UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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 31,2003
--------------
( ) 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 small business issuer as specified in its charter)
Illinois 36-2880990
------------------------------------------- ------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007
-------------------------------------------------------------------
(Address of principal executive offices)
847-956-0471
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
14,215,511
Transitional Small Business Disclosure Format (Check one):
Yes(X) No ( )
SEC 2334 (8-03)) PERSONS WHO ARE TO RESPOND TO THE
COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE
FORM DISPLAYS A CURRENTLY VALID OMB CONTROL
NUMBER.
BIOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Balance Sheets
ASSETS
July 31, 2003 April 30,2003
Unaudited Audited
------------- -------------
Current Assets
Cash 303,044 309,512
Accounts receivable, Trade (Net of 129,242 111,620
allowance for doubtful accounts of $500
at July 31, 2003 and April 30, 2003)
Inventories 55,011 66,447
Prepaid expenses 18,992 17,096
------- -------
Total Current Assets 506,289 504,675
------- -------
Due from Affiliates 20,585 19,699
------- -------
Equipment and Leasehold Improvements
Equipment 136,703 133,872
Leasehold improvements 15,896 15,140
------- -------
152,599 149,012
Less accumulated depreciation and
amortization (128,548) (126,561)
-------- --------
Total Equipment and Leasehold
Improvements, Net 24,051 22,451
-------- --------
Other Assets
Pending Patents 33,500 29,009
Deposits 6,015 6,015
-------- --------
Total Other Assets 39,515 35,024
590,440 581,849
======== ========
The accompanying notes are an integral part of the financial
statements.
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts payable 34,767 15,455
Accrued compensation and payroll taxes 4,608 9,546
Deferred rent 3,300 3,190
Other accrued expenses 3,304 2,338
Accrued vacation 17,486 15,625
------ ------
Total Current Liabilities 63,465 46,154
Shareholders' Equity
Common stock, No par value; 20,000,000
authorized shares issued: 14,215,511
Shares at July 31, 2003 and at April
30, 2003 642,988 642,988
Accumulated deficit (116,013) (107,293)
--------- ---------
Total Shareholders' Equity 526,975 535,695
--------- ---------
590,440 581,849
The accompanying notes are an integral part of the financial
statements.
Biosynergy, Inc.
Statements of Operations
Three Months Ended July 31
2003 2002
Unaudited Unaudited
------------ -------------
Net Sales $ 196,354 $ 172,918
Cost of Sales 56,170 49,920
------- -------
Gross Profit 140,184 122,998
------- -------
Operating Expenses
Marketing 20,016 21,198
General and administrative 106,237 55,541
Research and development 23,190 33,806
Total Operating Expenses 149,443 110,545
------- -------
Loss (Income) from Operations (9,259) 12,453
------- -------
Other Income
Interest income -- 1,941
Other income 539 543
------- -------
Total Other Income 539 2,484
------------ ------------
Net (Loss) Income $ (8,720) $ 14,937
Net (Loss) Income Per Common Stock - $ - $ -
Basic and Diluted
Weighted-Average Common Stock Outstanding-Basic 14,215,511 13,806,511
Weighted-Average Common Stock Outstanding-Diluted 14,215,511 16,537,511
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 2003
Unaudited
Common Stock Additional
----------------------- Paid-in
Shares Amount Capital Deficit Total
---------- ---------- ---------- ---------- ---------
Balance, May 1, 2003 14,215,511 $642,888 $100 $(107,293) $535,695
Net Profit (Loss) - - - (8,720) (8,720)
---------- -------- ----- ---------- --------
Balance, July 31, 2003 14,215,511 $642,888 $100 $(116,013) $526,975
The accompanying notes are an integral part of the financial
statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
THREE MONTHS ENDED JULY 31,
---------------------------
2003 2002
------------ ------------
Cash Flows from Operating Activities
Net (loss) income $(8,720) $14,937
Adjustments to reconcile net (loss) income to cash
provided by (used in) operating activities
Depreciation and amortization 1,987 1,961
Changes in assets and liabilities
Accounts receivable (17,622) 17,145
Inventories 11,436 1,055
Prepaid expenses (1,896) 3,466
Accounts payable and accrued expenses 17,311 (2,771)
-------- --------
Total Adjustments 2,496 35,793
-------- --------
Net Cash Provided By (Used In)
Operating Activities 2,496 35,793
-------- --------
Cash Flow from Investing Activities
Advances to affiliated companies (886) -
Patents pending (4,491) (5,320)
Equipment and leasehold improvements (3,587) -
Interest receivable - (712)
Decrease in short-term investment - 25,016
-------- --------
Net Cash Provided by (Used in)
Investing Activities (8,964) 18,984
-------- --------
Net Cash Provided by Financing Activities - -
Decrease) Increase in Cash and Cash Equivalents (6,468) 54,777
-------- --------
Cash and Cash Equivalents, Beginning Period $309,512 $37,874
-------- --------
Cash and Cash Equivalents at End of Period $303,044 $92,651
The accompanying notes are an integral part of the
financial statements.
Biosynergy, Inc.
Notes to Financial Statements
Three Months Ended July 31, 2003
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. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with accounting principals generally accepted
in the United States have been condensed or omitted. These
condensed financial statements should be read in
conjunction with the audited financial statements and notes included
in the Company's April 30, 2003 Annual Report to Shareholders.
The results of operations for the three months ended July 31, 2003
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 Hemo Temp II
Blood Monitoring Device, accounted for approximately 89% of the
sales during the quarter ending July 31, 2003. 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
Receivables
- -----------
Receivables are carried at original invoice less estimates made
for doubtful receivables. Management determines the allowances
for doubtful accounts be 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 of more than 90 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 using the FIFO
(first-in, first-out) method or market.
Note 2 - Summary of Significant Accounting Policies (Continued)
Depreciation and Amortization
- -----------------------------
Equipment and leasehold improvements are stated at cost.
Depreciation is computed primarily on the straight-line method over
the estimated useful lives of the respective assets. Repairs and
maintenance are charged to expense as incurred; renewals and
betterments which significantly extend the useful lives of existing
equipment are capitalized. Significant leasehold improvements are
capitalized and amortized over 10 years or the term of the lease, if
less; equipment is depreciated over 5 to 10 years.
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.
Stock Options
- -------------
The Company uses the intrinsic value method, as allowed by SFAS No.
123, "Accounting for Stock-Based Compensation," to account for stock
options granted to employees. No compensation expense is recognized
for stock options because the exercise price of the options is
estimated to be at least equal to the market price of the underlying
stock on the grant date.
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 (Loss) Per Common Share
- ------------------------------
The Company has adopted the provisions of FASB No. 128, "Earnings
Per Share." Income (loss) per common share is computed by dividing
net income (loss) 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. Basic and diluted net
loss per common share is the same for the three months ended July
31, 2003 as the common stock equivalents of the Company were
anti-dilutive.
Note 2 - Summary of Significant Accounting Policies (Continued)
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 balance sheet as of July 31, 2003,
approximates their carrying value.
Comprehensive Income (Loss)
- ---------------------------
The Company adopted the Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income," which established
standards for the reporting and display of comprehensive income
(loss) and its components in the financial statements. Components
of comprehensive income (loss) include amounts that, under SFAS No.
130, are included in the comprehensive income (loss) but are
excluded from net income (loss). There were no significant
differences between the Company's net (loss) income and
comprehensive (loss) income.
Income Taxes
- ------------
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Under the Tax Reform Act of 1986, the benefits from net
operating losses carried forward may be impaired or limited in
certain circumstances. In addition, a valuation allowance can be
provided for deferred tax assets when it is more likely than not
that all or some portion of the deferred tax assets will not be
realized. The Company has established a full valuation allowance on
the aforementioned deferred tax assets due to the uncertainty of
realization.
Recent Accounting Pronouncements
- --------------------------------
The Company adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets," effective for fiscal years beginning after December 15,
2001. SFAS No. 142 requires, among other things, the discontinuance
of goodwill amortization. In addition, SFAS No. 142 includes
provisions for the reclassification of certain existing recognized
intangible assets as goodwill, reassessment of the useful lives of
existing recognized intangible assets, reclassification of certain
intangible assets out of previously reported goodwill and the
identification of reporting units for purposes of assessing
potential future impairments of goodwill. The adoption of SFAS No.
141 and 142 did not have an impact on the Company's financial
position or results of operations, as the Company does not currently
hold any goodwill and only has other intangibles consisting of
unamortized patent pending costs.
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (continued)
- --------------------------------
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," effective for years
beginning after December 15, 2001. The new rules for long-lived
assets to be disposed by sale excludes the allocation of goodwill to
be tested for impairment of such assets, establishes a primary asset
approach to be used for the estimation of future cash flows and
allows for probability-weighted future cash flows estimation for
impairment testing. The adoption of SFAS No. 144 did not have an
impact on the Company's financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement
addresses financial accounting and reporting for costs associated
with exit or disposal activities. SFAS No. 146 became effective in
the quarter ending January 31, 2003. The adoption of SFAS No. 146
did not have a material impact on the Company's cash flows,
financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others."
Interpretation 45 requires a guarantor to include disclosure of
certain obligations and, if applicable, at the inception of the
guarantee, to recognize a liability for the fair value of other
certain obligations undertaken in issuing a guarantee. The
recognition requirement is effective for guarantees issued or
modified after December 31, 2002 and did not have a material impact
on the Company.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This
statement, which is effective for years beginning after December 15,
2002, amends Statement No. 123, "Accounting for Stock-Based
Compensation," and provides alternative methods of transition for a
voluntary change to the fair value-based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends
the disclosure requirements of Statement No. 123 regardless of the
accounting method used to account for stock-based compensation. The
adoption of the disclosure-only provisions of SFAS No. 148 did not
have a material impact upon the Company. The Company has elected to
continue to account for stock-based compensation using the intrinsic
value method.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No.
46), "Consolidation of Variable Interest Entities, an Interpretation
of ARB No. 51." FIN No. 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the entity
if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other
parties. FIN No. 46 is effective for all new variable interest
entities created or acquired
Note 2 - Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements (continued)
- ---------------------------------
after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be
applied for the first interim or annual period beginning after June
15, 2003. The Company does not expect FIN No. 46 to have a material
effect on its results of operations, financial condition or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149
amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after
June 30, 2003. The adoption of this statement did not have a
material impact on the Company's financial position, results of
operations or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." This statement establishes standards for how an issuer
classifies and measures in its statement of financial position
certain financial instruments with characteristics of both
liabilities and equity. In accordance with the standard, a
financial instrument that embodies an obligation for the issuer is
required to be classified as a liability (or an asset in some
circumstances). SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of this statement is not
expected to have a material impact on the Company's financial
position, results of operations or cash flows.
Note 3 - Inventories
Components of inventories are as follows:
April 30, July 31,
2003 2003
------------- ------------
Raw materials $ 31,078 $ 25,019
Work-in-process 14,038 9,669
Finished goods 21,331 20,323
------------- ------------
$ 66,447 $ 55,011
Note 4 - Stock Options
- ----------------------
On November 12, 1998, the Company granted an option to its
President, Fred K. Suzuki, to purchase all or a portion of 3,000,000
shares of the Company's common stock at a purchase price of $.025
per share. The option is subject to several contingencies
including, but not limited to, stockholder approval. On May 9,
2001, this option was exercised to the extent of 269,000 shares
resulting in additional paid-in capital of $6,725. This option was
to expire on November 12, 2001; however, upon the expiration date,
the Company extended the option to Mr. Suzuki to purchase all or a
portion of the remaining 2,731,000 shares of the Company's common
stock at a purchase price of $.025 per share to November 12, 2004.
The extended option remains subject to several contingencies,
including, but not limited to, stockholder approval. On September
30, 2002, this option was exercised to the extent of 140,000 shares
resulting in additional paid-in capital of $3,500.
The Company's 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. The Company
estimates the price at which the option was granted to the
President, was at or above market value per share of common stock on
the date of grant, based on the limited historical trade activity.
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting and Disclosure of Stock-Based Compensation."
Accordingly, no employee compensation expenses had been recognized
for the above grant. Had employee compensation expense for the
grant been recorded in the financial statements, consistent with
provisions of SFAS No. 123, net (loss) income for the applicable
periods would have been the same.
The option extended grant on November 12, 2001 did not result in any
intrinsic value using the Black-Scholes option pricing model.
Therefore, no pro forma net loss or loss per share is applicable.
In order to arrive at this determination, using the Black-Scholes
option pricing model, the following weighted average assumptions
were used for the period ended April 30, 2002:
Risk-Free
Options Exercise Expected Dividend Interest
Date of Issuance Issued Price (Years) Yield Rate Volatility
- ----------------- --------- -------- -------- --------- -------- ----------
November 12, 2001 2,731,000 $.025 3 .00% 5.0% .001
Note 5 - Related Party Transactions
The Company and its affiliates are related through common stock
ownership as follows as of April 30, 2003 and July 31, 2003:
Stock of Affiliates
-----------------------------------
F.K. Suzuki
Biosynergy, International, Medlab,
Inc. Inc. Inc.
----------- -------------- --------
F.K. Suzuki International, Inc. 31.6% - % 100.0%
Fred K. Suzuki, Officer 2.9 35.6 -
Lauane C. Addis, Officer .1 32.7 -
James F. Schembri, Director 12.6 - -
Mary K. Friske, Officer .1 .2 -
Laurence C. Mead, Officer .1 4.0 -
As of April 30, 2003, $19,699 and as of July 31, 2003 $20,585, was
due from F.K. Suzuki International, Inc. (FKSI). These balances
result from an allocation of common expenses charged to FKSI offset
by advances received from time to time. As of July 31, 2003, the
financial condition of FKSI was 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.
Note 6 - Earnings per Share
The following tables set forth the computation of basic and diluted
earnings per share:
Three Months Ended
July 31, 2003 July 31, 2002
------------- -------------
Numerator:
Net income (loss) attributable to
common shareholders (8,720) 14,937
Denominator:
Weighted Average Outstanding
Shares-Basic 14,215,511 13,806,511
Earnings Per Share-Basic 0.00 0.00
Effect of dilutive common equivalent
shares-weighted average stock
options outstanding - 2,731,000
Weighted Average Outstanding Shares
Diluted 14,215,511 16,537,511
Earnings Per Share-Diluted 0.00 0.00
Note 7 - Major Customers
Shipments to one customer amounted to approximately 44.62% of sales
during the first quarter of Fiscal 2004. As of July 31, 2003, there
were outstanding accounts receivable from this customer of
approximately $83,943.50.
Item 2. Management's Discussion of Financial Condition and Results
of Operations
----------------------------------------------------------
Net Sales/Revenues
- ------------------
For the three month period ending July 31, 2003 ("1st Quarter"), the
net sales increased 13.56%, or $23,436, as compared to net sales for
the comparative quarter ending in 2002. This increase in sales is
primarily the result of an increase in sales of HemoTempR II. As of
July 31, 2003, the Company had $3,545 in back orders.
In addition to the above, during the 1st Quarter the Company had
$539 of other miscellaneous revenues primarily from leasing a
portion of its storage space to a third party.
Net Income/Loss
- ---------------
The Company realized a net loss of $8,720 during the 1st Quarter as
compared to a net income of $14,937 for the comparative quarter of
the prior year. The net loss is primarily a result of increased
legal and accounting fees related to the preparation of the
Company's annual report on Form 10-K discussed below.
As of April 30, 2003, the Company had net operating loss carryovers
aggregating approximately $81,000. See "Financial Statements" for
the effect of the net operating loss carryforwards on the Company's
income tax position. The tax reform Act of 1986 did not alter the
Company's net operating loss carryforward position, and the net
operating loss carryforwards will be available and expire, if not
used, as set forth in Footnote 4 to the Financial Statements for the
three-month period ending July 31, 2003. See "Financial Statements".
Expenses
- --------
General
-------
The operating expenses of the Company during the 1st Quarter
increased overall by 35.19%, or $38,898, as compared to the 1st
quarter in 2002, primarily due to an increase in accounting and
legal fees related to the preparation of the Company's annual report
on Form 10-K for the fiscal year ending April 30, 2003.
Cost of Sales
-------------
The cost of sales during the 1st Quarter increased by $6,250 as
compared to these expenses during the same quarter ending in 2002.
As a percentage of sales, the cost of sales were 28.61% during the
1st Quarter and 28.87% for the comparative quarter ending in 2002.
Although the sales of the Company increased, the cost of sales and
other operating charges as a percentage of sales remained
substantially the same. 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 decreased $10,616, or 31.41%, as
compared to the same quarter in 2002. This decrease is due to a
reduction in salaries primarily related to the termination of the
employment of one of the Company's laboratory employees. The
Company is continuing its investigation and development of certain
compounds for use as bacteria retardant agents for use in food and
other products. The Company is uncertain how much of its resources
will be required to complete its investigation and development of
the bacteria retardant agents.
Marketing Expenses
------------------
Marketing expenses for the 1st Quarter decreased by $1,182 or 5.58%,
as compared to the quarter ending July 31, 2002. The Company
incurred additional expenses during the quarter ending July 31, 2002
for reprinting product brochures which are not reflected in the
results of the 1st Quarter. Since the Company from time to time is
required to replenish its supplies of product brochures and other
marketing supplies, the Company will occasionally experience
non-recovering increases in marketing expenses.
General and Administrative Expenses
-----------------------------------
General and administrative costs increased by $50,696, or 91.28%, as
compared to the 1st quarter ending in 2002. This increase was
primarily the result of an increase in accounting and legal expenses
of approximately $45,000 related to the auditing of the Company's
financial statements for the fiscal year ending April 30, 2003, and
costs incurred in preparation of the Company's annual report on Form
10-K. Management of the Company anticipates continuing increased
accounting and legal expenses on an ongoing basis related to the
audit and review of the Company's financial statements and
preparation of quarterly and annual reports for filing with the
Securities and Exchange Commission. A significant portion of these
additional costs and expenses are related to new requirements in
regulations promulgated by the Securities and Exchange Commission
under the Sarbanes-Oxley Act of 2002.
Assets/Liabilities
- ------------------
General
-------
Since April 30, 2003 the Company's assets have increased by $8,591
and liabilities have increased by $17,311. The increase in assets,
primarily cash, and liabilities, primarily accrued expenses, is due
to normal fluctuations, and is not indicative of any material change
in the financial condition of the Company.
Related Party Transactions
--------------------------
The Company was owed $20,585 by F.K. Suzuki International, Inc.
("FKSI"), an affiliate, at July 31, 2003. FKSI owed $19,699 at
April 30, 2003. This account primarily represents common expenses
which are charged by the Company to FKSI for reimbursement. These
expenses include general operating expenses. See "Financial
Statements." These expenses are incurred in the ordinary course of
business. Although management believes it is cost effective to
share common expenses with FKSI, the Company has reduced the amount
of advances and common expenses charged to FKSI until FKSI is in a
position to reimburse the Company. Collectability of the amounts
due from FKSI cannot be assured without the liquidation of all or a
portion of its assets, and thus such receivable has been classified
as a non-current asset.
On November 12, 1998, the Company granted an option to its
President, Fred K. Suzuki, to purchase all or a portion of 3,000,000
shares of the Company's common stock at a purchase price of $.025
per share. The option is subject to several contingencies
including, but not limited to, stockholder approval. On May 9,
2001, this option was exercised to the extent of 269,000 shares
resulting in additional paid-in capital of $6,725. This option was
to expire on November 12, 2001; however, upon the expiration date,
the Company extended the option to Mr. Suzuki to purchase all or a
portion of the remaining 2,731,000 shares of the Company's common
stock at a purchase price of $.025 per share to November 12, 2004.
The extended option remains subject to several contingencies,
including, but not limited to, stockholder approval. On September
30, 2002, this option was exercised to the extent of 140,000 shares
resulting in additional paid-in capital of $3,500.
Current Assets/Liabilities Ratio
- --------------------------------
The ratio of current assets to current liabilities, 7.98 to 1, has
decreased compared to 10.94 to 1 at April 30, 2003. This decrease
in ratio of current asset to current liabilities does not represent
a material change in the financial condition or operations of the
Company, although it is reflective of an increase of $17,311 in
current liabilities. In order to maintain or improve the Company's
asset/liabilities ratio, the Company's operations must return to
profitability.
Liquidity and Capital Resources
- -------------------------------
During the 1st Quarter, the Company experienced a decrease in
working capital of $15,697. This is primarily due to the Company's
net loss sustained during the 1st Quarter and the use of cash for
equipment purchases and patent expenses.
The Company has attempted to conserve working capital whenever
possible. To this end, the Company attempts to keep inventory at
minimum levels. The Company believes that it will be able to
maintain adequate inventory to supply its customers on a timely
basis by careful planning and forecasting demand for its products.
However, the Company is nevertheless required to carry a minimum
amount of inventory to meet the delivery requirements of customers
and thus, inventory represents a substantial portion of the
Company's current assets.
The cash provided by operating activities was $2,496 during the
quarter ending July 31, 2003. The cash used for equipment
purchases, patent expenses and advances to affiliated companies was
$8,964 during this same period. The Company presently grants
payment terms to customers and dealers of 30 days. Although the
Company experiences varying collection periods of its account
receivable, the Company believes that uncollectable accounts
receivable will not have a significant effect on future liquidity.
As of July 31, 2003, the Company had $506,289 of current assets
available. Of this amount, $18,992 was prepaid expenses, $55,011
was inventory, $129,242 was net trade receivables, and $303,044 was
cash. The Company's cash flow from operations are considered
adequate to fund the short-term capital needs of the Company.
However, 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.
Except for its operating working capital needs, the Company has no
material contingencies for which it must provide.
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 accounting policies are disclosed in Note 1 to the
Financial Statements for the 1st 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 principals generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as
of the date of the Financial Statements and the reported amounts of
revenues and expenses during the reporting period. The financial
condition of the Company and results of operations may differ from
the estimates and assumptions made by management in preparation of
the Financial Statements accompanying this report.
Allowance for Bad Debts - The Company periodically performs credit
evaluations of its customers and generally does not require
collateral to support amounts due from the sale of its products.
The Company maintains an allowance for doubtful accounts based on
its best estimate of accounts receivable.
Stock Options - The Company uses the intrinsic value method as
allowed by SFAS No. 123, "Accounting for Stock-Based Compensation,"
to account for stock options granted to employees. No compensation
expense is recognized for stock options because the exercise price
of the options is estimated to be at least equal to the market price
of the underlying stock on the grant date.
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. Controls and Procedures
(a) The management of the Company has prepared and is
responsible for the integrity of the information presented in this
Quarterly Report for the period ending July 31, 2003, including the
Company's financial statements. These statements have been prepared
in conformity with general accepted account principals and include,
where necessary, informed estimates and judgments by management.
(b) Within the 90 days prior to the date of filing this Form
10-QSB, the Company carried out an evaluation, under the supervision
and with the participation of the Company's management, including
the Company's Chief Executive Officer along with the Company's Chief
Accounting Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Company's
Chief Executive Officer along with the Company's Chief Accounting
Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material
information related to the Company required to be included in the
Company's periodic SEC filings.
(c) The Company maintains systems of accounting and internal
controls, policies and procedures designed to provide assurance that
assets are property accounted for, as well as to ensure that the
financial records are reliable for preparing financial statements.
The systems are augmented by qualified personnel and are reviewed on
a periodic basis. There have been no significant changed in the
Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date the
Company carried out its evaluation.
(d) The Company has an Audit Committee that meets periodically
with management to review the manner in which they are performing
their responsibilities and to discuss auditing, internal accounting
controls and financial reporting matters. It is the opinion of the
Audit Committee that such controls, policies and procedures are
effect to ensure that material regarding the Company is presented in
this Quarterly Report.
Item 6. Exhibits and Reports on Form 8K.
(a) The following exhibits are filed as a part of this report:
(2) Plan of Acquisition, reorganization, arrangement,
liquidation or succession - none
(3) Articles of Incorporation and By-laws
(4) Instruments defining rights of security holders,
including indentures - none.
(10) Material Contracts
(a) Stock Option Agreement, dated November 12,
2001, between the Company and Fred K.
Suzuki
(11) Statement regarding computation of per share earnings- none.
(18) Letter regarding change in accounting principals - none.
(19) Reports furnished to security holders - none.
(22) Published report regarding matters submitted to vote of
security holders - none.
(23) Consents of experts and counsel - none.
(24) Power of Attorney - none.
(31.1) Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
Filed herewith.
(31.2) Certification of the Chief Accounting Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
Filed herewith.
(32.1) Certification of the Chief Executive Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Sect. 1350. Filed herewith.
(32.2) Certification of the Chief Accounting Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Sect. 1350. Filed herewith.
(b) No Current Reports on Form 8K were filed during the period
covered by this Report.
- -------------------------------------
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 By-Laws, to the
Company's Annual Report on Form 10K for fiscal year
ending April 30, 1986 filed with the Securities and
Exchange Commission.
Incorporated by reference to the Company's Annual Report
on Form 10K for fiscal year ending April 30, 2002 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 10, 2003 /s/ Fred K. Suzuki
------------------ -------------------------------------
Fred K. Suzuki
Chief Executive Officer, Chairman
of the Board, President and Treasurer
Date September 10, 2003 /s/ Laurence C. Mead
------------------ -------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, and Chief Accounting Officer
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Fred K. Suzuki, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Biosynergy, Inc., small business issuer;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15f) for the small business issuer and we have:
a. Designed such disclosure controls and procedures, or
caused such controls and procedures to be designed under
our supervision, to ensure that material information
relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period
in which this quarterly report is being prepared;
b. Designed such internal control over financial reporting,
or cause such internal control over financial reporting
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for exertnal
purposes in accordance with generally accepted accounting
principles;
c. Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on
such evaluation; and
d. Disclosed in this quarterly report any change in the
small business issuer's internal control over financial
reporting that occurred during the small business issuer's
most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of small business issuer's board of directors (or
persons performing the equivalent function):
a. All significant deficiencies and material weaknesses
in the design or operation of internal controls over
financial reporting which are reasonably likely to
adversely affect the small business issuer's ability
to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the small business issuer's internal control
over financial reporting.
Dated: September 12, 2003
/s/ Fred K. Suzuki
---------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer, President and Treasurer
EXHIBIT 31.2
CERTIFICATION OF CHIEF ACCOUNTING OFFICER
I, Laurence C. Mead, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Biosynergy, Inc., small business issuer;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15f)for the small business issuer and we have:
a. Designed such disclosure controls and procedures, or
caused such controls and procedures to be designed under
our supervision, to ensure that material information
relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period
in which this quarterly report is being prepared;
b. Designed such internal control over financial reporting,
or cause such internal control over financial reporting
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for exertnal
purposes in accordance with generally accepted accounting
principles;
c. Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on
such evaluation; and
d. Disclosed in this quarterly report any change in the
small business issuer's internal control over financial
reporting that occurred during the small business issuer's
most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of the small business issuer's board of directors (or
persons performing the equivalent function):
a. All significant deficiencies and material weaknesses
in the design or operation of internal controls over
financial reporting which are reasonably likely to
adversely affect the small business issuer's ability
to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the small business issuer's internal control
over financial reporting.
Dated: September 12, 2003
/s/ Laurence C. Mead
-----------------------------------------
Laurence C. Mead
Vice President/Manufacturing and
Development, and Chief Accounting Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biosynergy, Inc. (the "small
business issuer")on Form 10-QSB for the quarter ending July 31, 2003,
as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that: (1) the Report fully complies with the requirements
of Section 13(a) of 15(d) of the Securities and Exchange Act of 1934;
and (2) the information contained in the Report fairly represents,
in all material respects, the financial conditions and results of
operations of the small business issuer as of July 31, 2003, and for
the period then ended.
Biosynergy, Inc.
/s/ Fred K. Suzuki
--------------------------------------------
Fred K. Suzuki
Chairman of the Board, Chief Executive
Officer, President and Treasurer
Dated: September 12, 2003
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biosynergy, Inc. (the "small
business issuer")on Form 10-QSB for the quarter ending July 31, 2003,
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), the undersigned hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with
the requirements of Section 13(a) of 15(d) of the Securities and
Exchange Act of 1934; and (2) the information contained in the Report
fairly represents, in all material respects, the financial conditions
and results of operations of the small business issuer as of July 31,
2003, and for the period then ended.
Biosynergy, Inc.
/s/ Laurence C. Mead
--------------------------------------------
Laurence C. Mead
Vice President/Manufacturing and Development
and Chief Accounting Officer