UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2009
-------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
- ---- EXCHANGE ACT
For the transition period from to
----- -----
Commission file number 0 -12459
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Biosynergy, Inc.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-2880990
- -------------------------------- --------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
- ------------------------------------------------------------
(Address of principal executive offices)
847-956-0471
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(Registrant's telephone number, including area code)
- ---------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data file required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (?232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files. Yes No
Indicate by check mark whether the registrant is a large
accelerated filing, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
--- ---
Non-accelerated filer (Do not check if a smaller reporting
--- company)
Smaller reporting company X
---
SEC 1296 (04-09) Potential persons who are to respond to the
collection of information contained in this form are not
required to respond unless the form displays a currently valid
OMB control number.
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN A BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13,
or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
14,935,511
BIOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets
- -------------------------------------------------------------
ASSETS
July 31, 2009 April 30, 2009
Unaudited Audited
------------- --------------
Current Assets
Cash $309,006 $285,395
Short-Term Investment 200,000 200,000
Accounts receivable, Trade (Net of 153,351 150,033
allowance for doubtful accounts of $500
at July 31, 2009 and April 30, 2009)
Inventories 91,376 81,299
Prepaid Expenses 52,261 48,937
Interest Receivable 1,738 541
--------- ---------
Total Current Assets 807,732 766,205
--------- ---------
Equipment and Leasehold Improvements
Equipment 203,137 203,137
Leasehold improvements 20,022 20,022
--------- ---------
223,159 223,159
Less accumulated depreciation and amortization (193,307) (188,793)
--------- ---------
Total Equipment and Leasehold
Improvements, Net 29,852 34,366
--------- ---------
Other Assets
Patents less Accumulated Amortization 15,674 15,938
Pending Patents 94,491 85,282
Deposits 5,947 5,947
--------- ---------
Total Other Assets 116,112 107,167
--------- ---------
$953,696 $907,738
========= =========
The accompanying notes are an integral part of the financial
statements.
Liabilities and Shareholders' Equity
July 31, 2009 April 30, 2009
Unaudited Audited
------------- --------------
Current Liabilities
Accounts payable $47,925 $ 9,454
Accrued compensation and payroll taxes 16,004 19,995
Deferred rent 5,223 5,733
Other accrued expenses 368 468
Accrued vacation 23,736 17,855
--------- ---------
Total Current Liabilities 93,256 53,505
--------- ---------
Deferred Income Taxes 13,019 13,019
--------- ---------
Shareholders' Equity
Common stock, No par value; 20,000,000
authorized shares issued: 14,935,511
Shares at July 31, 2009 and at
April 30, 2009 660,988 660,988
Receivable from Affiliate (19,699) (19,699)
Retained Earnings 206,132 199,925
--------- ---------
Total Shareholders' Equity 847,421 841,214
--------- ---------
$953,696 $907,738
========= =========
The accompanying notes are an integral part of the financial
statements.
Biosynergy, Inc.
Statements of Operations
Three Months Ended July 31
2009 2008
Unaudited Unaudited
----------- -----------
Net Sales $ 283,063 $ 279,431
Cost of Sales 78,763 67,697
--------- ---------
Gross Profit 204,300 211,734
--------- ---------
Operating Expenses
Marketing 36,984 28,198
General and administrative 137,985 130,460
Research and development 22,965 20,626
--------- ---------
Total Operating Expenses 197,934 179,284
--------- ---------
Income from Operations 6,366 32,450
--------- ---------
Other Income
Interest Income 1,417 2,356
Other income 480 480
--------- ---------
Total Other Income 1,897 2,836
--------- ---------
Net Income Before Income Taxes 8,263 35,286
Provision for Income Taxes 2,056 13,141
--------- ---------
Net Income $ 6,207 $ 22,145
--------- ---------
Net Income per Shares of Common
Stock-Basic and Diluted $ -- $ --
========== ==========
Weighted-Average Common Stock
Outstanding-Basic and Diluted 14,935,511 14,935,511
========== ==========
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 2009
Unaudited
Common Stock Receivable
---------------------- from Retained
Shares Amount Affiliate Earnings Total
---------- --------- ---------- --------- ---------
Balance, May 1,
2009 14,935,511 $660,988 (19,699) $199,925 $841,214
Net Income - - - 6,207 6,207
---------- -------- -------- -------- --------
Balance, July 31,
2009 14,935,511 $660,988 $(19,699) $206,132 $847,421
========== ======== ======== ======== ========
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
THREE MONTHS ENDED JULY 31,
2009 2008
------------- ------------
Cash Flows from Operating Activities
Net income $ 6,207 $ 22,145
---------- ----------
Adjustments to reconcile net
income to cash provided by (used in)
operating activities
Depreciation and amortization 4,514 4,818
Changes in assets and liabilities
Accounts receivable (3,318) (1,963)
Inventories (10,077) (37,240)
Prepaid expenses (3,324) (6,353)
Interest Receivable (1,197) 1,027
Accounts payable and accrued expenses 39,751 49,122
---------- ----------
Total Adjustments 26,349 9,411
---------- ----------
Net Cash Provided by Operating Activities 32,556 31,556
---------- ----------
Cash Flow from Investing Activities
Patents and Patents Pending (8,945) (8,844)
Purchase of Equipment - (3,408)
---------- ----------
Net Cash (Used in) Investing Activities (8,945) (12,252)
---------- ----------
Increase in Cash and Cash Equivalents 23,611 19,304
---------- ----------
Cash Beginning Period 285,395 481,123
---------- ----------
Cash Ending Period $ 309,006 $ 500,427
========== ==========
The accompanying notes are an integral part of the financial
statements.
Biosynergy, Inc.
Notes to Financial Statements
Three Months Ended July 31, 2009 and 2008
- --------------------------------------------------------------------
Note 1 - Company Organization and Description
In the opinion of management, the accompanying unaudited
condensed financial statements contain all adjustments,
consisting of normal recurring adjustments which are necessary
for a fair presentation of the financial position and results of
operations for the periods presented. The unaudited condensed
financial statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all the information
and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America. These
condensed financial statements should be read in conjunction with
the audited financial statements and notes included in the
Company's April 30, 2009 Annual Report on Form 10-K. The results
of operations for the three months ended July 31, 2009 are not
necessarily indicative of the operating results for the full
year.
Biosynergy, Inc. (the Company) was incorporated under the laws of
the State of Illinois on February 9, 1976. It is primarily
engaged in the development and marketing of medical, consumer and
industrial thermometric and thermographic products that utilize
cholesteric liquid crystals. The Company's primary product, the
HemoTemp II Blood Monitoring Device, accounted for approximately
92.7% of the sales during the quarter ending July 31, 2009. 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 and Cash Equivalents
- -------------------------
The Company maintains cash and cash equivalents with major
financial institutions. Cash and cash equivalents are maintained
in demand accounts to minimize risks. Demand accounts and
certificates of deposit are insured up to $250,000 as of July 31,
2009 and April 30, 2009 per depositor by the Federal Deposit
Insurance Corporation. Balances in excess of insured amounts
totaled $39,432 as of April 30, 2009 and $84,906 as of July 31,
2009. The Company has not experienced any loss on these
accounts. The Company does not believe it is exposed to any
significant risk on the uninsured amounts.
Receivables
- -----------
Receivables are carried at original invoice less estimates made
for doubtful receivables. Management determines the allowances
for doubtful accounts by reviewing and identifying troubled
accounts on a periodic basis and by using historical experience
applied to an aging of accounts. A receivable is considered to
be past due if any portion of the receivable balance is
outstanding for more than 30 days. Receivables are written off
when deemed uncollectible. Recoveries of receivables previously
written off are recorded when received.
Note 2 - Summary of Significant Accounting Policies (Continued)
Inventories
- -----------
Inventories are valued at the lower of cost or market using the
FIFO (first-in, first-out) method.
Depreciation and Amortization
- -----------------------------
Equipment and leasehold improvements are stated at cost.
Depreciation is computed primarily on the straight-line method
over the estimated useful lives of the respective assets.
Repairs and maintenance are charged to expense as incurred;
renewals and betterments which significantly extend the useful
lives of existing equipment are capitalized. Significant
leasehold improvements are capitalized and amortized over the
term of the lease; equipment is depreciated over 3 to 10 years.
Revenue Recognition
- -------------------
The Company recognizes net sales revenue upon the shipment of
product to customers.
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, amortized over the life
of the respective patent on the straight-line method.
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 FASB No. 128, "Earnings
Per Share." Income per common share is computed by dividing net
income by the weighted-average number of common shares
outstanding during the period. When dilutive, stock options are
included as share equivalents using the treasury stock method in
the calculation of diluted earnings per share. The Company has
no outstanding options or other rights to acquire its unissued
common shares.
Note 2 - Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments/Short Term Investments
- ----------------------------------------------------------
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. Short-term investments have been categorized as held-to-
maturity and as a result are stated at cost, which approximates
fair value. Short-term investments consist of certificates of
deposit, which mature within one year of July 31, 2009 and April
30, 2009, respectively. Based on the Company's analysis, the
fair value of short term investments recorded on the balance
sheet as of July 31, 2009, approximates their carrying value.
Comprehensive Income
- --------------------
The Company adopted the Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
established standards for the reporting and display of
comprehensive income and its components in the financial
statements. Components of comprehensive income include amounts
that, under SFAS No. 130, are included in the comprehensive
income but are excluded from net income. There were no
significant differences between the Company's net income and
comprehensive income.
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
purposes. The deferred tax income taxes represent the future tax
consequences of those differences, which will be taxable in the
future.
The Company files tax returns in the U.S. federal jurisdiction
and with the state of Illinois. Various tax years remain open to
examinations 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
expenses.
The provision for income taxes consists of the following
components as of July 31:
2009 2008
------- --------
Current
Federal $ 1,430 $ 10,061
State 626 3,080
------- --------
Provision for Income Taxes $ 2,056 $ 13,141
======= ========
Note 2 - Summary of Significant Accounting Policies (Continued)
The differences between the U.S. federal statutory tax rate and
the Company's effective tax rate are as follows:
Period Ended July 31,
2009 2008
-------- ---------
U.S. federal statutory tax rate 34.0% 34.0%
State income tax expense, net of
Federal tax benefit 3.0 3.0
Effect of graduated federal tax rates (12.2) .2
-------- ---------
Consolidated Effective Tax Rate 24.8% 37.2%
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
- --------------------------------
In June 2009, the FASB issued SFAS No. 168, "The 'FASB Accounting
Standards Codification' and the Hierarchy of Generally Accepted
Accounting Principals, a replacement of FASB Statement No. 162"
("SFAS 168"). SFAS 168 establishes the "FASB Accounting
Standards Codification" ("Codification"), which officially
launched July 1, 2009, to become the source of authoritative U.S.
generally accepted accounting principles ("GAAP") recognized by
the FASB to be applied by nongovernmental entities, superseding
existing FASB, American Institute of Certified Public Accountants
("AICPA"), Emerging Issues Task Force ("EITF"), and related
accounting literature. Rules and interpretive releases to the
Securities and Exchange Commission ("SEC") under authority of
federal securities laws are also sources of authoritative U.S.
GAAP for SEC registrants. SFAS 168 reorganizes the previously
issued GAAP pronouncements into accounting topics and displays
them using a consistent structure. The subsequent issuances of
new standards will be in the form of Accounting Standards Updates
that will be included in the Codification. SFAS 168 will be
effective for the Company as of the interim period ended October
31, 2009. As the Codification was not intended to change or
alter existing GAAP, it will not have an impact on the Company's
financial statements. The only impact will be that any future
references to authoritative accounting literature will be in
accordance with SFAS 168 and the new numbering system prescribed
by the Codification.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events"
("SFAS 165"). This standard is intended to establish general
standards of accounting and disclosure of events that occur after
the balance sheet date but before financial statements are issued
or are available to be issued. SFAS 165 requires issuers to
reflect in their financial statements and disclosures the effects
of subsequent events that provide additional evidence about
conditions at the balance sheet date. Disclosures should include
the nature of the event and either an estimate of its financial
effect or a statement that an estimate cannot be made. This
standard also requires issuers to disclose the date through which
they have evaluated subsequent events and whether the date
corresponds with the release of their financial statements. The
Company adopted SFAS 165 as of the interim period ended July 31,
2009. The implementation of this standard did not have an impact
on the Company's financial statements. The Company has evaluated
subsequent events through September 14, 2009, the date it filed
this quarterly report on Form 10-Q with the SEC.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities-an amendment of
FASB Statement No. 133." SFAS No. 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 Statement 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 SFAS No. 161 is effective for financial
statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. This
Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The Company
adopted SFAS No. 161 for the interim period ended July 31, 2009.
The Company's adoption of SFAS No. 161 did not have any impact
on its financial condition or results of operations.
In December 2007, the FASB issued 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) was
adopted by the Company as of the interim period ended July 31,
2009. The Company's adoption of this revision did not have any
impact on the Company's financial condition or results of
operations.
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
became effective for the Company May 1, 2009. The Company's
adoption of SFAS No. 160 did not have a significant impact on the
Company's financial position or results of operations.
Short-Term Investments
- ----------------------
In April, 2009, the Company reinvested $100,000 in a one year
certificate of deposit at an annual percentage yield of 2% with a
maturity date of April 22, 2010. The Company also reinvested an
additional $100,000 in a one year certificate of deposit at an
annual percentage yield of 2.75% with a maturity date of February
23, 2010.
Note 3 - Inventories
Components of inventories are as follows:
April 30, July 31,
2009 2009
---------- ----------
Raw materials $40,681 $46,105
Work-in-process 24,211 10,693
Finished goods 16,407 34,578
---------- ----------
$81,299 $91,376
Note 4 - Common Stock
The Company's common stock is traded in the over-the-counter
market. However, there is no established public trading market
due to limited and sporadic trades. The Company's common stock
is not listed on a recognized market or stock exchange.
Note 5 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of April 30, 2009 and July 31, 2009:
Shareholder Percentage Ownership in Affiliates
- ------------------------------- -----------------------------------
F.K. Suzuki
Biosyerngy, 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 K. Suzuki, Officer 2.7 - -
As of July 31, 2009 and April 30, 2009, $19,699 was due from F.K.
Suzuki International, Inc. (FKSI). These balances result from an
allocation of common expenses charged to FKSI offset by advances
received from time to time. No interest income is received or
accrued by the Company. The financial condition of FKSI is such
that it will unlikely be able to repay the Company during the
next year without liquidating a portion of its assets, including
a portion of its ownership in the Company. As a result, $19,699
of the total receivable balance has been reclassified as a contra
equity account.
Note 6 - Major Customers
Shipments to one customer amounted to 35.89% of sales during the
first three months of Fiscal 2010 compared to 39.19% during the
three month period ending July 31, 2009. As of July 31, 2009,
there were outstanding accounts receivable from this customer of
$88,560 compared to $80,275 at July 31, 2008. Shipments to
another customer amounted to 21.14% of sales during the first
three months of Fiscal 2010 and 19.43% of sales during the first
three months of Fiscal 2009. As of July 31, 2009, there were
outstanding accounts receivable from this customer of
approximately $21,135 compared to $23,470 at July 31, 2008.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
--------------------------------------------------
Net Sales/Revenues
- ------------------
For the three month period ending July 31, 2009 ("1st Quarter"),
the net sales increased 1.3%, or $3,632, as compared to net sales
for the comparative quarter ending in 2008. This increase in
sales was primarily the result of an increase in price of the
HemoTemp<Registered> II during the 1st Quarter. As of July, 31,
2009, the Company had no back orders.
In addition to the above, during the 1st Quarter the Company had
$1,897 of other miscellaneous revenues primarily from leasing a
portion of its storage space to a third party and interest income
of $1,417.
Costs and Expenses
- ------------------
General
-------
The operating expenses of the Company during the 1st Quarter
increased overall by 10.4%, or $18,650, as compared to the 1st
Quarter in 2008, primarily due to an increase in employee
expenses and marketing costs. See "General and Administrative
Expenses" below.
Cost of Sales
-------------
The cost of sales during the 1st Quarter increased by $11,066 as
compared to these expenses during the same quarter ending in
2008. This increase was due primarily to increased salaries. As
a percentage of sales, the cost of sales were 27.83% during the
1st Quarter and 24.23% for the comparative quarter ending in
2008. Subject to unanticipated increases in raw materials or
extraordinary occurrences, it is not anticipated that the cost of
sale as a percentage of sales will materially change in the near
future.
Research and Development Expenses
---------------------------------
Research and Development costs increased $2,339, or 11.34%, as
compared to the same quarter in 2008. This increase was
primarily due to increased salaries. The Company is continuing
to investigate certain compounds for use in food and other
products as antibacterial agents and research intended to improve
and expand the Company's current product line. The Company does
not have sufficient information to determine the extent to which
the Company will be required to allocate its resources to the
continued development of these products.
Marketing Expenses
------------------
Marketing expenses for the 1st Quarter increased by $8,786 or
31.16%, as compared to the quarter ending July 31, 2008. The
Company experienced increased costs for graphic design of
promotional material and increased salaries during the 1st
Quarter accounting for the overall increase in Marketing
expenses.
General and Administrative Expenses
-----------------------------------
General and administrative costs increased by $7,525, or 5.77%,
as compared to the 1st Quarter ending in 2008. This increase was
primarily the result of an increase in administrative salaries
and benefits and accounting fees incurred in the ordinary course
of business. Except for unforeseen expenses, increases to
employee compensation associated with the Company's 401(k) plan
and bonus plan, and normal increases in employee compensation, it
is unlikely general and administrative expenses will materially
change during Fiscal 2010.
Net Income
- ----------
The Company realized net income of $6,207 during the 1st Quarter
as compared to a net income of $22,145 for the comparative
quarter of the prior year. The decrease in net income was
primarily a result of increased employee wages and benefits,
promotional expenses, and accounting fees.
Assets/Liabilities
- ------------------
General
-------
Since April 30, 2009 the Company's assets have increased by
$45,958 and liabilities have increased by $39,751. The increase
in assets (primarily cash, inventories and prepaid expenses) is a
result of positive cash flow from operations.
Related Party Transactions
--------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at July 31, 2009 and April 30, 2009.
This account primarily represents common expenses incurred in the
ordinary course of business which were previously charged by the
Company to FKSI for reimbursement. 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, the amount owed by FKSI to the Company
has been reclassified as a reduction of FKSI's capital in the
Company. See "Financial Statements."
Current Assets/Liabilities Ratio
- --------------------------------
The ratio of current assets to current liabilities, 8.66 to 1,
has decreased compared to 14.32 to 1 at April 30, 2009, primarily
due to an increase in current liabilities. This decrease is not
indicative of a material change in the financial condition of the
Company, but rather a normal fluctuation due to the timing of
payment of vendors. In order to maintain or improve the
Company's asset/liabilities ratio, the Company's operations must
remain profitable.
The increase in liabilities was due primarily to legal and
accounting expenses incurred during the 1st Quarter in preparing
the Company's annual report on Form 10-K and auditing the
Company's April 30, 2009 year end financial statements.
Liquidity and Capital Resources
- -------------------------------
During the 1st Quarter, the Company experienced an increase in
working capital of $1,776. This was primarily due to an increase
in current assets.
The Company has attempted to conserve working capital whenever
possible. To this end, the Company attempts to keep inventory at
minimum levels. The Company believes that it will be able to
maintain adequate inventory to supply its customers on a timely
basis by careful planning and forecasting demand for its
products. However, the Company is nevertheless required to carry
a minimum amount of inventory to meet the delivery requirements
of customers and thus, inventory represents a substantial portion
of the Company's current assets.
The Company presently grants payment terms to customers and
dealers of 30 days. Although the Company experiences varying
collection periods of its accounts receivable, the Company
believes that uncollectable accounts receivable will not have a
significant effect on future liquidity.
Cash provided by operating activities was $32,556 during the
three month period ending July 31, 2009. An aggregate of $8,945
was used for patent expenses during this same period. Except for
operating capital and limited equipment purchases and patent
expenses, management is not aware of any other material capital
requirements or material contingencies for which it must provide.
There were no cash flows from financing activities during the
three month period ending July 31, 2009.
As of July 31, 2009, the Company had $807,732 of current assets
available. Of this amount, $52,261 was prepaid expenses, $91,376
was inventory, $153,351 was net trade receivables $200,000 was
short-term investments, and $309,006 was cash. The Company's
available cash and cash flow are considered adequate to fund the
short-term capital needs of the Company. However, to meet the
long-term operating capital needs of the Company, the Company
must remain profitable. The Company does not have a working line
of credit, and does not anticipate obtaining a working line of
credit in the near future. Thus there is a risk additional
financing may be necessary to fund long-term capital needs of the
Company, although there is no such currently known long-term
capital needs other than operations.
EFFECTS OF INFLATION. With the exception of raw material and
labor costs increasing with inflation, inflation has not had a
material effect on the Company's revenues and income from
continuing operations in the past three years. Inflation is not
expected to have a material effect in the foreseeable future.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES. On December 12,
2001, the SEC issued FR-60 ACautionary Advice Regarding
Disclosure About Critical Accounting Policies." FR-60 is an
intermediate step to alert companies to the need for greater
investor awareness of the sensitivity of financial statements to
the methods, assumptions, and estimates underlying their
preparation, including the judgments and uncertainties affecting
the application of those policies and the likelihood that
materially different amounts would be reported under different
conditions or using different assumptions.
The Company's significant accounting policies are disclosed in
Note 2 to the Financial Statements for the 1st Quarter. See
"Financial Statements." Except as noted below, the impact on the
Company's financial position or results of operation would not
have been materially different had the Company reported under
different conditions or using different assumptions. The
policies which may have materially affected the financial
position and results of operations of the Company if such
information had been reported under different circumstances or
assumptions are:
Forward-Looking Statements
- --------------------------
This report may contain statements which, to the extent they are
not recitations of historical fact, constitute "forward-looking
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-
looking statements involve risks and uncertainties. Actual
results may differ materially from such forward-looking
statements for reasons including, but not limited to, changes to
and developments in the legislative and regulatory environments
effecting the Company's business, the impact of competitive
products and services, changes in the medical and laboratory
industries caused by various factors, risks inherit in marketing
new products, as well as other factors as set forth in this
report. Thus, such forward-looking statements should not be
relied upon to indicate the actual results which might be
obtained by the Company. No representation or warranty of any
kind is given with respect to the accuracy of such forward-
looking information. The forward-looking information has been
prepared by the management of the Company and has not been
reviewed or compiled by independent public accountants.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
-----------------------------------------------------
Market risk is the risk of loss arising from adverse changes in
market rates and prices, such as interest rates, foreign currency
exchange rates and commodity prices. The Company's primary
exposure to market risk is the interest rate risk associated with
its short term money market investments. The Company does not
have any financial instruments held for trading or other
speculative purposes and does not invest in derivative financial
instruments, interest rate swaps or other investments that alter
interest rate exposure. The Company does not have any credit
facilities with variable interest rates. Thus, the Company's
operations are not exposed to financial risk that will have a
material impact on its financial position and results of
operation.
Item 4. Controls and Procedures
-----------------------
Disclosure Controls and Procedures
- ----------------------------------
The Company has established and maintains disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) which are controls and other procedures of the
Company that are designed to ensure that information required to
be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Accounting
Officer, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. The
Company's Chief Executive Officer and Chief Accounting Officer
have evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) of the Exchange Act) as of the end of the period covered by
this report. Based upon that evaluation, the Company's Chief
Executive Officer and its Chief Accounting Officer have concluded
that the Company's disclosure controls and procedures are
effective.
There have been no changes in the Company's internal control over
financial reporting during the Company's Fiscal Quarter ending
July 31, 2009 that have materially affected or are likely to
materially affect the Company's internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
As of the end of the Company's Fiscal Quarter ending July 31,
2009, there are no material pending legal proceedings to which
the Company or any of its subsidiaries is a party to of which any
of their property is the subject.
Item 2. Unregistered Sales of Equity Securities and Use or
Proceeds.
--------------------------------------------------
During the past three years, the Company has not sold securities
which were not registered under the Securities Act.
Item 3. Defaults Upon Senior Securities.
--------------------------------
(a) As of the end of the Company's Fiscal Quarter ending July
31, 2009, there have been no material defaults in the payment of
principal, interest, a sinking or purchase fund installment, or
any other material default not cured within 30 days, with respect
to any indebtedness of the registrant or any of its significant
subsidiaries exceeding 5 percent of the total assets of the
Company and its consolidated subsidiaries.
(b) As of the end of the Company's Fiscal Quarter ending July
31, 2009, there have been no material arrearages in the payment
of dividends and there has been no other material delinquency not
cured within 30 days, with respect to any class of preferred
stock of the Company which is registered or which ranks prior to
any class of registered securities, or with respect to any class
of preferred stock of any significant subsidiary of the Company.
Item 4. Submission of Matter to a Vote of Security Holders.
---------------------------------------------------
No matter has been submitted to a vote of security holders during
the period covered by this report, through the solicitation of
proxies or otherwise.
Item 5. Other Information.
------------------
(a) The Company is not required to disclose any information
required to be disclosed in a report on Form 8-K during the
period covered by this Form 10-Q. However, on August 28, 2009,
the Company filed a Form 8-K with the Securities and Exchange
Commission (the "Form 8-K") advising that Blackman Kallick, LLP
("Blackman Kallick") was dismissed as the Company's independent
accountant. Blackman Kallick's report on the Company's financial
statements for the fiscal years ended April 30, 2009 and April
30, 2008 did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to change
accountants was approved by the Company's Audit Committee. The
Company provided Blackman Kallick with a copy of the disclosure
on the Form 8-K asking whether Blackman Kallick agreed by the
statements made by the Company on the Form 8-K and, if not,
stating the respect in which it does not agree. A copy of the
letter furnished by Blackman Kallick in response to that request
is filed as Exhibit 16.1 to the Form 8-K. On August 27, 2009,
the Audit Committee also approved the engagement of Frank L.
Sassetti & Company ("Sassetti & Company") as the Company's
independent accountant to audit its financial statements for the
fiscal year ended April 30, 2010 and to review its unaudited
reports for the interim period
(b) During the Fiscal Quarter ending July 31, 2009, there have
been no material changes to the procedures by which the security
holders may recommend nominees to the Company's board of
directors, where such changes were implemented after the Company
last provided disclosure in response to the requirements of
Regulation S-K.
Item 6. Exhibits.
---------
The following exhibits are filed as a part of this report:
(2) Plan of Acquisition, reorganization, arrangement,
liquidation or succession - none
(3) Articles of Incorporation and By-laws<FNi>
(4) Instruments defining rights of security holders,
including indentures - none.
(10) Material Contracts - none.
(11) Statement regarding computation of per share earnings-
none.
(15) Letter regarding unaudited interim financial information-
none.
(18) Letter regarding change in accounting principals-
none.
(19) Reports furnished to security holders - none.
(22) Published report regarding matters submitted to vote of
security holders - none.
(23) Consents of experts and counsel - none.
(24) Power of Attorney - none.
(31.1) Certification of the Chief Executive Officer pursuant
to Rule 13a-14(a) under the Securities Exchange Act of
1934.
Filed herewith.
(31.2) Certification of the Chief Accounting Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
Filed herewith.
(32.1) Certification of the Chief Executive Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Sect. 1350.
Filed herewith.
(32.2) Certification of the Chief Accounting Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Sect. 1350.
Filed herewith.
____________________
<FN>
<FNi> Incorporated by reference to a Registration Statement
filed on Form S-18 with the Securities and Exchange
Commission, 1933 Act Registration Number 2-38015C, under the
Securities Act of 1933, as amended, and Incorporated by
reference, with regard to Amended and Restated By-Laws, to
the Company's Current Statement on Form 8-K dated as of July
2, 2009 filed with the Securities and Exchange Commission.
</FN>
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Biosynergy, Inc.
Date September 14, 2009 /s/ Fred K. Suzuki
------------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman of
the Board, and President
Date September 14, 2009 /s/ Laurence C. Mead
-------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, Chief Financial
Officer, and Chief Accounting Officer
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Fred K. Suzuki, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Biosynergy, Inc.;
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 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: September 14, 2009
/s/ Fred K. Suzuki
----------------------------
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 quarterly report on Form 10-Q 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 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: September 14, 2009
/s/ Laurence C. Mead
---------------------
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 Report of Biosynergy, Inc. (the "Company")
on Form 10-Q for the quarter ending July 31, 2009, as filed with
the Securities and Exchange Commission on the date hereof (the
"Report"), 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) or 15(d) of the Securities and Exchange Act of 1934, as
amended; 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 July 31, 2009, and for the period
then ended.
Biosynergy, Inc.
/s/ Fred K. Suzuki
------------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer and President
Dated: September 14, 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 Report of Biosynergy, Inc. (the "Company")
on Form 10-Q for the quarter ending July 31, 2009, as filed with
the Securities and Exchange Commission on the date hereof (the
"Report"), 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) or 15(d) of the Securities and Exchange Act of 1934, as
amended; 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 July 31, 2009, and for the period
then ended.
Biosynergy, Inc.
/s/ Laurence C. Mead
------------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, Chief Financial Officer, and
Chief Accounting Officer
Dated: September 14, 2009