10QSB 1 bio10qo7.txt 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 October 31, 2007 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 (IRS Employer of incorporation 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: 14,935,511 Transitional Small Business Disclosure Format (Check one): Yes No X BIOSYNERGY, INC. PART 1 - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- Balance Sheets ASSETS October 31, 2007 April 30,2007 Unaudited Audited ---------------- ------------- Current Assets Cash $176,427 $187,100 Short-Term Investment 200,000 200,000 Accounts receivable, Trade (Net of 144,795 124,540 allowance for doubtful accounts of $500 at October 31, 2007 and April 30, 2007) Inventories 73,449 56,538 Prepaid expenses 17,405 21,911 Interest Receivable 1,760 2,224 -------- -------- Total Current Assets 613,836 592,313 -------- -------- Equipment and Leasehold Improvements Equipment 202,071 196,176 Leasehold improvements 16,497 16,497 -------- -------- 218,568 212,673 Less accumulated depreciation and amortization (161,748) (151,129) -------- -------- Total Equipment and Leasehold Improvements, Net 56,820 61,544 -------- -------- Other Assets Patents Less Accumulated Amortization 17,523 18,052 Pending Patents 65,794 52,594 Deposits 5,947 5,947 --------- -------- Total Other Assets 89,264 76,593 --------- -------- $759,920 $730,450 ========= ========
The accompanying notes are an integral part of the financial statements. Liabilities and Stockholders' Equity Current Liabilities Accounts payable $23,274 $14,154 Accrued compensation and payroll taxes 4,100 14,209 Deferred rent 5,656 4,606 Accrued vacation 28,918 20,905 Other Accrued Expenses 274 112 Income Taxes Payable - 33,500 --------- -------- Total Current Liabilities 62,222 87,486 --------- -------- Shareholders' Equity Common stock, No par value; 20,000,000 Shares 660,988 660,988 authorized; 14,935,511 Shares issued at October 31, 2007 and April 30, 2007 Receivable From Affiliate (19,699) (19,699) Retained earnings 56,409 1,675 -------- -------- Total Shareholders' Equity 697,698 642,964 -------- -------- $759,920 $730,450 ======== ========
The accompanying notes are an integral part of the financial statements. Biosynergy, Inc. Statements of Operations ______________________________________________________________________________________ Three Months Ended Six Months Ended October 31, October 31, ------------------- ---------------------- 2007 2006 2007 2006 ---------- ---------- ---------- ---------- Net Sales $259,419 $233,585 $509,074 $503,757 Cost of Sales 70,354 78,918 143,077 147,045 ---------- ---------- ---------- ---------- Gross Profit 189,065 154,667 365,997 356,712 ---------- ---------- ---------- ---------- Operating Expenses Marketing 29,002 27,242 59,584 52,658 General and administrative 69,509 69,564 194,887 175,852 Research and development 22,623 21,795 43,938 43,055 ---------- ---------- ---------- ---------- Total Operating Expenses 121,134 118,601 298,409 271,565 ---------- ---------- ---------- ---------- Income from Operations 67,931 36,066 67,588 85,147 ---------- ---------- ---------- ---------- Other Income Interest Income 3,231 1,374 6,739 2,540 Other Income 480 540 960 972 ---------- ---------- ---------- ---------- Total Other Income 3,711 1,914 7,699 3,512 ---------- ---------- ---------- ---------- Net Income Before Income Taxes $71,642 $37,980 $75,287 $88,659 Provision for Income Taxes 19,897 - 20,553 - Net Income Per Common Stock - Basic and Diluted 51,745 - 54,734 - ---------- ---------- ---------- ---------- Weighted-Average Common Stock Outstanding-Basic 14,935,511 14,215,511 14,935,511 14,215,511 and Diluted ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements. BIOSYNERGY, INC. STATEMENT OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED OCTOBER 31, 2007 Unaudited Common Stock Other and Related Retained --------------------- Receivables Earnings Shares Amount Total ---------- -------- ----------------- ----------- ------------ Balance, May 1, 2007 14,935,511 $660,988 $(19,699) $ 1,675 $642,964 Net Income - - - 54,734 54,734 __________ _________ _________ ________ ________ Balance, October 31, 2007 14,935,511 $660,988 $(19,699) $ 56,409 $697,698 ========== ========= ========= ======== ========
The accompanying notes are an integral part of the financial statements. BIOSYNERGY, INC. STATEMENTS OF CASH FLOWS Unaudited SIX MONTHS ENDED OCTOBER 31, ---------------------------- 2007 2006 ----------- ------------ Cash Flows from Operating Activities Net income $ 54,734 $ 88,659 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 10,619 8,456 Changes in assets and liabilities Accounts receivable (20,255) (3,856) Inventories (16,911) 4,121 Prepaid expenses 4,506 3,262 Interest receivable 464 (276) Accounts payable and accrued expenses (25,264) (17,691) ---------- ----------- Total Adjustments (46,841) (5,984) ---------- ----------- Net Cash Provided By Operating Activities 7,893 82,675 ---------- ----------- Cash Flow from Investing Activities Patents and patents pending (12,671) (3,604) Equipment and leasehold improvements (5,895) (11,981) ---------- ----------- Net Cash Used in Investing Activities (18,566) (15,585) ---------- ----------- Increase (Decrease) in Cash and Cash Equivalents (10,673) 67,090 ---------- ----------- Cash Beginning Period 187,100 131,261 ---------- ----------- Cash Ending Period $176,427 $198,351 ========== ===========
The accompanying notes are an integral part of the financial statements. Note 1 - Company Organization and Description In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of normal recurring adjustments which are necessary for a fair presentation of the financial position and results of operations for the periods presented. The unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principals 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, 2007 Annual Report on Form 10-KSB. The results of operations for the six months ended October 31, 2007 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 HemoTempR II Blood Monitoring Device, accounted for approximately 90.11% of the sales during the quarter ending October 31, 2007. 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 by reviewing and identifying troubled accounts on a periodic basis and by using historical experience applied to an aging of accounts. A receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 30 days. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Inventories Inventories are valued at the lower of cost using the FIFO (first-in, first-out) method or market. 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 the term of the lease; equipment is depreciated over 3 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 Effective May 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-based Payment" (SFAS 123R) whereby stock option expense is calculated at fair value using Black Scholes Valuation model and amortized on an even basis (net of estimated forfeitures) over the requisite service period. The Company previously accounted for its stock option awards under the intrinsic value based method of accounting prescribe by Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value method, compensation cost is the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock. The Company made pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied as required by Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation" by using the Black-Scholes option-pricing model. The Company has never granted options below market price on the date of grant. No share-based compensation cost was recognized in the Company's financial statements for the six month period ended October 31, 2007, as no options were granted or outstanding during this time period. The Company adopted the provisions of SFAS 123(R) effective May 1, 2006 using a modified version of prospective application. This transition method provides that the Company would recognize compensation cost after the effective date as the requisite service is rendered for the portion of options outstanding at May 1, 2006, based on the grant-date fair value of those options calculated under Statement 123 for pro forma disclosures. No share-based payments were granted subsequent to the effective date. Under the modified version of prospective application, prior period statements have not been restated. 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. 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 October 31, 2007, approximates their carrying value. Note 2 - Summary of Significant Accounting Policies (continued) 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 components of deferred income taxes are as follows as of April 30, 2007 and 2006: 2007 2006 ----------- ----------- Deferred Tax Assets (Liabilities) Net operating loss carryforwards $ - $ 7,508 Other 6,583 2,996 Less: Valuation allowance (6,583) (10,504) ---------- --------- Net Deferred Tax Assets: $ - $ - ========== =========
Note 2 - Summary of Significant Accounting Policies (continued) The differences between the U.S. federal statutory tax rate and the Company's effective tax rate are as follows: Year Ended April 30, ---------------------------------- 2007 2006 2005 ------- -------- -------- U.S. federal statutory tax rate 34.0% 34.0% (34.0)% State income tax expense, net of federal tax benefit 3.0 - - Effect of graduated federal tax rates (14.3) (8.5) 11.6 Change in valuation allowance (2.4) (25.5) 22.4 -------- -------- -------- Consolidated Effective Tax Rate 20.3% - % - % ======== ======== ========
As of April 30, 2007, the Company had utilized all of its net operating loss carryforwards. A valuation allowance was established as of April 30, 2007 and 2006 for the deferred tax benefit related to those loss carryforwards and other deferred tax assets for which it is considered more likely than not that the benefit will not be realized. Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No 157 also establishes a fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability. SFAS No. 157 will be effective for the Company beginning in fiscal year 2009. The Company is assessing the potential impact that the adoption of SFAS No. 157 will have on its financial condition or results of operations. In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes." The Interpretation provides clarification related to accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes." This Interpretation is effective for fiscal year 2008. Adoption of FASB Interpretation No. 48 is not expected to have a material impact on the Company's financial position, results of operations and cash flows. Note 2 - Summary of Significant Accounting Policies (continued) In June 2006, the Emerging Issues Task Force (EITF) issue Issue No. 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation)" (EITF 06-3). EITF 06-3 is effective for fiscal year 2008. The adoption of EITF 06-3 will have an immaterial impact on our financial position, results of operations and cash flows. Short-Term Investments In July 2007, the Company reinvested $100,000 in a 180-day certificate of deposit at an interest rate of 5.1%. The maturity date is January 15, 2008. The Company reinvested in an additional $100,000 certificate of deposit on October 23, 2007 for five months at an interest rate of 5.17%. The maturity date is March 11, 2008. Note 3 - Inventories Components of inventories are as follows: April 30, October 31, 2007 2007 ---------- ----------- Raw materials $ 40,244 $ 53,412 Work-in-process 10,134 11,218 Finished goods 6,160 8,819 ---------- --------- $ 56,538 $ 73,449 ========== =========
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 April 30, 2007 and October 31, 2007: Stock of Affiliates ------------------------------------ F.K. Suzuki Biosynergy, International, Medlab, Inc. Inc. Inc. ---------- ------------- -------- F.K. Suzuki International, Inc. 30.1% - % 100.0% Fred K. Suzuki, Officer 4.1 35.6 - Lauane C. Addis, Officer .1 32.7 - James F. Schembri, Director 8.6 - - Mary K. Friske, Officer .3 .2 - Laurence C. Mead, Officer .4 4.0 - Beverly K. Suzuki, Officer 2.7 - -
As of October 31, 2007 and April 30, 2007, $19,699 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 prior to April 30, 2006. 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 without liquidating a portion of its assets, including a portion of its ownership in the Company. As a result, $19,699 of the total receivable balance was reclassified as a contra equity account at April 30, 2006. Note 6 - Earnings per Share The following tables set forth the computation of basic and diluted earnings per share: Six Months Ending October 31, 2007 2006 ----------- ----------- Numerator: Net income (loss) attributable to Common shareholders $54,734 $88,659 Denominator: Weighted Average Outstanding Shares-Basic 14,935,511 14,215,511 Earnings Per Share-Basic 0.00 0.00 ---------- ---------- Effect of dilutive common equivalent Shares-weighted average stock Options outstanding 0.00 0.00 Weighted Average Outstanding Shares Diluted 14,935,511 14,215,511 Earnings Per Share-Diluted 0.00 0.00 ---------- ----------
Note 7 - Major Customers Shipments to one customer amounted to 37.88% of sales during the first six months of Fiscal 2008. As of October 31, 2007, there were outstanding accounts receivable from this customer of $84,500. Shipments to another customer amounted to 13.32% of sales during the first six months of Fiscal 2008. As of October 31, 2007, there were outstanding accounts receivable from this customer of approximately $12,665. Item 2. Management's Discussion of Financial Condition and Results of Operations Net Sales/Revenues For the three month period ending October 31, 2007 ("2nd Quarter"), the net sales increased 11.06%, or $25,834, and increased 1.06%, or $5,317, during the six month period ending October 31, 2007, as compared to net sales for the comparative periods ending in 2006. This increase in sales is primarily the result of an increase in sales of HemoTempR, TempTrendR and HemoTempR II. As of October 31, 2007, the Company had no back orders. In addition to the above, the Company had $3,711 and $7,699 of other miscellaneous revenues primarily from interest income and leasing a portion of its storage space to a third party during the 2nd quarter and the six month period ending October 31, 2007, respectively. Costs and Expenses General The operating expenses of the Company during the 2nd Quarter increased overall by 2.14%, or $2,533, and increased by 9.89%, or $26,844, for the six month period ending October 31, 2007, as compared to the same periods ending in 2006. These increases were primarily due to an increase in health insurance premiums and labor wages, as well as an increase in income taxes, accounting fees and legal fees. Cost of Sales The cost of sales during the 2nd Quarter decreased by $8,564 and decreased by $3,968 during the six month period ending October 31, 2007 as compared to these expenses during the same periods ending in 2006. As a percentage of sales, the cost of sales were 27.12% during the 2nd Quarter and 33.79% for the comparative quarter ending in 2006; and 28.11% during the six month period ending October 31, 2007 compared to 29.19% in 2006. The decrease in cost of sales for the six month period ending October 31, 2007, primarily related to a decrease in part time labor expenses and raw material costs. Subject to unanticipated increases in raw materials or extraordinary expenses, 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 $828, or 3.8%, during the 2nd Quarter as compared to the same quarter in 2006. These costs increased by $883, or 2.05%, during the six month period ending October 31, 2007 as compared to the same period in 2006. This increase is due to the purchase of technical reference materials and an increase in travel expenses. The Company is continuing its investigation and development of certain compounds for use as bacteria retardant agents for use in food and other products and research intended to improve its current product line. The Company does not have sufficient information to determine the extent to which its resources will be required to complete its investigation and development of the bacteria retardant agents. Marketing Expenses Marketing expenses for the 2nd Quarter increased by $1,760, or 6.45%, as compared to the quarter ending October 31, 2006 and increased by $6,926, or 13.16%, during the six month period ending October 31, 2007 compared to the six-month period ending October 31, 2006. This increase was due to an increase in salaries, health insurance premiums and product brochure expenses incurred during the six month period ending October 31, 2007. General and Administrative Expenses General and administrative costs decreased by $55, or .08%, in the 2nd Quarter, and increased by $19,035, or 10.83% during the six month period ending October 31, 2007, as compared to the same periods in 2006. This overall increase was due primarily to increase in accounting fees and legal expenses. Management of the Company anticipates accounting and legal expenses 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 will level off over time. However, since a significant portion of these costs and expenses are related to new requirements and regulations promulgated by the Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 ("SOX"), including potential requirements for certification of internal controls and procedures under Section 404 of SOX, it is impossible to predict how much, if any, such new requirements and regulations will impact the Company's long term accounting and legal expenses. Net Income The Company realized a net income of $51,745 during the 2nd Quarter as compared to a net income of $37,980 for the comparative quarter in the prior year. The Company also realized a net income of $54,734 for the six month period ending October 31, 2007 as compared to a net income of $88,659 during the same period in 2006. The decrease in net income is a direct result of an increase in income taxes for 2007. Income taxes payable in 2006 were offset by net operating loss carryovers which are not available for 2007. Assets/Liabilities General Since April 30, 2007, the Company's assets have increased by $29,470 and liabilities have decreased by $25,264. The increase in assets, primarily accounts receivables and inventory, and decrease in liabilities, primarily accrued expenses, is due to the overall profitability of the Company since April 30, 2007. Related Party Transactions The Company was owed $19,699 by F.K. Suzuki International, Inc. ("FKSI"), an affiliate, at July 31, 2007 and April 30, 2007. This account primarily represents common expenses which were previously charged by the Company to FKSI for reimbursement. These expenses include certain office expenses, general operating expenses and legal fees incurred in the ordinary course of business. See "Financial Statements." No interest is received or accrued by the Company. Collectibility of the amounts due from FKSI as of 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, $19,669 of the amount owed by FKSI to the Company was reclassified as a reduction of FKSI's capital in the Company. Current Assets/Liabilities Ratio The ratio of current assets to current liabilities, 9.87 to 1, has increased compared to 6.77 to 1 at April 30, 2007. 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 six month period ending October 31, 2007, the Company experienced an increase in working capital of $46,787. This is primarily due to the Company's net income sustained during the six month period ending October 31, 2007. 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 investment in current assets. 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. The cash provided by operating activities was $7,893 during the six month period ending October 31, 2007. An aggregate of $18,566 was used for equipment purchases and patent expenses 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. As of October 31, 2007, the Company had $613,836 of current assets available. Of this amount, $17,405 was prepaid expenses, $73,449 was inventory, $144,795 was net trade receivables, $176,427 was cash, and $200,000 was short-term investments. The Company's cash flow from operations is considered adequate by management 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 management is not currently aware of any such long- term capital needs. 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 2nd 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 accounts receivable. The actual bad debts of the Company may differ from the allowance estimated by Management in preparation of the Financial Statements accompanying this report. Stock Options - The Company accounts for its stock options granted to employees in accordance with the provisions of SFAS 123(R), "Share- based Payment." The Company is required to recognize the cost related to share-based compensation based on the fair value of the equity or liability issued pursuant to SFAS No. 123(R). The adoption of SFAS 123(R) will have an immaterial impact on the Company's financial position, results of operations and cash flow. 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 October 31, 2007, including the Company's financial statements. These statements have been prepared in conformity with general accepted account principles 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 properly 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 changes 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 in effect to ensure that material regarding the Company is presented in this Quarterly Report. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. 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 (i) (4) Instruments defining rights of security holders, including indentures - none. (10) Material Contracts (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. (b) No current reports on Form 8-K were filed during the period covered by this report. (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 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. 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 December , 2007 ---------------------------- Fred K. Suzuki Chief Executive Officer, Chairman of the Board, President and Treasurer Date December , 2007 --------------------------------- Laurence C. Mead Vice President/Manufacturing and Development, Chief Financial Officer, Chief Accounting Officer and Director 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 procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f) 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. 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 c. 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 control 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: December , 2007 -------------------------------------- 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 procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f) 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. 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 c. 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 control 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: December , 2007 ----------------------------------------- Laurence C. Mead Vice President/Manufacturing and Development, Chief Financial Officer, Chief Accounting Officer and Director 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 "Company") on Form 10-QSB for the quarter ending October 31, 2007, 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 Company as of October 31, 2007, and for the period then ended. Biosynergy, Inc. ----------------------------------------- Fred K. Suzuki Chairman of the Board, Chief Executive Officer, President and Treasurer Dated: December , 2007 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 "Company") on Form 10-QSB for the quarter ending October 31, 2007, 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 Company as of October 31, 2007, and for the period then ended. Biosynergy, Inc. -------------------------------------------- Laurence C. Mead Vice President/Manufacturing and Development, Chief Financial Officer, Chief Accounting Officer and Director Dated: December , 2007