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 endedJuly 31, 20172018

__ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number0 -12459

Biosynergy, Inc.

(Exact name of registrant as specified in its charter)

Illinois36-2880990

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

1940 East Devon Avenue, Elk Grove Village, Illinois 60007847-956-0471

(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. YesX 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. YesX 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

“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 __ NoX

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, 2017:2018:14,935,511

BIOSYNERGY, INC.

PART 1 - FINANCIAL INFORMATION

Item 1.Financial Statements and Supplementary Data

BALANCE SHEETS

Assets

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

BIOSYNERGY, INC.

PART 1 - FINANCIAL INFORMATION

BALANCE SHEETS

Liabilities and Shareholders’ Equity

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

BIOSYNERGY, INC.

STATEMENTS OF OPERATIONS

(unaudited)(Unaudited)

Three Months Ended

July 31

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

BIOSYNERGY, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

THREE MONTHS ENDED JULY 31, 2017

2018

Unaudited

  Common Stock

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

BIOSYNERGY, INC.

STATEMENTS OF CASH FLOWS

Unaudited

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

BIOSYNERGY, INC.

Notes to Financial Statements

STATEMENTS OF CASH FLOWSThree Months Ended July 31, 2018 and 2017

Unaudited

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

Note 1 - Company Organization and Description

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of normal recurring adjustments which are necessary for a fair presentation of the financial position and results of operations for the periods presented. The unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s April 30, 20172018 Annual Report on Form 10-K. The results of operations for the three months ended July 31, 20172018 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 91.02%91.34% of the sales during the quarter ending July 31, 20172018 and 90.16%91.02% during the quarter ending July 31, 2016.2017. 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 $2,579$1,918 and $2,099$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 2016, respectively.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:

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 sales revenue uponcost is not material.

Income Taxes

Income taxes are provided for the shipmenttax effects of producttransactions reported in the financial statements and consist of taxes currently due and deferred taxes related primarily to customers.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 Taxes4,139 $(3,268)

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

Research and Development and Patents

Research and development expenditures are charged to operations as incurred. The costs of obtaining patents, primarily legal fees, are capitalized and, once obtained, are amortized over the life of the respective patent on the straight-line method.

Patent amortization expense for the three months ended July 31, 2017 was $2,171 and 2016 was $2,171. Patents relate to products that have been developed and are being marketed by the Company. Patents pending relate to products under development.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

BIOSYNERGY, INC.

Notes to Financial Statements

Three Months Ended July 31, 2018 and 2017

Note 2 - Summary of Significant Accounting Policies (Cont’d)

Income Per Common Share

Income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. When dilutive,Basic and diluted net income per common share is the same for the 1^st quarter ended July 31, 2018 and 2017 as there are no common stock options are included as share equivalents using the treasury stock method in the calculation of diluted earnings per share. The Company has no outstanding options or other rights to acquire its unissued common shares.equivalents.

Comprehensive Income

Components of comprehensive income include amounts that are included in the comprehensive income but are excluded from net income. During the three month periods ending July 31, 20172018 and 2016,2017, there were no differences between the Company’s net income and comprehensive income.

Income Taxes

Income taxes are provided for the tax effectsFair Value 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 implemented ASU 2015-17 during the quarter ended July 31, 2017 on a retrospective basis, and have classified their deferred tax liabilities as non-current.Financial Instruments

The Company files tax returns inevaluates its financial instruments based on current market interest rates relative to stated interest rates, length to maturity and the U.S. federal jurisdictionexistence of readily determinable market prices. Based on the Company’s analysis, the fair value of financial instruments recorded on the balances sheets as of April 30, 2018 and with the state of Illinois. Various tax years remain open to examinations although there are currently no ongoing tax examinations. Management’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.2017, approximates their carrying value.

Segments

Accounting standards have established annual reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. The (benefit) provision for income taxes consists of the following components for the three month periods ended July 31:

Company’s operations were a single reportable segment and an international segment. The differences between the U.S. federal statutory tax rate and the Company’s effective tax rateinternational segment operations are as follows:

immaterial. See Note 7.

Recent Accounting Pronouncements

The FASB issues ASUs to amend the authoritative literature in Accounting Standards Certification (ASC). There have been a number of ASUs to date that amend the original text of ASCs. Except for the ASUs listed below, thoseThose issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.

On February 25, 2016, the FASB issued Topic 842, Leases. Under its core principle, a lessee will recognize lease assets

BIOSYNERGY, INC.

Notes to Financial Statements

Three Months Ended July 31, 2018 and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. GAAP. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. At inception, a lessee must classify all leases as either finance or operating. The Company intends to adopt Topic 842 upon extension of the current lease for its facilities in Elk Grove Village or upon entering into a new lease agreement for alternative facilities on or about May 1, 2018. The Company is investigating the effect of adoption of Topic 842 on its results of operations and financial condition. However, it is not anticipated that adoption of Topic 842 will have a material impact on the results of operations or financial condition of the Company.

In May 2014, the Financial Accounting Standard Board (FASB) issued ASU 2014-09, Revenue from Contract with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance 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 standard is effective for annual periods beginning after December 15, 2017 and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2015-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2015-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard as of May 1, 2018.

Note 3 – Inventories

Components of inventories are as follows:

Note 4 – Common Stock

The Company’s common stock is traded in the over-the-counter market. However, there is no established public trading market due to limited and sporadic trades. The Company’s common stock is not listed on a recognized market or stock exchange.

Note 5 - Related Party Transactions

The Company and its affiliates are related through common stock ownership as follows as of July 31, 2017:2018:

BIOSYNERGY, INC.

Notes to Financial Statements

Three Months Ended July 31, 2018 and 2017

Note 5 - Related Party Transactions (Cont’d)

As of July 31, 2017,2018, $19,699 was due from F. K. Suzuki International, Inc. These balances result from an allocation of common expenses charged to FKSI prior to April 30, 2006 offset by advances received from time to time. No interest income is received or accrued by the Company. The financial condition of FKSI is such that it will unlikely be able to repay the Company during the next year without liquidating a portion of its assets, including a portion of its ownership in the Company. As a result, the receivable balance has been reclassified as a contra equity account since April 30, 2006.

A board member provided a variety of legal services to the Company in his capacity as a partner in a law firm. Fees for such legal services were approximately $13,485$8,706 and $9,665$13,485 for the three months ended July 31, 2018 and 2017 and 2016 respectively.

Note 6 – Lease Commitments

On February 25, 2016, the FASB issued Topic 842, Leases. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. GAAP. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. At inception, a lessee must classify all leases as either finance or operating. In January 2015,February 2018, the Company entered into a three-yeartwo-year lease agreement for its current facilities, which started May 1, 2018 and expires on April 30, 2018. The base rent under2020. Under the new lease standard, which was early-adopted by the Company as of May 1, 2018, the Company’s lease was accounted for as an operating lease. As a result, the Company measured the lease escalates overliability using the lifetwo year term and rates per the lease agreement and recognized a lease liability, with a corresponding right-of-use asset. A discount was not calculated due to the lease agreement only having a two year term.  

The operating lease expense, recorded as depreciation expense, for the three months ending July 31, 2018 is $22,275. The corresponding expense, recorded as rent expense, for the three months ending July 31, 2017 is $21,675.  Retrospective application of the lease. However, rent expense is recorded on a straight-line basisnew standard did not render any adjustments since all of the Company’s operating leases were less than one year.

Maturities of lease liabilities as required by accounting principles generally accepted in the United States of America. As of July 31, 2017,2018 are presented in the Company’s approximate total future minimum lease payments are as follows:following table:

Year Ending April 30:

Also included in the lease agreement are escalation clauses for the lessor’s increases in property taxes and other operating expenses.2019 $ 66,000

2020 $ 90,200

Note 7 – Customer Concentrations

Shipments to one customer amounted to 28.65%31.87% of sales during the first three months of Fiscal 20182019 compared to 29.42%28.65% during the comparative Fiscal 20172018 period. As of July 31, 2017,2018, there were outstanding accounts receivable from this customer of $59,526$66,518 compared to $56,432$59,526 at July 31, 2016.2017. Shipments to another customer amounted to 36.42% of sales during the first three months of Fiscal 2019 and 33.85% of sales during the first three months of Fiscal 2018 and 29.17% of sales during the first three months of Fiscal 2017.2018. As of July 31, 2017,2018, there were outstanding accounts receivable from this customer of $109,008$123,166 compared to $35,497$109,008 at July 31, 2016.2017.

The Company had export sales of $10,790 during the first three months of Fiscal 2019, and export sales of $8,650 during the first three months of Fiscal 2018, and export sales of $20,460 during the first three months of Fiscal 2017.2018. The Company also believes that some of its medical devices were sold to distributors within the United States who resold the devices in foreign markets. However, the Company does not have any information regarding such sales and such sales are not considered to be material.

BIOSYNERGY, INC.

Three Months Ended July 31, 2018 and 2017

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION

Net Sales/Revenues

For the three month period ending July 31, 20172018 (“1^st Quarter”), the net sales increased 4.43%4.92%, or $12,857,$14,925, as compared to net sales for the comparative three month period ending in 2016.2017. The increase in net sales during the 1^st Quarter was primarily due to an increase in sales of HemoTemp^®®II and HemoTemp^®®II.II Activator. During the 1^st Quarter, sales of HemoTemp^®®II increased by $14,200$14,620 resulting in higher net sales overall. As of July 31, 2017,2018, the Company had no back orders.

In addition to the above, during the 1^st Quarter the Company had $480 of other miscellaneous revenues primarily from leasing a portion of its storage space to a third party and interest income of $108.$92.

Costs and Expenses

General

The operating expenses of the Company during the 1^st Quarter decreased overall by 0.57%7.85%, or $1,236,$15,715, as compared to the three month period ending July 31, 2016,2017, primarily due to a decrease in marketinggeneral and administrative expenses and research and development costs.

Cost of Sales

The cost of sales during the 1^st Quarter increased by $7,005$5,678 as compared to these expenses during the three month period ending July 31, 2017. This increase was due primarily due to higher salaries and outgoing freightrelated employee expenses. As a percentage of sales, the cost of sales was 32.43%32.69% during the 1^st Quarter and 31.45%32.43% for the three month period ending July 31, 2016.2017. 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

During the quarter ending July 31, 2016, the Company incurred engineering costs for improvements to the Company’s HemoTemp II®Activator. Since such engineering costs were not incurred in the 1^st Quarter, Research and Development costs for the 1^st Quarter decreased by $1,530,$3,747, or 3.76%10.15%, as compared to the same quarter in fiscal 2016.2017. The decrease was mainly due to reduced prototype expenses for the 1^st Quarter compared to the three month period ending July 31, 2017. The Company is continuing research intended to improve and expand the Company’s current product line. The Company does not have sufficient information to determine the extent to which the Company will be required to allocate its resources to the continued development of these products.

Marketing Expenses

Marketing expenses for the 1^st Quarter decreasedincreased by $2,147 or 4.71%,$135 as compared to the quarter ending July 31, 2016. The decrease was primarily due to a decrease in acquiring artwork for promotional materials.2017.

BIOSYNERGY, INC.

Three Months Ended July 31, 2018 and 2017

General and Administrative Expenses

General and administrative costs for the 1^st Quarter increaseddecreased by $2,441,$12,103, or 1.92%10.31%, as compared to the 3 month period ending July 31, 2016.2017. This increasedecrease was primarily the result of an increasea decrease in legal fees and general insurance costs.the timing of accounting fees. Except for unforeseen expenses and normal increases in employee costs, it is unlikely general and administrative expenses will materially change during Fiscal 2018.2019.

Net Income (Loss)

The Company realized a net lossincome of $7,160$10,379 during the 1^st Quarter as compared to a net loss of $12,043$7,160 for the comparative quarter of the prior year. The lossesnet income during the first quarter of the past two years arewas primarily due to higher sales and reduced accounting fees due to the accounting and legal fees expensed in such respective quarters for the year-end audit and filingtiming of the Company’s 10-K for the previous year.billing.

Assets/Liabilities

General

Since April 30, 2017,2018, the Company’s assets have decreasedincreased by $14,393$160,958 and liabilities have decreasedincreased by $7,233.$150,579. The decreaseincrease in assets is due to a decrease in accounts receivable and inventories offset by an increase in cash. The decreasecash offset by decreases in liabilities (primarily accrued compensationaccounts receivables, inventories, and payroll taxes and accounts payable) is dueprepaid expenses. Also, the implementation of FASB Topic 842 related to the timing of employee expenses and payment of accounts payablechanges in the ordinary courseaccounting treatment for leases (“FASB Topic 842”) increased assets by $155,925 and increased liabilities by $156,200, offset by a decrease of business.$5,621 in other current liabilities.

Related Party Transactions

The Company was owed $19,699 by F.K. Suzuki International, Inc. ("FKSI"), an affiliate, at July 31, 20172018 and April 30, 2017.2018. This account primarily represents common expenses which were previously charged by the Company to FKSI for reimbursement. No interest is received or accrued by the Company. Collectability of the amounts due from FKSI since April 30, 2006 could not be assured without the liquidation of all or a portion of its assets, including a portion of its common stock of the Company. As a result, as of April 30, 2006, all of the amount owed by FKSI to the Company was reclassified as a reduction of FKSI’s capital in the Company.

A board member provides a variety of legal services to the Company in his capacity as a partner in a law firm. Fees for such legal services were approximately $13,485$8,706 and $9,665$13,485 at July 31, 20172018 and 2016,2017, respectively.

Current Assets/Liabilities Ratio

The ratio of current assets to current liabilities, 23.5312.04 to 1, has increaseddecreased compared to 21.2922.2 to 1 at April 30, 2017,2018, primarily due to lower current liabilities.the adoption of FASB Topic 842. This increasedecrease is not indicative of a material change in the financial condition of the Company, but rather the result of a change in accounting reporting method for the Company’s facilities lease. The Company anticipates the ratio of current assets to current liabilities will remain substantially at its current level as a result of the change in accounting methods, subject to other normal fluctuation due to the timing of payment of vendors and compensation of employees.fluctuations. In order to maintain or improve the Company’s asset/liabilities ratio, the Company’s operations must return to profitability.remain profitable.

The decrease in liabilities was due primarily to a decrease in accrued compensationBIOSYNERGY, INC.

Three Months Ended July 31, 2018 and payroll taxes during the 1^st Quarter related to timing of employee compensation and payroll taxes.2017

Liquidity and Capital Resources

During the 1^st Quarter, the Company experienced a decrease in working capital of $2,410.$51,257. This was primarily due to a decrease in accounts receivable and an increase in accounts payable during the 1^st Quarter.adoption of FASB Topic 842. Without the adoption of FASB Topic 842, working capital would have increased by $14,743.

The Company has attempted to conserve working capital whenever possible. To this end, the Company attempts to keep inventory at minimum levels. The Company believes that it will be able to maintain adequate inventory to supply its customers on a timely basis by careful planning and forecasting demand for its products. However, the Company is nevertheless required to carry a minimum amount of finished inventory and raw materials to meet the delivery requirements of customers and thus, inventory represents a substantial portion of the Company’s current assets.

The Company presently grants payment terms to customers and dealers. Although the Company experiences varying collection periods of its accounts receivable, the Company believes that uncollectable accounts receivable will not have a significant effect on future liquidity.

Cash provided by operating activities was $71,878$23,215 during the three month period ending July 31, 2017.2018. There was no cash used in investing activities. Except for operating capital and limited equipment purchases and patent expenses, management is not aware of any other material capital requirements or material contingencies for which it must provide. There were no cash flows from financing activities during the three month period ending July 31, 2018 or 2017.

As of July 31, 2017,2018, the Company had $1,516,961$1,577,141 of current assets available. Of this amount, $35,749$49,227 was prepaid expenses, $155,471$136,104 was inventory, $213,281$228,167 was net trade receivables and $1,112,460$1,163,643 was cash. The Company’s available cash and cash flow are considered adequate to fund the short-term capital needs of the Company. The Company does not have a working line of credit, and does not anticipate obtaining a working line of credit in the near future. Thus there is a risk additional financing may be necessary to fund long-term capital needs of the Company, although there is no such currently known long-term capital needs other than operations.

Effects of Inflation. With the exception of raw material and labor costs increasing with inflation, inflation has not had a material effect on the Company’s revenues and income from continuing operations in the past three years. Inflation is not expected to have a material effect in the foreseeable future.

Critical Accounting Policies and Estimates. On December 12, 2001, the SEC issued FR-60 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” FR-60 is an intermediate step to alert companies to the need for greater investor awareness of the sensitivity of financial statements to the methods, assumptions, and estimates underlying their preparation, including the judgments and uncertainties affecting the application of those policies and the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

The Company’s significant accounting policies are disclosed in Note 2 to the Financial Statements for the 1^st Quarter. See “Financial Statements.” Except as noted below, the impact on the Company’s financial position or results of operation would not have been materially different had the Company reported under different conditions or using different assumptions. The policies which may have materially affected the financial position and results of operations of the Company if such information had been reported under different circumstances or assumptions are:

BIOSYNERGY, INC.

Three Months Ended July 31, 2018 and 2017

Use of Estimates. Preparation of financial statements and conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. The financial condition of the Company and results of operations may differ from the estimates and assumptions made by management in preparation of the Financial Statements accompanying this report.

Allowance for Bad Debts. The Company periodically performs credit evaluations of its customers and generally does not require collateral to support amounts due from the sale of its products. The Company maintains an allowance for doubtful accounts based on its best estimate of the collectability accounts receivable.

Forward-Looking Statements

This report may contain statements which, to the extent they are not recitations of historical fact, constitute "forward-looking"forwardlooking 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-lookingforwardlooking statements for reasons including, but not limited to, changes to and developments in the legislative and regulatory environments effecting the Company’s business, the impact of competitive products and services, changes in the medical and laboratory industries caused by various factors, risks inherit in marketing new products, as well as other factors as set forth in this report. Thus, such forward-looking statements should not be relied upon to indicate the actual results which might be obtained by the Company. No representation or warranty of any kind is given with respect to the accuracy of such forward-looking information. The forward-looking information has been prepared by the management of the Company and has not been reviewed or compiled by independent public accountants.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. The Company’s primary exposure to market risk is the interest rate risk associated with its short term money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates. Thus, the Company’s operations are not exposed to financial risk that will have a material impact on its financial position and results of operation.

Item 4.CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)15d15(e) of the Exchange Act) which are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

 BIOSYNERGY, INC.

Three Months Ended July 31, 2018 and 2017

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Accounting Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and its Chief Accounting Officer have concluded that the Company’s disclosure controls and procedures are effective.

There have been no changes in the Company’s internal control over financial reporting during the Company’s Fiscal Quarter ending July 31, 20172018 that have materially affected or are likely to materially affect the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings.

As of the end of the Company’s Fiscal Quarter ending July 31, 2017,2018, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party to of which any of their property is the subject.

Item 1A.Risk Factors.

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect the Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2017.2018. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended April 30, 20172018 or during the first quarter of Fiscal 2018.2019.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

During the past three years, the Company has not sold securities which were not registered under the Securities Act.