (FASB) issued ASU 2014-09, Revenue from Contract with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 and subsequent amendments supersede the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our financial statements and have not yet determined the method by which we will adopt the standards as of May 1, 2018.

Note 3 – Inventories

Components of inventories are as follows:

Note 4 – Common Stock

The Company’s common 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.

Note 5 - Related Party Transactions

The Company and its affiliates are related through common stock ownership as follows as of January 31, 2018:

As of January 31, 2018, $19,699 was due from F. K. Suzuki International, Inc. These balances result from an allocation of common expenses charged to FKSI prior to April 30, 2006 offset by advances received from time to time. No interest income is received or accrued by the Company. The financial condition of FKSI is such that it will unlikely be able to repay the Company during the next year without liquidating a portion of its assets, including a portion of its ownership in the Company. As a result, the receivable balance has been reclassified as a contra equity account since April 30, 2006.

A board member provided a variety of legal services to the Company in his capacity as a partner in a law firm. Fees for such legal services were approximately $21,988 and $15,848 for the nine months ended January 31, 2018 and 2017, respectively.

Note 6 – Lease Commitments

In January 2015,February 2020, the Company entered into a three-yeartwo-year lease agreement for its current facilities, which started May 1, 2020 and expires on April 30, 2018. The base rent under2022. Under the new lease standard, the Company’s lease was accounted for as an operating lease. As a result, the Company measured the lease escalates overliability using the lifetwo year term and rates per the lease agreement and recognized a lease liability, with a corresponding right-of-use asset. A discount was not calculated due to the lease agreement only having a two year term.

The operating lease expense for the nine months ending January 31, 2022 and 2021 was $72,108 and $72,427, respectively.

Maturities of the lease. However, rent expense is recorded on a straight-line basislease liabilities as required by accounting principles generally accepted in the United States of America. As of January 31, 2018,2022 are presented in the Company’s approximate total future minimum lease payments are as follows:following table:

Also included inThe Company does not intend to renew the lease agreement are escalation clauses for the lessor’s increases in property taxes and other operating expenses. The Company is currentlyin negotiations to extend the lease agreement.once it expires.

Note 7 8 – Customer Concentrations

Shipments to one customer amounted to 28.24%26.13% of sales during the first nine months of Fiscal 20182022 compared to 27.1%32.28% during the comparative Fiscal 20172021 period. As of January 31, 2018,2022, there were outstanding accounts receivable from this customer of $54,732$48,175 compared to $67,535$77,358 at January 31, 2017.2021. Shipments to another customer amounted to 36.67%41.22% of sales during the first nine months of Fiscal 20182022 and 36.7%37.46% of sales during the first nine months of Fiscal 2017.2021. As of January 31, 2018,2022, there were outstanding accounts receivable from this customer of $136,466$214,587 compared to $152,440$121,915 at January 31, 2017.2021.

The Company had export sales of $32,120$4,678 during the first nine months3^rd Quarter of Fiscal 2018,2022, and export sales of $7,160$11,935 during the 3^rdQuarter of Fiscal 2021. For the nine months ending January 31, 2018. The Company had2022 export sales of $46,595 duringwere $12,178 and $33,505 for the first nine months of Fiscal 2017, and export sales of $16,505 during the Quartersame period ending January 31, 2017.2021. 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 salessales.

BIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and such sales are not considered to be material.2021

Item 2.Management’sManagement’s Discussion of Financial Condition and Results of Operations

Recent Developments

Biosynergy, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Agreement”) on November 23, 2021 with LCR Hallcrest, LLC (“Hallcrest”) for the sale of substantially all of the Company’s assets to Hallcrest (the “Asset Sale”). The Agreement contemplated the Asset Sale would be implemented through legal proceedings pursuant to 805 ILCS 5/12.05 et seq. of the Illinois Business Corporations Act (“BCA”). On November 24, 2021, Biosynergy filed a verified complaint (the “Complaint”) with the Circuit Court of Cook County, Illinois, Chancery Division, (the ”Court”), Case No. 2021CH05951 seeking a judicial dissolution and sale of Biosynergy’s assets pursuant to 805 ILCS 5/12.05 et seq. of the BCA. The complaint alleged that Biosynergy is a small publically traded company that has run out of viable options to continue in business for the benefit of its shareholders, or for the medical customers it serves.

On December 28, 2021, the Court entered an order finding that Biosynergy has established “dissolution is reasonably necessary because the business of the corporation can no longer be conducted to the general advantage of its shareholders.” The Court ordered Articles of Dissolution to be filed in accordance with BCA Section 12.20 and authorized and empowered Biosynergy to wind-down its business consistent with BCA Section 12.30.

The Company completed the Asset Sale on January 18, 2022. The Company sold all of its assets in the Asset Sale except for cash on hand and accounts receivable. As consideration for the Asset Sale, Hallcrest paid a purchase price of $1,504,496 in cash (of which $150,000 was paid into an indemnification escrow account to be held for 6 months as security for damages caused by a breach of representations and warranties in the Agreement by the Company). The Company retained all liabilities consisting of trade payables, rent and utilities for the premises at 1940 E. Devon, Elk Grove Village, Illinois through April 30, 2022, and all transaction expenses related to the Asset Sale.

The Company plans to change the name of the Company (as required under the Agreement) and file Articles of Dissolution prior to March 31, 2022. Shortly thereafter, the Company intends to deregister its common stock under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) and suspend its reporting obligations under Section 15(d) of the Exchange Act. The Company plans to dissolve and distribute the proceeds from the Asset Sale and available cash, less the expenses of the Asset Sale, income taxes, and the expenses of dissolving the Company to its shareholders after release of the funds in the indemnification escrow account described above.

The foregoing description of the Agreement and the Asset Sale contemplated by the Agreement does not purport to be complete and is qualified in its entirety by reference to the Current Report on Form 8-K filed on November 30, 2021, the Current Report on Form 8-K filed on January 5, 2022, the Current Report filed on Form 8-K filed on January 21, 2022, and the Agreement, a copy of which is attached as Exhibit 10.1 to the Current Report on Form 8-K filed on November 30, 2021, and is incorporated by reference herein.

For all periods prior to the asset sale agreement on November 23, 2021, the Company’s financial statements are presented on a going concern basis of accounting. As required by generally accepted accounting principles, the Company adopted the liquidation basis of accounting effective on November 23, 2021. The liquidation basis of accounting will continue to be used by the Company until such time that the dissolution is completed and all net cash has been distributed to its shareholders.

Under the liquidation basis of accounting, assets are stated at their realizable values and liabilities are stated at their estimated settlement amounts, which estimates are periodically reviewed and adjusted. Uncertainties as to the precise value of non-cash assets and the costs of winding down the Company make it impractical to predict the net value that will be available to distribute to the shareholders. Although we do not have a precise estimate of the costs that will be incurred to wind down the Company, management believes there is sufficient cash to pay all liabilities and expenses and make cash distributions to the shareholders. If adequate cash is not available to pay liabilities and the expenses to wind down the Company, estimated future distributions to shareholders will be reduced.

The Company reported in the accompanying financial statements that its net assets in liquidation aggregate are $2,461,111, or $16.47 per share, to distribute to its shareholders. The valuation of the net realizable value of the Company’s assets and the Company’s liabilities at their settlement amounts requires many estimates and assumptions. In addition, there are substantial risks and uncertainties associated the liquidation and winding down of the Company. The valuations set forth in the accompanying financial statements represent estimates, based on present facts and circumstances, of the value of assets and costs associated with the liquidation of the Company, and are subject to change.

Overview of Financial Condition and Results of Operations (Going Concern Basis)

The Company was primarily engaged in the development and marketing of medical, consumer and industrial thermometric and thermographic products that utilize cholesteric liquid crystals prior to January 18, 2022. The products were sold to hospitals, clinical end-users, laboratories and product dealers located throughout the United States. Note that while the discussion below refers to the period ended January 31, 2022, the Company ceased doing business on January 18, 2022 irrespective of the periods indicated.

Net Sales/Revenues

For the three month period ending January 31, 20182022 (“3^rd Quarter”), the net sales decreased 9.54%increased 22.99%, or $32,667,$60,937, and decreased 5.05%increased 17.57%, or $49,641,$152,836, during the nine month period ending January 31, 2018,2022, as compared to net sales for the comparative periods ending in 2017.2021. The decreaseincrease in sales during the three and nine month periods ending January 31, 2018 is2022 was primarily the result of lower HemoTemp^Rincreased HemoTemp® II and TempTrend sales. At January 31, 201818, 2022 there were no back orders.

In addition, during the 3^rd Quarter the Company had $569$525 of miscellaneous revenues and $1,682 for the nine month period ending January 31, 2022, primarily from interest income and leasing a portion of its storage space to an unrelated party.

Costs and Expenses

General

The operating expenses of the Company during the 3^rd Quarter increased overall by 4.07%129.68%, or $7,328,$228,504, as compared to the 3^rd quarter in 2017 primarily due to an increase in employee wages, FDA user fees and legal fees.2021. The operating expenses of the Company increased by 5.04%51.57%, or $28,580$278,253, for the nine month period ending January 31, 2018,2022, as compared to the nine month period ending January 31, 20172021. The overall increase in operating expenses was primarily due to an increasethe use of temporary independent contractors to replace employees who resigned earlier in legal fees, general insurance and chemical waste disposal fees.2021.

Cost of Sales

The cost of sales during the 3^rd Quarter increased by $25,963,$28,837, and also increased by $25,997$184,039 during the nine month period ending January 31, 20182022 as compared to these expenses during the same periods ending in 2017.2021. Due to the resignation of manufacturing employees, the Company entered into a manufacturing agreement with Hallcrest to manufacture its products other than liquid crystals. The increase in the cost of sales during the 3^rd Quarter was primarily due to the addition of a full-time employee and an increase in the cost of health insurance and certain raw materials. As a percentage of sales, the cost of sales were 37.42% during the 3^rd Quarter, 26.26% for the comparative quarter ending in 2017, and 32.48% during the nine month period ending January 31, 2018 compared2022 was primarily due to 28.19%the increased cost for Hallcrest to manufacture Biosynergy’s products. These increased costs to manufacture also resulted in 2017. Subject to unanticipated changesa material decrease in the price of raw materials or extraordinary occurrences, it is not anticipated that the cost of sales as a percentage of sales will materially change in the near future.Company’s gross profit margin.

Research and Development Expenses

Research and Development costs increased $1,182,decreased $15,822, or 2.82%36.73%, during the 3^rd Quarter as compared to the same quarter in 2017.2021. These costs increaseddecreased by $11,856,$33,350, or 9.74%27.81%, during the nine month period ending January 31, 20182022 as compared to the same period in 2017.2021. The overall cost in research and development expense increaseddecreased during the nine months due to chemical waste disposal fees, consulting feeslower employee costs as a result of employee resignations in 2021 and higher FDA user fees. Thereduced development activities as the Company is continuing its investigation and development of certain products intended to improve and expand its current product line. The Company does not have sufficient information to determine the extent to which its resources will be required to complete the development of such products.was winding down.

Marketing Expenses

Marketing expenses for the 3rd Quarter increaseddecreased by $1,999,$19,980, or 4.36%47.52%, as compared to the quarter ending January 31, 2017.2021. These costs increaseddecreased by $1,955,$47,375, or 1.40%37.54%, during the nine month period ending January 31, 20182022 as compared to the same period in 2017.2021. The increasedecrease is primarily due to higherlower employee costs.costs and no travel during the respective periods.

General and Administrative Expenses

General and administrative costs for the 3^rd Quarter increased by $4,147,$265,306, or 4.49%291.26%, as compared to the 3^rd quarter ending January 31, 2017, primarily due to higher legal fees2021, and employee expenses. General and administrative costs have increased overall by $14,769,$358,882, or 4.83%122.24%, during the nine month period ending January 31, 2018,2022, as compared to the same periodsperiod in 2018,2021, primarily due to higher legal and accounting fees general insurancerelated to the dissolution and employee expenses.liquidation of the Company and the use of temporary independent contractors to perform accounting and related services required as a result of the resignation of employees in 2021.

Net Income (Loss) from Operations

The Company realized a net incomeloss from operations of $5,097$206,829 during the 3^rd Quarter as compared to a net incomeloss of $49,606$10,425 for the comparative quarter in the prior year primarily due to lower sales during the 3^rd quarter.increased costs of operation. The Company also realized a net incomeloss of $28,399$300,126 for the nine month period ending January 31, 20182022 as compared to a net income of $96,064$9,229 during the same period in 2017.2021. This decrease in net income is due to an overall decreaseincrease in sales.

the operating expenses of the Company as discussed above.

Assets/Liabilities

General

Since April 30, 2017,2021, the Company's assets have increased by $8,464 and liabilities have decreased by $19,935. The increase in assets, such$1,098,155 primarily as cash and prepaid expenses, is a result of the Company’s continued profitabilitygain from the Asset Sale. Liabilities have increased by $401,032 (excluding the liquidation redemption liability) primarily due to income taxes payable as a result of the Asset Sale and cash generated from operations.the cost of liquidation of the Company.

BIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and 2021

Related Party Transactions

The CompanyAs of January 31, 2022 and April 30, 2021, $24,862 was owed $19,699 bydue from F.K. Suzuki International, Inc. ("FKSI"),. These balances result from an affiliate, at January 31, 2018 andallocation of common expenses charged to FKSI prior to April 30, 2017. This account primarily represents common expenses which were previously charged2006 offset by the Companyadvances received from time to FKSItime, and an advance of $5,163 in Fiscal 2020 for reimbursement.corporate compliance costs. No interest isincome has been received or accrued by the Company. CollectabilityThe financial condition of FKSI was such that it was unlikely able to repay the amounts due from FKSI since April 30, 2006 could not be assuredCompany within one year without the liquidation of all orliquidating a portion of its assets, including a portion of its common stock ofownership in the Company. As a result, as of April 30, 2006, all of the amount owed by FKSI to the Companyreceivable balance was reclassified as a reductioncontra equity account. However, once the cash assets from the liquidation of FKSI’s capital in the Company.Company are distributed to the shareholders, FKSI will be able to repay the advances.

Current Assets/Liabilities Ratio

The ratioA board member provides a variety of current assetslegal services to current liabilities, 29.93 to 1, has increased compared to 21.29 to 1 at April 30, 2017. This increasethe company in ratio of current assets to current liabilities ishis capacity as a result of increased cashpartner in a law firm. Fees for such legal services were approximately $142,400 and prepaid expenses$7,982 for the nine months ending January 31, 2022 and a reduction in accrued expenses. In order to maintain or improve the Company’s asset/liabilities ratio, the Company’s operations must remain profitable.2021 respectively.

Liquidity and Capital Resources

During the nine month period ending January 31, 2018,2022, the Company experienced an increase in working capitalcash of $42,469. This is primarily due to$1,233,981 as the Company’s increase in cash and prepaid expenses and a reduction in accrued expenses.

result of the Asset Sale. The Company has attempted$150,000 in an indemnity escrow that is anticipated to conserve working capital whenever possible. To this end,be returned to the Company attempts to keep inventory at minimum levels.six months after the Asset Sale. The Company believes that it willalso had $286,646 in accounts receivable to be able to maintain adequate inventory to supply its customers on a timely basis by careful planningcollected. Assuming collection of all accounts receivable, less the accounts payable and forecasting demand for its products. However,expenses of completing the liquidation and wind down, the Company is nevertheless requiredestimates to carry a minimum amount of finished inventory and raw materialshave $2,461,111 for distribution to meet the delivery requirements of customers and thus, inventory represents a material portion of the Company’s investment in current assets.

The Company presently grants payment terms to customers and dealers. Although the Company experiences varying collection periods of its accounts receivable, based on past experience, the Company believes that uncollectable accounts receivable will not have a significant effect on future liquidity.shareholders.

Cash providedused by operating activities was $92,110$120,515 during the nine month period ending January 31, 2018. Nothing2022. Cash provided by investing activities was used for equipment purchases or patent application expenditures$1,354,496 during this same period.period as a result of the Asset Sale. Except for its operating working capital, limited equipment purchasesthe expenses related to the liquidation and patent expenses,wind down of the Company to be incurred in the future, management is not aware of any other material capital requirements or material contingencies for which it must provide. There were no cash flows from financing activities during the nine month periods ending January 31, 2018 or 2017.

As of January 31, 2018, the Company had $1,549,138 of current assets available. Of this amount, $52,233 was prepaid expenses, $133,939 was inventory, $230,274 was net trade receivables and $1,132,692 was cash. The Company’s available cash and cash flow from operations is considered adequate to fund the short-term operating capital needs of the Company. The Company does not have a working line of credit, and does not anticipate obtaining a working line of credit in the near future. There is a risk financing may be necessary to fund long-term capital needs of the Company.

Effects of Inflation. With the exception of inventory and labor costs increasing with inflation, inflation has not had a material effect on the Company’s revenues and income from continuing operations in the past three years. Inflation is not expected to have a material effect in the foreseeable future.

Critical Accounting Policies and Estimates. On December 12, 2001, the SEC issued FR-60 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” FR-60 is an intermediate step to alert companies to the need for greater investor awareness of the sensitivity of financial statements to the methods, assumptions, and estimates underlying their preparation, including the judgments and

uncertainties affecting the application of those policies and the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

The Company’s significant accounting policies are disclosed in Note 23 to the Financial Statements for the 3rd Quarter. See “Financial Statements.” Except as noted below, the impact on the Company’s financial position or results of operation would not have been materially different had the Company reported under different conditions or used different assumptions. The policies which may have materially affected the financial position and results of operations of the Company if such information had been reported under different circumstances or assumptions are:

BIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and 2021

Lease Commitments - On February 25, 2016, the FASB issued Topic 842, Leases. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. GAAP. At inception, a lessee must classify all leases as either finance or operating. The Company classifies the lease for its facility in Elk Grove Village as an operating lease.

Revenue Recognition – The Company accounts for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized.

Use of Estimates - preparationPreparation of financial statements and conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. The financial condition of the Company and results of operations may differ from the estimates and assumptions made by management in preparation of the Financial Statements accompanying this report.

Allowance for Bad Debts - The Company periodically performs credit evaluations of its customers and generally does not require collateral to support amounts due from the sale of its products. The Company maintains an allowance for doubtful accounts based on its best estimate of collectability of accounts receivable.

Forward-Looking Statements

This report may contain statements which, to the extent they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve risks and uncertainties. Actual results may differ materially from such forward-looking statements for reasons including, but not limited to, changes to and developments in the legislative and regulatory environments effecting the Company’s business, the impact of competitive products and services, changes in the medical and laboratory industries caused by various factors, risks inherit in marketing new products, as well as other factors as set forth in this report. Thus, such forward-looking statements should not be relied upon to indicate the actual results which might be obtained by the Company. No representation or warranty of any kind is given with respect to the accuracy of such forward-looking information. The forward-looking information has been prepared by the management of the Company and has not been reviewed or compiled by independent public accountants.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Historically, the Company’s primary exposure to market risk has been interest rate risk associated with its short term money market investments. The Company currently does not have any money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. Thus, the Company does not have any credit facilities with variable interest rates. The Company’s operations areCompany is not exposed to financial risk that will have a material impact on its financial position and results of operation.position.

BIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and 2021

Item 4.Controls and Procedures

Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) which are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Accounting Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in

Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and its Chief Accounting Officer have concluded that the Company’s disclosure controls and procedures are effective.

There have been no changes in the Company’s internal control over financial reporting during the Company’s Fiscal Quarter ending January 31, 20182022 that have materially affected or are likely to materially affect the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings.

As of the end of the Company’s Fiscal Quarter ending January 31, 2018,2022, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party to of which any of their property is the subject.

Item 1A. Risk Factors.

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect the Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2017. There2021. Except as identified above, there were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended April 30, 20172021 or during the third quarter of Fiscal 2018.2022.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

During the past three years, the Company has not sold securities which were not registered under the Securities Act.

BIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and 2021

Item 3.Defaults Upon Senior Securities.

(a)         As of the end of the Company’s Fiscal Quarter ending January 31, 2022, there have been no material defaults in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days, with respect to any indebtedness of the registrant or any of its significant subsidiaries exceeding 5 percent of the total assets of the Company and its consolidated subsidiaries.

(b)         As of the end of the Company’s Fiscal Quarter ending January 31, 2022, there have been no material arrearages in the payment of dividends and there has been no other material delinquency not cured within 30 days, with respect to any class of preferred stock of the Company which is registered or which ranks prior to any class of registered securities, or with respect to any class of preferred stock of any significant subsidiary of the Company.

Item 4.Mine Safety Disclosures.

The disclosures required by this Item are not applicable to the Company.

The disclosures required by this Item are not applicable to the Company.5.Other Information.

(a)         The Company is not required to disclose any information in this Form 10-Q otherwise required to be disclosed in a report on Form 8-K during the period covered by this Form 10-Q.

(b)         During the Fiscal Quarter ending January 31, 2018,2022, there have been no material changes to the procedures by which the security holders may recommend nominees to the Company’s board of directors, where such changes were implemented after the Company last provided disclosure in response to the requirements of Regulation S-K.

Item 6.Exhibits.

The following exhibits are filed as a part of this report:

(3)       Articles of IncorporationBIOSYNERGY, INC.

Nine Months Ended January 31, 2022 and By-laws⁽ⁱ⁾

(4)       Instruments defining rights of security holders, including indentures - none.

(10)       Material Contracts – none.

(11)       Statement regarding computation of per share earnings- none.

(15)       Letter regarding unaudited interim financial information - none.

(18)       Letter regarding change in accounting principles - none.

(19)       Reports furnished to security holders - none.

(22)       Published report regarding matters submitted to vote of security holders - none.

(23)       Consents of experts and counsel - none.

(24)       Power of Attorney - none.

(31.1)       Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filed herewith.

(31.2)       Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filed herewith.

(32.1)       Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Sect. 1350. Filed herewith.

(32.2)       Certification of the Chief Accounting Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Sect. 1350. Filed herewith.

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