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, 2011
___ 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
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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. 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
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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)
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Smaller reporting company X
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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, 2011 April 30, 2010
---------------- --------------
Unaudited Audited
---------------- --------------
Current Assets
Cash $658,257 $426,569
Short-Term Investments - 100,000
Accounts receivable, Trade (Net of
allowance for doubtful accounts of $500
at January 31, 2011 and April 30, 2010) 156,858 149,033
Inventories 83,268 124,666
Prepaid Expenses 25,912 34,342
Interest Receivable - 11
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Total Current Assets 924,295 834,621
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Equipment and Leasehold Improvements
Equipment 198,906 200,923
Leasehold improvements 20,022 20,022
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218,928 220,945
Less Accumulated Depreciation and Amortization (201,571) (198,975)
-------- --------
Total Equipment and
Leasehold Improvements, Net 17,357 21,970
-------- --------
Other Assets
Patents less Accumulated Amortization 14,089 14,882
Pending Patents 136,797 106,268
Deposits 5,947 5,947
-------- --------
Total Other Assets 156,833 127,097
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$1,098,485 $983,688
======== ========
The accompanying notes are an integral part of the condensed
financial statements.
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Liabilities and Shareholders' Equity
January 31, 201 April 30, 2010
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Unaudited Audited
---------------- --------------
Current Liabilities
Accounts Payable $37,745 $12,892
Accrued Compensation and Payroll Taxes 18,873 20,406
Deferred Rent - 3,152
Income Taxes Payable 3,316 -
Accrued Vacation 13,895 14,294
Other Accrued Expenses 5,692 -
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Total Current Liabilities 79,521 50,744
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Deferred Income Taxes 17,772 17,772
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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 359,903 273,883
-------- --------
Total Shareholders' Equity 1,001,192 915,172
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$1,098,485 $983,688
========== ========
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
2011 2010 2011 2010
---------- ---------- ---------- ----------
Net Sales $298,725 $265,295 $862,882 $811,063
Cost of Sales 94,717 75,869 260,482 226,478
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Gross Profit 204,008 189,426 602,400 584,585
---------- ---------- ---------- ----------
Operating Expenses
Marketing 38,262 37,353 113,212 106,547
General and Administrative 89,574 88,423 298,953 323,193
Research and Development 23,005 22,038 71,618 68,521
---------- ---------- ---------- ----------
Total Operating Expenses 150,841 147,814 483,783 498,261
---------- ---------- ---------- ----------
Income from Operations 53,167 41,612 118,617 86,324
---------- ---------- ---------- ----------
Other Income
Interest Income 483 1,386 1,148 4,219
Other Income 481 480 1,441 1,440
---------- ---------- ---------- ----------
Total Other Income 964 1,866 2,589 5,659
---------- ---------- ---------- ----------
Net Income Before Income Taxes 54,131 43,478 121,206 91,983
Provision for Income Taxes 15,721 14,905 35,186 27,448
---------- ---------- ---------- ----------
Net Income $38,410 $28,573 $86,020 $64,535
---------- ---------- ---------- ----------
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, 2011
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 - - - 86,020 86,020
----------- --------- ---------- --------- ----------
Balance, January 31,
2011 14,935,511 $660,988 $(19,699) $359,903 $1,001,192
=========== ========= ========= ======== ==========
The accompanying notes are an integral part of the condensed
financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended January 31,
2011 2010
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Cash Flows from Operating Activities
Net Income $86,020 $64,535
Adjusted to Reconcile Net Income to Cash
Provided by Operating Activities
Depreciation and Amortization 12,900 13,138
Changes in Assets and Liabilities
Accounts Eeceivable (7,825) 27,321
Inventories 41,398 (33,997)
Prepaid Expenses 8,430 18,135
Interest Receivable 11 (2,234)
Accounts Payable and Accrued Expenses 28,777 (1,193)
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Total Adjustments 83,691 21,170
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Net Cash Provided by Operating Activities 169,711 85,705
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Cash Flow from Investing Activities
Patents and Patents Pending (30,528) (18,366)
Equipment and Leasehold Improvements (7,495) (1,762)
Redemption of Short-term Investments 100,000 -
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Net Cash Provided by (Used in)
Investing Activities 61,977 (20,128)
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Increase in Cash and Cash Equivalents 231,688 65,577
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Cash Beginning Period 426,569 285,395
---------- ----------
Cash Ending Period $658,257 $350,972
========== ==========
The accompanying notes are an integral part of the
condensed financial statements.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2011 and 2010
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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 nine months ended
January 31, 2011 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 92.41% of
the sales during the quarter ending January 31, 2011. The
products are sold to hospitals, clinical end-users, laboratories
and product dealers located throughout the United States.
Note 2 - Summary of Significant Accounting Policies
Cash
----
The Company maintains all of its cash in bank deposit accounts,
which at times may exceed federally insured limits. No losses
have been experienced on such accounts.
Receivables
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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.
Inventories
-----------
Inventories are valued at the lower of cost or market using the
FIFO (first-in, first-out) method.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2011 and 2010
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Note 2 - Summary of Significant Accounting Policies (Continued)
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 Nine Months Ended January 31, 2011 and 2010
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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.
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:
2011 2010
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Current
Federal $26,096 $20,549
State 9,090 6,899
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Provision for Income Taxes $35,186 $27,448
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Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2011 and 2010
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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,
2011 2010
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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) (7.2)
-------- ---------
Consolidated Effective Tax Rate 29.0% 29.8%
======== =========
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 Nine Months Ended January 31, 2011 and 2010
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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 adopted this
pronouncement in the third quarter of fiscal 2011. The adoption
of ASU 2010-06 did not have a material impact on 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.
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 at April 30, 2010 consisted
of certificates of deposit which matured within one year. 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. As of the maturity date, the Company moved these funds
into a cash account.
The Company had no short term investments as of January 31, 2011.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2011 and 2010
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Note 3 - Inventories
Components of inventories are as follows:
January 31, April 30,
2011 2010
---------- ----------
Raw materials $50,846 $ 54,994
Work-in-process 22,479 34,795
Finished goods 9,943 34,877
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$83,268 $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 January 31, 2011:
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.
Biosynergy, Inc.
Notes to Financial Statements
Three and Nine Months Ended January 31, 2011 and 2010
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Note 5 - Related Party Transactions (continued)
As of January 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 31.59% of sales during the
first nine months of Fiscal 2011 compared to 35.61% during the
comparative Fiscal 2010 period. As of January 31, 2011, there
were outstanding accounts receivable from this customer of
$72,750 compared to $58,370 at January 31, 2010. Shipments to
another customer amounted to 27.33% of sales during the first
nine months of Fiscal 2011 and 23.7% of sales during the first
nine months of Fiscal 2010. As of January 31, 2011, there were
outstanding accounts receivable from this customer of
approximately $39,250 compared to $25,205 at January 31, 2010.
Item 2. Management's Discussion of Financial Condition and
Results of Operations
--------------------------------------------------
Net Sales/Revenues
------------------
For the three month period ending January 31, 2011 ("3rd
Quarter"), the net sales increased 12.6%, or $33,430, and
increased 6.38%, or $51,819, during the nine month period ending
January 31, 2011, as compared to net sales for the comparative
periods ending in 2010. This increase in sales is primarily the
result of an increase in unit sales of HemoTemp II.
In addition, during the 3rd Quarter the Company had $964 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 2.04%, or $3,027, as compared to the 3rd
quarter in 2010 primarily due to an increase in salaries and
401(k) plan contributions. The operating expenses of the Company
decreased by 2.9%, or $14,478, for the nine month period ending
January 31, 2011, primarily due to a decrease in health insurance
premiums, accounting fees and legal fees.
Cost of Sales
-------------
The cost of sales during the 3rd Quarter increased by $18,848,
and increased by $34,004 during the nine month period ending
January 31, 2011 as compared to these expenses during the same
periods ending in 2010. Increases were primarily due to an
increase in unit sales and use of inventory. As a percentage of
sales, the cost of sales were 31.7% during the 3rd Quarter and
28.6% for the comparative quarter ending in 2010, and 30.19%
during the nine month period ending January 31, 2011 compared to
27.92% in 2010. 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 $967, or 4.4%, during
the 3rd Quarter as compared to the same quarter in 2010. These
costs increased by $3,097, or 4.52%, during the nine month period
ending January 31, 2011 as compared to the same period in 2010.
The overall increase in research and development is due primarily
to an increase in research books and automobile 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 $909, or
2.43%, as compared to the quarter ending January 31, 2010. These
costs increased by $6,665, or 6.25%, during the nine month period
ending January 31, 2011 as compared to the same period in 2010.
The increase is due to an increase in travel, entertainment and
product promotion expenses.
General and Administrative Expenses
-----------------------------------
General and administrative costs for the 3rd Quarter increased by
$1,151, or 1.3%, as compared to the 3rd quarter ending January
31, 2010, primarily due to increased salaries and office
supplies. General and administrative costs decreased by $24,240,
or 7.5%, during the nine month period ending January 31, 2011, as
compared to the same periods in 2010, primarily due to a decrease
in health insurance premiums, legal fees and accounting fees.
Net Income
----------
The Company realized a net income of $38,410 during the 3rd
Quarter as compared to a net income of $28,573 for the
comparative quarter in the prior year. The Company also realized
a net income of $86,020 for the nine month period ending January
31, 2011 as compared to a net income of $64,535 during the same
period in 2010. The increase in net income is a direct result of
an increase in sales.
Assets/Liabilities
------------------
General
-------
Since April 30, 2010, the Company's assets have increased by
$114,797 and liabilities have increased by $28,777. The increase
in assets, primarily cash and accounts receivable, is a result of
the Company's increase in sales and profits.
Related Party Transactions
--------------------------
The Company was owed $19,699 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at January 31, 2011 and April 30, 2010.
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, 11.62 to 1,
has decreased compared to 16.44 to 1 at April 30, 2010. This
decrease in ratio of current asset to current liabilities is a
result of increased accounts payable. 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, 2011, the Company
experienced an increase in working capital of $60,897. This is
primarily due to the Company's increase in cash.
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 $169,711 during the
nine month period ending January 31, 2011. An aggregate of
$38,023 was used for equipment purchases and patent application
expenditures and $100,000 was provided by the redemption of a
short-term investment 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, 2011 or 2010.
As of January 31, 2011, the Company had $924,295 of current
assets available. Of this amount, $25,912 was prepaid expenses,
$83,268 was inventory, $156,858 was net trade receivables and
$658,257 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, 2011 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,
2011, 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, 2011, 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, 2011, 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, 2011, 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(i)
(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.
____________________
(i) 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 March 17, 2011 /s/ Fred K. Suzuki
-------------- ---------------------------
Fred K. Suzuki
Chief Executive Officer,
Chairman of the Board, and
President
Date March 17, 2011 /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, 2011
/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, 2011
/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, 2011, 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, 2011, 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, 2011
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, 2011, 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, 2011, 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, 201
