UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended 4/30/14

 

OR

 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13OR 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 itscharter)

 

 

Securities registered under Section 12(b) ofthe Act:

 

 

Securities registered under section 12(g) ofthe Act:

Common Stock, No Par Value

(Title of class)

 

Indicate by check mark if the registrant isa well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes[ ] No[X]

 

Indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes[ ] No[X]

 

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 preceding12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes[X] No[ ]

 

Indicate by check mark whether the registranthas submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes[X] No[ ]

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitionsof “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Act). Yes[ ] No[X]

 

The aggregate market value of the voting stockand non-voting stock held by non-affiliates of the issuer on April 30, 2014 cannot be ascertained with any certainty because thereis no established trading market for the common stock of the Company.

 

The number of shares of common stock outstandingon April 30, 2014 was 14,935,511.

 

No documents have been incorporated by referencein this report except for certain exhibits and schedules listed in Item 15.

 

 Part I

 

Item 1. Business.

 

General Development of Business. Biosynergy,Inc. (the "Company") was incorporated as an Illinois corporation on February 9, 1976. The Company was formed primarilyfor the purpose of developing, manufacturing, and marketing products utilizing cholesteric liquid crystals. The Company presentlymanufactures and markets disposable medical, laboratory, and industrial thermometric and thermographic cholesteric liquid crystaldevices. The Company also distributes an electronic heat block used as an activator for its HemoTempR II Core CorrelatedBlood Monitoring Device manufactured by a third party to specifications of the Company.

 

The Company did not enter into any agreementsmaterially affecting its operations during Fiscal 2014. The Company experienced a decrease in sales of $947 or .07% in Fiscal 2014.Sales in Fiscal 2014 were $1,304,544. The Company realized an after income tax profit of $26,530 for Fiscal 2014 compared to anafter income tax profit of $95,309 for Fiscal 2013. See “Management’s Discussion and Analysis of Financial Conditionand Results of Operations.”

 

The Company continued its development and reviewof the proposed products described in “Thermographic and Thermometric Devices and Accessories” below.

 

The Company continued to introduce its productsdirectly to industrial customers during Fiscal 2014. Although the ultimate results of these activities are not known, Managementbelieves there is a need for its products and technology in the industrial markets.

 

Except as stated above, there were no othersignificant contracts or developments with regard to the Company's business during the past fiscal year.

 

Financial Information About Industry Segments.The Company’s revenues were generated from sales of medical and laboratory products in the medical and laboratory industrysegment during the fiscal years ended April 30, 2014 and 2013. For a description of these products, see “Narrative Descriptionof Business.”

 

See "Information About Foreign and DomesticOperations and Export Sales". See also "Selected Financial Data" and "Financial Statements and SupplementaryData" for the operating profit and loss and identifiable assets related to the Company's operations in its industry segment.

 

Narrative Description of Business. TheCompany is presently engaged in the business of developing, manufacturing, and marketing disposable thermometric and thermographictemperature indicators and accessories for the medical, laboratory and industrial markets. The Company has also developed a bacteriagrowth retardant agent which is not currently produced or sold by the Company. Further information about the business and proposedproducts of the Company are described below.

 

Thermographic and Thermometric Devices andOther Products. During the fiscal year ending April 30, 2014 the Company manufactured and marketed various medical, laboratory,and consumer thermometric, thermographic, and temperature control devices and accessories. These products (described below) weresold to hospitals, clinical end-users, laboratories, and product dealers.

 

1. The HemoTempR Core CorrelatedBlood Monitoring Device ("BMD") is designed to be a human blood bag temperature indicator. Human blood must be maintained,optimally, at 1-3o C., and not allowed to exceed 6-10oC. Since human blood is always in short supply, itis critical that blood be maintained within these specifications to avoid loss. HemoTempR BMD monitors the core temperatureof a blood bag from 1-12o C., and replaces the impractical mercury thermometer susceptible to breakage. HemoTempRBMD once attached to the blood bag is usable throughout the life of the blood.

 

2. HemoTempR II Core Correlated BMDis designed to warn blood bank personnel whenever the internal temperature of the blood bag has exceeded approximately 6-10oC. HemoTempR II BMD has an irreversible indicator that is activated when the tag is applied to the blood bag atapproximately 3o C. After being

activated,the irreversible indicator remains blue colored for at least 48 hours if the blood is kept at 3°C, however, if the blood is warmed to a temperature of 6-10o C. or above, the indicator will lose its blue color muchmore rapidly or the indicator will change color; the nature and degree of the color change depend on the temperature of the sampleand the time at each temperature. The irreversible indicator will not return to blue even if the blood is subsequently recooled,indicating that the blood has been warmed. The reversible portion of the indicator reversibly monitors temperatures from 1-9oC. HemoTempR II BMD is non-reusable and must be replaced each time the blood bag is returned to the blood bank and reissued.

 

3. HemoTempR II Activator is an electronic,portable block model heater developed to provide a reliable source of heat necessary to activate the Company's HemoTempRII BMD. The HemoTempR II Activator has a thermostatic control to permit precise setting and continuous control of temperaturesin the range for activation of the Company's HemoTempR II BMD. This device is intended by the Company to be used withHemoTempR II BMD as a system for blood monitoring. This device is manufactured by another company to specificationsset by the Company.

 

4. TempTrendR Temperature Indicator("TI") is primarily used to monitor the temperature of urine specimens collected for drug testing to detect fraudulenturine specimens. Most common forms of drug testing require a urine specimen. However, the test is valid only if a legitimate urinespecimen is collected which has not been altered by the subject to mask a drug abuse problem. In order to eliminate altered orfraudulent urine specimens in tests on federal employees, federal government guidelines require that urine temperature be measuredwithin four minutes of sample collection, and that the temperature be 90.5-98.9o F. Temperature measurements taken withTempTrendR TI are simply a matter of observing the color illuminated number and recording the temperature. TempTrendRTI also provides a non-invasive method of monitoring the actual surface temperature trends of any body surface where temperaturemeasurement is important, such as near joints in rheumatoid arthritis and to assess blood circulation.

 

5. TempTrendR II Temperature TrendDevice ("TTD") is a second generation temperature trend device which is correlated to internal body temperature and providesa non-invasive, readily visible means of monitoring changes in body temperature. TempTrendR II TTD will reflect oraltemperatures such as those taken by glass thermometers. TempTrendR II TTD is used intraoperatively to warn of developinghyper or hypothermic conditions. The indicator can also be used for monitoring a patient's temperature during any type of transfusionprocedure.

 

6. LabTempR 20, LabTempR40 and LabTempR 60 Surface Temperature Indicators ("STI") are designed to reversibly indicate the temperatureof laboratory materials which require specific storage or use temperatures. LabTempR 20 STI indicates temperatures between0-21o C., LabTempR 40 STI monitors temperatures between 19-21 and 24-41o C., while LabTempR60 STI measures temperatures between 41-61o C. These thermometers are designed to monitor the temperature and changesin temperature of hundreds of laboratory chemicals and supplies which require specific temperature conditions; however, these thermometersare suitable for temperature measurement of any surface.

 

7. StaFreezR Freeze-Thaw Indicator("FTI") is a freeze-thaw indicator which will irreversibly indicate whether frozen material is warmed to greater than-20 o C. Once the frozen product exceeds -20o C., the liquid crystal indicator will turn from blue to grayto black, and refreezing the product at a lower temperature will not bring back the original frozen state color.

 

8. HemoCoolTM Gel-Pak is a reusablegel pack designed for transporting temperature sensitive materials. The HemoCoolTM Gel-Pak is unique in that it canbe used to assist in maintaining the temperature of temperature sensitive materials both during the processing of the materials(labeling, testing, etc.) while outside the refrigerator as well as during transport.

 

9. HemoCoolTM Gel-Pak for test tubesis a reusable gel pack designed for transporting up to six test tubes while outside of the refrigerator. For example, this usecan be valuable for new admissions in hospitals who may have 1 – 6 test tubes of samples collected or large collections whichmay consist of more than one test tube. These collections can also be isolated using the gel pack.

 

10. HemoCoolTM Rollup Gel-Pak fortest tubes is a reusable rollup gel pack designed for transporting up to seven test tubes while outside of the refrigerator. Thisdevice has the same capability as the Gel-Pak described above and additionally can be rolled up and transported through a pneumatictube system.

 

11. The Company also has the capability of manufacturingon an as needed basis, specialty products including devices manufactured to the specification and design of the customer, suchas time/ temperature shipping labels for food products under the trade name FoodGardeTM Time/Temperature Indicatorsand liquid crystal thermometers for general purpose thermometry. The Company is not currently selling any such specialty products.

 

Products Under Development. The Companyis also developing these other products.

 

1. ThermolyzerTM Liquid ConductiveCooling/Heating Device is a small product for providing continuous heating or cooling of medical fluids which are administeredto patients, particularly for patients undergoing intravenous fluid administration during surgery or post-operative recovery. Thedevice does not use electricity for heating or cooling the medical fluids. The heating or cooling is accomplished by conduction,which is a process for transporting energy in a medium from one location to another without the involvement of any visible movement.Marketing of this device is subject to an exact environmental study which is necessary to receive FDA 510(k) pre-market approval.

 

2. The Company previously developed a compoundintended for use as bacteria growth retardant agents for use in various products and processes. Although these antibacterial compoundsare subject to Food and Drug Administration regulation, they are historically designated as Generally Recognized As Safe (GRAS).The Company is not currently producing or selling these compounds. Since there are several unknown factors regarding efficacy,supply and regulatory requirements, the outcome of this project cannot be predicted with any certainty at this time.

 

3. The Company is also investigating productionmethods for the bacteria growth retardant compound described in Paragraph 2 above. In this regard, the Company has developed certainproprietary technology related to the processing of these compounds. The Company has filed for one patent related to the processingand manufacture of bacteria growth retardant compounds for use in food and other products. Another patent related to the use ofsuch compounds has been abandoned (see “Patents and Trademarks”).

 

4. The Company is developing an improved smallportable refrigerated cooler for transportation of blood and other biologicals. The Company is near completion of a prototype andexpects to be in production in Fiscal 2015, subject to the completion of the prototype and UL approval. (See “Material RiskFactors”).

 

5. The Company intends to market new irreversibletime/temperature indicators which will be used as shipping labels, and in other forms, for the frozen food packaging industry (underthe tradename FoodGardeTM), the pharmaceutical industry, and for other industries requiring careful monitoring of refrigeratedor frozen materials. The devices will have irreversible color changes at various temperatures determined to be critical by theend-user. Therefore, a purchaser, whether an individual consumer or a merchant, will be able to instantaneously determine the temperaturehistory of the material. These products will generally be customized to meet the requirements of the customer. There are currentlyno contracts for development, manufacture or sale of any such irreversible time/temperature indicators.

 

6. The Company has recognized a need existsfor a simple, inexpensive indicator to determine if sensitive materials have been subjected to freezing temperatures. The Companyis continuing its investigation of the feasibility of such an indicator.

 

7. The Company is investigating the feasibilityof additional products to systematize the use of its thermometric and thermographic liquid crystal devices as well as alternativetechnologies to supplement its current product line where the Company’s current products are not suitable. The results ofsuch investigations are not available at this time.

 

Manufacturing. The Company manufacturesall of its products except for the HemoTempR II Activator and ThermolyzerTM. The Company anticipates thatthe portable refrigerated cooler under development will also be manufactured by a third party vendor. These products are manufacturedfor the Company by unrelated

companies on an as needed basis. Raw materialsfor the Company's other products are purchased, but all manufacturing of these products is performed at the Company's productionfacility. All outside manufacturing is done to specifications set by the Company. There are no commitments or firm agreements foroutside manufacturers to provide products for the Company, and the Company does not anticipate it will enter into any such agreementsin the foreseeable future. Currently, the Company relies exclusively on Fred Suzuki, the Company’s President and Chief ExecutiveOfficer, to manufacture the temperature sensitive liquid crystals used in the Company’s temperature indicators (See “MaterialRisk Factors”, below).

 

The Company has thirty-eight years of experienceworking with various liquid crystal formulations, thermometric and thermographic application methods and the effect of temperatureand other factors on degradable materials. The Company maintains complete records of manufacturing and quality assurance testingof all of its products in compliance with Food and Drug Administration ("FDA") regulations. All products are manufacturedaccording to "good manufacturing practices" ("GMP") for medical devices.

 

Marketing and Distribution. The Companyhas traditionally targeted the medical and laboratory markets. The Company currently uses marketing tools such as direct mailing,cold calls, public announcements, and its website for introduction of its new products. While novel products, such as the Company'sproducts, enjoy the advantage of no initial competition, they also initially lack a demonstrated market demand and acceptance.Furthermore, cost savings programs have slowed down the introduction of new products, particularly in the medical market. As aresult, the time required to achieve acceptance of the Company's medical products has significantly increased, in Management'sopinion.

 

Although the Company relies on its own salesand distribution efforts for a portion of its sales, the Company's distributors accounted for a majority of the Company’snet sales in Fiscal 2014. During Fiscal 2014, Fisher Scientific Company (“Fisher”) accounted for 35.5% of the Company'ssales. Cardinal Health, Inc. (“Cardinal”) accounted for 28.8% of Company sales during Fiscal 2014 (See “MaterialRisk Factors”, below). Management believes distributors will continue to be an important part of the Company’s salesand distribution system in the future.

 

The Company continues to negotiate with variousmedical and laboratory product companies for the distribution of its products under private labels and to introduce its productsin the industrial, pharmaceutical and laboratory markets, the success of which cannot be assured. The Company is attempting tointroduce new products to supplement its current product line. The Company is also researching products outside the traditionalmedical and laboratory markets, the results of which cannot be predicted at this time.

 

During Fiscal 2014, the Company engaged threepart-time employees in marketing the Company's products. During Fiscal 2015, the Company anticipates that one of these employeeswill devote substantially all of her time to marketing and selling the Company’s products. The Company does not have an outsidesales force. Since the Company markets its products to approximately 7,000 hospitals in the United States, hundreds of laboratoriesand industrial end-users in the United States, and thousands of hospitals and laboratories in foreign countries, it will continueto rely upon the marketing efforts of independent dealers and sales representatives for the medical and laboratory markets. TheCompany also directly markets and sells to its industrial customers.

 

The Company is unaware of its current marketshare for its medical and laboratory products.

 

Sources and Availability of Raw Materials.In general, the Company believes its sources and availability of raw materials and finished products to be satisfactory. Presently,there are a limited number of domestic manufacturers of liquid crystal chemicals. Although it is expected that these domestic manufacturerswill continue to supply the raw liquid crystals needed for the production of the Company's products, continued supply from suchdomestic manufacturers cannot be assured. If industrial quantities of raw liquid crystals are unavailable from domestic sources,the Company will need to import these materials from foreign suppliers, or, as an alternative, manufacture such materials itself.There can be no assurance that foreign suppliers will have adequate surplus or availability in the event the Company needs to utilizeforeign sources. Other materials and products are currently available from a variety of suppliers (See however “Risk Factors”,below).

 

Patents and Trademarks. The Company waspreviously granted or assigned five United States and four foreign patents relating to liquid crystal technology. All of thesepatents have expired. Although these patents are no longer in effect, management does not believe this will have an adverse materialimpact on the Company's operations, revenues or properties.

 

The Company currently holds several other patents.“Liquid Conductive Cooling/Heating Device and Method of Use”, Patent Number US 7,276,046, relating to the Company’sthermolyzer, was granted on October 2, 2007. This patent will expire on June 6, 2024.

 

The Company was also granted a design patent,“Fold-Over Cooling Pack”, Patent Number US D670816, relating to the Company’s HemoCoolTM Gel-Pak,on November 13, 2012. This patent will expire on November 13, 2026. In addition, the Company holds several Foreign Design Patentsfor the “Fold-Over Cooling Pack”, including Europe, Patent Number 002038745-0001, issued August 7, 2012, expiring onMay 8, 2037; Canada, Patent Number 145628, issued March 21, 2013, expiring March 21, 2023; and Turkey, Patent Number 201203234,issued May 7, 2012, expiring May 7, 2037. The Company has a patent pending related to the “Fold-Over Cooling Pack”in India, Design Patent Application Number 245076, which was filed on May 2, 2012.

 

The Company has filed applications for threepatents related to its products and products under development. One patent entitled “Method of Producing Eggshell Powder,”Application Number 10/535,779 was filed on August 4, 2005 replacing provisional patent application number 60/474,195 filed May29, 2003 and provisional patent number 60/575,336 filed May 28, 2004. This patent application is pending review by the U.S. Patentand Trademark Office. See “Products Under Development. The second patent, “Gel-Packs for Test Tubes”, DesignPatent Application Number 29/447,625 was filed March 5, 2013. The subject of this patent is a design for a gel-pack which holdstest tubes. Industrial Design Applications have also been filed in Turkey on March 25, 2013 (2013/02394), and Canada on April 2,2013 (150495). Design Patents have been issued in Europe (002295212-0001 and 002295212-0002) on November 28, 2013, expiring August22, 2038; and India (252644) on January 23, 2014, expiring March 5, 2028. The third patent, “Roll-Up-Gel-Pack for Test Tubes,”Design Patent Application Number 29/447,628 was filed March 5, 2013. The subject of this patent is a design for a gel-pack whichholds test tubes and can be rolled up for shipping and storage. Industrial Design Applications have also been filed in Turkey onMarch 26, 2013 (2013/02413); and Canada on April 2, 2013 (150496). Design Patents for the Roll Up Gel-Pak have been issued in Europe(002295105-0001 and 002295105-0002) on November 18, 2013, expiring August 22, 2038; and India (252643) on February 5, 2014, expiringMarch 5, 2028. It is uncertain whether the patent applications pending related to the use of the bacteria growth retardant, orany of the other patent applications pending, will ultimately be approved, or if approved, will be approved as currently presented.

 

During Fiscal 2013 two patent applications wereabandoned; “Method of Cleaning Poultry” and “Gel and Ice”. A total of $33,393 in capitalized patent applicationexpenses were written off as a result.

 

During Fiscal 2014 two patent applications wereabandoned, “Method of Feeding Poultry” and “Eggshell Anti-Microbial Agent and Method of Use”. A total of$98,100 in capitalized patent application expenses were written off as a result.

 

The Company may also seek to obtain patentson other products, as appropriate.

 

The Company has received registered trademarkprotection on all product names to date excepting Temp-D-TekTM, Tempa-SlideTM, FoodGardeTM, LaproVueTMand Hemo-CoolTM. The Company has retained, however, all the common law rights to the ThermolyzerTM, Temp-D-TekTM,Tempa-SlideTM, FoodGardeTM, LaproVueTM, and Hemo-CoolTM trademarks. Additional trademarkregistrations will be applied for as needed.

 

Patent and trademark protection is importantto the Company, both with respect to its current products, as well as products under development. In circumstances where the Companyis unable to obtain patent trademark protection on its products, as well as any improvements, developments and modifications relatedto such products if the Company is able to sell such products without initial significant competition, then the Company believesno material adverse effects to the Company's operations will result in the event additional patents and/or trademarks are not obtained,or, if obtained, such patents and/or trademarks are held to be invalid. However, certain processes and chemical formulas will bemaintained only as trade secrets.

Management feels that it will be difficult forpotential competitors to analyze or reproduce certain secret processes and formulas without substantial expenditure of capitaland resources.

 

Seasonable Aspect of Business. The businessof the Company is not seasonal.

 

Working Capital Items. The Company hasattempted 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 planningand forecasting demand for its products. However, the Company is nevertheless required, as is customary in the medical and laboratoryindustries, to carry inventory to meet the delivery requirements of customers and thus, inventory represents a substantial portionof the Company's current assets.

 

The Company presently grants payment terms tocustomers and dealers of 30 days. The Company will not accept returns of products from its dealers except for change or creditbut does guarantee the quality of its products to the end user for a period of one year. In addition, the Company maintains productliability insurance at a level which the Company’s management believes is adequate protection for the Company’s productliability exposure.

 

As of April 30, 2014, the Company had $1,206,849of current assets available. Of this amount, $30,375 represented prepaid expenses, $121,197 was inventory, $190,749 was net tradereceivables, and $864,528 represented cash.

 

Management of the Company believes that it hassufficient working capital to continue operations for the fiscal year ending April 30, 2015 provided the Company's sales and abilityto collect accounts receivable are not adversely affected. In the event the Company's sales materially decrease, the receivablesof the Company are materially impaired for any reason, or the Company needs additional capital for its development projects, itmay be necessary to obtain additional financing to cover working capital items and keep current trade accounts payable, of whichthere can be no assurance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 

Major Customers. The Company’stwo largest customers are its primary product distributors, Fisher and Cardinal. Fisher was directly responsible for 35.5% of theCompany's net sales during the fiscal year ending April 30, 2014. Cardinal accounted for 28.8% of the Company’s net salesduring the fiscal year ending April 30, 2014. At April 30, 2014, Fisher owed the Company $98,298 and Cardinal owed $44,022. Noother customers accounted for 10% or more of the Company’s net sales during Fiscal 2014. Management believes the loss ofthese distributors would materially reduce the revenues of the Company until the Company could retain, if available, the servicesof other major product distributors or the end users serviced by Fisher and Cardinal began ordering directly from the Company.Management has no reason to believe that the Company will lose either of these distributors in the foreseeable future.

 

Backlogs. The Company had no backordersat April 30, 2014 or 2013.

 

Government Contracts. The Company doesnot have a material portion of its business that may be subject to renegotiation of profits or termination of contracts or subcontractsat the election of any government entity.

 

Competition. The Company has no knowncommercial competitors of its blood monitoring devices using liquid crystal technology. The Company's HEMOTEMPR II BMD(blood bag temperature monitor) competes in the medical market against several functionally similar products. Management of theCompany has become aware of one such product sold by a competitor with sales substantially equal to the Company’s sales ofHEMOTEMPR II BMD. Management of the Company believes that HEMOTEMPR II BMD is superior because it providesan irreversible monitor with a reversible monitor to warn the user that blood is approaching an unsafe temperature. There are noknown commercial competitors of the Company's HemoTempR II Activator.

 

In the area of laboratory temperature monitoring,a known competitor supplies reversible and irreversible temperature indicators. In the area of a food or drink safety indicator,there is no competition known to the Company that utilizes liquid crystal technology. The Company believes that the frozen foodindustry presently uses primarily physical and organoleptic evaluation (e.g. evaluation of softness, texture, aroma, taste, andthe

like), as well as mercury thermometers and temperaturesensitive inks to monitor freshness. Labels containing wax encapsulated dyes with specific low melting points and capillary actionproducts are produced by several other companies.

 

The Company’s TempTrendR IIcompetes in the medical market against products produced by several other companies. The Company’s TempTrendRcompetes in the drug testing market, specifically for monitoring the temperature of urine samples, with several other companiesutilizing liquid crystal and non-liquid crystal technology.

 

A number of other companies are only involvedin the manufacture of liquid crystal raw materials and do not directly compete with the Company for sale of medical, industrialor consumer products. Mercury and electronic thermometers are used in several competitive applications. They are generally morecostly, non-disposable or not usable in most applications where liquid crystal thermometry and temperature indicators are utilized.

 

Many of the Company’s competitors mayhave greater financial and other resources than the Company. The Company’s ability to compete depends on its ability to design,manufacture and sell high quality products as well as its ability to develop new products and functionality that meet evolvingcustomer requirements.

 

Research and Development. During Fiscal2014 and 2013, the Company spent $143,426 and $133,625, respectively, on Company-sponsored research and development activities.All expenditures for research and development are expensed currently with the exception of significant equipment and set-up chargeswhich are capitalized and depreciated or amortized over their estimated useful life.

 

The Company is conducting research and developmentof products discussed under "Products Under Development." Although not anticipated, the Company may require financingto complete the development of these products. The success of the Company in obtaining financing for research and development maylargely determine whether the Company will be able to continue the research and development for such products. Management believesthe Company has sufficient working capital for anticipated research and development for the ensuing year.

 

Government Regulations. The Company requiresFDA pre-market approval for its ThermolyzerTM Liquid Conductive Cooling/Heating device. Other products, such as thebacteria growth retarding compound, may require pre-clearance by the FDA or other government agencies. Present medical productsof the Company are classified by the FDA as Class I or Class II. These are subject only to general regulations requiring that manufacturersadhere to certain guidelines to provide reasonable assurance of utility, safety, and effectiveness. These guidelines include labelingrequirements, registration with the FDA as a manufacturer, listing of devices in commercial distribution with the FDA, notificationto FDA of devices proposed to be marketed, conformance to specified current good manufacturing practices in the manufacture ofthe devices, conformance to certain record-keeping requirements, and, in the case of Class II devices, conformance to certain performancestandards. At the present time, the Company believes that it is in compliance with regulations set forth by the FDA.

 

Information About Foreign and Domestic Operationsand Export Sales. The Company had export sales of $61,325 during the last fiscal year, and export sales of $48,170 during thefiscal year ending in 2013. The Company also believes that some of its medical devices were sold to distributors within the UnitedStates who resold the devices in foreign markets. However, the Company does not have any information regarding such sales, andsuch sales are not considered to be material.

 

The Company does not rely on any foreign operationsother than its dealers and marketing representatives in their respective marketing areas. See "Marketing and Distribution."It is not anticipated export sales will be material to operating revenues or income of the Company. Foreign sales are contingentupon, among other factors, foreign trade regulations, value of the United States Dollar and, where required, government approvalof the Company's products including CE Marketing requirements.

 

The Company is exposed to risks generally attendantto foreign operations, including but not limited to, trade restrictions, tariffs, embargos, foreign war and unrest and competitionfrom foreign and domestic producers.

Management believes the partial or total lossof foreign operations would not have a material impact on the Company’s financial condition or results of operations.

 

Environmental Protection Expenditures.The Company's operations are not subject to any federal, state or local laws regulating the discharge of materials into the environmentwhich materially affect earnings or the competitive position of the Company, although the Company is subject to such laws. Therewere no material capital expenditures made during the last fiscal year to comply with such laws.

 

Employees. The Company presently hasfive full-time employees comprised of the President and three Vice Presidents. The Company also has a part-time employee in theproduction department when needed.

 

Website. The Company maintains a Websiteat www.biosynergyinc.com. The Company makes available on its Website free of charge its annual report on form 10-K, quarterly reportson Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)). The Company will provide electronic or paper copies of its filings free of chargeupon request.

 

Reports to Shareholders. The Companyis not required to deliver annual reports to its shareholders. Historically, the Company has not delivered annual reports to itsshareholders and does not intend to do so this year. However, all written material filed with the Securities and Exchange Commissionmay be read and copied at the Securities and Exchange Commission’s Public Reference Room at 450 5th Street, N.W.,Washington, D.C. 20549. Such information may also be obtained from the Public Reference Room by calling 1-800-SEC-0330 or by visitingthe Securities and Exchange Commission’s internet site at www.sec.gov. You may obtain copies of this Annual Report and otherreports filed with the Securities and Exchange Commission by contacting the Company at 1940 East Devon Avenue, Elk Grove Village,Illinois 60007, telephone number 847-956-0471. See also “Website” above.

 

Item 1A. Material Risk Factors.

 

***The Company depends on key members ofits management and scientific staff and, if the Company fails to*** ***retain and recruit qualified individuals, itsability to execute its business*** ***strategy would be harmed.***

 

The Company is highly dependent on the principalmembers of its management and scientific staff, in particular Fred K. Suzuki, Jr., the Company’s President, Chief ExecutiveOfficer, Chairman of the Board of Directors, and Director of Research and Product Development. Mr. Suzuki is primarily responsiblefor developing products and manufacturing the liquid crystals for use in the Company’s primary line of products. Mr. Suzukiis 84 years old. The loss of Mr. Suzuki may impede the achievement of the Company’s business objectives or have an adverseeffect on the Company’s financial condition or results of operations. The Company may not be able to attract and retain skilledand experienced personnel on acceptable terms in the future to replace Mr. Suzuki. Further the Company may not be able to attractand retain skilled and experienced marketing, scientific and sales personnel on acceptable terms in the future because numerousother high technology companies compete for the services of these qualified individuals. The Company currently does not maintainkey man life insurance on any of its employees, nor has the Company implemented a formal succession plan.

 

***Certain familial groups, in the aggregate,beneficially own a large percentage of the Company’s common stock and as a result can exert significant influence over theCompany.***

 

As of April 30, 2014, Mr. Suzuki owned 30% ofthe outstanding stock of F.K. Suzuki International, Inc. (“FKSI”), and also served on FKSI’s board of directors,together with Laurence Mead, the Chief Operating Officer of the Company, Lauane Addis, Mr. Suzuki’s son in law and counseland Secretary for the Company, and Ira Goldstein, an unrelated unaffiliated third party. FKSI in turn owns approximately 30.02%of the outstanding stock of the Company. As a result of (i) Mr. Suzuki’s ownership and position as director of FKSI, (ii)shared directorial control over FKSI with Messrs. Mead and Addis with respect to the shares of stock in the Company owned by FKSI,(iii) other shares of stock in the Company owned by Mr. Suzuki directly, and (iv) stock owned by Mr. Suzuki and his spouse as jointtenants, Mr. Suzuki is deemed to “beneficially” own an aggregate of 5,513,470 shares, or approximately 36.9%, of theCompany’s outstanding common stock. In

addition, Mr. Suzuki’s daughter, JeanneS. Addis, is the Trustee of the Addis Family Trust dated September 1, 2009, which owns approximately 28.1% of the outstanding FKSIstock. Accordingly, Mr. Suzuki, together with other members of his immediate family as a group, may be able to substantially influenceall matters requiring approval by the Company’s shareholders, including the election of directors and the approval of mergersor other business combination transactions. Circumstances may arise in which the interests of this group could conflict with theinterests of the Company’s other shareholders. Mr. Suzuki, acting in concert with other members of his immediate family,may also delay or prevent a change in control of the Company even if such a transaction would be beneficial to the Company’sother shareholders.

 

***The FDA’s failure to approve theThermolyzerTM Liquid Conductive Cooling/Heating Device may have an adverse effect on the Company’s ability tosell such product.***

 

There can be no assurance that the FDA willapprove the exact environmental study with respect to the ThermolyzerTM Liquid Conductive Cooling/Heating Device, whichis necessary to receive FDA 510(k) pre-market approval. The FDA’s failure to approve the ThermolyzerTM LiquidConductive Cooling/Heating Device could have an adverse effect on the Company’s ability to sell the ThermolyzerTMLiquid Conductive Cooling/Heating Device.

 

***The Company’s failure to engagean economically viable manufacturer for the Company’s portable refrigerated cooler for transportation of blood and otherbiologicals may cause the Company to lose opportunities to increase the Company’s cash flows and profits.***

 

There can be no assurance that the Company canengage a manufacturer of the Company’s prototype portable refrigerated cooler for transportation of blood and other biologicalson economically reasonable terms. The Company’s failure to engage a manufacturer on economically reasonable terms may causethe Company to lose opportunities to increase the Company’s cash flows and profits.

 

***The Company depends on key distributorsfor the marketing and sale of its products and the failure to*** ***retain such distributors may materially affectthe Company and its results of operations.***

*** ***

The Company’s key distributors, Fisherand Cardinal, accounted for 35.5% and 28.8% of the Company’s sales, respectively, during Fiscal 2014. The Company’sfailure to retain one or both of such distributors may have an adverse effect on the sales of the Company, which may in turn havean adverse effect on the Company’s results of operations, financial condition and cash flows if such sales cannot be replacedby another distributor of the Company.

 

***The unavailability of the Company’scurrent domestically sourced raw materials may materially affect the Company and its results of operations.***

 

There can be no assurance that the Company willcontinue to be able to acquire raw materials, including raw materials for the liquid crystals, which are essential for the manufactureof the Company’s temperature indicators and other products, from domestic sources, or that the domestic sources currentlyused by the Company will continue to supply such raw materials on cost-effective terms. Further, there is no assurance such rawmaterials will continue to be available from foreign sources. Although the liquid crystal raw materials are currently availablefrom foreign sources, acquiring raw materials from such foreign sources may result in an increase in the Company’s cost forsuch raw materials, which may in turn have an adverse effect on the Company’s results of operations, financial conditionand cash flows.

 

***The Company receives a substantial percentageof sales from two products and the failure to increase or maintain sales levels with respect to one or more of such products maymaterially affect the Company and its results of operations.***

 

During Fiscal 2014, and for several prior fiscalperiods, two products, HemoTempR Core Correlated BMD and HemoTempR II Core Correlated BMD accounted for asubstantial percentage of the Company’s sales. In the aggregate, these two products accounted for $1,222,010 in sales (orapproximately 93.67% of all Company sales). The Company’s failure to maintain sales levels with respect to one or both ofthese products will have an adverse effect on the Company’s results of operations, financial condition and cash flows.

 

***Changes in environmental regulations mayadversely affect the Company and its results of operations.***

 

The Company is not aware of any violations ofenvironmental regulations by the Company. However, changes in environmental regulations may cause the Company to incur additionalexpense for compliance. For instance, the Company may be forced to develop alternative manufacturing methods and processes, orprocure alternative suppliers or raw materials for its products. Increased expense occasioned by changes in environmental regulationsmay have an adverse effect on the Company’s results of operations, financial condition and cash flows.

 

***Company’s distributors’ violationof the Foreign Corrupt Practices Act may adversely affect the Company and its results of operations.***

 

The Company maintains a policy requiring allof its employees to comply with the Foreign Corrupt Practices Act. However, because the Company engages independent distributorsto distribute and market the Company’s products, there can be no assurance that such distributors will likewise comply. Aviolation of the Foreign Corrupt Practice Act by a distributor engaged by the Company may implicate the Company which may in turnhave an adverse effect on the Company’s results of operations, financial condition and cash flows.

 

Item 2. Properties.

 

The Company's production facilities, researchfacilities, and administrative offices are located at 1940 East Devon, Elk Grove Village, Illinois 60007, in a 10,400 square footfacility leased from an unaffiliated third party. The lease for these facilities expires on April 30, 2015.

 

A majority of the Company's Elk Grove Villagefacility is currently in use; however, Management believes this facility is adequate for its needs in the foreseeable future. Locatedat the Company's facility is equipment utilized for research, development, and manufacturing of the Company's products.

 

The Company does not as a matter of policy investin any derivative financial instruments or any other instruments as securities which are subject to market fluctuations which couldadversely affect the financial condition or operations of the Company. The Company does not invest in real estate, mortgages orin entities owing or investing in real estate.

 

Item 3. Legal Proceedings.

 

There is no material litigation threatened orpending against the Company or any of its properties.

 

Item 4. Mine Safety Disclosures.

 

The disclosure required in this Item is notapplicable to the Company.

 

PART II

 

Item 5. Market for Registrant’s CommonEquity, Related Stockholder Matters and Issuer 

Purchases of Equity Securities.

 

Market Information. Although the commonstock of the Company is traded in the over-the-counter market, there is no established public trading market due to limited andsporadic trades. Information regarding these trades is compiled by the Stock Section of the National Daily Quotation Service ("PinkSheets") and selected broker-dealers trading such common stock.

 

Holders. As of April 30, 2014, therewere approximately 425 shareholders of record of the Company's common stock.

 

Dividends. The Company does not havea dividend policy and does not expect to pay dividends in fiscal 2015.

 

Common Stock for Issuance Under Equity CompensationPlans. As of April 30, 2014, the Company has no outstanding equity compensation plans and otherwise has no obligation to issueor sell stock pursuant to an option or similar agreement.

 

Item 6. Selected Financial Data.

 

The registrant is not required to furnish anyinformation in this Item.

 

 

Item 7. Management's Discussion and Analysisof FinancialCondition and Results of Operations.

 

Net Sales. Net sales for the fiscal yearending April 30, 2014 were $947, or 0.07%, lower than the previous fiscal year. The decrease in sales during Fiscal 2014 was primarilydue to a decrease in sales of HemoTempR II Activators as demonstrated in the schedule below offset by increased salesof the Company's TempTrendR Temperature Indicators and HemoCoolR Gel-Paks. The Company experienced an increaseof $13,990 or 57% in sales of its TempTrendR product, and an increase of $1,674 in sales of its HemoCoolTMGel-Pak product in Fiscal 2014 as compared to Fiscal 2013. The Company also experienced a decrease of $17,550, or 65.37%, in salesof its HemoTempR II Activator in Fiscal 2014. The increase in net sales of the TempTrendR Temperature Indicatorsis a result of price increases as well as an increase in unit sales volume. The increase in net sales of the HemoCoolTMGel-Paks is a result of introducing it to the market. The decrease in net sales of the HemoTempR II Activator is a resultof decreased unit sales.

 

Below is a schedule which represents the salesfor each product for the fiscal years ending April 30, 2014 and 2013.