Biosynergy (BSYN) 10-Q 2022 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 31, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number 0-12459

Biosynergy, Inc.

(Exact name of registrant as specified in its charter)

Illinois	36-2880990
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007	847-956-0471
(Address of principal executive offices)	(Registrant’s telephone number, including area code)

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 ☒  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 ☒ No ☐

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

Large accelerated filer ☐           Accelerated filer ☐        

Non-accelerated filer (Do not check if a smaller reporting company) ☐           Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicated 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 ☒

1

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common stock, as of October 31, 2021: 14,935,511

2

BIOSYNERGY, INC.

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

BALANCE SHEETS

	October 31, 2021 Unaudited			April 30, 2021 Audited
Assets
Current assets
Cash	$	1,087,784		$	1,250,581
Accounts receivable. Trade (net of allowance for doubtful accounts of $500 in October 31, 2021 and April 30, 2021)		426,190			264,509
Inventories		132,390			145,178
Prepaid expenses		31,339			34,261
Total Current Assets		1,677,703			1,694,529
Property, Plant and Equipment
Equipment		176,812			176,812
Leasehold improvements		25,809			25,809
		202,621			202,621
Less accumulated depreciation and amortization		(201,790	)		(199,558	)
Total equipment and leasehold improvements net		831			3,063
Operating Lease Right of Use
Operating Lease Right of Use Asset		48,285			96,570
Total Operating Lease Right of Use Asset		48,285			96,570
Other Assets
Patents less accumulated amortization		85,730			91,415
Deposits		5,937			5,937
Deferred tax asset		1,269			0
Total other assets		92,936			97,352
	$	1,819,755		$	1,891,514

The accompanying notes are an integral part of the financial statements

3

BIOSYNERGY, INC.

PART 1 - FINANCIAL INFORMATION

BALANCE SHEETS

	October 31, 2021			April 30, 2021
	Unaudited			Audited
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	92,959		$	3,189
Accrued compensation and payroll taxes		4,690			11,689
Accrued vacation		0			14,125
Other accrued liabilities		0			543
Operating lease liability		48,990			97,980
Total Current Liabilities		146,639			127,526
Long term Liabilities
Deferred income taxes		0			24,992
Total long term liabilities		0			24,992
Stockholders’ Equity
Common stock, no par value: 20,000,000 authorized Shares issued: 14,935,511 shares at October 31, 2021 and April 30, 2021		660,988			660,988
Receivable from affiliate		(24,862	)		(24,862	)
Retained earnings		1,036,990			1,102,870
Total Stockholders’ Equity		1,673,116			1,738,996
	$	1,819,755		$	1,891,514

The accompanying notes are an integral part of the financial statements

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BIOSYNERGY, INC.

Statements of Operations

(Unaudited)

	Three Months Ended				Six Months Ended
	October 31				October 31
	2021		2020		2021			2020
Net sales	$	522,021	$	313,508	$	696,859		$	604,959
Cost of sales		271,949		109,935		377,020			221,818
Gross profit		250,072		203,573		319,839			383,141
Operating expenses
Marketing		22,593		39,069		56,758			84,155
General and administrative		165,170		88,953		297,068			202,492
Research and development		29,911		36,787		59,310			76,840
Total Operating Expenses		217,674		164,809		413,136			363,487
Income from operations	$	32,398		38,764		(93,297	)		19,654
Other income
Interest income		24		115		81			257
Other income		320		480		1,075			960
Total Other Income		344		595		1,156			1,217
Net income (loss) before income taxes		32,742		39,359		(92,141	)		20,871
Provision (benefit) for income taxes		9,060		11,217		(26,261	)		5,948
Net income (loss)	$	23,682	$	28,142	$	(65,880	)	$	14,923
Net income (loss) per common share - basic and diluted	$	.0016	$	.0019	$	(.0044	)	$	.0010
Weighted-Average Shares of Common Stock Outstanding - Basic and Diluted		14,935,511		14,935,511		14,935,511			14,935,511

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

5

BIOSYNERGY, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

SIX MONTHS ENDED OCTOBER 31, 2021

(Unaudited)

	Common Stock
	Shares		Amounts		Receivable from Affiliate			Retained Earnings			Total
Balance, May 1, 2021		14,935,511	$	660,988	$	(24,862	)	$	1,102,870		$	1,738,996
Net Loss		-		0		0			(65,880	)		(65,880	)
Balance, October 31,2021		14,935,511	$	660,988	$	(24,862	)	$	1,036,990		$	1,673,116

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

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BIOSYNERGY, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended October 31
	2021			2020
Cash flows from operating activities
Net income (loss)	$	(65,880	)	$	14,923
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities
Deferred taxes		(26,261	)		0
Depreciation and amortization		7,917			9,053
Noncash lease expense		48,285			48,285
Changes in assets and liabilities
Accounts receivable		(161,681	)		805
Inventories		12,788			11,168
Prepaid expenses		2,922			13,880
Accounts payable and accrued expenses		68,103			(35,675	)
Building lease liability for right of use asset		(48,990	)		(47,580	)
Total adjustments		(96,917	)		(64	)
Net cash (used in) provided by operating activities		(162,797	)		14,859
(Decrease) increase in cash and cash equivalents		(162,797	)		14,859
Cash and cash equivalents beginning period		1,250,581			1,245,282
Cash and cash equivalents ending period	$	1,087,784		$	1,260,141
Supplemental Cash Flow information
Interest paid	$	0		$	0
Income taxes paid	$	0		$	0

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

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

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, 2021 Annual Report on Form 10-K. The results of operations for the six months ended October 31, 2021 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 is 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 II Blood Monitoring Device, accounted for approximately 82.5% of the sales during the six months ending October 31, 2021 and 88.2% during the six months ending October 31, 2020. The products are sold to hospitals, clinical end-users, laboratories and product dealers located throughout the United States.

Note 2 - Summary of Significant Accounting Policies

Cash

The Company maintains all of its cash 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 $2,232 and $2,232 for the six month periods ending October 31, 2021 and 2020, respectively.

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 2 - Summary of Significant Accounting Policies (Cont’d)

Prepaid Expenses

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

Revenue Recognition

The Company accounts for revenue in accordance with 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:

• The Company’s revenue is primarily generated from the sales of products directly to customers or through distribution channels, based on purchase orders and not supply contracts providing for additional goods or services once the products are transferred to the customer. The Company believes its performance obligations are satisfied upon shipment of goods to customers. The customers are billed at shipment, and revenue is recognized by the Company at that time.

•   ASU No. 2014-09 requires that the Company recognize its sales return allowance on a gross basis rather than as a net liability. As such, the Company now recognizes a return asset for the right to recover the goods returned by the customer, measured at the former carrying amount of the products, less any expected recovery costs (recorded as an increase to prepaid expenses and other current assets), and a return liability for the amount of expected returns (recorded as an increase to other current liabilities). The Company’s analysis of sales returns over the past several years noted that sales returns are nominal and therefore no sales return allowance is deemed necessary.

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.

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 2 - Summary of Significant Accounting Policies (Cont’d)

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 (benefit) for income taxes consists of the following components for the six month periods ended October 31:

	2021			2020
Current
Federal	$	0		$	3,965
State		0			1,983
Deferred		(26,261	)		0
Provision for Income Taxes	$	(26,261	)	$	5,948

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

	Period ended October 31,
	2021			2020
U.S. federal statutory tax rate		21	%		21	%
State income tax expense, net of Federal tax benefit		7.5	%		7.5	%
Effective Tax Rate		28.5	%		28.5	%

Research and Development and Patents

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

Patent amortization expense for the six months ended October 31, 2021 and 2020 was $5,685 and $6,822, respectively.

Patents relate to products that have been developed and are 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.

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 2 - Summary of Significant Accounting Policies (Cont’d)

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. Basic and diluted net income per common share is the same for the six months ended October 31, 2021 and 2020 as there are no common stock equivalents.

Comprehensive Income

Components of comprehensive income include amounts that are included in the comprehensive income but are excluded from net income. During the six month periods ending October 31, 2021 and 2020, there were no differences between the Company’s net income and comprehensive income.

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 October 31, 2021 and April 30, 2021, approximates their carrying value.

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.

Recent Accounting Pronouncements

The FASB issues ASUs to amend the authoritative literature in Accounting Standards Certification (ASC). There have been a number of ASUs to date that amend the original text of ASCs. Those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.    

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 3 – Inventories

Components of inventories are as follows:

	October 31,		April 30,
	2021		2021
Raw materials	$	104,544	$	108,604
Work-in-process		1,964		25,371
Finished goods		25,882		11,203
	$	132,390	$	145,178

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 October 31, 2021:

	Stock of Affiliates
	Biosynergy, Inc.			F.K. Suzuki International, Inc.			Medlab, Inc.
F.K. Suzuki International, Inc		30.0	%		-	%		100.0	%
Fred K. Suzuki, Officer		4.1			30.0			0
Jeanne S. Addis, Trustee		0			28.1			0
Mary K. Friske		0.3			0.7			0
Laurence C. Mead		0.4			10.0			0
Beverly R. Suzuki		2.7			0			0
Lauane C. Addis, Officer		0			0			0
Malcolm MacCoun, Director		0			0			0

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BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 5 - Related Party Transactions (Cont’d)

As of October 31, 2021 and April 30, 2021, $24,862 was due from F. K. Suzuki International, Inc. These balances result from an allocation of common expenses charged to FKSI 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.

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 $95,517 and $6,002 for the six months ended October 31, 2021 and 2020 respectively.

Note 6 – 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. In February 2021, the Company entered into a two-year lease agreement for its current facilities, which started May 1, 2021 and expires on April 30, 2022. Under the new lease standard, the Company’s lease was accounted for as an operating lease. As a result, the Company measured the lease liability using the two 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 six months ending October 31, 2021 and 2020 was $48,285 and $48,285, respectively.

Maturities of lease liabilities as of October 31, 2021 are presented in the following table:

Period Ending April 30:
2022	$	48,285

Note 7 – Customer Concentrations

Shipments to 1 customer amounted to 28.36% of sales during the first six months of Fiscal 2021 compared to 32.04% during the comparative Fiscal 2021 period. As of October 31, 2021, there were outstanding accounts receivable from this customer of $117,130 compared to $82,190 at October 31, 2020. Shipments to another customer amounted to 38.25% of sales during the first six months of Fiscal 2021 and 36.57% of sales during the first six months of Fiscal 2021. As of October 31, 2021, there were outstanding accounts receivable from this customer of $223,869 compared to $136,555 at October 31, 2020.

13

BIOSYNERGY, INC.

Notes to Financial Statements

Six Months Ended October 31, 2021 and 2020

Note 7 – Customer Concentrations (Cont’d)

The Company had export sales of $11,860 during the 2^nd Quarter of Fiscal 2022, and export sales of $9,930 during the 2^nd Quarter of Fiscal 2021. For the six months ending October 31, 2021 export sales were $15,430 and $21,570 for the same period ending October 31, 2020. 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.

Note 8 – COVID-19 Pandemic and Other Challenges

The Company will face challenges in 2021 and 2022 as a result of the COVID-19 pandemic and the resignation of 3 employees since April 30, 2021. Such challenges will include (among other things) decreases or significant decreases in demand for certain products that is partially responsible for a decrease in sales for the six month period ending October31, 2021, and increases in demand for others, collectability of customer accounts receivable from customers negatively impacted by the pandemic, managing the health and productivity of our employees working in our facility or working remotely, managing our information technology (IT) infrastructure and security for our employees working remotely, procuring adequate raw materials and packaging, as well as managing our supply chain. However the resignation of the 3 employees negatively impacted the short-term ability of the Company to manufacture and deliver its products to customer since the employees who resigned were primarily responsible for manufacturing and shipping. We have worked closely with our domestic suppliers to source and maintain a consistent supply of raw material, ingredients and packaging to provide a steady supply of our products to our customers, and have entered into a contract manufacturing agreement with a third party to manufacture our liquid crystal temperature indicators. We are fortunate that to date that we have not been significantly impacted by the pandemic and were able to find a manufacturer for the Company’s products. We believe with the third party manufacturing arrangement and temporary packaging and shipping personnel, the Company will be able to continue supplying its customers with products.

Note 9-Subsequent Events

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, other than cash, to Hallcrest for total consideration of $1,500,000, subject to adjustment for inventory value (the “Transaction”). Pursuant to the Agreement, Hallcrest will acquire the Company’s entire product line, and all tangible assets and technology owned by the Company. The Transaction is expected to close in late December 2021 or early January, 2022, subject to satisfaction or waiver of closing conditions. The Agreement contains customary representations, warranties and covenants of Biosynergy and Hallcrest. Ten percent (10%) of the purchase price will be held in escrow for six (6) months after closing as security for the representations and warranties made by Biosynergy in the Agreement. It is anticipated the proceeds from the sale of its assets, less expenses of the Transaction and dissolution of the Company, and existing cash assets will be distributed by Biosynergy to its shareholders.

14

BIOSYNERGY, INC.

Six Months Ended October 31, 2021 and 2020

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Sales/Revenues

For the three month period ending October 31, 2021 (“2nd Quarter”), the net sales increased 66.5%, or $208,513, and increased 15.2%, or $91,900, during the six month period ending October 31, 2021, as compared to net sales for the comparative periods ending in 2020. The increase in sales during the 2^nd Quarter is primarily the result of an increase in the sales of HemoTemp® II to fill backorders and sales of certain raw materials. The Company had no production of its products during July, 2021 due to the resignation of the Company’s production manager. LCR Hallcrest LLC (“Hallcrest”) began manufacturing the Company’s products, other than the HemoTemp® II Activator and HemoCoolTM Gel-Pak, to the Company’s specifications on July 15, 2021 pursuant to a Contract Manufacturing Agreement (“Hallcrest Agreement”) executed August 6, 2021. Raw materials, including the liquid crystal inks, were supplied and sold by the Company to Hallcrest for production of the Company’s products. As a result of the Hallcrest Agreement, the Company was able to resume shipments of its products in August 2021. As of July 31, 2021, the Company had back orders consisting mostly of orders for HemoTemp® II totaling $149,968. As of October 31, 2021, the Company had back orders of $9,110, but had no backorders of HemoTemp® II.

In addition to the above, the Company had $344 and $1,156 of other miscellaneous revenues primarily from interest income and leasing a portion of its storage space to a third party during the three and the six month periods ending October 31, 2021, respectively.

Costs and Expenses

General

The operating expenses of the Company during the 2nd Quarter increased overall by 32.07%, or $52,865, and increased by 13.66%, or $49,652, for the six month period ending October 31, 2021, as compared to the same periods ending in 2020. The increase during the 2nd Quarter and for the six month period ending October 31, 2021 was due primarily to an increase in legal and accounting fees offset by a reduction in employee expenses due to the resignation of three employees during the three-month period ending July 31, 2021 (“1^st Quarter”).

Cost of Sales

The overall cost of sales during the 2nd Quarter increased by $162,014 and increased by $155,202 during the six month period ending October 31, 2021 as compared to the same periods ending in 2020. This overall increase was due to the Company purchasing finished products from Hallcrest at a cost higher than producing its own products. As a percentage of sales, the cost of sales were 52.1% during the 2nd Quarter and 35.07% for the comparative quarter ending in 2020; and 54.1% during the six month period ending October 31, 2021 compared to 36,67% in 2020. It is anticipated that the cost of sales as a percentage of sales will not materially change as long as Hallcrest is producing the Company’s products.

15

Research and Development Expenses

Research and Development costs decreased $6,876, or 18.7%, during the 2nd Quarter as compared to the same quarter in 2020. These costs decreased by $17,530, or 22.8% during the six month period ending October 31, 2021 as compared to the same period in 2020. This decrease was primarily due to lower employee costs and decreased development activities.

Marketing Expenses

Marketing expenses for the 2nd Quarter decreased by $16,476, or 42.42%, as compared to the quarter ending October 31, 2020 and decreased by $27,397 or 32.56%, during the six month period ending October 31, 2021 compared to the six-month period ending October 31, 2020. The change in marketing expenses for the six-month period ending October 31, 2021 compared to the six-month period ending October 31, 2020 was primarily due to lower salaries, employee expenses, advertising fees and travel and entertainment expenses and a decrease in marketing activities due to the employee resignations during the 1^st Quarter.

General and Administrative Expenses

General and administrative costs increased by $76,217, or 85.7%, in the 2nd Quarter, and increased by $94,666, or 46.8%, during the six month period ending October 31, 2021, as compared to the same periods in 2020. This overall increase for the six months ending October 31, 2021 was due primarily to higher legal and accounting fees and administrative personnel expenses as a result of the Company using independent contractors to perform services previously provided by employees of the Company who resigned during the 1^st Quarter, offset by a decrease in employee costs.

Net Income

The Company realized a net income of $32,742 during the 2nd Quarter as compared to a net income of $28,142 for the comparative quarter in the prior year. The Company also realized a net loss of $92,141 for the six month period ending October 31, 2021 as compared to a net income of $14,923 during the same period in 2020. The decrease in net income is a result of decreased net sales for the 1^st Quarter and higher general and administrative expenses due to the resignation of three employees during the 1^st Quarter.

Assets/Liabilities

General

Since April 30, 2021, the Company’s assets have decreased by $74,810 and liabilities have increased by $19,113. The overall decrease in assets is primarily due to net operating loss during the six months ending October 31, 2021.

Related Party Transactions

As of October 31, 2021 and April 30, 2021, $24,862 was due from F. K. Suzuki International, Inc. These balances result from an allocation of common expenses charged to FKSI 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.

16

A board member provides 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 $95,517 and $6,002 for the six months ended October 31, 2021 and 2020, respectively.

Current Assets/Liabilities Ratio

The ratio of current assets to current liabilities, 11.4 to 1, has decreased compared to 13.3 to 1 at April 30, 2021, primarily due to lower cash balances with higher accounts receivable and higher accounts payable and accrued liabilities. The Company anticipates the ratio of current assets to current liabilities will remain substantially at its current level, subject to other normal fluctuations. In order to maintain or improve the Company’s asset/liabilities ratio, the Company’s operations must return to profitability.

Liquidity and Capital Resources

During the six month period ending October 31, 2021, the Company experienced a decrease in working capital of $35,940. This was primarily due to the net operating loss during the six month period ending October 31, 2021.

The Company has attempted to conserve working capital whenever possible. To this end, the Company attempts to keep inventory at minimum levels. The Company believes that it will be able to maintain adequate inventory to supply its customers on a timely basis by careful planning and forecasting demand for its products. However, the Company is nevertheless required to carry a minimum amount of inventory to meet the delivery requirements of customers and thus, inventory represents a substantial 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 account receivable, the Company believes that uncollectable accounts receivable will not have a significant effect on future liquidity. The Company’s accounts receivable increased during the 2^nd Quarter by $295,675 due to the shipment of backorders as of July 31, 2021 during the 2^nd Quarter.

The cash used by operating activities was $162,797 during the six month period ending October 31, 2021 primarily due to the use of cash to purchase inventory for sale to its customers and an increase in accounts receivable due to shipments of products backordered during the 1^st Quarter. Except for its operating working capital, 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 or investing activities during the six month period ending October 31, 2021.

As of October 31, 2021, the Company had $1,677,703 of current assets available. Of this amount, $31,339 was prepaid expenses, $132,390 was inventory, $426,190 was net trade receivables and $1,087,784 was cash. The Company’s available cash and cash flow are considered adequate to fund the short-term 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. Thus there is a risk additional financing may be necessary to fund long-term capital needs of the Company, although there is no such currently known long-term capital needs other than operations.

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Effects of Inflation. With the exception of inventory, labor costs and product sales prices 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 2 to the Financial Statements for the

2nd 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 using 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:

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 - In May 2014, the Financial Accounting Standard Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification (“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. This guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized.

Use of Estimates. Preparation 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 accounts receivable.

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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. The Company’s primary exposure to market risk is interest rate risk associated with its short term 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. The Company does not have any credit facilities with variable interest rates. The Company’s operations are not exposed to financial risk that will have a material impact on its financial position and results of operation.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a15(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 has 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 Chief Accounting Officer has concluded that the Company’s disclosure controls and procedures are effective.

On July 2, 2021, Laurence Mead, the Company’s Chief Financial Officer, Chief Accounting Officer and Treasurer, resigned. The Board of Directors elected Fred Suzuki as the Interim Chief Financial Officer, Chief Accounting Officer and Treasurer to serve until the Company is able to find replacements. The Audit Committee adopted new accounting and financial internal controls over financial reporting procedures to reflect changes in office and accounting personnel and ensure that proper controls remain in place.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

As of the end of the Company’s Fiscal Quarter ending October 31, 2021, there were no material pending legal proceedings to which the Company was a party or to which any of their property was the subject.  However, as reported in the Company’s Form 8-K filed with the Securities and Exchange Commission on November 30, 2021, 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, other than cash, to Hallcrest for total consideration of $1,500,000, subject to adjustment for inventory value (the “Transaction”).  See Footnote 9 of the “Financial Statements”.  The Agreement contemplates the Transaction will be implemented through legal proceedings pursuant to 805 ILCS 5/12.05 et seq. of the Illinois Business Corporations Act.  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 Illinois Business Corporations Act.  The complaint alleges 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.  A Court ordered dissolution and sale will enable Biosynergy to quickly close the Transaction without the cost of a shareholders’ meeting.  Because this is not a bankruptcy or insolvency situation, Biosynergy’s creditors will not be harmed in any way.  If the relief Biosynergy seeks is granted—a judicially approved dissolution and sale under the terms of the Agreement—then all liabilities of the Company will be paid in full and the remaining proceeds from the sale of the Company, less expenses of the Transaction and dissolution, will be paid to the shareholders.  In the event Biosynergy is unable to obtain the relief sought from the Court, Biosynergy will attempt to obtain shareholder approval for the Transaction.

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, 2021. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended April 30, 2021 or during the second quarter of Fiscal 2021.

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.

Item 3. Defaults Upon Senior Securities.

(a)     As of the end of the Company’s Fiscal Quarter ending October 31, 2021, 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 October 31, 2021, 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.

Item 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.

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(b)     During the Fiscal Quarter ending October 31, 2021, 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:

(2) Plan of Acquisition, reorganization, arrangement, liquidation or succession - none

(3) Articles of Incorporation and By-laws⁽ⁱ⁾  

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

(10) Material Contracts – 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.

101.INS Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(i) Incorporated by reference to a Registration Statement filed on Form S-18 with the Securities and Exchange Commission, 1933 Act Registration Number 2-38015C, under the Securities Act of 1933, as amended, and Incorporated by reference, with regard to Amended and Restated By-Laws, to the Company’s Current Statement on Form 8-K dated as of July 2, 2009 filed with the Securities and Exchange Commission.

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BIOSYNERGY, INC.

Six Months Ended October 31, 2021 and 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Biosynergy, Inc.

Date December 15, 2021	/s/ Fred K. Suzuki
	Fred K. Suzuki
	Chief Executive Officer, Chairman of the Board, President,
	Chief Financial Officer, Chief Accounting Officer and
	Treasurer

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