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 July 31, 2016

 

__ 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.

(Exact name of registrant as specified in its charter)

 

Illinois	36-2880990
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007	847-956-0471
(Address of principal executive offices)	(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes X 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 stock, as of July 31, 2016: 14,935,511

 

BIOSYNERGY, INC.

 

PART 1 - FINANCIAL INFORMATION

 

Item 1. Financial Statements and Supplementary Data

 

 

BALANCE SHEETS

 

 

 

Assets

 

			July 31, 2016				April 30, 2016
Unaudited							Audited
Current Assets
Cash		$	1,128,947			$	1,091,649
Accounts receivable. Trade (net of allowance for doubtful accounts of $500 at July 31, 2016 and April 30, 2016			130,878				192,051
Inventories			127,139				108,960
Prepaid expenses			35,413				25,958
Total Current Assets			1,422,377				1,418,618
Equipment and leasehold improvements
Equipment			201,952				198,640
Leasehold improvements			20,022				20,022
			221,974				218,662
Less accumulated depreciation and amortization			(205,375	)			(203,276	)
Total Equipment and Leasehold Improvements Net			16,599				15,386
Other Assets
Patents less accumulated amortization			76,886				79,057
Pending patents			60,788				60,788
Deposits			5,937				5,937
Total Other Assets			143,611				145,782
		$	1,582,587			$	1,579,786

 

 

The accompanying notes are an integral part of the financial statements.

 

BIOSYNERGY, INC.

 

PART 1 - FINANCIAL INFORMATION

 

 

 

BALANCE SHEETS

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

			July 31, 2016				April 30, 2016
Unaudited							Audited
Current Liabilities
Accounts payable		$	37,251			$	4,595
Accrued compensation and payroll taxes			11,268				39,206
Accrued vacation			32,443				21,835
Other accrued liabilities			3,063				3,545
Total Current Liabilities			84,025				69,181
Deferred Income Taxes			32,110				32,110
Shareholder's Equity
Common stock, no par value: 20,000,000 authorized shares issued: 14,935,511 shares at July 31, 2016 and April 30, 2016			660,988				660,988
Receivable from affiliate			(19,699	)			(19,699	)
Retained earnings			825,163				837,206
Total Shareholders' Equity			1,466,452				1,478,495
		$	1,582,587			$	1,579,786

 

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

		Three Months Ended
		July 31
		2016				2015
Net sales		$	290,047			$	306,144
Cost of sales			91,231				103,051
Gross profit			198,816				203,093
Operating expenses
Marketing			47,721				47,812
General and administrative			127,002				116,501
Research and development			42,197				35,979
Total Operating Expenses			216,920				200,292
Income from operations			(18,104	)			2,801
Other income
Interest income			107				111
Other income			480				480
Total Other Income			587				591
Net income (loss) before income taxes			(17,517	)			3,392
Provision (benefit) for income taxes			(5,474	)			1,130
Net income (loss)		$	(12,043	)		$	2,262
Net loss per common share - basic and diluted		$	(.001	)		$	—
Weighted-Average Shares of Common Stock Outstanding - Basic and Diluted			14,935,511				14,935,511

 

 

 

The accompanying notes are an integral part of the financial statements.

BIOSYNERGY, INC.

 

STATEMENT OF SHAREHOLDERS' EQUITY

 

THREE MONTHS ENDED JULY 31, 2016

 

Unaudited

 

 

 

 

			Common Stock
			Shares				Amounts				Receivable from Affiliate				Retained Earnings				Total
Balance, May 1, 2016			14,935,511			$	660,988			$	(19,699	)		$	837,206			$	1,478,495
Net Income			—				—				—			$	(12,043	)		$	(12,043	)
Balance, July 31, 2016			14,935,511			$	660,988			$	(19,699	)		$	825,163			$	1,466,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

BIOSYNERGY, INC.

 

STATEMENTS OF CASH FLOWS

 

Unaudited

 

		Three Months Ended July 31
		2016				2015
Cash flows from operating activities
Net income		$	(12,043	)		$	2,262
Adjustments to reconcile net income to cash provided by (used in) operating activities
Depreciation and amortization			4,270				4,337
Changes in assets and liabilities
Accounts receivable			61,173				(1,021	)
Inventories			(18,179	)			16,336
Prepaid expenses and other			(9,455	)			(10,770	)
Accounts payable and accrued expenses			14,844				(16,866	)
Total adjustments			52,653				(7,984	)
Net cash provided (used in) by operating activities			40,610				(5,722	)
Cash flow from investing activities
Patents and patents pending			—				(290	)
Purchase of equipment			(3,312	)			—
Net cash used in investing activities			(3,312	)			(290	)
Increase (decrease) in cash and cash equivalents			37,298				(6,012	)
Cash beginning period			1,091,649				975,777
Cash ending period		$	1,128,947			$	969,765
Supplemental cash flow information
Interest paid		$	—			$	—
Income taxes paid		$	—			$	8,700

 

The accompanying notes are an integral part of the financial statements.

 

 

Note 1 - Company Organization and Description

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of normal recurring adjustments which are necessary for a fair presentation of the financial position and results of operations for the periods presented. The unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s April 30, 2016 Annual Report on Form 10-K/A. The results of operations for the three months ended July 31, 2016 are not necessarily indicative of the operating results for the full year.

 

Biosynergy, Inc. (the Company) was incorporated under the laws of the State of Illinois on February 9, 1976. It is primarily engaged in the development and marketing of medical, consumer and industrial thermometric and thermographic products that utilize cholesteric liquid crystals. The Company’s primary product, the HemoTemp II Blood Monitoring Device, accounted for approximately 90.16% of the sales during the quarter ending July 31, 2016 and 90.85% during the quarter ending July 31, 2015. 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 various bank deposit accounts, which at times may exceed federally insured limits. No losses have been experienced on such accounts.

 

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.

 

Inventories

 

Inventories are valued at the lower of cost or market using the FIFO (first-in, first-out) method.

 

Depreciation

 

Equipment and leasehold improvements are stated at cost. Depreciation is computed using 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 three to ten years. Depreciation expense was $2,099 and $2,166 for the three month periods ending July 31, 2016 and 2015, respectively.

 

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.

 

Patent amortization expense for the three months ended July 31, 2016 and 2015 was $2,171. Patents relate to products that have been developed and by the Company. Patents pending relate to products under development.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Income Per Common Share

 

Income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. When dilutive, stock options are included as share equivalents using the treasury stock method in the calculation of diluted earnings per share. The Company has no outstanding options or other rights to acquire its unissued common shares.

 

Comprehensive Income

 

Components of comprehensive income include amounts that are included in the comprehensive income but are excluded from net income. During the three month periods ending July 31, 2016 and 2015, there were no 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 reporting purposes. The deferred 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 expense.

 

The (benefit) provision for income taxes consists of the following components for the three month periods ended July 31:

 

			2016				2015
Current
Federal		$	(4,117	)		$	815
State			(1,357	)			315
Provision (Benefit) for Income Taxes		$	(5,474	)		$	1,130

 

The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows:

 

		Period ended July 31,
		2016				2015
U.S. federal statutory tax rate			34.0	%			34.0	%
State income tax expense, net of Federal tax benefit			5.0				5.0
Adjustment for prior year estimates			—				—
Effect of graduated federal tax rates			(7.75	)			(5.4	)
Effective Tax Rate			31.25	%			33.6	%

 

 

Recent Accounting Pronouncements

 

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. Those ASUs 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.

 

On February 25, 2016, the FASB issued Topic 842, its highly-anticipated leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. GAAP. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. At inception, a lessee must classify all leases as either finance or operating. The Company intends to adopt Topic 842 upon extension of the current lease for its facilities in Elk Grove Village or upon entering into a new lease agreement for alternative facilities on or about May 1, 2018. The Company is investigating the effect of adoption of Topic 842 on its results of operations and financial condition. However, it is not anticipated that adoption of Topic 842 will have a material impact on the results of operations or financial condition of the Company.

 

In May 2015, the FASB issued Accounting Standards Update No. 2015-09, Revenue from Contracts with Customers (ASU 2015-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2015-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2015-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

 

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2015-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2015-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard as of May 1, 2018.

 

 

Note 3 – Inventories

 

Components of inventories are as follows:

 

		July 31, 2016				April 30, 2016
Raw materials		$	84,881			$	83,231
Work-in-process			13,341				16,303
Finished goods			28,917				9,426
		$	127,139			$	108,960

 

 

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 July 31, 2016:

 

		Stock of Affiliates
			Biosynergy, Inc.				F.K. Suzuki International, Inc.				Medlab, Inc.
F.K. Suzuki International, Inc			30.0	%			—	%			100.0	%
Fred K. Suzuki, Officer			4.1				30.0				—
Lauane C. Addis, Officer			—				—				—
Jeanne S. Addis, Trustee			—				28.1				—
James F. Schembri, Director			8.6				—				—
Mary K. Friske, Officer			.3				.7				—
Laurence C. Mead, Officer			.4				10.0				—
Beverly K. Suzuki			2.7				—				—

 

As of July 31, 2016, $19,699 was due from F. K. Suzuki International, Inc. 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.

 

A board member provided a variety of legal services to the Company in his capacity as a partner in a law firm. Fees for such legal services were approximately $9,665 and $9,320 for the three months ended July 31, 2016 and 2015 respectively.

 

 

Note 6 – Lease Commitments

 

In January 2015, the Company entered into a three-year lease agreement for its current facilities, which expires on April 30, 2018. The base rent under the lease escalates over the life of the lease. However, rent expense is recorded on a straight-line basis as required by accounting principles generally accepted in the United States of America. As of July 31, 2016, the Company’s approximate total future minimum lease payments are as follows:

 

	Year Ending April 30:
	2017			$	65,006
	2018				89,275

 

Also included in the lease agreement are escalation clauses for the lessor’s increases in property taxes and other operating expenses.

 

Note 7 – Customer Concentrations

 

Shipments to one customer amounted to 29.42% of sales during the first three months of Fiscal 2017 compared to 32.65% during the comparative Fiscal 2016 period. As of July 31, 2016, there were outstanding accounts receivable from this customer of $56,432 compared to $80,393 at July 31, 2015. Shipments to another customer amounted to 29.17% of sales during the first three months of Fiscal 2017 and 31.82% of sales during the first three months of Fiscal 2016. As of July 31, 2016, there were outstanding accounts receivable from this customer of $35,497 compared to $46,170 at July 31, 2015.

 

The Company had export sales of $20,460 during the first three months of Fiscal 2017, and export sales of $10,285 during the first three months of Fiscal 2016. The Company also believes that some of its medical devices were sold to distributors within the United States who resold the devices in foreign markets. However, the Company does not have any information regarding such sales and such sales are not considered to be material.

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Net Sales/Revenues

 

For the three month period ending July 31, 2016 (“1^st Quarter”), the net sales decreased 5.26%, or $16,097, as compared to net sales for the comparative three month period ending in 2015. The decrease in net sales during the 1^st Quarter was primarily due to a decrease in sales of HemoTemp^R II. During the 1^st Quarter, sales of HemoTemp^R II decreased by $16,620 resulting in lower net sales overall. As of July 31, 2016, the Company had no back orders.

 

In addition to the above, during the 1^st Quarter the Company had $480 of other miscellaneous revenues primarily from leasing a portion of its storage space to a third party and interest income of $107.

 

Costs and Expenses

General

The operating expenses of the Company during the 1^st Quarter increased overall by 8.3%, or $16,628, as compared to the three month period ending July 31, 2015, primarily due to an increase in general and administrative expenses and research and development costs.

 

 

Cost of Sales

 

The cost of sales during the 1^st Quarter decreased by $11,820 as compared to these expenses during the three month period ending July 31, 2015. This decrease was due primarily due to lower sales. As a percentage of sales, the cost of sales was 31.45% during the 1^st Quarter and 33.66% for the three month period ending July 31, 2015. Subject to unanticipated increases in 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 for the 1^st Quarter increased $6,218, or 17.28%, as compared to the same quarter in 2015. This increase was primarily due to engineering costs for improvements to the Company’s HemoTemp II^R Activator. The Company is continuing research intended to improve and expand the Company’s current product line. The Company does not have sufficient information to determine the extent to which the Company will be required to allocate its resources to the continued development of these products.

 

Marketing Expenses

 

Marketing expenses for the 1^st Quarter decreased by $91 or .19%, as compared to the quarter ending July 31, 2015. Management believes the small change in marketing expenses was not material to the operations of the Company.

 

General and Administrative Expenses

 

General and administrative costs for the 1^st Quarter increased by $10,501, or 9.01%, as compared to the 3 month period ending July 31, 2015. This increase was primarily the result of an increase in accounting fees due to timing of year end billing, office supplies, and general insurance costs. Except for unforeseen expenses and normal increases in employee costs, it is unlikely general and administrative expenses will materially change during Fiscal 2017.

 

Net Income (Loss)

 

The Company realized a net loss of $12,043 during the 1^st Quarter as compared to a net income of $2,262 for the comparative quarter of the prior year. The decrease in net income was primarily the result of decreased sales, but also an increase in expenses discussed above.

 

Assets/Liabilities

General

 

Since April 30, 2016, the Company’s assets have increased by $2,801 and liabilities have increased by $14,844. The increase in assets is due to the cash flow provided by operations offset by a decrease in accounts receivable as a result of the decrease in sales. The increase in liabilities (primarily accrued vacation and accounts payable) is due to the timing of employee vacations and payment of accounts payable in the ordinary course of business rather than a lack of cash to pay these liabilities.

 

Related Party Transactions

 

The Company was owed $19,699 by F.K. Suzuki International, Inc. ("FKSI"), an affiliate, at July 31, 2016 and April 30, 2016. 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. Collectability 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.

 

A board member provides a variety of legal services to the Company in his capacity as a partner in a law firm. Fees for such legal services were approximately $9,665 and $9,320 at July 31, 2016 and 2015, respectively.

 

Current Assets/Liabilities Ratio

 

The ratio of current assets to current liabilities, 16.92 to 1, has decreased compared to 20.51 to 1 at April 30, 2016, primarily due to a higher percentage increase in current liabilities than the percentage decrease in current assets. This increase is not indicative of a material change in the financial condition of the Company, but rather a normal fluctuation due to the timing of payment of vendors. In order to maintain or improve the Company’s asset/liabilities ratio, the Company’s operations must return to profitability.

 

The increase in liabilities was due primarily to an increase in accrued vacation and accounts payable during the 1^st Quarter related to timing of employee vacations and payment of accounts payable rather than a lack of cash to pay these liabilities.

 

Liquidity and Capital Resources

 

During the 1^st Quarter, the Company experienced a decrease in working capital of $11,085. This was primarily due to a decrease in accounts receivable and an increase in accounts payable during the 1^st Quarter as discussed above.

 

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 substantial portion of the Company’s current assets.

 

The Company presently grants payment terms to customers and dealers of 30 days. Although the Company experiences varying collection periods of its accounts receivable, the Company believes that uncollectable accounts receivable will not have a significant effect on future liquidity.

 

Cash provided in operating activities was $40,610 during the three month period ending July 31, 2016. Cash used in investing activities was $3,312. This amount, $3,312 was used for new production equipment during the three month period ending July 31, 2016. Except for operating capital and limited equipment purchases and patent expenses, management is not aware of any other material capital requirements or material contingencies for which it must provide. There were no cash flows from financing activities during the three month period ending July 31, 2016.

 

As of July 31, 2016, the Company had $1,422,377 of current assets available. Of this amount, $35,413 was prepaid expenses, $127,139 was inventory, $130,878 was net trade receivables and $1,128,947 was cash. The Company’s available cash and cash flow are considered adequate to fund the short-term 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. Thus there is a risk additional financing may be necessary to fund long-term capital needs of the Company, although there is no such currently known long-term capital needs other than operations.

 

Effects of Inflation. With the exception of raw material and labor costs increasing with inflation, inflation has not had a material effect on the Company’s revenues and income from continuing operations in the past three years. Inflation is not expected to have a material effect in the foreseeable future.

 

Critical Accounting Policies and Estimates. On December 12, 2001, the SEC issued FR-60 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” FR-60 is an intermediate step to alert companies to the need for greater investor awareness of the sensitivity of financial statements to the methods, assumptions, and estimates underlying their preparation, including the judgments and uncertainties affecting the application of those policies and the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

 

The Company’s significant accounting policies are disclosed in Note 2 to the Financial Statements for the 1^st Quarter. See “Financial Statements.” Except as noted below, the impact on the Company’s financial position or results of operation would not have been materially different had the Company reported under different conditions or using different assumptions. The policies which may have materially affected the financial position and results of operations of the Company if such information had been reported under different circumstances or assumptions are:

 

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 the collectability 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 the interest rate risk associated with its short term money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates. Thus, the Company’s operations are not exposed to financial risk that will have a material impact on its financial position and results of operation.

 

Item 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) which are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Accounting Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and its Chief Accounting Officer have concluded that the Company’s disclosure controls and procedures are effective.

 

There have been no changes in the Company’s internal control over financial reporting during the Company’s Fiscal Quarter ending July 31, 2016 that have materially affected or are likely to materially affect the Company’s internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

As of the end of the Company’s Fiscal Quarter ending July 31, 2016, 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 of Proceeds.

 

During the past three years, the Company has not sold securities which were not registered under the Securities Act.

 

Item 3. Defaults Upon Senior Securities.

 

(a)       As of the end of the Company’s Fiscal Quarter ending July 31, 2016, there have been no material defaults in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days, with respect to any indebtedness of the registrant or any of its significant subsidiaries exceeding 5 percent of the total assets of the Company and its consolidated subsidiaries.

 

(b)       As of the end of the Company’s Fiscal Quarter ending July 31, 2016, 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. Mine Safety Disclosures.

 

The disclosures required by this Item are not applicable to the Company.

 

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 July 31, 2016, 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 principles - 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  September 14, 2016	/s/ Fred K. Suzuki
	Fred K. Suzuki Chief Executive Officer, Chairman of the Board, and President
Date  September 14, 2016	/s/ Laurence C. Mead
	Laurence C. Mead Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer and Treasurer