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 January 31, 2010
___ 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.
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(Exact name of small business issuer as specified in its charter)
Illinois 36-2880990
- --------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
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)
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(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. X Yes No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(Sec.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
----
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 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of February 28, 2010: 14,935,511
BIOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Balance Sheets
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ASSETS
January 31, 2010 April 30, 2009
---------------- --------------
Unaudited Audited
---------------- --------------
Current Assets
Cash $350,972 $285,395
Short-Term Investments 200,000 200,000
Accounts receivable, Trade (Net of 122,712 150,033
allowance for doubtful accounts of $500
at January 31, 2010 and April 30, 2009)
Inventories 115,296 81,299
Prepaid Expenses 30,802 48,937
Interest Receivable 2,775 541
-------- --------
Total Current Assets 822,557 766,205
-------- --------
Equipment and Leasehold Improvements
Equipment 199,399 203,137
Leasehold improvements 20,022 20,022
-------- --------
219,421 223,159
Less Accumulated Depreciation and Amortization (195,639) (188,793)
-------- --------
Total Equipment and
Leasehold Improvements, Net 23,782 34,366
-------- --------
Other Assets
Patents less Accumulated Amortization 15,146 15,938
Pending Patents 103,648 85,282
Deposits 5,947 5,947
-------- --------
Total Other Assets 124,741 107,167
-------- --------
$971,080 $907,738
======== ========
The accompanying notes are an integral part of the condensed
financial statements.
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Liabilities and Shareholders' Equity
January 31, 2010 April 30, 2009
---------------- --------------
Unaudited Audited
---------------- --------------
Current Liabilities
Accounts Payable $14,049 $ 9,454
Accrued Compensation and Payroll Taxes 17,080 19,995
Deferred Rent 4,203 5,733
Income Taxes Payable 1,923 -
Accrued Vacation 14,594 17,855
Other Accrued Expenses 463 468
-------- --------
Total Current Liabilities 52,312 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 January 31, 2010
and at April 30, 2009 660,988 660,988
Receivable from Affiliate (19,699) (19,699)
Retained Earnings 264,460 199,925
-------- --------
Total Shareholders' Equity 905,749 841,214
-------- --------
$971,080 $907,738
======== ========
The accompanying notes are an integral part of the condensed
financial statements.
Biosynergy, Inc.
Statements of Operations
(unaudited)
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Three Months Ended Nine Months Ended
January 31 January 31
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net Sales $265,295 $248,904 $811,063 $757,508
Cost of Sales 75,869 73,809 226,478 211,359
---------- ---------- ---------- ----------
Gross Profit 189,426 175,095 584,585 546,149
---------- ---------- ---------- ----------
Operating Expenses
Marketing 37,353 35,966 106,547 95,505
General and Administrative 88,423 85,242 323,193 303,009
Research and Development 22,038 21,585 68,521 64,575
---------- ---------- ---------- ----------
Total Operating Expenses 147,814 142,793 498,261 463,089
---------- ---------- ---------- ----------
Income from Operations 41,612 32,302 86,324 83,060
---------- ---------- ---------- ----------
Other Income
Interest Income 1,386 2,173 4,219 7,068
Other Income 480 480 1,440 1,440
---------- ---------- ---------- ----------
Total Other Income 1,866 2,653 5,659 8,508
---------- ---------- ---------- ----------
Net Income Before Income Taxes $43,478 $34,955 $91,983 $91,568
Provision for Income Taxes 14,905 9,528 27,448 27,654
---------- ---------- ---------- ----------
Net Income $28,573 $25,427 $64,535 $63,914
---------- ---------- ---------- ----------
Net Income Per Common Share -
Basic and Diluted $ - $ - $ - $ -
---------- ---------- ---------- ----------
Weighted-Average Shares of Common
Stock Outstanding - Basic and
Diluted 14,935,511 14,935,511 14,935,511 14,935,511
---------- ---------- ---------- ----------
The accompanying notes are an integral part of the condensed
financial statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED January 31, 2010
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 - - - 64,535 64,535
----------- --------- ---------- --------- --------
Balance, October 31,
2009 14,935,511 $660,988 $(19,699) $264,460 $905,749
=========== ========= ========= ======== ========
The accompanying notes are an integral part of the condensed
financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended January 31,
2010 2009
---------- ----------
Cash Flows from Operating Activities
Net income $64,535 $63,914
Adjustments to reconcile net
income to cash provided by (used in)
operating activities
Depreciation and amortization 13,138 14,686
Changes in assets and liabilities
Accounts receivable 27,321 14,074
Inventories (33,997) (16,054)
Prepaid expenses 18,135 (20,653)
Interest Receivable (2,234) (1,296)
Accounts payable and accrued expenses (1,193) (40,411)
---------- ----------
Total Adjustments 21,170 (49,654)
---------- ----------
Net Cash Provided by Operating Activities 85,705 14,260
---------- ----------
Cash Flow from Investing Activities
Patents and Patents Pending (18,366) (14,826)
Equipment and Leasehold Improvements (1,762) (3,408)
---------- ----------
Net Cash Used in Investing Activities (20,128) (18,234)
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents 65,577 (3,974)
---------- ----------
Cash Beginning Period 285,395 281,123
---------- ----------
Cash Ending Period $350,972 $277,149
========== ==========
The accompanying notes are an integral part of the
financial statements.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
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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 principals
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 or Form 10-K. The results
of operations for the nine months ended January 31, 2010 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
91.9% of the sales during the quarter ending January 31, 2010.
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 January
31, 2010 and April 30, 2009 per depositor by the Federal Deposit
Insurance Corporation. Balances may exceed insured amounts 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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
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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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
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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 January 31, 2010 and
April 30, 2009, respectively. Based on the Company's analysis,
the fair value of short term investments 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 January 31:
2010 2009
-------- --------
Current
Federal $20,549 $21,244
State 6,899 6,410
------- -------
Provision for Income Taxes $27,448 $27,654
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
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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 January 31,
2010 2009
-------- ---------
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 (7.2) (6.8)
-------- ---------
Consolidated Effective Tax Rate 29.8% 30.2%
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, 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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
- --------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
- --------------------------------------------------------------------
Note 3 - Inventories
Components of inventories are as follows:
January 31, April 30,
2010 2009
---------- ----------
Raw materials $ 48,109 $ 40,681
Work-in-process 30,763 24,211
Finished goods 36,424 16,407
-------- --------
$115,296 $81,299
======== ========
Note 4 - Common Stock
The Company's common stock is traded in the over-the-counter
market. However, there is no established public trading market
due to limited and sporadic trades. The Company's common stock
is not listed on a recognized market or stock exchange.
Note 5 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of January 31, 2010:
Stock of Affiliates
-----------------------------------
F.K. Suzuki
Biosyerngy, International Medlab
Inc. Inc.<F1> Inc.
----------- ------------- -------
F.K. Suzuki International, Inc 30.1% - % 100.0%
Fred K. Suzuki, Officer 4.1 35.6 -
Lauane C. Addis, Officer<F2> .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> As of January 31, 2010 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
prior to April 30, 2006 offset by advances received from time to
time. No interest income is received or accrued by the Company.
The financial condition of FKSI is such that it will unlikely be
able to repay the Company during the next year without
liquidating a portion of its assets, including a portion of its
ownership in the Company. As a result, the receivable balance
has been reclassified as a contra equity account since April 30,
2006.
<F2> 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.
</FN>
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2010 and 2009
- --------------------------------------------------------------------
Note 6 - Major Customers
Shipments to one customer amounted to 35.61% of sales during the
first nine months of Fiscal 2010 compared to 38.44% during the
comparative Fiscal 2009 period. As of January 31, 2010, there
were outstanding accounts receivable from this customer of
$58,370 compared to $71,580 at January 31, 2009. Shipments to
another customer amounted to 23.7% of sales during the first nine
months of Fiscal 2010 and 18.04% of sales during the first nine
months of Fiscal 2009. As of January 31, 2010, there were
outstanding accounts receivable from this customer of
approximately $25,205 compared to $16,450 at January 31, 2009.
Item 2. Management's Discussion of Financial Condition and
Results of Operations
--------------------------------------------------
Net Sales/Revenues
- ------------------
For the three month period ending January 31, 2010 ("3rd
Quarter"), the net sales increased 6.58%, or $16,391, and
increased 7%, or $53,555, during the nine month period ending
January 31, 2010, as compared to net sales for the comparative
periods ending in 2009. This increase in sales is primarily the
result of an increase in unit sales of HemoTemp<Registered> II,
TempTrend<Registered>II, and HT2 Activat. In January 2010,
there was an increase in the distributor price for the
Company's products. This accounted for an increase in net sales
of 2.57%, or $4,220, for the three month period ending
January 31, 2010.
In addition, during the 3rd Quarter the Company had $1,866 of
miscellaneous revenues primarily from interest income and leasing
a portion of its storage space to an unrelated party.
Costs and Expenses
- ------------------
General
-------
The operating expenses of the Company during the 3rd Quarter
increased overall by 3.51%, or $5,021, as compared to the 3rd
quarter in 2009 primarily due to an increase in salaries, 401(k)
plan contributions and health insurance premiums. The operating
expenses of the Company increased by 7.59%, or $35,172, for the
nine month period ending January 31, 2010, primarily due to an
increase in salaries, 401(k) plan contributions, health
insurance premiums and accounting fees.
Cost of Sales
-------------
The cost of sales during the 3rd Quarter increased by $2,060, and
increased by $15,119 during the nine month period ending January
31, 2010 as compared to these expenses during the same periods
ending in 2009. Increases were primarily due to an increase in
unit sales and increases in part time employee salaries, health
insurance premiums, 401(k) plan contributions and payroll taxes.
As a percentage of sales, the cost of sales were 28.59% during
the 3rd Quarter and 29.65% for the comparative quarter ending in
2009, and 27.92% during the nine month period ending January 31,
2010 compared to 27.9% in 2009. Subject to unanticipated changes
in the price of raw materials or extraordinary occurrences, it is
not anticipated that the cost of sales as a percentage of sales
will materially change in the near future.
Research and Development Expenses
---------------------------------
Research and Development costs increased $453, or 2%, during the
3rd Quarter as compared to the same quarter in 2009. These costs
increased by $3,946, or 6.1%, during the nine month period ending
January 31, 2010 as compared to the same period in 2009. The
overall increase in research and development is due primarily to
an increase in employee 401(k) plan contributions and health
insurance premiums. The Company is continuing its investigation
and development of certain compounds for use as bacteria
retardant agents for use in food and other products. The Company
is uncertain how much of its resources will be required to
complete its investigation and development of these products.
Marketing Expenses
------------------
Marketing expenses for the 3rd Quarter increased by $1,387, or
3.85%, as compared to the quarter ending January 31, 2009. These
costs increased by $11,042, or 11.56%, during the nine month
period ending January 31, 2010 as compared to the same period in
2009. The increase is due to an increase in salaries, employee
401(k) plan contributions, health insurance premiums,
entertainment and product promotion expenses.
General and Administrative Expenses
-----------------------------------
General and administrative costs for the 3rd Quarter increased by
$3,181, or 3.73%, as compared to the 3rd quarter ending January
31, 2009, primarily due to increased salaries, health insurance
premiums and office supplies. General and administrative costs
increased by $20,184, or 6.66%, during the nine month period
ending January 31, 2010, as compared to the same periods in 2009,
primarily due to increased salaries, health insurance premiums,
website design expenses, office supplies and accounting fees.
Net Income
- ----------
The Company realized a net income of $28,573 during the 3rd
Quarter as compared to a net income of $25,427 for the
comparative quarter in the prior year. The Company also realized
a net income of $64,535 for the nine month period ending January
31, 2010 as compared to a net income of $63,914 during the same
period in 2009. The increase in net income is a direct result of
an increase in sales.
Assets/Liabilities
- ------------------
General
-------
Since April 30, 2009, the Company's assets have increased by
$63,342 and liabilities have decreased by $1,193. The increase in
assets, primarily cash and inventories, is a result of the
Company's profit and an increase in the stock of raw materials
and finished goods.
Related Party Transactions
--------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at January 31, 2010 and April 30, 2009.
This account primarily represents common expenses which were
previously charged by the Company to FKSI for reimbursement.
These expenses include certain office expenses, general operating
expenses and legal fees incurred in the ordinary course of
business. See "Financial Statements." No interest is received
or accrued by the Company. Collectibility of the amounts due
from FKSI since April 30, 2006 could not 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, as of
April 30, 2006, all of 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, 15.72 to 1,
has increased compared to 14.32 to 1 at April 30, 2009. This
increase in ratio of current asset to current liabilities is a
result of net income realized by 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 nine month period ending January 31, 2010, the Company
experienced an increase in working capital of $57,545. This is
primarily due to the Company's increase in inventories and cash,
and a pay-down of current liabilities.
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 finished inventory and raw materials to meet
the delivery requirements of customers and thus, inventory
represents a material portion of the Company's investment in
current assets.
The Company presently grants payment terms to customers and
dealers of 30 days. Although the Company experiences varying
collection periods of its accounts receivable, based on past
experience, the Company believes that uncollectable accounts
receivable will not have a significant effect on future
liquidity.
Cash provided by operating activities was $85,705 during the nine
month period ending January 31, 2010. An aggregate of $20,127 was
used for equipment purchases and patent application expenditures
and $1,193 used to pay down accounts payable, primarily accrued
vacations, 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
nine month period ending January 31, 2010.
As of January 31, 2010, the Company had $822,557 of current
assets available. Of this amount, $30,802 was prepaid expenses,
$115,296 was inventory, $122,712 was net trade receivables,
$200,000 was invested in short-term certificates of deposit, and
$350,972 was cash. The Company's available cash and cash flow
from operations is considered adequate to fund the short-term
operating capital needs of the Company. The Company does not
have a working line of credit, and does not anticipate obtaining
a working line of credit in the near future. There is a risk
financing may be necessary to fund long-term operating capital
needs of the Company if the Company does not remain profitable.
EFFECTS OF INFLATION. With the exception of inventory and labor
costs increasing with inflation, inflation has not had a material
effect on the Company's revenues and income from continuing
operations in the past three years. Inflation is not expected to
have a material effect in the foreseeable future.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES. The Company's
accounting policies are disclosed in Note 1 to the Financial
Statements for the 3rd Quarter. See "Financial Statements."
Except as noted below, the impact on the Company's financial
position or results of operation would not have been materially
different had the Company reported under different conditions or
used different assumptions. The policies which may have
materially affected the financial position and results of
operations of the Company if such information had been reported
under different circumstances or assumptions are:
USE OF ESTIMATES - preparation of financial statements and
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
as of the date of the Financial Statements and the reported
amounts of revenues and expenses during the reporting period.
The financial condition of the Company and results of operations
may differ from the estimates and assumptions made by management
in preparation of the Financial Statements accompanying this
report.
ALLOWANCE FOR BAD DEBTS - The Company periodically performs
credit evaluations of its customers and generally does not
require collateral to support amounts due from the sale of its
products. The Company maintains an allowance for doubtful
accounts based on its best estimate of accounts receivable.
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
January 31, 2010 that have materially affected or are likely to
materially affect the Company's internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
As of the end of the Company's Fiscal Quarter ending January 31,
2010, 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
January 31, 2010, there have been no material defaults in the
payment of principal, interest, a sinking or purchase fund
installment, or any other material default not cured within 30
days, with respect to any indebtedness of the registrant or any
of its significant subsidiaries exceeding 5 percent of the total
assets of the Company and its consolidated subsidiaries.
(b) As of the end of the Company's Fiscal Quarter ending
January 31, 2010, 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. (Removed and Reserved).
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 January 31, 2010, 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 March 17, 2010 /s/ Fred K. Suzuki
------------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman of
the Board, and President
Date March 17, 2010 /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 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 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: March 17, 2010
/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 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 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: March 17, 2010
/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 January 31, 2010, 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 January 31, 2010, 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: March 17, 2010
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 January 31, 2010, 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 January 31, 2010, 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: March 17, 2010