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, 2010
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0 -12459
Biosynergy, Inc.
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(Exact name of small business issuer as specified in its charter)
Illinois 36-2880990
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(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. 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
(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 No X
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: 14,935,511
BIOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Balance Sheets
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ASSETS
October 31, 2010 April 30, 2010
---------------- --------------
Unaudited Audited
---------------- --------------
Current Assets
Cash $532,278 $426,569
Short-Term Investments 100,000 100,000
Accounts receivable, Trade (Net of 127,181 149,033
allowance for doubtful accounts of $500
at October 31, 2010 and April 30, 2010)
Inventories 97,080 124,666
Prepaid Expenses 20,646 34,342
Interest Receivable 267 11
-------- --------
Total Current Assets 877,452 834,621
-------- --------
Equipment and Leasehold Improvements
Equipment 198,906 200,923
Leasehold improvements 20,022 20,022
-------- --------
218,928 220,945
Less accumulated depreciation and amortization (197,871) (198,975)
-------- --------
Total Equipment and
Leasehold Improvements, Net 21,057 21,970
-------- --------
Other Assets
Patents less Accumulated Amortization 14,353 14,882
Pending Patents 115,350 106,268
Deposits 5,947 5,947
-------- --------
Total Other Assets 135,650 127,097
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$1,034,159 $983,688
========== ========
The accompanying notes are an integral part of the financial statements.
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Liabilities and Shareholders' Equity
October 31, 2010 April 30, 2010
---------------- --------------
Unaudited Audited
---------------- --------------
Current Liabilities
Accounts Payable $13,612 $12,892
Accrued Compensation and Payroll Taxes 8,657 20,406
Deferred Rent 1,051 3,152
Other Accrued Expenses 6,549 -
Accrued Vacation 23,736 14,294
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Total Current Liabilities 53,605 50,744
-------- --------
Deferred Income Taxes 17,772 17,772
-------- --------
Shareholders' Equity
Common stock, no par value; 20,000,000
authorized shares issued: 14,935,511
Shares at October 31, 2010 and at
April 30, 2010 660,988 660,988
Receivable from Affiliate (19,699) (19,699)
Retained Earnings 321,493 273,883
-------- --------
Total Shareholders' Equity 962,782 915,172
-------- --------
$1,034,159 $983,688
========== ========
The accompanying notes are an integral part of the financial statements.
Biosynergy, Inc.
Statements of Operations
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Three Months Ended Six Months Ended
October 31, October 31,
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net Sales $282,999 $262,705 $564,157 $545,768
Cost of Sales 81,506 71,845 165,764 150,609
---------- ---------- ---------- ----------
Gross Profit 201,493 190,860 398,393 395,159
---------- ---------- ---------- ----------
Operating Expenses
Marketing 34,581 32,210 74,951 69,194
General and Administrative 86,525 96,785 209,379 234,770
Research and Development 23,371 23,518 48,613 46,483
---------- ---------- ---------- ----------
Total Operating Expenses 144,477 152,513 332,943 350,447
---------- ---------- ---------- ----------
Income from Operations 57,016 38,347 65,450 44,712
---------- ---------- ---------- ----------
Other Income
Interest Income 327 1,415 665 2,833
Other Income 480 480 960 960
---------- ---------- ---------- ----------
Total Other Income 807 1,895 1,625 3,793
---------- ---------- ---------- ----------
Net Income Before Income Taxes 57,823 40,242 67,075 48,505
Provision for Income Taxes 16,780 10,487 19,465 12,543
---------- ---------- ---------- ----------
Net Income $41,043 $29,755 $47,610 $35,962
========== ========== ========== ==========
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, 2010
Unaudited
Common Stock Receivable Retained
Shares Amount from Affiliate Earnings Total
----------- --------- -------------- --------- --------
Balance, May 1,2010 14,935,511 $660,988 $(19,699) $273,883 $915,172
Net Income - - - 47,610 47,610
----------- --------- ---------- --------- --------
Balance, Ocrober 31,
2010 14,935,511 $660,988 $(19,699) $321,493 $962,782
=========== ========= ========= ======== ========
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended October 31,
2010 2009
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Cash Flows from Operating Activities
Net income $47,610 $35,962
Adjustments to reconcile net
income to cash provided by (used in)
operating activities
Depreciation and amortization 8,937 8,499
Changes in assets and liabilities
Accounts receivable 21,852 (2,466)
Inventories 27,586 (9,879)
Prepaid expenses 13,699 14,653
Interest Receivable (256) (1,037)
Accounts payable and accrued expenses 2,861 (559)
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Total Adjustments 74,646 9,211
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Net Cash Provided by Operating Activities 122,286 45,173
---------- ----------
Cash Flow from Investing Activities
Patents and Patents Pending (9,082) (12,449)
Purchase of Equipment (7,495) -
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Net Cash (Used in) Investing Activities (16,577) (12,449)
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Increase in Cash and Cash Equivalents 105,709 32,724
---------- ----------
Cash Beginning Period 426,569 285,395
---------- ----------
Cash Ending Period $532,278 $318,119
========== ==========
The accompanying notes are an integral part of the financial statements.
Biosynergy, Inc.
Notes to Financial Statements
Three and Six Months Ended October 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 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, 2010 Annual Report on Form 10-K of Biosynergy, Inc. (the
Company). The results of operations for the six months ended
October 31, 2010 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 91.45% of
the sales during the quarter ending October 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
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Cash
----
The Company maintains all of its cash in bank deposit accounts,
which at times may exceed federally insured limits. No losses
have been experienced on such accounts.
Short-Term Investments
----------------------
The Company's investments in certificates of deposit are
classified as held to maturity. These investments are stated at
amortized cost, which approximates fair value.
Receivables
-----------
Receivables are carried at original invoice less estimates made
for doubtful receivables. Management determines the 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 Six Months Ended October 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.
Prepaid Expenses
----------------
Certain expenses, primarily insurance and income taxes, have been
prepaid and will be used within one year.
Revenue Recognition
-------------------
The Company recognizes net sales revenue upon the shipment of
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.
Patents relate to products that have been developed and are being
marketed by the Company.
Patents pending relate to products under development. The
Company is developing certain compounds intended for use as
bacteria growth retardant agents for use in food and other
products.
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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Six Months Ended October 31, 2010 and 2009
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Note 2 - Summary of Significant Accounting Policies (Continued)
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.
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, 2010 and
April 30, 2010, 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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Six Months Ended October 31, 2010 and 2009
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Note 2 - Summary of Significant Accounting Policies (Continued)
The provision for income taxes consists of the following
components as of October 31:
2010 2009
-------- --------
Current
Federal $ 14,434 $ 8,905
State 5,031 3,638
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Provision for Income Taxes $ 19,465 $12,543
======== ========
The differences between the U.S. federal statutory tax rate and
the Company's effective tax rate are as follows:
Period Ended October 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 (8.0) (11.1)
------ ------
Consolidated Effective Tax Rate 29.0% 25.9%
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Recent Accounting Pronouncements
--------------------------------
In April 2010, FASB issued ASU 2010-17, "Revenue Recognition -
Milestone Method of Revenue Recognition - a consensus of the
Financial Accounting Standards Board ("FASB") Emerging Issues
Task Force" (ASU 2010-17). ASU 2010-17 provides new
authoritative guidance on the milestone method of revenue
recognition. The milestone method applies to research and
development arrangements in which one or more payments are
contingent upon achieving certain future events or circumstances.
ASU 2010-17 defines a milestone and provides criteria for
determining whether the milestone method is appropriate. This
standard is effective for milestones achieved in fiscal years
beginning on or after June 15, 2010, on a prospective basis, with
earlier application permitted. The adoption of ASU 2010-17 is not
expected to have a material impact on the Company's results of
operation and financial condition.
In January 2010, FASB issued ASU 2010-6, "Improving Disclosures
about Fair Measurements" (ASU 2010-6). ASU 2010-6 provides
amendments to subtopic 820-10 of the FASB Accounting Standards
Codification, originally issued as FASB Statement No.157, "Fair
Value Measurements", now ASC 820, "Fair Value Measurements and
Disclosures" (ASC 820) that require separate disclosure of
significant transfers in and out of Level 1 and Level 2 fair
value measurements and the presentation of separate information
regarding purchases, sales, issuances and settlements for Level 3
fair value measurements. Additionally, ASU 2010-6 provides
amendments to Subtopic 820-10 that clarify existing
disclosures about the level of disaggregation and inputs
and valuation
Biosynergy, Inc.
Notes to Financial Statements
Three and Six Months Ended October 31, 2010 and 2009
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Note 2 - Summary of Significant Accounting Policies (Continued)
techniques. ASU 2010-6 is effective for financial statements
issued for interim and annual periods
ending after December 15, 2010. The Company will adopt this
pronouncement in the third quarter of fiscal 2011 and does not
expect the adoption of ASU 2010-06 will have a material impact on
its results of operation and financial condition.
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
financial statements.
The FASB issues ASUs to amend the authoritative literature in
Accounting Standards Certification (ASC). There have been a
number of ASUs to date that amend the original text of ASCs.
Except for the ASUs listed above, those issued to date either (i)
provide supplemental guidance, (ii) are technical corrections,
(iii) are not applicable to the Company or (iv) are not expected
to have a significant impact on the Company.
Short-Term Investments
----------------------
The Company's investments in certificates of deposit are
classified as held to maturity. These investments are stated at
amortized cost, which approximates fair value.
On April 18, 2009, the Company invested $100,000 in a certificate
of deposit with an annual percentage yield of 2% with a maturity
date of April 22, 2010. As of the maturity date, the Company
reinvested the funds in a nine-month certificate of deposit at an
annual percentage yield of .5% with a maturity date of January
22, 2011. The Company reinvested an additional $100,000 in a
certificate of deposit on February 23, 2009 at an annual
percentage yield of 2.75% with a maturity date of February 23,
2010. As of the maturity date, the Company moved these funds
into a cash account.
Accounting Standards Codification Topic 820 (SASC 820) defines
fair value as the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When
determining the fair value measurements for assets and
liabilities required to be recorded at fair value, the Company
considers the principal or most advantageous market in which it
would transact and considers assumptions that market participants
would use when pricing the asset or liability, such as inherent
risk, transfer restrictions, and risk of nonperformance.
Biosynergy, Inc.
Notes to Financial Statements
Three and Six Months Ended October 31, 2010 and 2009
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Note 2 - Summary of Significant Accounting Policies (Continued)
ASC 820 also establishes a fair value hierarchy that requires the
Company to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. A financial
instrument's categorization within the fair value hierarchy is
based upon the lowest level of input that is significant to the
fair value measurement. The standard establishes three levels of
inputs that may be used to measure fair value:
- Level 1 : quoted prices in active markets for identical assets
or liabilities;
- Level 2 : inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices in active
markets for similar assets or liabilities, quoted prices for
identical or similar assets or liabilities in markets that are
not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the
full term of the assets or liabilities ; or
- Level 3: observable inputs that are supported by little or no
market activity and that are significant to the fair value of
the assets or liabilities.
The Company's investments in certificates of deposit are deemed
to be Level 2.
Note 3 - Inventories
Components of inventories are as follows:
October 31, April 30,
2010 2010
---------- ---------
Raw materials $51,725 $54,994
Work-in-process 28,976 34,795
Finished goods 16,379 34,877
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$97,080 $124,666
======== ========
Note 4 - Common Stock
The Company's common stock is traded in the over-the-counter
market. However, there is no established public trading market
due to limited and sporadic trades. The Company's common stock
is not listed on a recognized market or stock exchange.
Note 5 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of October 31, 2010:
Stock of Affiliates
-----------------------------------
F.K. Suzuki
Biosyerngy, International Medlab
Inc. Inc. Inc.
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F.K. Suzuki International, Inc 30.1% - % 100.0%
Fred K. Suzuki, Officer 4.1 35.6 -
Lauane C. Addis, Officer .1 - -
Jeanne S. Addis, Trustee - 32.7 -
James F. Schembri, Director 8.6 - -
Mary K. Friske, Officer .3 .6 -
Laurence C. Mead, Officer .4 4.0 -
Beverly K. Suzuki, Officer 2.7 - -
------------
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, 2010 and April 30, 2010, $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.
Note 6 - Major Customers
Shipments to one customer amounted to 31.49% of sales during the
first six months of Fiscal 2011 compared to 37.16% during the
comparative Fiscal 2010 period. As of October 31, 2010, there
were outstanding accounts receivable from this customer of
$62,630 compared to $80,265 at October 31, 2009. Shipments to
another customer amounted to 27.11% of sales during the first six
months of Fiscal 2011 and 20.9% of sales during the first six
months of Fiscal 2010. As of October 31, 2010, there were
outstanding accounts receivable from this customer of
approximately $25,445 compared to $19,470 at October 31, 2009.
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, 2010 ("2nd
Quarter"), the net sales increased 7.73%, or $20,294, and
increased 3.4%, or $18,389 during the six month period ending
October 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 the unit sales of HemoTemp,
HemoTemp II and HemoTemp II Activator. As of October 31, 2010,
the Company had $2,400 in back orders.
In addition to the above, the Company had $807 and $1,625 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, 2010,
respectively.
Costs and Expenses
------------------
General
-------
The operating expenses of the Company during the 2nd Quarter
decreased overall by 5.3%, or $8,036 and decreased by 5%, or
$17,504 for the six month period ending October 31, 2010, as
compared to the same periods ending in 2009. These decreases
were primarily due to a decrease in costs for accounting and
legal services.
Cost of Sales
-------------
The cost of sales during the 2nd Quarter increased by $9,661 and
increased by $15,155 during the six month period ending October
31, 2010 as compared to the same periods ending in 2009. As a
percentage of sales, the cost of sales were 28.8% during the 2nd
Quarter and 27.35% for the comparative quarter ending in 2009;
and 29.38% during the six month period ending October 31, 2010
compared to 27.59% in 2009. 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 decreased $147, or .6%, during the
2nd Quarter as compared to the same quarter in 2009. These costs
increased by $2,130, or 4.58%, during the six month period ending
October 31, 2010 as compared to the same period in 2009. This
increase is due to an increase in employee compensation and
related costs. 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 $2,371, or
7.36%, as compared to the quarter ending October 31, 2009 and
increased by $5,757, or 8.32%, during the six month period ending
October 31, 2010 compared to the six-month period ending October
31, 2009. This increase was due to product brochure and
entertainment expenses during the six month period ending October
31, 2010.
General and Administrative Expenses
-----------------------------------
General and administrative costs decreased by $10,260, or 10.6%,
in the 2nd Quarter, and decreased by $25,391, or 10.8%, during
the six month period ending October 31, 2010, as compared to the
same periods in 2009. This overall decrease was due primarily to
a decrease in accounting and legal fees. Except for unforeseen
extraordinary items, and ordinary cost increases, it is unlikely
general and administrative expenses will materially change during
the remainder of Fiscal 2011.
Net Income
----------
The Company realized a net income of $41,043 during the 2nd
Quarter as compared to a net income of $29,755 for the
comparative quarter in the prior year. The Company also realized
a net income of $47,610 for the six month period ending October
31, 2010 as compared to a net income of $35,962 during the same
period in 2009. The overall increase in net income is a result
of an increase in net sales and a decrease in operating costs.
Assets/Liabilities
------------------
General
-------
Since April 30, 2010, the Company's assets have increased by
$50,471 and liabilities have increased by $2,861. The increase in
assets, primarily cash and pending patents is due to the overall
profitability of the Company and investment in the development of
potential products since April 30, 2010.
Related Party Transactions
--------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at October 31, 2010 and April 30, 2010.
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 is classified as a reduction
of FKSI's capital in the Company.
Current Assets/Liabilities Ratio
--------------------------------
The ratio of current assets to current liabilities, 16.37 to 1,
has decreased slightly compared to 16.45 to 1 at April 30, 2010.
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, 2010, the Company
experienced an increase in working capital of $39,970. This is
primarily due to the Company's net income sustained during the
six month period ending October 31, 2010.
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 $122,286 during the
six month period ending October 31, 2010. $16,577 was used for
patent expenses and equipment purchases 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, 2010.
As of October 31, 2010, the Company had $877,452 of current
assets available. Of this amount, $20,646 was prepaid expenses,
$97,080 was inventory, $127,181 was net trade receivables,
$532,278 was cash, and $100,000 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 INCLATION. 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:
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
October 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 October 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
October 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
October 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 October 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
(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.
-----------------------
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.
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 14, 2010 /s/ Fred K. Suzuki
---------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman
of the Board, and
President
Date December 14, 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: December 14, 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: December 14, 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 October 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 October 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: December 14, 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 October 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 October 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: December 14, 2010
