UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 4/30/09
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission file number 0-12459
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Biosynergy, Inc.
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(Name of registrant as specified in its charter)
Illinois 36-2880990
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(State or other jurisdiction of I.R.S. Employer
Identification No.)
incorporation or organization)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 956-
0471
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
NONE NONE
Securities registered under section 12(g) of the Act:
Common Stock, No Par Value
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes[ ] No[X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act. Yes[] No[X]
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 issuer 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 Website, if any,
every Interactive Date File required to be submitted and posted
pursuant to Rule 405 of Regulations S-T (Sec. 229.405 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[X]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Non-accelerated filer [ ] (do not check if a smaller reporting
company
Accelerated filer [ ]
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes[ ] No[X]
The aggregate market value of the voting stock and non-voting
stock held by non-affiliates of the issuer on April 30, 2009
cannot be ascertained with any certainty because there is no
established trading market for the common stock of the Company.
The number of shares of common stock outstanding on April 30,
2009 was 14,935,511.
No documents have been incorporated by reference in this report
except for certain exhibits and schedules listed in Item 15.
Part I
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Item 1. Business.
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General Development of Business.
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Biosynergy, Inc. (the "Company") was incorporated as an Illinois
corporation on February 9, 1976. The Company was formed
primarily for the purpose of developing, manufacturing, and
marketing products utilizing cholesteric liquid crystals. The
Company presently manufactures and markets disposable medical,
laboratory, and industrial thermometric and thermographic
cholesteric liquid crystal devices. The Company also
distributes certain blood bank and laboratory products
manufactured by third parties to specifications of the Company.
Although the Company did not enter into any agreements
materially affecting its operations during Fiscal 2009, the
Company experienced an increase in sales of $9,509. The
Company's sales of $1,033,318 in Fiscal 2009 were the highest in
its history. The Company realized an after income tax profit of
$91,364 for the fiscal year ending April 30, 2009 compared to an
after income tax profit of $106,886 for Fiscal 2008. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company did not introduce any new products in Fiscal 2009.
The Company, however, continued its development and review of
the proposed products described in "Thermographic and
Thermometric Devices and Accessories" below.
The Company continued to introduce its products directly to
industrial customers during Fiscal 2009. The Company did not
make any material sales to customers in the industrial markets.
Although the ultimate results of these activities are not known,
Management believes there is a need for its products and
technology in the industrial markets.
Except as stated above, there were no other significant
contracts or developments with regard to the Company's business
during the past fiscal year.
Financial Information About Industry Segments.
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The Company generated revenues from sales of the medical and
laboratory products listed below in the medical and laboratory
industry segment during the fiscal years ended April 30, 2009
and 2008. For a description of these products, see "Narrative
Description of Business."
Below is a schedule which presents the sales for each product
and the percentage of the Company's total sales attributable to
each product for the fiscal years ending April 30, 2009 and
2008.
Fiscal Year Ending
April 30, 2009
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Medical and Laboratory Sales of Percentage of
Products Products Total Sales
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HemoTemp(Registered) II BMD $960,200 92.9%
TempTrend(Registered) TI 25,984 2.5%
HemoTemp(Registered) II Activator 21,175 2.1%
HemoTemp(Registered) BMD 18,042 1.7%
LabTemp(Registered) 40 ST 3,205 .3%
LabTemp(REGISTERED) 20 ST 2,134 .2%
Hemo-Cool(Trademark) JR Accessories 1,199 .1%
TempTrend(Registered) II TTD 818 .1%
StaFreez(Registered) FTI 515 .1%
LabTemp(Registered)60 ST 46 .0%
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$1,033,318.45(1) 100.0%
Fiscal Year Ending
April 30, 2008
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Medical and Laboratory Sales of Percentage of
Products Products Total Sales
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HemoTemp(Registered) II BMD $937,500 91.57%
HemoTemp(Registered) II Activator 26,180 2.56%
TempTrend(Registered) TI 25,468 2.49%
HemoTemp(Registered) BMD 23,794 2.32%
StaFreez(Registered) FTI 3,047 .30%
LabTemp(Registered) 40 ST 2,172 .21%
LabTemp(Registered) 20 ST 1,950 .19%
Hemo-Cool(Trademark) JR II 1,790 .17%
TempTrend(Registered) II TTD 1,003 .10%
Hemo-Cool(Registered) JR Accessories 905 .09%
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$1,023,809.00(1) 100.0%
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(1) Includes discounts and returns.
See "Information About Foreign and Domestic Operations and
Export Sales". See also "Selected Financial Data" and
"Financial Statements and Supplementary Data" for the operating
profit and loss and identifiable assets related to the Company's
operations in its industry segment.
Narrative Description of Business.
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As described in "General Development of Business", the Company
is presently engaged in the business of developing,
manufacturing, and marketing disposable thermometric and
thermographic temperature indicators and accessories for the
medical, laboratory and industrial markets. The Company is also
developing bacteria growth retardant agents. Further information
about the business and proposed products of the Company are
described below.
Thermographic and Thermometric Devices and Other Products.
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During the fiscal year ending April 30, 2009 the Company
manufactured and marketed various medical, laboratory, and
consumer thermometric and thermographic devices and accessories.
These products (described below) were sold to hospitals,
clinical end-users, laboratories, and product dealers.
1. The HemoTemp(Registered) Core Correlated Blood Monitoring
Device ("BMD") is designed to be a human blood bag temperature
indicator. Human blood must be maintained, optimally, at 1-4
degrees Celsius, and not allowed to exceed 10 degrees Celsius.
Since human blood is always in short supply, it is critical that
blood be maintained within these specifications to avoid loss.
HemoTemp(Registered) BMD monitors the core temperature of a
blood bag from 1-12 degrees Celsius, and replaces the impractical
mercury thermometer susceptible to breakage.
HemoTemp(Registered) BMD once attached to the blood bag is
usable throughout the life of the blood.
2. HemoTemp(Registered) II Core Correlated BMD is designed to
warn blood bank personnel whenever the internal temperature of
the blood bag has exceeded approximately 10-11 degrees Celsius.
HemoTemp(Registered) II BMD has an irreversible indicator that
is activated when the tag is applied to the blood bag at
approximately 4 degrees Celsius. After being activated, the
irreversible indicator remains blue colored for at least 72
hours if the blood is kept at 4 degrees Celsius, however, if the
blood is warmed to a temperature of 10 degrees Celsius or above,
the indicator will lose its blue color much more rapidly or the
indicator will change color; the nature and degree of the color
change depend on the temperature of the sample and the time at
each temperature. The irreversible indicator will not return to
blue even if the blood is subsequently recooled, indicating that
the blood has been warmed. The reversible portion of the
indicator reversibly monitors temperatures from 1-9 degrees
Celsius. HemoTemp(Registered) II BMD is non-reusable and must
be replaced each time the blood bag is returned to the blood
bank and reissued.
3. HemoTemp(Registered) II Activator is an electronic, portable
block model heater developed to provide a reliable source of
heat necessary to activate the Company's HemoTemp(Registered) II
BMD. The HemoTemp(Registered) II Activator has a thermostatic
control to permit precise setting and continuous control of
temperatures in the range for activation of the Company's
HemoTemp(Registered) II BMD. This device is intended by the
Company to be used with HemoTemp(Registered) II BMD as a system
for blood monitoring. This device is manufactured by another
company to specifications set by the Company.
4. TempTrend(Registered) Temperature Indicator ("TI") is primarily
used to monitor the temperature of urine specimens collected for
drug testing to detect fraudulent urine specimens. Most common
forms of drug testing require a urine specimen. However, the
test is valid only if a legitimate urine specimen is collected
which has not been altered by the subject to mask a drug abuse
problem. In order to eliminate altered or fraudulent urine
specimens in tests on federal employees, federal government
guidelines require that urine temperature be measured within
four minutes of sample collection, and that the temperature be
90.5-98.9o F. Temperature measurements taken with
TempTrend(Registered) TI are simply a matter of observing the
color illuminated number and recording the temperature.
TempTrend(Registered) TI also provides a non-invasive method of
monitoring the actual surface temperature trends of any body
surface where temperature measurement is important, such as near
joints in rheumatoid arthritis and to assess blood circulation.
5. TempTrend(Registered) II Temperature Trend Device ("TTD") is
a second generation temperature trend device which is correlated
to internal body temperature and provides a non-invasive,
readily visible means of monitoring changes in body temperature.
TempTrend(Registered) II TTD will reflect oral temperatures such
as those taken by glass thermometers. TempTrend(Registered) II
TTD is used intraoperatively to warn of developing hyper or
hypothermic conditions. The indicator can also be used for
monitoring a patient's temperature during any type of
transfusion procedure.
6. LabTemp(Registered) 20, LabTemp(Registered) 40 and
LabTemp(Registered) 60 Surface Temperature Indicators ("STI")
are designed to reversibly indicate the temperature of
laboratory materials which require specific storage or use
temperatures. LabTemp(Registered) 20 STI indicates temperatures
between 0-21 degrees Celsius, LabTemp(Registered) 40 STI
monitors temperatures between 19-21 and 24-41 degrees Celsius,
while LabTemp(Registered) 60 STI measures temperatures between
41-61 degrees Celsius. These thermometers are designed to
monitor the temperature and changes in temperature of hundreds
of laboratory chemicals and supplies which require specific
temperature conditions; however, these thermometers are suitable
for temperature measurement of any surface.
7. StaFreez(Registered) Freeze-Thaw Indicator ("FTI") is a
freeze-thaw indicator which will irreversibly indicate whether
frozen material is warmed to greater than -20 degrees Celsius.
Once the frozen product exceeds -20 degrees Celsius, the liquid
crystal indicator will turn from blue to gray to black, and
refreezing the product at a lower temperature will not bring
back the original frozen state color.
8. Thermolyzer(Trademark) Liquid Conductive Cooling/Heating
Device is a small product for providing continuous heating or
cooling of medical fluids which are administered to patients,
particularly for patients undergoing intravenous fluid
administration during surgery or post-operative recovery. The
device does not use electricity for heating or cooling the
medical fluids. The heating or cooling is accomplished by
conduction, which is a process for transporting energy in a
medium from one location to another without the involvement of
any visible movement.
9. The Company also has the capability of manufacturing on an
as needed basis, specialty products include devices manufactured
to the specification and design of the customer, such as time/
temperature shipping labels for food products under the trade
name FoodGarde(Trademark) Time/Temperature Indicators and liquid
crystal thermometers for general purpose thermometry. The
Company is not currently selling any such specialty products.
Products Under Development.
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The Company is also developing these other products.
1. The Company is developing certain compounds intended for use
as bacteria growth retardant agents for use in food and other
products. Although these antibacterial compounds are subject to
Food and Drug Administration regulation, they are historically
designated as Generally Recognized As Safe (GRAS). Since there
are several unknown factors regarding efficacy, supply and
regulatory requirements, the outcome of this project cannot be
predicted with any certainty at this time.
2. The Company is also investigating production methods for the
bacteria growth retardant compound described in Paragraph 1
above. In this regard, the Company has developed certain
proprietary technology related to the processing of these
compounds. The Company has filed for one patent related to the
processing and manufacture of bacteria growth compounds for use
in food and other products and one patent related to the use of
such compounds (see "Patents and Trademarks").
3. The Company intends to market new irreversible time/
temperature indicators which will be used as shipping labels,
and in other forms, for the frozen food packaging industry
(under the tradename FoodGarde(Trademark)), the pharmaceutical
industry, and for other industries requiring careful monitoring
of refrigerated or frozen materials. The devices will have
irreversible color changes at various temperatures determined to
be critical by the end-user. Therefore, a purchaser, whether an
individual consumer or a merchant, will be able to
instantaneously determine the temperature history of the
material. These products will generally be customized to meet
the requirements of the customer. There are currently no
contracts for development, manufacture or sale of any such
irreversible time/temperature indicators.
4. The Company has recognized a need exists for a simple,
inexpensive indicator to determine if sensitive materials have
been subjected to freezing temperatures. The Company is
continuing its investigation of the feasibility of such an
indicator.
5. The Company is investigating the feasibility of additional
products to systematize the use of its thermometric and
thermographic liquid crystal devices as well as alternative
technologies to supplement its current product line where the
Company's current products are not suitable. The results of
such investigations are not available at this time.
Manufacturing.
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The Company manufactures all of its products except for the
HemoTemp(Registered) II Activator. This product is manufactured
for the Company by unrelated companies on an as needed basis.
Raw materials for the Company's other products are purchased,
but all manufacturing of these products is performed at the
Company's production facility. All outside manufacturing is
done to specifications set by the Company. There are no
commitments or firm agreements for outside manufacturers to
provide products for the Company, and the Company does not
anticipate it will enter into any such agreements in the
foreseeable future.
The Company has thirty-three years of experience working with
various liquid crystal formulations, thermometric and
thermographic application methods and the effect of temperature
and other factors on degradable materials. The Company
maintains complete records of manufacturing and quality
assurance testing of all of its products in compliance with Food
and Drug Administration ("FDA") regulations. All products are
manufactured according to "good manufacturing practices" ("GMP")
for medical devices.
Marketing and Distribution.
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The Company has traditionally targeted the medical and
laboratory markets. While novel products, such as the Company's
products, enjoy the advantage of no initial competition, they
also initially lack a demonstrated market and acceptance.
Furthermore, cost savings programs and awareness have slowed
down the introduction of new products, particularly in the
medical market. As a result, the time required to achieve
acceptance of the Company's medical products is significantly
increased, in Management's opinion.
The Company has historically relied on its own sales and
distribution efforts for a large portion of its sales. More
recently, the Company's distributors have accounted for a
majority of the Company's net sales. During Fiscal 2009, Fisher
Scientific Company ("Fisher") accounted for 38.11% of the
Company's sales. Cardinal Health, Inc. ("Cardinal") accounted
for 18.58% of Company sales during Fiscal 2009. Management
believes distributors will continue to be an important part of
the Company's sales and distribution system in the future.
The Company continues to negotiate with various medical and
laboratory product companies for the distribution of its
products under private labels and to introduce its products in
the industrial, pharmaceutical and laboratory markets, the
success of which cannot be assured. The Company is attempting
to introduce new products to supplement its current product
line. The Company is also researching products outside the
traditional medical and laboratory markets, the results of which
cannot be predicted at this time.
At the present time, two employees are engaged on a part-time
basis in marketing the Company's products. The Company does not
have an outside sales force. Since the Company markets its
products to approximately 7,000 hospitals in the United States,
hundreds of laboratories and industrial end-users in the United
States, and thousands of hospitals and laboratories in foreign
countries, it will continue to rely upon the marketing efforts
of independent dealers and sales representatives for the medical
and laboratory markets. The Company directly markets and sells
to industrial customers.
The Company is unaware of its current market share for its
medical and laboratory products.
Sources and Availability of Raw Materials.
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In general, the Company believes its sources and availability of
raw materials and finished products to be satisfactory.
Presently, there are a limited number of domestic manufacturers
of liquid crystal chemicals. Although it is expected that these
domestic manufacturers will continue to supply the raw liquid
crystals needed for the production of the Company's products,
which cannot be assured, if industrial quantities of raw liquid
crystals are unavailable from domestic sources, the Company will
need to import these materials from foreign suppliers, or, as an
alternative, manufacture such materials itself. Other materials
and products are currently available from a variety of
suppliers.
Patents and Trademarks.
- ----------------------
The Company was previously granted or assigned five United
States and four foreign patents relating to liquid crystal
technology. All of these patents have expired. Although these
patents are no longer in effect, management does not believe
this will have an adverse material impact on the Company's
operations, revenues or properties.
The Company was granted a patent, "Liquid Conductive
Cooling/Heating Device and Method of Use", Patent Number US
7,276,046 B1, relating to the Company's thermolyzer, on October
2, 2007. This patent will expire on June 6, 2024.
The Company has filed two patents which are pending related to
its products and products under development. One patent
entitled "Method of Producing Eggshell Powder," application
number 10/535,779 was filed on August 4, 2005 replacing
provisional patent application number 60/474,175 filed May 29,
2003 and provisional patent number 60/575,336 filed May 27,
2004. The other patent, "Eggshell Antimicrobial Agent and
Method of Use", application number 11/108,584 was filed April
18, 2005 replacing provisional patent application number
60/638,548 filed December 22, 2004. The application was
published as U.S. Pat. Publication No. 2006/0062857. The
subject of this patent is the Company's bacteria growth
retardant under development. These patent applications are
pending review by the U.S. Patent and Trademark office. See
"Products Under Development." It is uncertain whether the
patent pending related to the use of the bacteria growth
retardant will ultimately be approved, or, if approved, will be
approved as currently presented.
The Company will also seek to obtain patents on other products
currently being developed, as appropriate.
The Company has received registered trademark protection on all
product names to date excepting Temp-D-Tek(Trademark), Tempa-
Slide(Trademark), FoodGarde(Trademark), LaproVue(Trademark) and
Hemo-Cool(Trademark). The Company has retained, however, all
the common law rights to the Temp-D-Tek(Trademark), Tempa-
Slide(Trademark), FoodGarde(Trademark), LaproVue(Trademark), and
Hemo-Cool(Trademark) trademarks. Additional trademark
registrations will be applied for as needed.
Although patent and trademark protection is important, the
Company believes no material adverse effects to the Company's
operations will result in the event additional patents and/or
trademarks are not obtained, or, if obtained, such patents
and/or trademarks are held to be invalid. Certain processes and
chemical formulas will be maintained only as trade secrets.
Management feels that it will be difficult for potential
competition to analyze or reproduce the secret processes and
formulas without substantial expenditure of capital and
resources.
Seasonable Aspect of Business.
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The business of the Company is not seasonal.
Working Capital Items.
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The Company has attempted to conserve working capital whenever
possible. To this end, the Company attempts to keep inventory
at minimum levels. The Company believes that it will be able to
maintain adequate inventory to supply its customers on a timely
basis by careful planning and forecasting demand for its
products. However, the Company is nevertheless required, as is
customary in the medical and laboratory industries, to carry
inventory to meet the delivery requirements of customers and
thus, inventory represents a substantial portion of the
Company's current assets.
The Company presently grants payment terms to customers and
dealers of 30 days. The Company will not accept returns of
products from its dealers except for exchange, but does
guarantee the quality of its products to the end user.
As of April 30, 2009, the Company had $766,205 of current assets
available. Of this amount, $81,299 was inventory, $150,033 was
net trade receivables, and $485,395 represented cash and short-
term cash investments.
Management of the Company believes that it has sufficient
working capital to continue operations for the fiscal year
ending April 30, 2010 provided the Company's sales and ability
to collect accounts receivable are not adversely affected. In
the event the Company's sales decrease, the receivables of the
Company are impaired for any reason, or the Company needs
additional capital for its development projects, it may be
necessary to obtain additional financing to cover working
capital items and keep current trade accounts payable, of which
there can be no assurance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Major Customers.
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Fisher, the Company's primary independent product distributor,
was directly responsible for 38.11% of the Company's net sales
during the fiscal year ending April 30, 2009. Cardinal, the
Company's other primary distributor, accounted for 18.58% of the
Company's net sales during the fiscal year ending April 30,
2009. At April 30, 2009, Fisher owed the Company $78,150 and
Cardinal owed $28,455. No other customers accounted for 10% or
more of the Company's net sales during Fiscal 2009. Management
believes the loss of these distributors would materially reduce
the revenues of the Company until the Company could retain, if
available, the services of other major product distributors or
the end users serviced by Fisher and Cardinal began ordering
directly from the Company. Management has no reason to believe
that the Company will lose either of these distributors in the
foreseeable future.
Backlogs.
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The Company had no backorders at April 30, 2009 compared to
$3,600 in backorders at April 30, 2008.
Government Contracts.
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The Company does not have a material portion of its business
that may be subject to renegotiation of profits or termination
of contracts or subcontracts at the election of any government
entity.
Competition.
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The Company has no known commercial competitors of its blood
monitoring devices using liquid crystal technology. Because of
the Company's employment agreements with former employees and
processing trade secrets, it does not anticipate competition in
this area in the near future.
In the area of laboratory temperature monitoring, one known
competitor, Omega Engineering, Inc., supplies RLC reversible and
TL irreversible temperature indicators. In the area of a food
or drink safety indicator, there is no competition known to the
Company that utilizes liquid crystal technology. The Company
believes that the frozen food industry presently uses primarily
physical and organoleptic evaluation (e.g. evaluation of
softness, texture, aroma, taste, and the like), as well as
mercury thermometers and temperature sensitive inks to monitor
freshness. Labels containing wax encapsulated dyes with
specific low melting points and capillary action products are
produced by companies such as 3M(Trademark) under the trade name
MonitorMark(Trademark), Technical Industrial Products ("TIP")
under the trade name Thermax(Registered), and Medical
Indicators, Inc. under the trade name NexTemp(Registered), and
IntroTech under the trade names WarmMark(Registered) and
ColdMark(Registered), among others.
The Company's HemoTemp(Registered) II BMD (blood bag temperature
monitor) competes in the medical market against Safe-T-
Vue(Registered) (William Laboratories, Inc.),
MonitorMark(Trademark) (3M) and WarmMark(Registered)
(DeltaTrak). Management of the Company believes that the
William Laboratories and 3M products are technically inferior to
HemoTemp(Registered) II BMD in that they provide only an
irreversible monitor with nothing to warn the user that blood is
approaching an unsafe temperature. In addition, the William
Laboratories product must be refrigerated prior to use, and,
because of their design, both products can readily be dislodged
from the blood bag. There are no known commercial competitors
of the Company's HemoTemp(Registered) II Activator.
The Company's TempTrend(Registered) II competes in the medical
market against Tempa-Dot(Trademark) (3M), CliniTemp(Registered)
and FeverScan(Registered) (Hallcrest, Inc.), TraxIt(Registered)
(Medical Indicators, Inc.), and FeverScan(Registered) (Robinson
Healthcare) and Crystaline (Sharn, Inc.), with others. Tempa-
Dot(Trademark) is a wax impregnated strip of paper inserted into
the mouth to monitor core temperature. Although it is reported
to cost less than TempTrend(Registered) II thermometers, it has
the disadvantage of just a single reading, invasive methodology,
and it cannot be used to monitor temperature trends. The
Company's TempTrend(Registered) competes in the drug testing
market, specifically for urine samples, with TIP's
Thermax(Registered) and others.
Other companies, such as Eurand American, are only involved in
the manufacture of liquid crystal raw materials and do not
directly compete with the Company for sale of medical,
industrial or consumer products. Mercury and electronic
thermometers are used in several competitive applications. They
are generally more costly, non-disposable or not usable in most
applications where liquid crystal thermometry and temperature
indicators are utilized.
Research and Development.
- ------------------------
During Fiscal 2009 and 2008, the Company spent $90,572 and
$86,187, respectively, on Company-sponsored research and
development activities. All expenditures for research and
development are expensed currently with the exception of
significant equipment and set-up charges which are capitalized
and depreciated or amortized over their estimated useful life.
The Company is conducting research and development of products
discussed under "Products Under Development." In this regard,
the Company may require financing to complete the development of
these products. The success of the Company in obtaining
financing for research and development may largely determine
whether the Company will be able to continue the research and
development for such products. Management believes the Company
has sufficient working capital for anticipated research and
development for the ensuing year.
Government Regulations.
- ----------------------
The Company does not currently plan to market diagnostic or
therapeutic products which are subject to stringent United
States Food and Drug Administration (FDA) review and pre-market
approval in the near future, although some of the products under
review, such as the bacteria growth retarding compound, may
require pre-clearance by the FDA or other government agencies.
Present medical products of the Company are classified by the
FDA as Class I or Class II. These are subject only to general
regulations requiring that manufacturers adhere to certain
guidelines to provide reasonable assurance of utility, safety,
and effectiveness. These guidelines include labeling
requirements, registration with the FDA as a manufacturer,
listing of devices in commercial distribution with the FDA,
notification to FDA of devices proposed to be marketed,
conformance to specified current good manufacturing practices in
the manufacture of the devices, conformance to certain record-
keeping requirements, and, in the case of Class II devices,
conformance to certain performance standards. At the present
time, the Company believes that it is in compliance with
regulations set forth by the FDA.
Information About Foreign and Domestic Operations and Export
Sales.
- ------------------------------------------------------------
The Company had export sales of $45,990 during the last fiscal
year, and export sales of $33,930 during the fiscal year ending
in 2008. The Company also believes that some of its medical
devices were sold to distributors within the United States who
resold the devices in foreign markets. However, the Company
does not have any information regarding such sales, and such
sales are not considered to be material.
The Company does not rely on any foreign operations other than
its dealers and marketing representatives in their respective
marketing areas. See "Marketing and Distribution." It is not
anticipated export sales will be material to operating revenues
or income of the Company. Foreign sales are contingent upon,
among other factors, foreign trade regulations, value of the
United States Dollar and, where required, government approval of
the Company's products including CE Marketing requirements.
The Company is exposed to risks generally attendant to foreign
operations, including but not limited to, trade restrictions,
tariffs, embargos, foreign war and unrest and competition from
foreign and domestic producers. Management believes the partial
or total loss of foreign operations would not have a material
impact on the Company's financial condition or results of
operations.
Environmental Protection Expenditures.
- -------------------------------------
The Company's operations are not subject to any federal, state
or local laws regulating the discharge of materials into the
environment which materially affect earnings or the competitive
position of the Company, although the Company is subject to such
laws. There were no material capital expenditures made during
the last fiscal year to comply with such laws, nor are any such
expenditures anticipated for Fiscal 2010.
Employees.
- ---------
The Company presently has four full-time employees comprised of
the President (who also presently serves as the Director of
Marketing and Technical Operations), and three Vice Presidents.
The Company also has several part-time employees in the
production department when needed.
Website.
- -------
The Company maintains a Website at www.biosynergyinc.com. The
Company does not make available on its Website free of charge
its annual report on form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act (15 U.S.C. 78m(a) or 78o(d)). Such reports are not
available on the Company's Website because management seeks to
minimize costs associated with maintaining the Website. The
Company will provide electronic or paper copies of its filings
free of charge upon request.
Reports to Shareholders.
- -----------------------
The Company is not required to deliver annual reports to its
shareholders. Historically, the Company has not delivered
annual reports to its shareholders and does not intend to do so
this year. However, all written material filed with the
Securities and Exchange Commission may be read and copied at the
Securities and Exchange Commission's Public Reference Room at
450 5th Street, N.W., Washington, D.C. 20549. Such information
may also be obtained from the Public Reference Room by calling
1-800-SEC-0330 or by visiting the Securities and Exchange
Commission's internet site at www.sec.gov. You may obtain
copies of this Annual Report and other reports filed with the
Securities and Exchange Commission by contacting the Company at
1940 East Devon Avenue, Elk Grove Village, Illinois 60007,
telephone number 847-956-0471.
Item 2. Properties.
-----------
The Company's production facilities, research facilities, and
administrative offices are located at 1940 East Devon, Elk Grove
Village, Illinois 60007, in a 10,400 square foot facility leased
from an unaffiliated third party. The lease for these
facilities expires on January 31, 2011.
A majority of the Company's Elk Grove Village facility is
currently in use; however, Management believes this facility is
adequate for its needs in the foreseeable future. Located at
the Company's facility is equipment utilized for research,
development, and manufacturing of the Company's products.
The Company does not as a matter of policy invest in any
derivative financial instruments or any other instruments as
securities which are subject to market fluctuations which could
adversely affect the financial condition or operations of the
Company. The Company does not invest in real estate, mortgages
or in entities owing or investing in real estate.
Item 3. Legal Proceedings.
-----------------
There is no material litigation threatened or pending against
the Company or any of its properties.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
--------------------------------------------------
Market Information.
- ------------------
Although the common stock of the Company is traded in the over-
the-counter market, there is no established public trading
market due to limited and sporadic trades. Information
regarding these trades is compiled by the Stock Section of the
National Daily Quotation Service ("Pink Sheets") and selected
broker-dealers trading such common stock.
Holders.
- -------
As of April 30, 2009, there were approximately 859 shareholders
of record of the Company's common stock.
Dividends.
- ---------
The Company has never declared any dividends and does not intend
to do so until such time as the Company sustains a profitable
status and has provided for all of its capital requirements.
Common Stock for Issuance Under Equity Compensation Plans.
- ---------------------------------------------------------
As of April 30, 2009, the Company has no outstanding equity
compensation plans and otherwise has no obligation to issue or
sell stock pursuant to an option or similar agreement.
Item 6. Selected Financial Data.
------------------------
The registrant is not required to furnish any information in
this Item.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
--------------------------------------------------
Net Sales.
- ---------
Net sales for the fiscal year ending April 30, 2009 were $9,509,
or .9%, higher than the previous fiscal year. The increase in
sales during Fiscal 2009 was primarily due to increased sales of
the Company's HemoTemp(Registered) II blood temperature
indicators. The Company experienced an increase of $22,700, or
2.42%, in sales of its HemoTemp(Registered) II product in Fiscal
2009 as compared to Fiscal 2008. The increase in net sales of
the HemoTemp(Registered) II product is a result of price
increases as well as an increase in unit sales volume during
Fiscal 2009.
Other Revenues.
- --------------
Interest income for Fiscal 2009 was $4,191 less than fiscal 2008
due to a decrease in the interest rate paid on investments of
available cash during the fiscal year ending April 30, 2009. At
April 30, 2009, the Company had invested $100,000 in a
certificate of deposit dated February 23, 2009, with a maturity
date of February 23, 2010, at an interest rate of 2.75% APY.
The Company also invested $100,000 in a certificate of deposit
dated April 22, 2009, with a maturity date of April 22, 2010, at
an interest rate of 2.0% APY. During Fiscal 2009, the Company
maintained a money market account which received an interest
rate between 0.4% and 2.22% APY. The Company also realized
$1,920 in miscellaneous income from subleasing a portion of the
Company's storage space during Fiscal 2009.
Costs and Expenses.
- ------------------
Overall operating costs and expenses for the fiscal year ending
April 30, 2009 increased by $58,210 compared to the fiscal year
ending in 2008. The increase in operating costs and expenses
for Fiscal 2009 was generally related to expenses incurred as
the result of increased legal and employee expenses. With the
exception of the above expenses, the overhead of the Company has
remained substantially constant. In order for the Company to
continue without materially altering its present operations, the
overall operating costs and expenses for the ensuing fiscal year
are expected to be similar to or slightly higher than those of
the last fiscal year.
Cost of Sales.
- -------------
As a percentage of net sales, the cost of sales was 27.57% for
the fiscal year ending April 30, 2009 and 28.24% for the fiscal
year ending April 30, 2008. This decrease in cost of sales as a
percentage of net sales is primarily due to increases in the
sales price of the Company's products during the comparative
time periods. The Company expects that the cost of sales as a
percentage of net sales will remain relatively stable over the
next fiscal year in the absence of a material change in unit
sales volume or an increase in cost of raw materials.
Research and Development Expenses.
- ---------------------------------
Research and development expenses increased during the fiscal
year ending in 2009 by $4,385 or 5%, as compared to the fiscal
year ending in 2008. The overall increase from Fiscal 2008 is
due to increases in employee costs and supplies. The Company is
investigating several new products including certain compounds
for use in food and other products as antibacterial agents and
research intended to improve the Company's current product line.
These development expenses have remained substantially constant
for the past three years. There is insufficient information
available to determine the extent to which the Company will be
required to allocate its resources to the continued development
of these products. See "Narrative Description of Business -
Products Under Development."
Marketing Expenses.
- ------------------
The Company's marketing expenses were $138,918 in 2009 as
compared to $120,034 for the fiscal year ending in 2008. The
increase for Fiscal 2009 was primarily due to an increase in
product advertising costs and employee salaries. The Company
will continue to increase its marketing activities as resources
became available which management believes is necessary to
continue the Company's growth.
General and Administrative Expenses.
- -----------------------------------
The Company's general and administrative costs increased by
$34,941 as compared to the 2008 fiscal year. The increase was
primarily the result of increases in legal fees, employee costs
and general maintenance costs, offset by a decrease in write-
downs of obsolete inventory and general insurance. Except for
unforeseen extraordinary items, increases to employee
compensation associated with the Company's 401(k) plan and
formal bonus plan, and normal increases in employee
compensation, it is unlikely general and administrative expenses
will materially change during Fiscal 2010.
Net Income/Loss.
- ---------------
The Company experienced a net after-tax profit of $91,364 for
Fiscal 2009 as compared to a net after-tax profit of $106,886
for Fiscal 2008. The overall decrease in profitability of the
Company is due to increased expenses during Fiscal 2009. See
discussion of various expenses above.
Assets.
- ------
Since April 30, 2008, the Company's assets have increased by
$58,546. This increase is primarily due to increased cash
resulting from the Company's profit position. Other changes in
specific items do not reflect transactions outside the ordinary
course of business. See also "Related Party Transactions"
below.
Related Party Transactions.
- --------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at April 30, 2009 and 2008. This
account primarily represents common expenses which are charged
by the Company to FKSI for reimbursement. These expenses
include certain office expenses, general operating expenses and
legal fees incurred in the ordinary course of business. See
"Financial Statements." No interest is received or accrued by
the Company. Collectibility of the amounts due from FKSI cannot
be assured without the liquidation of all or a portion of its
assets, including a portion of its common stock of the Company.
As a result, $19,699 of the amount owed by FKSI to the Company
was reclassified as a reduction of FKSI's capital in the
Company.
Lauane C. Addis, Secretary and Director of the Company, is a
member of the law firm of Stahl Cowen Crowley Addis LLC. Mr.
Addis has represented the Company with respect to the
preparation and filing of this Report. Mr. Addis, and other
members and associates of Stahl Cowen Crowley Addis LLC, perform
other legal services for the Company from time to time, and it
is anticipated such services will be performed by Mr. Addis and
other members and associates of Stahl Cowen Crowley Addis LLC,
in the future. During Fiscal 2009, the Company paid $36,000 in
legal fees to Stahl Cowen Crowley Addis LLC, some of which
inured to the benefit of Mr. Addis in the form of distributions
from the law firm.
Liabilities.
- -----------
The Company's current liabilities have decreased by $33,572
since April 30, 2008. This decrease is primarily due to reduced
Income Taxes payable, reduced number of vacation days earned but
not paid as of April 30, 2009 as compared to the fiscal year
ended April 30, 2008, and ordinary fluctuations in operations.
The decrease does not represent any material change in the
financial status or operations of the Company. See also
"Assets" and "Liquidity and Capital Resources."
Current Assets/Liabilities Ratio.
- --------------------------------
The ratio of current assets to current liabilities, 14.32 to 1,
has increased from 8.11 to 1 at April 30, 2008. The increase in
ratio of current assets to current liabilities is a result of
recent net income realized by the Company, and is reflective of
a decrease in current payables. In order to maintain the
Company's asset/liability ratio, the Company's operations must
remain profitable.
Liquidity and Capital Resources.
- -------------------------------
During the fiscal year ending April 30, 2009, the Company had an
increase in net working capital of $93,445. The increase in net
working capital is primarily due to the Company's realizing a
profit in Fiscal 2009.
The Company has attempted to conserve working capital whenever
possible. To this end, the Company attempts to keep inventory
at a minimum level. 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 sufficient inventory to meet the delivery requirements of
customers and thus, inventory represents a substantial portion
of the Company's current assets.
The Company presently grants payment terms to customers and
dealers of 30 days. Although the Company experiences varying
collection periods of its account receivable, the Company
believes that uncollectible accounts receivable will not have a
significant effect on future liquidity.
Cash provided by operating activities was $21,449 during Fiscal
2009. Cash provided by operating activities was $121,049 during
Fiscal 2008. An aggregate of $17,177 was also used for
equipment purchases and capitalized patent costs during Fiscal
2009. Except for operating capital, limited equipment purchases
and patent expenses, Management is not aware of any other
material capital requirements or material contingencies for
which it must provide.
As of April 30, 2009, the Company had $766,205 of current assets
available. Of this amount, $48,937 was prepaid expenses,
$81,299 was inventory, $150,033 was net trade receivables, and
$485,395 was cash and short term investments. The Company's
cash flow from operations is considered adequate to fund the
short-term operating capital needs of the Company. However, 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 operating capital needs of the
Company if the Company does not remain profitable.
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 on the Company's revenues or
income 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 accounting policies are disclosed in Note 2 to the
Financial Statements for the year ending April 30, 2009. 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:
USE OF ESTIMATES - preparation of financial statements and
conformity with accounting principals 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.
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - In May
2008, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards SFAS 162, "The
Hierarchy of Generally Accepted Accounting Principles" (FAS
162). FAS 162 identifies the sources of accounting principles
and the framework for selecting the principles used in the
preparation of financial statements for nongovernmental entities
that are presented in conformity with accounting principles
generally accepted in the United States of America. FAS 162
shall be effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendment to AU
Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles." The Company does not
expect this adoption to have a material impact on its financial
statements.
DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -
In March 2008, FASB issued SFAS 161, "Disclosures about
Derivative Instruments and Hedging Activities - an amendment of
FASB Statement No. 133" (FAS 161). FAS 161 changes the
disclosure requirement for derivative instruments and hedging
activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative
instruments; (b) how derivative instruments and related hedged
items are accounted for under FAS 133 and its related
interpretations; and (c) how derivative instruments and related
hedged items affect an entity's financial position, financial
performance and cash flows. The guidance in FAS 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early
application encouraged. FAS 161 encourages, but does not
require, comparative disclosures for earlier periods at initial
adoption. FAS 161 will be effective for the Company beginning
in the first quarter of fiscal 2010 (May 1, 2009). The Company
is assessing the potential impact that the adoption of FAS 161
will have on its financial condition and results of operations.
BUSINESS COMBINATIONS - In December 2007, the FASB issued
Statement of Financial Accounting Standards (SFAS) No. 141
(revised 2007), "Business Combinations." SFAS No. 141(R)
significantly changes the accounting for business combinations
in a number of areas including the treatment of contingent
consideration, preacquisition contingencies, transaction costs,
in-process research and development and restructuring costs. In
addition, under SFAS No. 141(R), changes in an acquired entity's
deferred tax assets and uncertain tax positions after the
measurement period will impact income tax expense. SFAS No
141(R) will be effective for the Company beginning in the first
quarter of fiscal 2010 (May 1, 2009). The impact of this
standard will only be to apply it to any business combinations
that may occur in the future.
VALUATION OF FINANCIAL ASSETS AND LIABILITIES - In February
2007, the FASB issued SFAS NO. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - including an
amendment to FASB Statement No. 115." SFAS No. 159 permits
entities to measure certain financial instruments and certain
other items at fair value that are not currently required to be
measured at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159 was effective
for the Company beginning in the first quarter of fiscal 2009
(May 1, 2008). This standard is elective, and management did no
choose to adopt the standard in the current period.
MINORITY INTEREST - In December 2007, the FASB issued SFAS No.
160, "Noncontrolling Interests in Consolidated Financial
Statements, and amendment of ARB No. 51." SFAS No. 160 changes
the accounting and reporting for minority interests, which will
be recharacterized as noncontrolling interests and classified as
a component of equity. This new consolidation method
significantly changes the accounting for transactions with
minority interest holders. SFAS No. 160 is effective for fiscal
years beginning after December 15, 2008. SFAS will be effective
for the Company beginning in the first quarter of fiscal 2010
(May 1, 2009). The Company has no noncontrolling interests,
thus management feels that FAS 160 will not have an impact on
its financial position and results of operations.
FAIR VALUE OF ASSETS, LIABILITIES AND EXPENDITURES - In
September 2006, FASB issued SFAS 157, "Fair Value Measurements"
(FAS 157). FAS 157 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants as of the
measurement date, establishes a framework for measuring fair
value and expands disclosures about fair value measurements.
FAS 157 also establishes a fair value hierarchy that prioritizes
information used in developing assumptions when pricing an asset
of liability. FAS 157 is effective for the Company beginning in
fiscal year 2009. The Company's adoption of FAS 157 did not
have a significant effect on the Company's financial position or
results of operations.
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
including level of reimbursement by insurance companies and
Medicare and Medicaid agencies, and 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 the Company's independent public
accountants.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
-----------------------------------------------------
The Company has not entered into any transactions using
derivative financial instruments, nor has the Company invested
in any instruments or securities which are subject to market
fluctuations which could adversely affect the financial
condition or operations of the Company.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The financial statements required by this item are filed as a
part of this report as described in Item 15.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
------------------------------------------------
The Company retained the services of Blackman Kallick, LLP to
audit the Company's annual financial statements as of April 30,
2009 and 2008, and to review the Company's quarterly statements.
No accountants of the Company were dismissed or resigned during
the past two years. There have been no disagreements with the
Company's accountants regarding accounting matters or financial
disclosure.
Item 9A. 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 were effective.
(a) Management's Annual Report on Internal Control Over
Financial Reporting.
(1) Management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) for the Company. The Company maintains processes
designed by, or under the supervision of the Company's
management, including but not limited to the Company's Chief
Executive Officer and its Chief Accounting Officer, or persons
performing similar functions, and effected by the Company's
board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles including policies and procedures that:
(i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and
disposition of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made only in accordance
with authorization of management and directors of the Company;
and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on the
financial statements.
(2) The Company has an Audit Committee that meets periodically
with management to review the manner in which they are
performing their responsibilities and to discuss auditing,
internal accounting controls and financial reporting matters.
It is the opinion of the Audit Committee that the Company's
internal control over financial reporting is effective. The
internal control over financial reporting is augmented by
qualified personnel and is evaluated on a periodic basis. The
evaluation is essentially an audit of the controls and
procedures (and risk factors related to them) which was
developed by the Company utilizing the framework proscribed by
the committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control - Integrated Framework.
(3) Prior to the date of filing this Form 10-K, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's management, including the
Company's Chief Executive Officer and the Company's Chief
Accounting Officer, of the effectiveness as of the end of the
Company's fiscal year ending April 30, 2009 of the Company's
internal control over financial reporting pursuant to Exchange
Act Rule 13a-15(c). Based upon that evaluation, the Company's
Chief Executive Officer and the Company's Chief Accounting
Officer conclude that the Company's internal control over
financial reporting is effective.
(4) This Annual Report does not include an attestation report
of the Company's registered public accounting firm regarding
internal control over financial reporting. Management's report
was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to
provide only management's report in this Annual Report.
(b) There have been no changes in the Company's internal
control over financial reporting during the Company's Fiscal
Quarter ending April 30, 2009 that have materially affected or
are likely to materially affect the Company's internal control
over financial reporting.
Item 9B. Other Information.
------------------
No information was required to be disclosed by the Company on
Form 8-K during the fourth quarter of the year covered by this
Annual Report.
Part III
--------
The information contained in items 10, 11, 12, and 13 is the
same information to be included in the Registrant's definitive
proxy statement, if any, to be filed with the Commission, and is
included herein for convenience only.
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
The executive officers and directors of the Company are:
Served in Office
Name Age Positions with Company Since
- -------------------- ----- -------------------------- -----------------
Fred K. Suzuki 79 President, Chief February, 1976<F1>
Executive Officer,
Treasurer, Director of
Research and Development,
Director of Marketing
and Sales, and Chairman
of the Board of Directors
Mary K. Friske 49 Vice President - September, 1993
Administration,
Manager of Sales
Laurence Mead 47 Vice President - April, 1994
Manufacturing and
Development, Chief
Operating Officer, Chief
Financial Officer, Chief
Accounting Officer, and
Treasurer
Manager of Financial
and Product Development
Beverly R. Suzuki 74 Vice President - Customer June, 2005
Support
Lauane C. Addis 53 Corporate Counsel, February, 1984
Secretary and December, 1985
Director February, 1987
James F. Schembri 74 Director November, 1990
- ------------------------------
<FN>
<F1> Mr. Suzuki did not serve as President from August 1982
through February 1983. Prior to October, 1984, Mr. Suzuki
served as Treasurer of the Company, and was once again appointed
Treasurer on June 30, 1991.
</FN>
As an incentive for his investment in the Company, the Board of
Directors agreed to nominate James F. Schembri as a candidate
for election to the Board of Directors of the Company. Other
than the foregoing, there are no arrangements or understandings
between any of the directors or officers of the Company and any
other person pursuant to which any director or officer was or is
to be selected as a director or officer.
The term of office for the members of the Board of Directors
extends to the next regular meeting of shareholders or until
they resign and until their successors are duly elected. The
term of office for the officers of the Company extends until
they resign, are not re-elected by the Board of Directors, or
are otherwise replaced by the Board of Directors of the Company.
FAMILY RELATIONSHIPS. Lauane C. Addis is the son-in-law of Fred
K. Suzuki. Beverly R. Suzuki is the spouse of Fred K. Suzuki.
Otherwise, there is no family relationship between any director,
executive officer, or person nominated or chosen by the Company
to become a director or executive officer.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. None of the officers
or directors are or have been involved in any legal proceedings
which are material to an evaluation of the ability or integrity
of same.
BUSINESS EXPERIENCE. Certain information regarding the business
experience of the directors, officers, significant employees and
consultants of the Company are set forth below:
FRED K. SUZUKI, Jr., Chairman of the Board, President, Chief
Executive Officer, Director of Research and Development and
Director of Marketing and Sales. Mr. Suzuki is founder of the
Company and has served as President of the Company since its
inception in 1976 to August 1982 and from February 1983 to the
present. He has served as Chairman of the Board of Directors of
the Company since its inception to the present, and as Treasurer
from its inception to October, 1984 and from July, 1991 until
June, 2008. Mr. Suzuki is also President and Chairman of the
Board of Directors of F.K. Suzuki International, Inc. ("FKSI"),
and President and Chairman of the Board of Directors of Medlab
Products, Inc. ("Medlab"), affiliates of the Company. Mr.
Suzuki is the sole owner, President and Director of Suzuki
International, Inc. ("SI"). Mr. Suzuki also served as President
and Chairman of the Board of Directors of Stevia Company, Inc.
("Stevia") until its dissolution on April 16, 1999. FKSI is a
holding company of Medlab and the Company, and was a holder of a
majority of the common stock of Stevia until its dissolution.
As such, it has no other business operations. See "Security
Ownership of Certain Beneficial Owners and Management." Medlab
is a dormant company, organized to develop, manufacture, and
market scientific products. Stevia was a development company in
the business of developing, manufacturing, and marketing natural
sweeteners and other products derived from Stevia rebaudiana
plant. SI is in the business of marketing various products.
Mr. Suzuki has developed several patents or patents pending for
clinical instruments and has licensed them to unaffiliated
corporations. These patents do not inure to the benefit of the
Company. Mr. Suzuki has developed several patents in the area
of Diterpene glycosides chemistry derived from the Stevia
rebaudiana plant. Mr. Suzuki also holds patents in the area of
liquid crystal chemistry. Mr. Suzuki attended Roosevelt
University from 1951 to 1954, where he studied Chemistry and
Biology.
MARY K. FRISKE, Vice President - Administration and Manager of
Sales. Ms. Friske joined the office staff in July, 1983. Ms.
Friske served as an Executive Secretary for several years and
was promoted to Office Manager in 1989. In September, 1993, Ms.
Friske was appointed Vice President - Administration and Manager
of Sales. Ms. Friske received her Bachelor of Science degree in
May, 1981 from Eastern Illinois University where she majored in
Personnel Management.
LAURENCE MEAD, Chief Operating Officer, Chief Financial Officer,
Vice President - Manufacturing and Development, Chief Accounting
Officer, Treasurer, Manager of Product Development and Director.
Mr. Mead joined the production department of the Company in
1980, and has served as the Company's Production Manager since
1984. In April, 1994, Mr. Mead was appointed Vice President -
Manufacturing and Manager of Financial and Product Development.
Mr. Mead was appointed to the Company's Board of Directors in
June, 2006. Mr. Mead received his Bachelor of Science degree in
August, 1992 from Roosevelt University where he majored in
Accounting.
BEVERLY R. SUZUKI, Vice President - Customer Service. Mrs.
Suzuki was elected to the office of Vice-President - Customer
Service on June 20, 2005. Mrs. Suzuki served the Company as a
sales representative from 1993 through 2000 promoting the
Company's products directly to end users. In 2000, Mrs. Suzuki
was promoted to the position of research associate/sales
liaison. During this time, Mrs. Suzuki assisted both in
research and product production development as well as
continuing with her marketing and sales responsibilities. Mrs.
Suzuki's extensive experience in sales and customer service
includes serving as a sales representative for Computer Services
Bull, H.N. from 1992 to 1993, serving as a sales representative
for Honeywell, Inc. from 1984 to 1991, and serving as human
resources assistant for UOP, Inc. from 1970 to 1983. Mrs.
Suzuki attended DePaul University from 1963 to 1966 and again
from 1978 to 1979. Mrs. Suzuki also completed course work at
William Rainey Harper College during 1983 and 1984.
LAUANE C. ADDIS, Secretary and Director. Mr. Addis is currently
a member of the law firm Stahl Cowen Crowley Addis LLC, Chicago,
Illinois. Mr. Addis served the Company from February, 1984 to
December, 1985 as its Vice President - Finance and Chief
Financial Officer. From December, 1985 thru June, 1991, Mr.
Addis also served as Executive Vice President, Chief Operating
Officer, Chief Financial Officer, and Treasurer of the Company.
Mr. Addis is an officer and director of FKSI, an affiliate of
the Company. Mr. Addis is also a member of the board of
directors of Northwest Suburban Day Care Center, a non-profit
organization which provides child day care services for low-
income and indigent persons. Mr. Addis graduated from Andrews
University with a B.A. in History and Business Administration in
June, 1978. He received his Doctor of Jurisprudence from Baylor
University in 1981 and his Master of Laws in Taxation from the
University of Denver in 1982. Mr. Addis is a member of the
Colorado, Illinois and Texas Bar Associations.
JAMES F. SCHEMBRI, Director. Mr. Schembri was elected to the
Board of Directors on November 15, 1990. Mr. Schembri is the
founder and President of Schembri & Associates (formerly
Automatic Controls Company). This company was a manufacturer's
representative with offices in Michigan, Ohio and Kentucky. Mr.
Schembri is one of the founders and President of Fenton Systems,
Inc., Goodrich, Michigan. In addition to these activities, Mr.
Schembri is founder and President of Wickfield Leasing Company,
which leases automobiles and office equipment. Mr. Schembri
also served as a director of Stevia until its dissolution on
April 16, 1999. Mr. Schembri received his Bachelor of Science
Degree in Mechanical Engineering from the University of Detroit
in June, 1957.
Section 16(a) Beneficial Ownership Reporting Compliance.
- -------------------------------------------------------
The Company did not receive any reports during fiscal 2009
required to be filed by a director, officer or beneficial owner
of more than 10% of the Company's common stock pursuant to
Section 16(a) of the Securities and Exchange Act. Management is
not aware of any director, officer or beneficial owner of more
than 10% of the Company's common stock who has failed to file on
a timely basis any reports required by Section 16(a) of the
Securities Exchange Act during the fiscal year ending April 30,
2009.
Audit Committee.
- ---------------
The Audit Committee reviews and, when it deems appropriate,
approves internal accounting and financial controls for the
Company and accounting principals and auditing practices and
procedures to be employed in the preparation and review of the
financial statements of the Company. The Audit Committee also
meets periodically with management to review the manner in which
they are performing their responsibilities and to discuss
auditing, internal accounting controls and financial reporting
matters. The Audit Committee also makes recommendations to the
Board of Directors concerning the engagement of independent
public auditors to audit the annual consolidated financial
statements, review the unaudited quarterly financial statements
of the Company, and perform other services for the Company. The
Audit Committee arranges with such auditors the scope of the
audit to be undertaken by them and any other services to be
provided. The Audit Committee currently has one member, James
F. Schembri, a director of the Company. The Board of Directors
has determined that Mr. Schembri is a financial expert as a
result of Mr. Schembri's experience described under "Business
Experience" above. Mr. Schembri is an independent director as
defined in Rule 401of Regulation S-B under the Securities Act
and the Securities Exchange Act.
Audit Committee Charter.
- -----------------------
The Board of Directors has adopted a written charter for the
Audit Committee. A copy of the Audit Committee Charter is
available without charge upon request delivered to the Company
at its principal executive offices.
Code of Ethics.
- --------------
The Company has adopted a Code of Ethics which applies to all
officers of the Company. A copy of the Company's Code of Ethics
has been filed with this Annual Report on Form 10-K as Exhibit
14 and is incorporated by reference.
Item 11. Executive Compensation.
----------------------
The following summary compensation table sets forth a summary of
compensation for services in all capacities to the Company
during the fiscal years ended April 30, 2009 and 2008 paid to
the Chief Executive Officer and Chief Operating Officer. None
of the Company's other executive officers received annual
salaries and bonuses for such fiscal years exceeding $100,000.
Summary Compensation Table:
Non-Equity Nonqualified
Incentive Plan Deferred All Other
Stock Option Compensation Compensation Compensation
Salary Bonus Awards Awards <F2> Earnings <F1> Total
Name and Principal Position Year $ $ $ $ $ $ $ $
- --------------------------- ---- -------- ------- ------- ------- -------------- ------------ ------------ --------
Fred K. Suzuki,
President, Chairman of
the Board, and Chief
Executive Officer 2009 $117,791 $ 2,880 - - $ 5,204 - $16,754 $142,629
2008 $106,896 $6,960 - - - - $2,500 $116,356
Laurence C. Mead, Chief
Operating Officer, Chief
Financial Officer, Vice
President/Manufacturing
and Development Chief
Accounting Officer,
Treasurer and
Manager of Product
Development 2009 $102,018 $2,880 - - $ 4,508 - $8,380 $117,786
2008 $91,700 $6,380 - - - - $2,500 $100,580
- ------------------------------
<FN>
<F1> No executive officer received perquisites in excess of the
lesser of $50,000 or 10% of the aggregate of such officer's
salary and bonus. Mr. Suzuki received $14,254 in lieu of
accrued vacation for Fiscal 2009. Mr. Suzuki and Mr. Mead each
received $2,500 for their services as directors in Fiscal 2009
and 2008. Mr. Mead also received $5,880 in lieu of accrued
vacation for Fiscal 2009.
<F2> Amounts represent Company's match portion of 401(k)
contribution.
</FN>
Stock Options.
- -------------
The Company did not grant stock options to any of the named
executive officers during the predecessor period of the fiscal
year ended April 30, 2009, and no such stock options were
outstanding as of April 30, 2009.
Directors Compensation
- ----------------------
The directors' compensation is determined by the Company's
Compensation Committee and approved by the Board of Directors.
The following Director Compensation Table sets forth a summary
of compensation for services by the directors of the Company in
their capacities as directors for the fiscal year ending April
30, 2009.
Directors Compensation Table
Fees Earned or Paid
in Cash Total
Director Name $ $
- --------------------------------- ------------------- -----------
<s>
Fred K. Suzuki, President,
Chairman of the Board and
Chief Executive Officer<F1> $2,500 $2,500
James F. Schembri, Director $2,500 $2,500
Lauane C. Addis, Director and $2,500 $2,500
Secretary
Laurence C. Mead, Director, Vice-
President-Manufacturing, Chief
Operating Officer, and Chief
Accounting Officer <F1> $2,500 $2,500
- ------------------------
<FN>
<F1> Does not include compensation received as an officer
of the Company. See also "Summary Compensation Table"
above for more information.
</FN>
All officers and directors are reimbursed for out-of-pocket
expenses incurred in connection with the Company's business.
See "Certain Relationships and Related Party Transactions."
The Company put in place a 401(k) retirement plan in June of
2008 to benefit the Company's employees, including officers.
The plan provides for the Company to match participant
contributions up to 5% of the participant's compensation.
Management of the Company believes it is important to provide a
retirement plan for the benefit of its employees to retain key
employees and provide its employees with retirement benefits.
Compensation Committee.
- ----------------------
The Company has a Compensation Committee of its Board of
Directors. The Compensation Committee makes all decisions
concerning the compensation of the officers and directors of the
Company, including, but not limited to, the granting of options
to acquire common stock of the Company. The current members of
the Compensation Committee are James F. Schembri, director of
the Company, and Lauane C. Addis, director and the Secretary of
the Company.
Compensation Committee Interlocks and Insider Participation.
- -----------------------------------------------------------
The members of the Company's Board of Directors serving as the
Compensation Committee are set forth in the preceding section.
During the most recent fiscal year, none of our executive
officers served on the Compensation Committee (or equivalent),
or the board of directors, of another entity whose executive
officer(s) served on our Compensation Committee.
Compensation Committee Charter.
- ------------------------------
The Board of Directors has adopted a written charter for the
Compensation Committee. A copy of the Compensation Committee
Charter is available without charge upon request delivered to
the Company at its principal executive offices.
Competitiveness of Company's Compensation System.
- ------------------------------------------------
The Compensation Committee of the Company's Board of Directors
has reviewed and discussed the competitiveness of the Company's
compensation system and has concluded that such system is
competitive with the compensation systems of similar sized
organizations operating in identical or similar industries.
Performance of the Compensation Committee.
- ------------------------------------------
The Compensation Committee of the Company's Board of Directors
has reviewed its performance during the fiscal year ending April
30, 2009 and has concluded that the Compensation Committee has
performed all necessary duties and complied with all of its
obligations as set forth in the Compensation Committee charter.
The Compensation Committee has adopted a bonus program for all
executive officers of the Company based on Company
profitability. In the aggregate, $25,020 in bonuses was paid or
accrued during fiscal year ended April 30, 2009 to four
executive officers. Under the bonus program, as Company
profitability improves, the bonus payouts will increase. The
distribution of the bonus payouts under the bonus program is
determined with consultation from the Company's CEO.
Report of the Compensation Committee.
- ------------------------------------
The Compensation Committee of the Company's Board of Directors
has reviewed and discussed the Compensation Discussion and
Analysis presented above with management and, based on that
review and discussion, has recommended to the Company's Board of
Directors that the Compensation Discussion and Analysis be
included in this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
----------------------------------------------------
The following table sets forth information as of April 30, 2009,
as to the voting securities of the Company owned by the officers
and directors of the Company and by each person who owns of
record, or is known by the Company to own beneficially, more
than 5% of any class of voting securities.
Amount and Nature
Name and Address of Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class
- -------------- ----------------------- ------------------ ----------
<s>
Common Stock Fred K. Suzuki 5,526,146 shares 37.00%
710 S. Kennicott of record and
Arlington Heights, beneficial (1)
Illinois 60005
Common Stock F.K. Suzuki Inter- 4,497,146 shares 30.11%
national, Inc. record and bene-
1940 E. Devon Ave. ficial
Elk Grove Village, IL
60007
Common Stock Lauane C. Addis 4,506,146 shares 30.17%
1819 Orleans Circle record and bene-
Elk Grove Village, IL ficial (2)
60007
Common Stock James F. Schembri 1,291,500 shares 8.65%
3565 Port Cove Dr. #73 of record and
Waterford, MI 48328 beneficial (3)
Common Stock Mary K. Friske (4) 41,000 shares of .27%
940 Bradley Court record and
Palatine, IL 60074 beneficial
Common Stock Laurence C. Mead (5) 61,250 shares of .41%
1151 Warwick Cir. North record and
Hoffman Estates IL beneficial
60169
Common Stock Beverly R. Suzuki (6) 820,000 shares of 5.49%
710 S. Kennicott record and
Arlington Heights IL beneficial
60005
Common Stock All directors and 6,928,896 46.39%
officers as a
group (6 members)
- ----------------------
(1) Fred K. Suzuki is President of F.K. Suzuki International,
Inc. ("FKSI") and owns 33.5% of the outstanding common stock of
FKSI. Mr. Suzuki personally holds of record 209,000 shares of
the Company's common stock; however he is deemed to be
beneficial owner by reason of voting and disposition control of
4,497,146 shares which are owned by FKSI and 820,000 shares
which are owned by him and Beverly R. Suzuki as joint tenants.
(2) Mr. Addis personally owns 9,000 shares of the outstanding
Common Stock of the Company. In addition, Mr. Addis owns 31.1%
of the outstanding Common Stock of FKSI, which owns 30.11% of
the Common Stock of the Company. Mr. Addis is therefore deemed
to be beneficial owner by reason of voting and disposition
control of 4,497,146 shares owned by FKSI.
(3) Included in the shares owned by Mr. Schembri are 66,000
shares in Mr. Schembri's individual retirement account for the
benefit of Mr. Schembri.
(4) In addition to the Shares of outstanding common stock of
the Company owned by Mary K. Friske, she also owns 200 shares,
or approximately .2%, of the outstanding common stock of FKSI,
which owns 30.11% of the common stock of the Company.
(5) In addition to the common stock of the Company owned by
Laurence C. Mead, he also owns 4,000 shares, or approximately
4%, of the outstanding common stock of FKSI, which owns 30.11%
of the common stock of the Company.
(6) Beverly R. Suzuki is deemed to be a beneficial owner by
reason of voting and disposition control of 820,000 shares owned
by her and Fred K. Suzuki as joint tenants.
Changes in Control.
- ------------------
The Company does not know of any arrangements, the operation of
which may at a subsequent date result in a change in control in
the Company nor has a change in the control of the Company
occurred during the last fiscal year.
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
---------------------------------------------------
At April 30, 2009, F.K. Suzuki International, Inc. ("FKSI") owed
$19,699 to the Company in connection with past shared common
expenses. Since a portion of this receivable had been
outstanding for a significant period of time, and FKSI was not
in a position to reimburse the Company without the liquidation
of all or a portion of its assets, including common stock of the
Company, $19,669 of the receivable balance was reclassified as a
contra-equity account thus reducing FKSI's capital in the
Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Lauane C. Addis, Secretary and Director, as a member of the law
firm of Stahl Cowen Crowley Addis LLC, has represented the
Company with respect to the preparation and filing of this
Report. Mr. Addis, and other Members and associates of Stahl
Cowen Crowley Addis LLC, perform other legal services for the
Company from time to time, and it is anticipated such services
will be performed by Mr. Addis and other members and associates
of Stahl Cowen Crowley Addis LLC, in the future. During Fiscal
2009, the Company paid $36,000 in legal fees to Stahl Cowen
Crowley Addis LLC, some of which inured to the benefit of Mr.
Addis in the form of distributions from the law firm. Mr. Addis
is an officer, director and shareholder of the Company, and is
also the son-in-law of Fred K. Suzuki, President and Chairman of
the Board of Directors. See "Directors and Executive Officers
of the Registrant" and "Security Ownership of Certain Beneficial
Owners and Management."
Except with regard to the above, there were no other material
transactions involving management of the Company or any third
party during the last fiscal year which accrued to the benefit
of officers or directors of the Company.
Item 14. Principal Accounting Fees and Services.
---------------------------------------
Blackman Kallick, LLP served as independent auditors for the
fiscal year ended April 30, 2009, and it has acted as auditors
for the Company since May 1, 2002.
Audit Fees.
- ----------
Fees billed by Blackman Kallick, LLP totaled $47,510 for year
ended April 30, 2009 and $48,042 for year ended April, 30, 2008.
This included fees for the annual audit and reviews of all the
Company's quarterly reports filed by the Company with the SEC
during the fiscal year ended April 30, 2009.
Audit-Related Fees.
- ------------------
Blackman Kallick, LLP did not bill any fees for professional
services described in paragraph 9(e)(2) of Schedule 14A during
the past two fiscal years.
Tax Fees.
- --------
During the fiscal year ending April 30, 2009, Blackman Kallick,
LLP billed the Company $4,063 for professional fees related to
tax services rendered to the Company. Blackman Kallick, LLP
billed the Company $4,860 for professional fees related to tax
services during the fiscal year ending April 30, 2008.
All Other Fees.
- ---------------
Blackman Kallick, LLP did not bill for any fees for professional
services described in Item 9(e)(4) of Schedule 14A during the
past two fiscal years.
Audit Committee Review.
- -----------------------
The Company's Audit Committee is required to approve all non-
audit services to be performed by Blackman Kallick, LLP. In
this respect, the Audit Committee has considered whether the
provision of the tax services during the Company's fiscal year
ending April 30, 2009 was compatible with maintaining the
independence of Blackman Kallick, LLP. The Audit Committee has
made a determination that the independence of Blackman Kallick,
LLP will not be adversely affected as a result of performance of
tax services for the Company, and therefore has approved the
performance of such tax services for the fiscal years ending
April 30, 2009 and April 30, 2008.
Item 15. Exhibits, Financial Statement Schedules
---------------------------------------
The following financial statements, schedules and exhibits are
filed as a part of this report:
(a) (1) Financial Statements.
Balance sheets for the fiscal years ending April 30,
2009 and 2008.
Statements of operations for the fiscal years ending
April 30, 2009 and 2008.
Statements of Shareholders' Equity for the fiscal years
April 30, 2009 and 2008.
Statements of Cash Flows for fiscal years ending
April 30, 2009 and 2008.
Notes to financial statements.
(a) (2) List of Financial Statement Schedules:
No financial schedules for the fiscal years ending April
30, 2009 and 2008 are submitted.
Except as listed above, there are no financial statement
schedules required to be filed by Item 8 of this Form 10-K
except for those otherwise shown on the financial statements or
notes thereto contained in this report.
(a)(3) The Following Exhibits are Filed as a Part of this
Report:
2. Plan of Acquisition, reorganization, arrangement,
liquidation or succession - none.
3. a. Articles of Incorporation(1)
b. Amended and Restated By-Laws(2)
4. Instruments Defining the Rights of Security Holders,
Including Indentures - none.
9. Voting Trust Agreements - none.
10. Material Contracts - none.
11. Statement Regarding Computation of Earnings Per Share
- none.
13. Annual or Quarterly Reports to Security Holders - none.
14. Code of Ethics.
(a) Amended and Restated Code of Ethics of Biosynergy, Inc.,
adopted as of June 30, 2009
16. Letter Regarding Change in Certifying Accountants -
none.
18. Letter Regarding Change in Accounting Principles -
none.
19. Previously Unfiled Documents - none.
22. Subsidiaries of Registrant - none.
23. Published Report Regarding Matters Submitted to Vote
of Security Holders - none.
24. Consent of Experts and Counsel - none.
25. Power of Attorney - none.
31.1 Certification of the Chief Executive Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934. Accompanying this Report.
31.2 Certification of the Chief Accounting Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934. Accompanying this Report.
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. Accompanying this Report.
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. Accompanying this Report.
(99) Additional Exhibits - none
- ---------------------------
(1) Incorporated by reference to a Registration Statement filed
on Form S-18 with the Securities and Exchange Commission, 1933
Act Registration Number 2-83015C, under the Securities Act of
1933, as amended.
(2) Incorporated by reference, to the Company's Current Report
filed on Form 8-K with the Securities and Exchange Commission as
of July 2, 2009.
(b) Reports on Form 8K. No current reports on Form 8K were
filed or were required to be filed during the last quarter
covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
REGISTRANT: BIOSYNERGY, INC.
/s/ Fred K. Suzuki /s/ July __, 2009
- ------------------------------- -------------
Fred K. Suzuki, Chairman of the Date
Board, Chief Executive
Officer and President
Pursuant to the requirements of Securities and Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Fred K. Suzuki /s/ July __, 2009
- ----------------------------------- -------------
Fred K. Suzuki, Chairman of the Date
Board of Directors, Chief Executive
Officer, President and Treasurer
/s/ Lauane C. Addis /s/ July __, 2009
- ----------------------------------- --------------
Lauane C. Addis, Secretary Date
and Director
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Fred K. Suzuki, certify that:
1. I have reviewed this Annual Report on Form 10-K of
Biosynergy, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses
in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: July __, 2009
/s/ Fred K. Suzuki /s/
- ---------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer and President
EXHIBIT 31.2
CERTIFICATION OF CHIEF ACCOUNTING OFFICER
I, Laurence C. Mead, certify that:
1. I have reviewed this Annual Report on Form 10-K of
Biosynergy, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses
in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: July __, 2009
/s/ Laurence C. Mead /s/
- ------------------------------------------------------
Laurence C. Mead
Vice President/Manufacturing and Development,
Chief Financial Officer, and Chief Accounting Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Biosynergy, Inc. (the
"Company") on Form 10-K for the year ending April 30, 2009, the
undersigned hereby certifies pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that: (1) the Report fully complies with the requirements
of Section 13(a) and 15(d) of the Securities and Exchange Act of
1934; and (2) the information contained in the Report fairly
represents, in all material respects, the financial conditions
and results of operations of the Company as of April 30, 2009,
and for the period then ended.
Biosynergy, Inc.
/s/ Fred K. Suzuki /s/
- --------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer and President
Dated: July __, 2009
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Biosynergy, Inc. (the
"Company") on Form 10-K for the year ending April 30, 2009, the
undersigned hereby certifies pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that: (1) the Report fully complies with the requirements
of Section 13(a) and 15(d) of the Securities and Exchange Act of
1934; and (2) the information contained in the Report fairly
represents, in all material respects, the financial conditions
and results of operations of the Company as of April 30, 2009,
and for the period then ended.
Biosynergy, Inc.
/s/Laurence C. Mead/s/
- ------------------------------------------------------
Laurence C. Mead
Vice President/Manufacturing and Development,
Chief Financial Officer, and Chief Accounting Officer
Dated: July __, 2009
Biosynergy, Inc.
Financial Statements for the
Years Ended April 30, 2009 and 2008
C o n t e n t s
Reference Page
Report of Independent Registered
Public Accounting Firm 1
Balance Sheets Exhibit A 2-3
Statements of Operations Exhibit B 4
Statements of Stockholders' Equity Exhibit C 5
Statements of Cash Flows Exhibit D 6
Notes to Financial Statements 7-15
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------
Board of Directors and Stockholders
Biosynergy, Inc.
Elk Grove Village, Illinois
We have audited the accompanying balance sheets of Biosynergy,
Inc. as of April 30, 2009 and 2008, and the related statements of
operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audit
included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Biosynergy, Inc. as of April 30, 2009 and 2008, and the results of
its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the
United States of America.
/s/ Blackman Kallick, LLP /s/
- ------------------------------
July 29, 2009
Chicago, Illinois
Balance Sheets Follow
Biosynergy, Inc.
Balance Sheets
April 30, 2009 and 2008
- ---------------------------------------------------------------------
Assets
--------
2009 2008
-------- --------
Current Assets
Cash $285,395 $281,123
Short-term investments 200,000 200,000
Accounts receivable - Trade (Net of allowance for
doubtful accounts of $500 in both 2009 and 2008) 150,033 143,656
Inventories 81,299 60,906
Prepaid expenses 48,937 19,013
Interest receivable 541 1,634
-------- --------
Total Current Assets 766,205 706,332
-------- --------
Equipment and Leasehold Improvements
Equipment 203,137 201,576
Leasehold improvements 20,022 18,175
-------- --------
223,159 219,751
Less accumulated depreciation and amortization 188,793 170,289
-------- --------
Total Equipment and Leasehold Improvements 34,366 49,462
-------- --------
Other Assets
Patents less accumulated amortization 15,938 16,995
Patents pending 85,282 70,456
Deposits 5,947 5,947
-------- --------
Total Other Assets 107,167 93,398
-------- --------
$907,738 $849,192
======== ========
The accompanying notes are an integral part of the financia statements.
-2-
Exhibit A
---------
- --------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------
2009 2008
-------- --------
Current Liabilities
Accounts payable $ 9,454 $ 17,895
Accrued compensation and payroll taxes 19,995 15,620
Deferred rent 5,733 6,197
Other accrued expenses 468 182
Accrued vacation 17,855 32,933
Income taxes payable - 14,250
-------- --------
Total Current Liabilities 53,505 87,077
-------- --------
Deferred Income Taxes 13,019 12,265
-------- --------
Stockholders' Equity
Common stock - No par value; 20,000,000 shares
authorized; 14,935,511 shares issued as of
both April 30, 2009 and 2008 660,988 660,988
Receivable from affiliate (19,699) (19,699)
Retained earnings 199,925 108,561
-------- --------
Total Stockholders' Equity 841,214 749,850
-------- --------
$907,738 $849,192
======== ========
-3-
Exhibit B
---------
Biosynergy, Inc.
Statements of Operations
Years Ended April 30, 2009 and 2008
- ----------------------------------------------------------------------
2009 2008
---------- ----------
Net Sales $1,033,318 $1,023,809
Cost of Sales 284,875 289,072
---------- ----------
Gross Profit 748,443 734,737
---------- ----------
Operating Expenses
Marketing 138,918 120,034
General and administrative 409,590 374,649
Research and development 90,572 86,187
---------- ----------
Total Operating Expenses 639,080 580,870
---------- ----------
Income from Operations 109,363 153,867
---------- ----------
Other Income
Interest income 8,736 12,926
Other income 1,920 1,920
---------- ----------
Total Other Income 10,656 14,846
---------- ----------
Income Before Income Taxes 120,019 168,713
Provision for Income Taxes 28,655 61,827
---------- ----------
Net Income $91,364 $106,886
========== ==========
Net Income Per Common Share -
Basic and diluted $ - $ -
========== ==========
Weighted-Average Common
Shares Outstanding 14,935,511 14,935,511
The accompanying notes are an integral part of the financial statements.
-4-
Exhibit C
---------
Biosynergy, Inc.
Statements of Stockholders' Equity
Years Ended April 30, 2009 and 2008
- --------------------------------------------------------------------
Common Stock Other and Accumulated
------------------- Related (Deficit)
Shares Amount Receivable Equity Total
---------- -------- ---------- ----------- --------
Balance,
April 30, 2007 14,935,511 $660,988 $(19,699) $1,675 $642,964
Net income - - - 106,886 106,886
---------- -------- --------- -------- --------
Balance,
April 30, 2008 14,935,511 660,988 (19,699) 108,561 749,850
Net income - - - 91,364 91,364
---------- -------- ---------- -------- --------
Balance,
April 30, 2009 14,935,511 $660,988 $(19,699) $199,925 $841,214
========== ======== ========== ======== ========
The accompanying notes are an integral part of the financial statements.
-5-
Exhibit D
---------
Biosynergy, Inc.
Statements of Cash Flows
Years Ended April 30, 2009 and 2008
- ----------------------------------------------------------------------
2009 2008
-------- --------
Cash Flows from Operating Activities
Net income $91,364 $106,886
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 18,504 22,305
Deferred income taxes 754 12,265
Changes in assets and liabilities
Accounts receivable (6,377) (19,116)
Interest receivable 1,093 590
Inventories and prepaid expenses (50,317) (1,470)
Accounts payable and accrued expenses (33,572) (409)
-------- --------
Total Adjustments (69,915) 14,163
-------- --------
Net Cash Provided by
Operating Activities 21,449 121,049
-------- --------
Cash Flows from Investing Activities
Purchase of equipment (1,561) (7,487)
Purchase of leasehold improvements (1,847) (1,678)
Patents and patents pending (13,769) (17,861)
Purchases of short-term investments (500,000) (400,000)
Redemption of short-term investments 500,000 400,000
-------- --------
Net Cash Used in
Investing Activities (17,177) (27,026)
-------- --------
Increase in Cash 4,272 94,023
Cash, Beginning of Year 281,123 187,100
-------- --------
Cash, End of Year $285,395 $281,123
======== ========
The accompanying notes are an integral part of the financial statements.
-6-
Biosynergy, Inc.
Notes to Financial Statements
Years Ended April 30, 2009 and 2008
- ----------------------------------------------------------------------
Note 1 - Company Organization and Description
Biosynergy, Inc. (the Company) was incorporated under the laws of
the state of Illinois on February 9, 1976. The Company 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
Hemo Temp II Blood Monitoring Device, accounted for more than 90%
of sales for the years ended April 30, 2009 and 2008. 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 bank deposit accounts,
which at times may exceed federally insured limits. No losses have
been experienced on such accounts. All cash is held with Bank of
America, N.A. and JPMorgan Chase Bank.
Short-Term Investments
The Company's investments in certificates of deposit are classified
as held to maturity. In accordance with Statement of Financial
Accounting Standards 115, these investments are stated at amortized
cost, which approximates fair value.
Receivables
Receivables are carried at original invoice less estimates made for
doubtful receivables. Management determines the allowance for
doubtful accounts by reviewing and identifying troubled accounts on
a periodic basis 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 for more than 30
days. 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 using the FIFO (first-
in, first-out) method or market.
Depreciation and Amortization
Equipment and leasehold improvements are stated at cost.
Depreciation is computed primarily 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 10 years or the
term of the lease, if shorter. Equipment is depreciated over three
to 10 years.
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 net sales revenue upon the shipment of
products to customers.
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 tax income taxes represent the
future tax consequences of those differences, which will be taxable
in the future. See Note 5 for additional information regarding
income taxes.
The Company files tax returns in the U.S. federal jurisdiction and
with the state of Illinois. Various tax years remain open to
examinations 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.
In July 2006, the Financial Accounting Standards Board (FASB)
issued Interpretation 48, "Accounting for Uncertainly in Income
Taxes" (FIN 48). FIN 48 provides detailed guidance for the
financial statement recognition, measurement and disclosure of
uncertain tax positions recognized in an enterprise's financial
statements in accordance with FAS 109. Income tax positions must
meet a more-likely-than-not recognition threshold as of the
effective date to be recognized upon the adoption of FIN 48 and in
subsequent periods. The Company adopted FIN 48, effective May 1,
2007, and the provisions of FIN 48 have been applied to all income
tax positions commencing as of that date. There was no material
impact on the financial statements from the adoption.
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 using the straight-line method.
Patents relate to products that have been developed and are being
marketed by the Company.
Patents pending relate to products under development. The Company
is developing certain compounds intended for use as bacteria growth
retardant agents for use in food and other products.
Note 2 - Summary of Significant Accounting Policies
Research and Development and Patents (Continued)
The Company is also investigating production methods for the
bacteria growth retardant. In this regard, management has developed
certain proprietary technology related to the processing of these
compounds. The Company has filed for one patent related to the
processing and manufacturing of bacteria growth compounds and one
patent related to the use of such compounds.
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
The Company has adopted the provisions of SFAS 128, "Earnings Per
Share" (FAS 128). Income (loss) 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 of diluted earnings per share. Basic and diluted
net income per common share is the same for the years ended April
30, 2009 and 2008, as the common stock equivalents of the Company
were anti-dilutive.
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 balance sheets as of April 30, 2009 and
2008, approximates their carrying value.
Conformity With Generally Accepted Accounting Principles." The
Company does not expect this adoption to have a material impact on
its financial statements.
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (FASB) issued
Statement of Financial accounting Standards SFAS 162, "The
Hierarchy of Generally Accepted Accounting Principles" (FAS 162).
FAS 162 identifies the sources of accounting principles and the
framework for selecting the principles used in the preparation of
financial statements for nongovernmental entities that are
presented in conformity with accounting principles generally
accepted in the United States of America. FAS 162 shall be
effective 60 days following the SEC's approval of the Public
Company Accounting Oversight Board amendment to AU Section 411,
"The Meaning of Present Fairly in
In March 2008, FASB issued SFAS 161, "Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement
No. 133" (FAS 161). FAS 161 changes the disclosure requirement for
derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments; (b) how derivative instruments
and related hedged items are accounted for under FAS 133 and its
related interpretations; and (c) how derivative instruments and
related hedged items affect an entity's financial position,
financial performance and cash flows. The guidance in FAS 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early
application encouraged. FAS 161 encourages, but does not require,
comparative disclosures for earlier periods at initial adoption.
FAS 161 will be effective for the Company beginning in the first
quarter of fiscal 2010 (May 1, 2009). The Company is assessing the
potential impact that the adoption of FAS 161 will have on its
financial condition and results of operations.
In December 2007, FASB issued SFAS 141 (revised 2007), "Business
Combinations" (FAS 141(R)). FAS 141(R) significantly changes the
accounting for business combinations in a number of areas including
the treatment of contingent consideration, pre-acquisition
contingencies, transaction costs, in-process research, and
development and restructuring costs. In addition, under FAS 141(R),
changes in an acquired entity's deferred tax assets and uncertain
tax positions after the measurement period will impact income tax
expense. FAS 141(R) will be effective for the Company beginning in
the first quarter of fiscal 2010 (May 1, 2009). The impact of this
standard will only be to apply it to any business combinations that
might occur in the future.
In February 2007, FASB issued SFAS 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-Including an amendment
of FASB Statement 115" (FAS 159). FAS 159 permits entities to
measure certain financial instruments and certain other items at
fair value that are not currently required to be measured at fair
value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. FAS 159 became effective for the Company beginning in
the first quarter of fiscal 2009 (May 1, 2008). This standard is
elective, and management chose not to adopt the standard in the
current period.
Note 2 - Summary of Significant Accounting Policies
Recent Accounting Pronouncements (Continued)
In December 2007, FASB issued SFAS 160, "Noncontrolling Interests
in Consolidated Financial Statements-an amendment of ARB 51" (FAS
160). FAS 160 changes the accounting and reporting
for minority interests, which will be recharacterized as
noncontrolling interests and classified as a component of equity.
This new consolidation method significantly changes the accounting
for transactions with minority interest holders. FAS 160 is
effective for fiscal years beginning after December 15, 2008. FAS
160 will be effective for the Company beginning in the first
quarter of fiscal 2010 (May 1, 2009). The Company has no
noncontrolling interests. Therefore, management does not feel that
FAS 160 will have an impact on its financial position and results
of operations.
In September 2006, FASB issued SFAS 157, "Fair Value Measurements"
(FAS 157). FAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants as of the
measurement date, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. FAS 157 also
establishes a fair value hierarchy that prioritizes information
used in developing assumptions when pricing an asset of liability.
FAS 157 is effective for the Company beginning in fiscal year 2009.
The Company's adoption of FAS 157 did not have a significant effect
on the Company's financial position or results of operations.
Note 3 - Short-Term Investments
In May 2008, the Company reinvested $100,000 in a 120-day
certificate of deposit at an annual percentage yield of 2.64%. The
maturity date was September 18, 2008. As of the maturity date, the
Company reinvested the funds in a seven-month certificate of
deposit at an annual percentage yield of 3%. The maturity date was
April 18, 2009. As of the maturity date, the Company reinvested the
funds in a one-year certificate of deposit an annul percentage
yield of 2% with a maturity date of April 22, 2010. The Company
reinvested an additional $100,000 in a certificate of deposit on
July 23, 2008 for seven months at an annual percentage yield of
3.51%. The maturity date was February 23, 2009. As of the maturity
date, the Company reinvested the funds in a one-year certificate of
deposit at an annual percentage yield of 2.75% with a maturity date
of February 23, 2010.
Throughout fiscal 2009 and 2008, the Company had $200,000 in
certificates of deposit. However, gross sales and purchases of such
short-term investments were each $500,000 in fiscal 2009 and
$400,000 in fiscal 2008, given maturity dates during the year. Such
purchase and sales are presented on the balance sheets at gross.
Note 4 - Inventories
Inventories consist of the following:
2009 2008
-------- ----------
Raw materials $40,681 $46,820
Work-in-process 24,211 13,939
Finished goods 16,407 147
-------- ----------
$81,299 $60,906
======== ==========
Note 5 - Income Taxes
The components of the deferred income tax (assets) and liabilities as of
April 30, 2009 and 2008 are as follows:
2009 2008
------- -------
Total deferred tax liabilities
Patents $10,966 $12,040
Equipment and leaseholds 4,888 8,707
Prepaid insurance 4,258 5,208
------- -------
20,112 25,955
Total deferred tax assets
Accrued vacation pay (4,616) (10,614)
Other (2,477) (3,076)
------- -------
(7,093) (13,690)
------- -------
Net deferred income tax
liabilities $13,019 $12,265
======= =======
Deferred income tax liabilities result primarily from prepaid
expenses and capitalized legal costs associated with patents that
are deducted immediately for income tax purposes and from
differences between depreciation expense for book and tax purposes.
(See Note 2.) Deferred income tax assets result primarily from
accrued vacation pay, which is not deducted for tax purposes unless
it is paid within 21/2 months of each year-end, and other expenses,
which are not deductible for tax purposes until paid.
Note 5 - Income Taxes (Continued)
The provision for income taxes consists of the following
components:
2009 2008
------- --------
Current
Federal $20,700 $37,777
State 7,201 11,885
------- --------
27,901 49,662
Deferred
Federal 570 15,078
State 184 3,670
Change in valuation
allowance - (6,583)
------- --------
$28,655 $61,827
======= ========
The differences between the U.S. federal statutory tax rate and the
Company's effective tax rate are as follows:
Year Ended April 30,
2009 2008
------- -------
U.S. federal statutory tax rate 34% 34%
State income tax expense, net of
federal tax benefit 3.0 3.0
Adjustment of prior year estimates 0.0 4.4
Effect of graduated federal tax rates (7.1) (0.8)
Change in valuation allowance (0.0) (3.9)
------- -------
Consolidated effective tax rate 23.9% 36.7%
======= =======
The Company has utilized all of its net operating loss
carryforwards. A valuation allowance was established as of April
30, 2007 (no valuation allowance was necessary as of April 30, 2008
or 2009) for the deferred tax benefit related to those loss
carryforwards and other deferred tax assets for which it is
considered more likely than not that the benefit will not be
realized.
Note 6 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of April 30, 2009:
Stock of Affiliates
F.K. Suzuki
Biosynergy, International, Medlab,
Inc. Inc. Inc.
------------- -------------- --------
F.K. Suzuki International, Inc. 30.1% - % 100.0%
Fred K. Suzuki, Officer 4.1 35.6 -
Lauane C. Addis, Officer .1 32.7 -
James F. Schembri, Director 8.6 - -
Mary K. Friske, Officer .3 .2 -
Laurence C. Mead, Officer .4 4.0 -
Beverly R. Suzuki, Officer 2.7 - -
As of April 30, 2009 and 2008, $19,699 was due from F.K. Suzuki
International, Inc. (FKSI). This balance is resulted 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 likely be unable to repay the Company without
liquidating a portion of its assets, including a portion of its
ownership in the Company. As a result, $19,699 of the total
receivable balance was reclassified as a contra equity account.
A board member, who is also a stockholder, 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 $35,000 and
$36,000 for the years ended April 30, 2009 and 2008, respectively.
Note 7 - Lease Commitments
In 2006, the Company entered into a five-year extension of the
lease agreement for its current facilities, which expires on
January 31, 2011. The base rent under the extended lease escalates
over the life of the lease. However, rent expense is recorded on a
straight-line basis as required by accounting principles generally
accepted in the United States of America. As of April 30, 2009, the
Company's approximate total future minimum lease payments are as
follows:
Year Ending April 30:
2010 $ 72,661
2011 55,713
--------
Total $128,374
Also included in the lease agreement are escalation clauses for the
lessor's increases in property taxes and other operating expenses.
Rent expense was $70,081 for both fiscal years ended April 30, 2009
and 2008.
Note 8 - Major Customers
Shipments to one customer amounted to approximately 38% and 39% of
sales in fiscal years 2009 and 2008, respectively. As of April 30,
2009 and 2008, there were outstanding accounts receivable from this
customer of approximately $78,150 and $72,375, respectively.
Shipments to another customer accounted for 19% and 16% of sales in
fiscal years 2009 and 2008, respectively. As of April 30, 2009 and
2008, there were outstanding accounts receivable from this customer
of approximately $28,455 and $31,005, respectively.