UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
For the quarterly period ended October 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
--------------
Biosynergy, Inc.
- -----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-2880990
- -------------------------------- ------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
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(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
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ASSETS
October 31, 2009 April 30, 2009
---------------- --------------
Unaudited Audited
Current Assets
Cash $318,119 $285,395
Short-Term Investment 200,000 200,000
Accounts receivable, Trade (Net of 152,499 150,033
allowance for doubtful accounts of $500
at October 31, 2009 and April 30, 2009)
Inventories 91,178 81,299
Prepaid Expenses 34,284 48,937
Interest Receivable 1,578 541
-------- --------
Total Current Assets 797,658 766,205
-------- --------
Equipment and Leasehold Improvements
Equipment 197,594 203,137
Leasehold improvements 20,022 20,022
-------- --------
217,616 223,159
Less accumulated depreciation
and amortization (191,749) (188,793)
-------- --------
Total Equipment and
Leasehold Improvements, Net 25,867 34,366
-------- --------
Other Assets
Patents less Accumulated Amortization 15,410 15,938
Pending Patents 98,259 85,282
Deposits 5,947 5,947
-------- --------
Total Other Assets 119,616 107,167
-------- --------
$943,141 $907,738
======== ========
The accompanying notes are an integral part of the financial
statements.
- ---------------------------------------------------------------------------
Liabilities and Shareholders' Equity
------------------------------------
October 31, 2009 April 30, 2009
---------------- --------------
Unaudited Audited
--------- -------
Current Liabilities
Accounts payable $14,988 $ 9,454
Accrued compensation and payroll taxes 8,327 19,995
Deferred rent 4,713 5,733
Other accrued expenses 462 468
Accrued vacation 24,456 17,855
-------- --------
Total Current Liabilities 52,946 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 October 31, 2009
and at April 30, 2009 660,988 660,988
Receivable from Affiliate (19,699) (19,699)
Retained Earnings 235,887 199,925
-------- --------
Total Shareholders' Equity 877,176 841,214
-------- --------
$943,141 $907,738
======== ========
The accompanying notes are an integral part of the financial
statements.
Biosynergy, Inc.
Statements of Operations
Three Months Ended Six Months Ended
October 31 October 31
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net Sales $262,705 $229,173 $545,768 $508,604
Cost of Sales 71,845 69,853 150,609 137,550
---------- ---------- ---------- ----------
Gross Profit 190,860 159,320 395,159 371,054
---------- ---------- ---------- ----------
Operating Expenses
Marketing 32,210 31,341 69,194 59,539
General and Administrative 96,785 87,308 234,770 217,767
Research and Development 23,518 22,365 46,483 42,991
---------- ---------- ---------- ----------
Total Operating Expenses 152,513 141,014 350,447 320,297
---------- ---------- ---------- ----------
Income from Operations 38,347 18,306 44,712 50,757
---------- ---------- ---------- ----------
Other Income
Interest Income 1,415 2,539 2,833 4,895
Other Income 480 480 960 960
---------- ---------- ---------- ----------
Total Other Income 1,895 3,019 3,793 5,855
---------- ---------- ---------- ----------
Net Income Before Income Taxes $40,242 $21,325 $48,505 $56,612
Provision for Income Taxes 10,487 4,985 12,543 18,126
---------- ---------- ---------- ----------
Net Income $29,755 $16,340 $35,962 $38,486
Net Income Per Common Stock -
Basic and Diluted - - - -
---------- ---------- ---------- ----------
Weighted-Average Common Stock
Outstanding - Basic and Diluted 14,935,511 14,935,511 14,935,511 14,935,511
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED OCTOBER 31, 2009
(Unaudited)
Common Stock Receivable Retained
Shares Amount from Affiliate Earnings Total
----------- --------- -------------- --------- --------
Balance, May 1,2009 14,935,511 $660,988 $(19,699) $199,925 $841,214
Net Income - - - 35,962 35,962
----------- --------- ---------- --------- --------
Balance, October 31,
2009 14,935,511 $660,988 $(19,699) $235,887 $877,176
=========== ========= ========= ======== ========
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended October 31,
2009 2008
---------- ----------
Cash Flows from Operating Activities
Net income $35,962 $38,486
Adjustments to reconcile net
income to cash provided by (used in)
operating activities
Depreciation and amortization 8,499 9,774
Changes in assets and liabilities
Accounts receivable (2,466) 17,978
Inventories (9,879) (22,432)
Prepaid expenses 14,653 (7,265)
Interest Receivable (1,037) 333
Accounts payable and accrued expenses (559) (16,471)
---------- ----------
Total Adjustments 9,211 (18,083)
---------- ----------
Net Cash Provided by Operating Activities 45,173 20,403
---------- ----------
Cash Flow from Investing Activities
Patents and Patents Pending (12,449) (14,826)
Purchase of Equipment - (3,408)
---------- ----------
Net Cash (Used in) Investing Activities (12,449) (18,234)
---------- ----------
Increase in Cash and Cash Equivalents 32,724 2,169
---------- ----------
Cash Beginning Period 285,395 281,123
---------- ----------
Cash Ending Period $318,119 $283,292
========== ==========
The accompanying notes are an integral part of the
financial statements.
Note 1 - Company Organization and Description
In the opinion of management, the accompanying unaudited
condensed financial statements contain all adjustments,
consisting of normal recurring adjustments which are necessary
for a fair presentation of the financial position and results of
operations for the periods presented. The unaudited condensed
financial statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all the information
and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America. These
condensed financial statements should be read in conjunction with
the audited financial statements and notes included in the April
30, 2009 Annual Report on Form 10-K of Biosynergy, Inc. (the
Company). The results of operations for the six months ended
October 31, 2009 are not necessarily indicative of the operating
results for the full year.
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 94.21% of
the sales during the quarter ending October 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 October
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 $69,692 as of October
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
- -----------------------
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 October 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 October 31, 2009 and April 30, 2009, approximates
their carrying value.
Comprehensive Income
- --------------------
Components of comprehensive income include amounts that 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
tax 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 October 31:
<TABLE
2009 2008
------- -------
Current
Federal $8,905 $14,163
State 3,638 3,963
------- -------
Provision for Income Taxes $12,543 $18,126
======= =======
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 October 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 (11.1) (5.0)
-------- ---------
Consolidated Effective Tax Rate 25.9% 32.0%
Subsequent Events
- -----------------
The Company has evaluated subsequent events through December 15,
2009, the date it filed this quarterly report on form 10-Q with
the SEC.
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",
now ASC 105, "Generally Accepted Accounting Principles" (ASC
105). ASC 105 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. ASC 105 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. ASC 105 was adopted
by the Company as of the interim period ended October 31, 2009.
As the Codification was not intended to change or alter existing
GAAP, ASC 105 did 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 the new numbering
system prescribed by the Codification.
In October 2009, the FASB issued ASC 605-25, "Revenue
Recognition" (ASC 605-25). ASC 605-25 modifies the fair value
requirements of revenue recognition on multiple element
arrangements by allowing the use of the "best estimate of selling
price" in addition to vendor specific objective evidence and
third-party evidence for determining the selling price of a
deliverable. This guidance establishes a selling price hierarchy
for determining the selling price of a deliverable, which is
based on: (a) vendor-specified objective evidence, (b) third-
party evidence, or (c) estimates. In addition,
Note 2 - Summary of Significant Accounting Policies (Continued)
ASC 605-25 eliminates the residual method of allocation and
significantly expands the disclosure requirements for such
arrangements. ASC 605-25 is effective for fiscal years beginning
on or after June 15, 2010, with early adoption permitted. The
Company is assessing the impact that ASC 605-25 will have on the
Company's consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities-an amendment of
FASB Statement No. 133", now ASC 815, "Disclosure about
Derivative Instruments and Hedging Activities" (ASC 815). ASC
815 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 ASC 815
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 ASC 815 as of May 1, 2009. The
Company's adoption of ASC 815 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", now ASC 805, "Business Combinations"
(ASC 805). ASC 805 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 ASC 805,
changes in an acquired entity's deferred tax assets and uncertain
tax positions after the measurement period will impact income tax
expense. The Company adopted ASC 805 May 1, 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", now ASC 810, "Consolidation" (ASC 810). ASC 810
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. ASC 810 became effective for the
Company May 1, 2009. The Company's adoption of ASC 810 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, October 31,
2009 2009
---------- ----------
Raw materials $40,681 $37,687
Work-in-process 24,211 25,191
Finished goods 16,407 28,300
---------- ----------
$81,299 $91,178
Note 4 - Common Stock
The Company's common stock is traded in the over-the-counter
market. However, there is no established public trading market
due to limited and sporadic trades. The Company's common stock
is not listed on a recognized market or stock exchange.
Note 5 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of April 30, 2009 and October 31, 2009:
Stock of 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<F1> .1 - -
Jeanne S. Addis, Trustee - - -
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 - -
- ------------
<FN>
<F1> On October 21, 2009, Lauane C. Addis transferred all of his
interest in F.K. Suzuki International, Inc. (FKSI) consisting of
31,423 shares of FKSI common stock to Jeanne S. Addis as Trustee
of the Addis Family Equity Trust dated September 1, 2009. As of
October 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.
</FN>
Note 6 - Major Customers
Shipments to one customer amounted to 37.16% of sales during the
first six months of Fiscal 2010 compared to 37.49% during the
comparative Fiscal 2009 period. As of October 31, 2009, there
were outstanding accounts receivable from this customer of
$80,265 compared to $62,520 at October 31, 2008. Shipments to
another customer amounted to 20.9% of sales during the first six
months of Fiscal 2010 and 19.09% of sales during the first six
months of Fiscal 2009. As of October 31, 2009, there were
outstanding accounts receivable from this customer of
approximately $19,740 compared to $18,015 at October 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 October 31, 2009 ("2nd
Quarter"), the net sales increased 14.63%, or $33,532, and
increased 7.3%, or $37,164 during the six month period ending
October 31, 2009, as compared to net sales for the comparative
periods ending in 2008. This increase in sales is primarily the
result of an increase in the unit sales of HemoTempR, HemoTemp II
and LabTemp 40. As of October 31, 2009, the Company had no back
orders.
In addition to the above, the Company had $1,895 and $3,793 of
other miscellaneous revenues primarily from interest income and
leasing a portion of its storage space to a third party during
the 2nd Quarter and the six month period ending October 31, 2009,
respectively.
Costs and Expenses
- ------------------
General
-------
The operating expenses of the Company during the 2nd Quarter
increased overall by 8.15%, or $11,499 and increased by 9.41%, or
$30,150 for the six month period ending October 31, 2009, as
compared to the same periods ending in 2008. These increases
were primarily due to an increase in salaries, as well as an
increase in medical insurance and legal fees.
Cost of Sales
-------------
The cost of sales during the 2nd Quarter increased by $1,992 and
increased by $13,059 during the six month period ending October
31, 2009 as compared to the same periods ending in 2008. As a
percentage of sales, the cost of sales were 27.35% during the 2nd
Quarter and 30.48% for the comparative quarter ending in 2008;
and 27.59% during the six month period ending October 31, 2009
compared to 27.04% in 2008. It is not anticipated that the cost
of sales as a percentage of sales will materially change in the
near future.
Research and Development Expenses
---------------------------------
Research and Development costs increased $1,153, or 5.15%, during
the 2nd Quarter as compared to the same quarter in 2008. These
costs increased by $3,492, or 8.12%, during the six month period
ending October 31, 2009 as compared to the same period in 2008.
This increase is due to an increase in salaries, travel and
medical insurance expenses during the period. The Company is
continuing its investigation and development of certain compounds
for use as bacteria retardant agents for use in food and other
products and research intended to improve its current product
line. The Company does not have sufficient information to
determine the extent to which its resources will be required to
complete its investigation and development of the bacteria
retardant agents.
Marketing Expenses
- ------------------
Marketing expenses for the 2nd Quarter increased by $869, or
2.77%, as compared to the quarter ending October 31, 2008 and
increased by $9,655, or 16.21%, during the six month period
ending October 31, 2009 compared to the six-month period ending
October 31, 2008. This overall increase was due to increases in
product brochure expenses and increases in salaries, health
insurance premiums and employer 401(k) plan contributions during
the six month period ending October 31, 2009.
General and Administrative Expenses
- -----------------------------------
General and administrative costs increased by $9,477, or 10.85%,
in the 2nd Quarter, and increased by $17,003, or 7.8%, during the
six month period ending October 31, 2009, as compared to the same
periods in 2008. This overall increase was due primarily to
increases in salaries, employer 401(k) plan contributions, health
insurance premiums and accounting fees. Except for unforeseen
extraordinary items, and increases to employee compensation
associated with salaries and the Company's 401(k) plan and bonus
plan, it is unlikely general and administrative expenses will
materially change during Fiscal 2010.
Net Income
- ----------
The Company realized a net income of $29,755 during the 2nd
Quarter as compared to a net income of $16,340 for the
comparative quarter in the prior year. The Company also realized
a net income of $35,962 for the six month period ending October
31, 2009 as compared to a net income of $38,486 during the same
period in 2008. The overall decrease in net income is a result
of an increase in operating costs and expenses described above.
Assets/Liabilities
- ------------------
General
-------
Since April 30, 2009, the Company's assets have increased by
$35,403 and liabilities have decreased by $559. The increase in
assets, primarily cash, pending patents and inventory, and
decrease in liabilities, is due to the overall profitability of
the Company since April 30, 2009.
Related Party Transactions
--------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at October 31, 2009 and April 30, 2009.
This account primarily represents common expenses 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 was reclassified as a
reduction of FKSI's capital in the Company.
Current Assets/Liabilities Ratio
- --------------------------------
The ratio of current assets to current liabilities, 15.06 to 1,
has increased compared to 14.32 to 1 at April 30, 2009 due to the
overall profitability of the Company. In order to maintain or
improve the Company's asset/liabilities ratio, the Company's
operations must remain profitable.
Liquidity and Capital Resources
- -------------------------------
During the six month period ending October 31, 2009, the Company
experienced an increase in working capital of $32,012. This is
primarily due to the Company's net income sustained during the
six month period ending October 31, 2009.
The Company has attempted to conserve working capital whenever
possible. To this end, the Company attempts to keep inventory at
minimum levels. The Company believes that it will be able to
maintain adequate inventory to supply its customers on a timely
basis by careful planning and forecasting demand for its
products. However, the Company is nevertheless required to carry
a minimum amount of inventory to meet the delivery requirements
of customers and thus, inventory represents a substantial portion
of the Company's investment in current assets.
The Company presently grants payment terms to customers and
dealers of 30 days. Although the Company experiences varying
collection periods of its account receivable, the Company
believes that uncollectable accounts receivable will not have a
significant effect on future liquidity.
The cash provided by operating activities was $45,173 during the
six month period ending October 31, 2009. $12,449 was used for
patent expenses during this same period. Except for its
operating working 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.
There were no cash flows from financing activities during the
six month period ending October 31, 2009.
As of October 31, 2009, the Company had $797,658 of current
assets available. Of this amount, $34,284 was prepaid expenses,
$91,178 was inventory, $152,499 was net trade receivables,
$318,119 was cash, and $200,000 was short-term certificates of
deposit. 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 "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies." FR-60 is an
intermediate step to alert companies to the need for greater
investor awareness of the sensitivity of financial statements to
the methods, assumptions, and estimates underlying their
preparation, including the judgments and uncertainties affecting
the application of those policies and the likelihood that
materially different amounts would be reported under different
conditions or using different assumptions.
The Company's significant accounting policies are disclosed in
Note 2 to the Financial Statements for the 2nd Quarter. See
"Financial Statements." Except as noted below, the impact on the
Company's financial position or results of operation would not
have been materially different had the Company reported under
different conditions or used different assumptions. The policies
which may have materially affected the financial position and
results of operations of the Company if such information had been
reported under different circumstances or assumptions are:
Forward-Looking Statements
- --------------------------
This report may contain statements which, to the extent they are
not recitations of historical fact, constitute "forward-looking
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-
looking statements involve risks and uncertainties. Actual
results may differ materially from such forward-looking
statements for reasons including, but not limited to, changes to
and developments in the legislative and regulatory environments
effecting the Company's business, the impact of competitive
products and services, changes in the medical and laboratory
industries caused by various factors, risks inherit in marketing
new products, as well as other factors as set forth in this
report. Thus, such forward-looking statements should not be
relied upon to indicate the actual results which might be
obtained by the Company. No representation or warranty of any
kind is given with respect to the accuracy of such forward-
looking information. The forward-looking information has been
prepared by the management of the Company and has not been
reviewed or compiled by independent public accountants.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
-----------------------------------------------------
Market risk is the risk of loss arising from adverse changes in
market rates and prices, such as interest rates, foreign currency
exchange rates and commodity prices. The Company's primary
exposure to market risk is interest rate risk associated with its
short term money market investments. The Company does not have
any financial instruments held for trading or other speculative
purposes and does not invest in derivative financial instruments,
interest rate swaps or other investments that alter interest rate
exposure. The Company does not have any credit facilities with
variable interest rates. The Company's operations are not
exposed to financial risk that will have a material impact on its
financial position and results of operation.
Item 4. Controls and Procedures
-----------------------
Disclosure Controls and Procedures
- ----------------------------------
The Company has established and maintains disclosure controls and
procedures (as defined in Rules 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
October 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 October 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
October 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
October 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 in
this Form 10-Q otherwise required to be disclosed in a report on
Form 8-K during the period covered by this Form 10-Q.
(b) During the Fiscal Quarter ending October 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<Fi>
(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>
<Fi> 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 December 15, 2009 /s/ Fred K. Suzuki
------------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman of
the Board, and President
Date December 1, 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: December 15, 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: December 15, 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 October 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 October 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: December 15, 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 October 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 October 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: December 15, 2009