Washington, D.C. 20549
__ TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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.
State the number of shares outstanding of each
of the issuer’s classes of common stock, as of July 31, 2016:
14,935,511
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.
B
IOSYNERGY,
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
|