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Biosynergy Inc – ‘10-Q’ for 1/31/20

On:  Thursday, 3/12/20, at 3:06pm ET   ·   For:  1/31/20   ·   Accession #:  715812-20-2   ·   File #:  0-12459

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  As Of               Filer                 Filing    For·On·As Docs:Size

 3/12/20  Biosynergy Inc                    10-Q        1/31/20   41:1.1M

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    124K 
 2: EX-31.1     Certification of Chief Executive Officer            HTML     18K 
 3: EX-31.2     Certification of Chief Accounting Officer           HTML     18K 
 5: EX-32       Certification -- §906 - SOA'02                      HTML     13K 
 4: EX-32.1     Certification Pursuant to 18 U.S.C. Section 1350    HTML     13K 
                as Adopted                                                       
27: R1          Document and Entity Information                     HTML     45K 
38: R2          Balance Sheets (Unaudited)                          HTML    101K 
34: R3          Balance Sheets (Parenthetical)                      HTML     21K 
16: R4          Statements of Operations (Unaudited)                HTML     57K 
26: R5          Statements of Cash Flows (Unaudited)                HTML     66K 
37: R6          Shareholders Equity (Unaudited)                     HTML     24K 
33: R7          Company Organization and Description                HTML     19K 
15: R8          Summary of Significant Accounting Policies          HTML     40K 
28: R9          Inventories                                         HTML     19K 
14: R10         Common Stock                                        HTML     16K 
24: R11         Related Party Transactions                          HTML     24K 
36: R12         Lease Commitments                                   HTML     18K 
32: R13         Customer Concentration                              HTML     19K 
13: R14         Depreciation                                        HTML     16K 
23: R15         Research and Development and Patents                HTML     17K 
35: R16         Summary of Significant Accounting Policies          HTML     88K 
                (Policies)                                                       
31: R17         Summary of Significant Accounting Policies          HTML     23K 
                (Tables)                                                         
12: R18         Inventories (Tables)                                HTML     20K 
25: R19         Related Party Transactions (Tables)                 HTML     22K 
40: R20         Summary of Significant Accounting Policies -        HTML     27K 
                Income Tax Rate (Details)                                        
30: R21         Summary of Significant Accounting Policies -        HTML     23K 
                Provision for Income Taxes (Details)                             
18: R22         Depreciation (Details Narrative)                    HTML     16K 
22: R23         Research and Development and Patents (Details       HTML     17K 
                Narrative)                                                       
39: R24         Inventories - Inventories (Details)                 HTML     22K 
29: R25         Related Party Transactions (Details Narrative)      HTML     22K 
17: R26         Lease Commitments - Future Minimum Lease Expense    HTML     20K 
                (Details)                                                        
21: R27         Customer Concentrations (Details)                   HTML     21K 
41: XML         IDEA XML File -- Filing Summary                      XML     64K 
20: EXCEL       IDEA Workbook of Financial Reports                  XLSX     31K 
11: EX-101.INS  XBRL Instance -- bsyn-20200131                       XML    236K 
 7: EX-101.CAL  XBRL Calculations -- bsyn-20200131_cal               XML     98K 
 8: EX-101.DEF  XBRL Definitions -- bsyn-20200131_def                XML     56K 
 9: EX-101.LAB  XBRL Labels -- bsyn-20200131_lab                     XML    304K 
10: EX-101.PRE  XBRL Presentations -- bsyn-20200131_pre              XML    223K 
 6: EX-101.SCH  XBRL Schema -- bsyn-20200131                         XSD     55K 
19: ZIP         XBRL Zipped Folder -- 0000715812-20-000002-xbrl      Zip     41K 


‘10-Q’   —   Quarterly Report


This is an HTML Document rendered as filed.  [ Alternative Formats ]



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, 2020

 

[ ]       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.

(Exact name of registrant as specified in its charter)

 

Illinois 36-2880990
(State of 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 equity, as of January 31, 2020: 14,935,511

 

BIOSYNERGY, INC.

 

PART 1 – FINANCIAL INFORMATION

 

Item 1 - Financial Statements and Supplementary Data

 

BALANCE SHEETS

 

 

Assets

 

 

   January 31, 2020
Unaudited
  April 30, 2019
Audited
Current Assets          
Cash  $1,246,516   $1,180,125 
Accounts receivable, Trade (net of allowance for doubtful accounts of $500 at January 31, 2020 and April 30, 2019   218,439    246,363 
Inventories   146,112    162,678 
Prepaid expenses   57,271    57,658 
Total Current Assets   1,668,338    1,646,824 
           
Property, Plant and Equipment          
Equipment   200,590    201,489 
Leasehold improvements   25,809    25,809 
    226,399    227,298 
           
                    Less accumulated depreciation and amortization   (217,419)   (214,982)
  Total Property, Plant and Equipment   8,980    12,316 
           
Operating Lease Right of Use Asset          
Operating Lease Right of Use Asset   22,275    89,100 
     Total Operating Lease Right of Use Asset   22,275    89,100 
           
Other Assets          
Patents less accumulated amortization   108,470    118,702 
Deposits   5,937    5,937 
Total Other Assets   114,407    124,639 
           
   $1,814,000   $1,872,879 

   

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

 

BIOSYNERGY, INC.

 

PART 1 – FINANCIAL INFORMATION

 

BALANCE SHEETS

 

 

 

Liabilities and Shareholders’ Equity 

 

   January 31, 2020
Unaudited
  April 30, 2019
Audited
Current Liabilities          
Accounts payable  $4,206   $4,538 
Accrued compensation and payroll taxes   24,991    39,766 
Accrued vacation   21,031    21,578 
Other accrued liabilities   1,086    209 
                    Operating lease liability   22,550    90,200 
                                  Total Current Liabilities   73,864    156,291 
           
                     Deferred income taxes   24,272    24,272 
           
           
Shareholders’ Equity          
Common stock, no par value: 20,000,000 authorized shares issued: 14,935,511 shares at January 31, 2020 and April 30, 2019   660,988    660,988 
Receivable from affiliate   (19,699)   (19,699)
Retained earnings   1,074,575    1,051,027 
Total Shareholders' Equity   1,715,864    1,692,316 
           
   $1,814,000   $1,872,879 
           

 

 

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

 

 

BIOSYNERGY, INC.

 

PART 1 – FINANCIAL INFORMATION

 

Statement of Operations

(Unaudited)

 

  

   Three Months Ended  Nine Months Ended
   January 31  January 31
   2020  2019  2020  2019
             
Net sales  $291,454   $372,530   $920,539   $1,018,788 
Cost of sales   111,362    110,513    327,090    322,312 
Gross profit   180,092    262,017    593,449    696,476 
Operating expenses                    
Marketing   45,751    45,951    137,318    139,924 
General and administrative   91,055    98,883    299,249    313,838 
Research and development   45,935    43,168    125,032    119,000 
Total Operating Expenses   182,741    188,002    561,599    572,762 
                     
Income (Loss) from operations   (2,649)   74,015    31,850    123,714 
Other income                    
Interest income   149    150    449    375 
Other income   480    480    1,440    1,440 
Total Other Income   629    630    1,889    1,815 
                     
Net income (Loss) before income taxes   (2,020)   74,645    33,739    125,529 
                     
Provision for income taxes   —      21,281    10,191    35,788 
Net income (Loss)  $(2,020)  $53,364   $23,548   $89,741 
                     
Net income per common share - basic and diluted  $.000   $.004   $.002   $.006 
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 financial statements.

 

 

 

BIOSYNERGY, INC.

 

STATEMENT OF SHAREHOLDERS’ EQUITY

 

Nine Months Ended January 31, 2020

 

(Unaudited) 

 

  Common Stock

 

   Shares  Amounts  Receivable from Affiliate  Retained Earnings  Total
 

Balance,

May 1, 2019

 

    14,935,511   $660,988   $(19,699)  $1,051,027   $1,692,316 
 

Net Income

 

    

-

__________

    

-

_________

    

-

__________

   $25,568   $25,568 
 Balance, January 31,                          
 2020                   14,935,511   $660,988   $(19,699)  $1,076,595   $1,717,884 

 

 

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

 

BIOSYNERGY, INC.

STATEMENT OF CASH FLOWS

(Unaudited)

   Nine Months Ended January 31
   2020  2019
Cash flows from operating activities          
Net income  $23,548   $89,741 
Adjustments to reconcile net income to cash provided by operating activities          
Depreciation and amortization   14,530    15,846 
        Noncash Lease Expense   66,825    66,825 
Changes in assets and liabilities          
Accounts receivable   27,924    (73,607)
Inventories   16,566    (7,003)
Prepaid expenses and other   387    24,777 
Accounts payable and accrued expenses   (14,777)   (5,335)
Building Lease Liability For Right of Use Asset   (67,650)   (66,000)
Total adjustments   43,805    (44,497)
           
Net cash provided by operating activities   67,353    45,244 
           
Cash flows from investing activities          
Purchase of equipment   (962)   (11,022)
           
Net cash used in investing activities   (962)   (11,022)
           
Increase in cash and cash equivalents   66,391    34,222 
Cash and cash equivalents beginning period   1,180,125    1,140,428 
Cash and cash equivalents ending period  $1,246,516   $1,174,650 
           
Supplemental cash flow information          
Interest paid  $__  $—   
Income taxes paid  $—     $—   
Non-Cash Transactions          
Recording of Right of Use Asset – Building Lease  $—     $178,200 

 

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

 

 

 

BIOSYNERGY, INC.

Notes to Financial Statements

Nine Months Ended January 31, 2020 and 2019

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, 2019 Annual Report on Form 10-K/A. The results of operations for the nine months ended January 31, 2020 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 92.49% of the sales during the nine months ending January 31, 2020 and 92.14% during the nine months ending January 31, 2019. 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 beyond the stipulated due date. 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 $4,298 and $6,852 for the nine month periods ending January 31, 2020 and 2019, respectively.

 

Prepaid Expenses

 

Certain expenses, primarily insurance and income taxes, have been prepaid and will be used within one year.

 

Revenue Recognition

 

In May 2014, the FASB issued an Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition. Several additional ASUs have subsequently been issued amending and clarifying the standard. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized. The updates may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption.

 

The Company adopted this standard on May 1, 2018, using the modified retrospective approach. The impact of the adoption of ASU 2014-09 on the Company’s condensed consolidated financial statements is as follows:

The Company’s revenue is primarily generated from the sales of products directly to customers or through distribution channels, based on purchase orders and not supply contracts providing for additional goods or services once the products are transferred to the customer. The Company’s performance obligations underlying such sales, and the timing of revenue recognition related thereto, remain substantially unchanged following the adoption of this ASU.
The adoption of ASU No. 2014-09 requires that the Company recognize its sales return allowance on a gross basis rather than as a net liability. As such, the Company now recognizes a return asset for the right to recover the goods returned by the customer, measured at the former carrying amount of the products, less any expected recovery costs (recorded as an increase to prepaid expenses and other current assets), and a return liability for the amount of expected returns (recorded as an increase to other current liabilities). The Company’s analysis of sales returns over the past several years noted that sales returns are nominal and therefore no sales return allowance is deemed necessary.

  

There was no adjustment necessary for fiscal year ending April 30, 2019 or prior in relation to the change in the revenue recognition policy and no significant effects on the nine month period ending January 31, 2020.

 

Shipping and Handling

 

Shipping and handling fees billed to customer, if any, are netted against the related costs which are included in cost of sales. The net cost is not material.

 

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, generally for three years after filing, 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 provision for income taxes consists of the following components for the nine month periods ended January 31:

 

       2020   2019
Current      
Federal  $6,986   $23,863 
State   3,205    11,925 
Provision for Income Taxes  $10,191   $35,788 

 

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

 

   Period Ended January 31,
       2020   2019
U.S. federal statutory tax rate   21.0%   21.0%
State income tax expense, net of          
Federal tax benefit   9.2%   7.51%
Effective Tax Rate   30.2%   28.51%

 

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, are amortized over the life of the respective patent on the straight-line method.

 

Patent amortization expense for the nine months ended January 31, 2020 and 2019 were $10,232 and $8,994 respectively.

 

Patents relate to products that have been developed and are being marketed 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. Basic and diluted net income per common share is the same for the nine months ended January 31, 2020 and 2019 as there are no common stock equivalents.

 

Comprehensive Income

 

Components of comprehensive income include amounts that are included in the comprehensive income but are excluded from net income. During the nine month periods ending January 31, 2020 and 2019, there were no differences between the Company’s net income and comprehensive income.

  

Fair Value of Financial Instruments

 

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. Based on the Company’s analysis, the fair value of financial instruments recorded on the balances sheets as of January 31, 2020 and April 30, 2019, approximates their carrying value.

 

Segments

 

Accounting standards have established annual reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. The Company’s operations were a single reportable segment and an international segment. The international segment operations are immaterial. See Note 7.

 

Recent Accounting Pronouncements

 

The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASCs. 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.

 

Note 3 – Inventories

 

Components of inventories are as follows:

 

  

January 31,

2020

  April 30,
2019
Raw Materials  $105,926   $112,499 
Work-in-Process   23,952    32,882 
Finished Goods   16,234    17,297 
   $146,112   $162,678 

 

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, 2020

   Stock of Affiliates
    

 

Biosynergy, Inc.

    F.K. Suzuki International, Inc.    

 

Medlab, Inc.

 
F.K. Suzuki International, Inc.   30.0%   —  %   100%
Fred K. Suzuki, Officer   4.1    30.0    —   
Jeanne S. Addis, as Trustee   —      28.1    —   
Mary K. Friske, Officer   .3    .7    —   
Laurence C. Mead, Officer   .4    10.0    —   
Beverly R. Suzuki   2.7    —      —   
Lauane C. Addis, Officer   —      —      —   
Malcolm MacCoun, Director   —      —      —   

As of January 31, 2020, $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 $9,216 and $18,341 for the nine months ended January 31, 2020 and 2019, respectively.

Note 6 – Lease Commitments

 

On February 25, 2016, the FASB issued Topic 842, Leases. 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. At inception, a lessee must classify all leases as either finance or operating. In February 2018, the Company entered into a two-year lease agreement for its current facilities, which started May 1, 2018 and expires on April 30, 2020. Under the new lease standard, which was early-adopted by the Company as of May 1, 2018, the Company’s lease was accounted for as an operating lease. As a result, the Company measured the lease liability using the two year term and rates per the lease agreement and recognized a lease liability, with a corresponding right-of-use asset. A discount was not calculated due to the lease agreement only having a two year term. 

The operating lease expense for the nine months ending January 31, 2020 is $66,825. The corresponding expense, recorded as rent expense, for the nine months ending January 31, 2020 is $67,650. Retrospective application of the new standard did not render any adjustments since all of the Company’s operating leases were less than one year.

 

Lease liability as of January 31, 2020 is $22,550 through April 30, 2020. Management is in the process of negotiating a new lease agreement.

  

Note 7 – Customer Concentrations

 

Shipments to one customer amounted to 28.43% of sales during the first nine months of Fiscal 2020 compared to 28.15% during the comparative Fiscal 2019 period. As of January 31, 2020, there were outstanding accounts receivable from this customer of $64,554 compared to $65,955 at January 31, 2019. Shipments to another customer amounted to 37.70% of sales during the first nine months of Fiscal 2020 and 40.51% of sales during the first nine months of Fiscal 2019. As of January 31, 2020, there were outstanding accounts receivable from this customer of $120,626 compared to $199,484 at January 31, 2019.

 

The Company had export sales of $4,750 during the 3rd Quarter of Fiscal 2020, and export sales of $25,005 during the 3rd Quarter of Fiscal 2019. For the nine months ending January 31, 2020 export sales were $27,355 and $68,660 for the same period ending January 31, 2019. 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.

 

 

 

 C: 
 
 

BIOSYNERGY, INC.

Nine Months Ended January 31, 2020 and 2019

 

Item 2. Management’s Discussion of Financial Condition and Results of Operations

 

Net Sales/Revenues

 

For the three month period ending January 31, 2020 (“3rd Quarter”), the net sales decreased 21.7%, or $81,076, and decreased 9.6%, or $98,249, during the nine month period ending January 31, 2020, as compared to net sales for the comparative periods ending in 2019. The decrease in sales during the three and nine month periods ending January 31, 2020 is primarily the result of lower HemoTemp® II sales. At January 31, 2020 there were no back orders.

 

In addition, during the 3rd Quarter the Company had $629 of miscellaneous revenues and $1,889 for the nine month period ending January 31, 2020 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 decreased overall by 2.8%, or $5,261, as compared to the 3rd quarter in 2019. The operating expenses of the Company decreased by 1.9% or $11,163 for the nine month period ending January 31, 2020, as compared to the nine month period ending January 31, 2019, primarily due to a decrease in legal fees and employee health insurance costs.

 

Cost of Sales

 

The cost of sales during the 3rd Quarter increased by $849, and increased by $4,778 during the nine month period ending January 31, 2020 as compared to these expenses during the same periods ending in 2019. The increase in the cost of sales during the 3rd Quarter was primarily due to higher freight charge revenues, which are offset against other expenses included in cost of sales. The increase for the nine month period ending January 31, 2020 was due to an increase in the cost of health insurance allocated to manufacturing, higher freight charges and certain raw materials. As a percentage of sales, the cost of sales were 38.2% during the 3rd Quarter, 29.6% for the comparative quarter ending in 2019, and 35.5% during the nine month period ending January 31, 2020 compared to 31.6% in 2019. 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 $2,767, or 6.4%, during the 3rd Quarter as compared to the same quarter in 2019. These costs increased by $6,032, or 5.0%, during the nine month period ending January 31, 2020 as compared to the same period in 2019. The overall cost in research and development expense increased during the nine months due to higher employee costs and increased FDA user fees.

 

Marketing Expenses

 

Marketing expenses for the 3rd Quarter decreased by $200, or .43%, as compared to the quarter ending January 31, 2019. These costs decreased by $2,606, or 1.8%, during the nine month period ending January 31, 2020 as compared to the same period in 2019. The decrease is primarily due to lower health care costs allocated to marketing activities.

  

General and Administrative Expenses

 

General and administrative costs for the 3rd Quarter decreased by $7,828, or 7.9%, as compared to the 3rd quarter ending January 31, 2019, primarily due to lower legal fees, timing on accounting costs, and employee health care costs. General and administrative costs have decreased overall by $14,589, or 4.6%, during the nine month period ending January 31, 2020, as compared to the same periods in 2019, primarily due to lower legal fees and employee health care costs.

 

Net Income

 

The Company realized a net loss of $2,020 during the 3rd Quarter as compared to a net income of $53,364 for the comparative quarter in the prior year primarily due to lower sales during the 3rd quarter. The Company also realized a net income of $23,548 for the nine month period ending January 31, 2020 as compared to a net income of $89,741 during the same period in 2019. This decrease in net income is due to an overall decrease in sales, while the operating expenses of the Company have not materially changed.

 

Assets/Liabilities

 

General

 

Since April 30, 2019, the Company's assets have decreased by $58,879 and liabilities have decreased by $82,427. The overall decrease in assets and liabilities is primarily due to the changes in the accounting treatment for leases, which include amortization of the right of use asset and payments against the lease liability.

 

Related Party Transactions

 

The Company was owed $19,699 by F.K. Suzuki International, Inc. ("FKSI"), an affiliate, at January 31, 2020 and April 30, 2019. 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 $9,216 and $18,341 for the nine months ending January 31, 2020 and 2019 respectively.

 

Current Assets/Liabilities Ratio

 

The ratio of current assets to current liabilities, 22.5 to 1, has increased compared to 10.5 to 1 at April 30, 2019 primarily due to higher cash balances and lower accrued liabilities and lower operating lease liability. The Company anticipates the ratio of current assets to current liabilities will remain substantially at its current level as a result of the change in accounting methods, subject to other normal fluctuations. 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, 2020, the Company experienced an increase in working capital of $103,941. This is primarily due to the Company’s increase in cash, and lower accrued liabilities and lower operating lease liability.

 

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. 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 $67,353 during the nine month period ending January 31, 2020. Cash used for investing activities was $962 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 periods ending January 31, 2020 or 2019.

 

As of January 31, 2020, the Company had $1,668,338 of current assets available. Of this amount, $57,271 was prepaid expenses, $146,112 was inventory, $218,439 was net trade receivables and $1,246,516 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 capital needs of the Company.

 

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. 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 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 collectability 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. Historically, the Company’s primary exposure to market risk has been interest rate risk associated with its short term money market investments. The Company currently does not have any 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. Thus, 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, 2020 that have materially affected or are likely to materially affect the Company’s internal control over financial reporting.

 C: 
 
 

 

BIOSYNERGY, INC.

Nine Months Ended January 31, 2020 and 2019

 

PART II – OTHER INFORMATION

 

Item 1.Legal Proceedings.

 

As of the end of the Company’s Fiscal Quarter ending January 31, 2020, 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 1A. Risk Factors.

 

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect the Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K/A for the fiscal year ended April 30, 2019. There were no significant changes to the risk factors identified on the Form 10-K/A for the fiscal year ended April 30, 2019 or during the first nine months of Fiscal 2020.

 

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 January 31, 2020, 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, 2020, 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 January 31, 2020, 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: March 12, 2020   /s/ Fred K. Suzuki
   

Fred K. Suzuki

Chief Executive Officer, Chairman of the Board, and President

 

 

   
Date: March 12, 2020   /s/ Laurence C. Mead
   

Laurence C. Mead

Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer and Treasurer

 

 


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
4/30/2010-K
Filed on:3/12/20
For Period end:1/31/20
5/1/19
4/30/1910-K,  10-K/A
1/31/1910-Q
5/1/18
2/25/16
7/2/098-K
4/30/0610KSB
12/12/01
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