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 July 31, 2018
__ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0 -12459
Biosynergy, Inc.
(Exact name of registrant as specified in its charter)
Illinois 36-2880990
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
1940 East Devon Avenue, Elk Grove Village, Illinois 60007 847-956-0471
(Address of principal executive offices) (Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes X No __
Indicate by check mark whether the registrant is a large accelerated filing, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer",
"smaller reporting company" and "emerging growth 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 ___
Emerging growth company ______
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 2018: 14,935,511
B IOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data
BALANCE SHEETS
Assets
| July 31, 2018 Unaudited | April 30, 2018 Audited | |||||||
| Current Assets Cash Accounts receivable. Trade (net of allowance for | $ | 1,163,643 | $ | 1,140,428 | ||||
| doubtful accounts of $500 at July 31, 2018 and April 30, 2018 | 228,167 | 230,701 | ||||||
| Inventories | 136,104 | 141,045 | ||||||
| Prepaid expenses | 49,227 | 55,845 | ||||||
| Total Current Assets | 1,577,141 | 1,568,019 | ||||||
| Property, Plant and Equipment Equipment | 201,764 | 201,764 | ||||||
| Leasehold improvements | 23,447 | 23,447 | ||||||
| Operating lease right of use asset | 178,200 | - | ||||||
| 403,411 | 225,211 | |||||||
| Less accumulated depreciation and amortization | (239,569 | ) | (215,371 | ) | ||||
| Total Property, Plant and Equipment Net | 163,847 | 9,840_ | ||||||
| Other Assets Patents less accumulated amortization | 59,516 | 61,687 | ||||||
| Pending patents | 69,420 | 69,420 | ||||||
| Deposits | 5,937 | 5,937 | ||||||
| Total Other Assets | 134,873 | 137,044 | ||||||
| $ | 1,875,861 | $ | 1,714,903 | |||||
The accompanying notes are an integral part of the financial statements.
B IOSYNERGY, INC.
PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS
Liabilities and Shareholders' Equity
| July 31, 2018 Unaudited | April 30, 2018 Audited | |||||||
| Current Liabilities Accounts payable | $ | 19,738 | $ | 9,373 | ||||
| Accrued compensation and payroll taxes | 16,153 | 25,992 | ||||||
| Accrued vacation | 28,486 | 24,271 | ||||||
| Other accrued liabilities | 634 | 10,996 | ||||||
| Operating lease liability | 66,000 | - | ||||||
| Total Current Liabilities | 131,011 | 70,632 | ||||||
| Long Term Liabilities | ||||||||
| Deferred income taxes | 25,440 | 25,440 | ||||||
| Operating lease liability | 90,200 | - | ||||||
| Total Long Term Liabilities | 115,640 | 25,440 | ||||||
| Shareholder's Equity Common stock, no par value: 20,000,000 authorized | ||||||||
| shares issued: 14,935,511 shares at July 31, 2018 and April 30, 2018 | 660,988 | 660,988 | ||||||
| Receivable from affiliate | (19,699 | ) | (19,699 | ) | ||||
| Retained earnings | 987,921 | 977,542 | ||||||
| Total Shareholders' Equity | 1,629,210 | 1,618,831 | ||||||
| $ | 1,875,861 | $ | 1,714,903 | |||||
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
July 31
| 2018 | 2017 | |||||||
| Net sales | $ | 317,829 | $ | 302,904 | ||||
| Cost of sales | 103,914 | 98,236 | ||||||
| Gross profit | 213,915 | 204,668 | ||||||
| Operating expenses | ||||||||
| Marketing | 45,709 | 45,574 | ||||||
| General and administrative | 117,340 | 129,443 | ||||||
| Research and development | 36,920 | 40,667 | ||||||
| Total Operating Expenses | 199,969 | 215,684 | ||||||
| Income (Loss) from operations | 13,946 | (11,016 | ) | |||||
| Other income | ||||||||
| Interest income | 92 | 108 | ||||||
| Other income | 480 | 480 | ||||||
| Total Other Income | 572 | 588 | ||||||
| Net Income (loss) before income taxes | 14,518 | (10,428 | ) | |||||
| Provision (benefit) for income taxes | 4,139 | (3,268 | ) | |||||
| Net Income (Loss) | $ | 10,379 | $ | (7,160 | ) | |||
| Net income (loss) per common share - basic and diluted | $ | .0007 | $ | (.0005 | ) | |||
| Weighted-Average Shares of Common Stock Outstanding - Basic and Diluted | 14,935,511 | 14,935,511 | ||||||
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 2018
Unaudited
Common Stock
| Shares | Amounts | Receivable from Affiliate | Retained Earnings | Total | ||||||||||||||||||
| Balance, May 1, 2018 | 14,935,511 | $ | 660,988 | $ | (19,699 | ) | $ | 977,542 | $ | 1,618,831 | ||||||||||||
Net Income Balance, July 31, 2018 | - | - | - | $ | 10,379 | $ | 10,379 | |||||||||||||||
| 14,935,511 | $ | 660,988 | $ | (19,699 | ) | $ | 987,921 | $ | 1,629,210 | |||||||||||||
The accompanying notes are an integral part of the financial statements.
BIOSYNERGY, INC.
STATEMENTS OF CASH FLOWS
Unaudited
| Cash flows from operating activities | Three Months Ended July 31 | ||
| 2018 | 2017 | ||
Net income (loss) Adjustments to reconcile net loss to cash provided by operating activities | $ 10,379 | $ (7,160) | |
| Depreciation and amortization Changes in assets and liabilities | 26,364 | 4,750 | |
| Accounts receivable | 2,534 | 54,264 | |
| Inventories | 4,941 | 30,841 | |
| Prepaid expenses and other | 6,618 | (3,584) | |
| Accounts payable and accrued expenses | (5,621) | (7,233) | |
| Building lease liability for right of use asset | (22,000) | - | |
| Total adjustments | 12,836 | 79,038 | |
| Net cash provided by operating activities | 23,215 | 71,878 | |
| Increase in cash and cash equivalents | 23,215 | 71,878 | |
| Cash and cash equivalents beginning period | 1,140,428 | 1,040,582 | |
Cash and cash equivalents ending period Supplemental cash flow information | $ 1,163,643 | $ 1,112,460
| |
| 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
Three Months Ended July 31, 2018 and 2017
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, 2018 Annual Report on Form 10-K. The results of operations for the three months ended July 31, 2018 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 91.34% of the sales during the quarter ending July 31, 2018 and 91.02% during the quarter ending July 31, 2017. 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 $1,918 and $2,579 for the three month periods ending July 31, 2018 and 2017, respectively.
BIOSYNERGY, INC.
Notes to Financial Statements
Three Months Ended July 31, 2018 and 2017
Note 2 - Summary of Significant Accounting Policies (Cont'd)
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 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, 2018 or prior in relation to the change in the revenue recognition policy and no significant effects on the first quarter ending July 31, 2018.
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 (benefit) for income taxes consists of the following components for the three month periods ended July 31:
Current
Federal $ 2,760 $(2,460)
State 1,379 (808)
Provision (Benefit) for Income Taxes 4,139 $(3,268)