U.S. Securities and Exchange Commission
Washington D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 31, 1996
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
Commission File number: 0-19879
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BioSpecifics Technologies Corp.
-------------------------------
(Exact name of Small Business Issuer as Specified in Its Charter)
Delaware 11-3054851
-------- ----------
(State of Incorporation) (IRS Employer I.D. Number)
35 Wilbur St.
Lynbrook, NY 11563
------------------
(Address of principal executive offices)
(516) 593-7000
--------------
(Issuer's telephone number, including area code)
Check whether the issuer: (1) has filed all reports required by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x No____
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: 4,883,396 shares of Common
--------------------------
Stock, $0.001 par value as of September 1, 1996.
- ------------------------------------------------
Page 1 of 12
<PAGE>
INDEX
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Page
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PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Financial Statements:
Balance Sheets as of July 31, 1996 (unaudited) and January 3
31, 1996
Statements of Operations for the Three and Six Months Ended
July 31, 1996 and 1995 (unaudited) 4
Statements of Cash Flows for the Six Months Ended July 31,
1996 and 1995 (unaudited) 5
Notes to Consolidated Interim Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information 11
SIGNATURES 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
July 31, January 31,
ASSETS 1996 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 3,044,514 $ 2,288,316
Marketable securities 1,887,708 2,395,534
Accounts receivable 1,212,257 1,186,526
Inventory 1,519,220 1,435,767
Prepaid expenses & other current assets 375,737 340,616
........... ...........
Total current assets 8,039,436 7,646,759
Property, plant, and equipment - net 906,056 981,082
Other assets 596,514 639,046
........... ...........
TOTAL ASSETS $ 9,542,006 $ 9,266,887
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 538,013 $ 993,577
Notes payable to related parties 11,040 10,570
Income taxes payable 278,300 140,090
Deferred revenue 130,000 130,000
........... ...........
Total current liabilities 957,353 1,274,237
Minority interest in subsidiaries 167,583 148,458
STOCKHOLDERS' EQUITY
Series A Preferred stock, $.50 par value; 700,000
shares authorized; none outstanding -- --
Common stock, $.001 par value; 10,000,000 shares
authorized; 4,883,396 shares issued and outstanding
at July 31, 1996 and January 31, 1996 4,883 4,883
Additional paid-in capital 3,556,145 3,556,145
Retained earnings 5,038,552 4,465,674
........... ...........
8,599,580 8,026,702
Less: Treasury stock - 10,000 shares at cost (182,510) (182,510)
........... ...........
Stockholders' equity - net 8,417,070 7,844,192
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,542,006 $ 9,266,887
=========== ===========
See accompanying notes to consolidated
financial statements.
</TABLE>
3
<PAGE>
Biospecifics Technologies Corp. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
July 31, July 31,
1996 1995 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $1,150,458 $999,310 $2,000,661 $1,150,135
Royalties 726,844 465,176 $1,197,141 $845,228
License fees 20,000 - - 20,000 - -
............................................................
Total Revenues 1,897,302 1,464,486 3,217,802 1,995,363
------------------------------------------------------------
Costs & Expenses:
Cost of sales 454,371 330,650 851,670 587,487
Selling, general and administrative 356,103 444,460 723,549 829,315
Research and development 404,111 534,037 762,587 938,949
............................................................
Total Costs & Expenses 1,214,585 1,309,147 2,337,806 2,355,751
------------------------------------------------------------
Income (loss) from operations 682,717 155,339 879,996 (360,388)
Other income (expense)
Investment & other income 41,475 115,462 71,504 278,723
Interest expense (1,322) (4,960) (3,286) (7,941)
............................................................
Total other income - net 40,153 110,502 68,218 270,782
------------------------------------------------------------
Income (loss) before provision for income taxes 722,870 265,841 948,214 (89,606)
Provision for income taxes (272,560) (117,050) (356,210) (25,950)
............................................................
Income (loss) before minority interest 450,310 148,791 592,004 (115,556)
Less: minority interest in net income (loss) of subsidiaries 15,000 4,950 19,125 (2,020)
............................................................
Net income (loss) $435,310 $143,841 $572,879 ($113,536)
============================================================
Net income (loss) per common share $0.09 $0.03 $0.12 ($0.02)
============================================================
Weighted average number of shares used in
computing net income (loss) per share: 4,925,543 4,966,039 4,921,558 4,918,692
============================================================
See accompanying notes to
consolidated financial statements
</TABLE>
4
<PAGE>
BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
Six months ended
July 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
--------------------------------------
<S> <C> <C>
Net income (loss) $572,879 ($113,536)
Adjustments to reconcile net income (loss)
to cash provided by/(used by) operating activities:
Depreciation 100,257 98,001
(Gain) loss on marketable securities - net 53,230 (116,973)
Minority interest in income (loss) of subsidiaries 19,125 (2,020)
Issuance of stock options 0 20,000
Changes in operating assets & liabilities:
Decrease (increase) in accounts receivable (25,731) 733,822
Proceeds from sales of marketable securities 749,421 772,501
Purchases of marketable securities (294,825) (361,219)
Increase in inventory (83,453) (86,356)
Increase in prepaid and other current assets (35,121) (117,787)
(Increase) decrease in other assets 42,532 (191,362)
Decrease in accounts payable & accruals (455,565) (199,832)
Increase in deferred revenues 0 60,000
(Decrease) increase in income taxes payable 138,210 (93,847)
......................................
Net cash provided by operating activities 780,959 401,392
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant, property and equipment (25,231) (40,521)
......................................
Net cash used in investing activities (25,231) (40,521)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes with related parties 470 0
......................................
Net cash provided by financing activities 470 0
--------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 756,198 360,871
CASH AND EQUIVALENTS:
Beginning of Period 2,288,316 1,438,368
......................................
End of Period $3,044,514 $1,799,239
======================================
SUPPLEMENTAL DISCLOSURE
Cash paid during period for interest $1,964 $7,946
======================================
Cash paid during period for income taxes $248,000 $194,000
======================================
See accompanying notes to
consolidated financial statements
</TABLE>
5
<PAGE>
BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION - BioSpecifics Technologies
Corp. (the Company) serves as a holding company for Advance Biofactures
Corporation (ABC-New York), Advance Biofactures of Curacao, N.V. and
subsidiaries (ABC-Curacao), and Biospecifics Pharma GmbH (Bio Pharma), Germany,
which was established in November 1995.
The Company, through its subsidiaries, engages in the business of producing and
licensing for sale by others a U.S. Food and Drug Administration ("FDA")
approved enzyme product named Collagenase ABC, and researching, developing and
clinically testing additional products derived therefrom for potential use as
pharmaceuticals.
The Company currently derives substantially all of its revenues through a
license agreement with a major US pharmaceutical company, Knoll Pharmaceutical
Company ("KPC"). Since February 1, 1995, sales of collagenase have been
principally to KPC, which markets it as an ointment in the United States under
its trademarked name "Collagenase Santyl(R)". The license agreement with KPC
expires in 2003. In the event that KPC were to cancel the license agreement for
cause, which the Company believes is unlikely, the financial condition of the
Company would be materially adversely impacted unless the Company were to find
another licensee in the United States.
The Company has undertaken efforts to secure licensees outside the United
States. The Company has licensing agreements with foreign companies to market
collagenase, either as a topical product or an injectable, when permitted by
local governmental authorities. The Company sells Collagenase ABC to
pharmaceutical companies in Latin America and India, in relatively small
amounts.
6
<PAGE>
2. INTERIM FINANCIAL STATEMENTS - In the opinion of management, the accompanying
consolidated financial statements of the Company reflect all adjustments
necessary to present fairly, in all material respects, the Company's balance
sheet as of July 31, 1996, the results of operations for the three and six
months ended July 31, 1996 and 1995, and cash flows for the six months ended
July 31, 1996 and 1995. The results of operations for interim periods are not
necessarily indicative of the results to be expected for an entire fiscal year,
and the results for the current interim period are not necessarily indicative of
results to be expected in other interim periods. These interim financial
statements should be read in conjunction with the Company's Form 10-KSB for the
fiscal year ended January 31, 1996.
3. EARNINGS (LOSS) PER SHARE - Earnings per share is computed by dividing net
income available to common stockholders by the weighted average number of common
shares outstanding during the period. The dilutive effect of outstanding stock
options and warrants was included in the calculation for the three and six
months ended July 31, 1996. Net loss per share is computed by dividing net loss
by the weighted average number of common shares outstanding during the period.
Options and warrants are not included in any period when the effect would be
anti-dilutive.
4. ACCOUNTING FOR STOCK BASED COMPENSATION - In October 1995, The Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS
123 establishes financial accounting and reporting standards for stock-based
employee compensation plans. SFAS 123 also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from non
employees. SFAS 123 encourages, but does not require, a fair value based method
of accounting for employee stock options or similar equity instruments. Entities
electing not to adopt a fair value method must make pro-forma disclosures of net
income and earnings per share as if a fair value based method had been applied.
SFAS 123 requires a fair value method for stock options or similar equity
instruments issued to non employees. SFAS 123 is effective for fiscal year 1997.
The Company does not expect that it will adopt a fair value based method and
therefore does not expect the adoption of SFAS 123 to have material impact on
its financial position or results of operations.
7
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
The Company cautions readers that important factors may affect the Company's
actual results and could cause such results to differ materially from
forward-looking statements made by or on behalf of the Company. Such factors
include, but are not limited to, changing market conditions, the impact of
competitive products and pricing, the timely development, approval by the FDA
and foreign health authorities, and market acceptance, of the Company's products
in development, the Company's dependence on KPC, and other risks detailed herein
and in other filings the Company makes with the Securities and Exchange
Commission.
The Company incorporates by reference the Management's Discussion and Analysis
of Financial Condition and Results of Operations set forth in its Form 10-KSB
for the fiscal year ended January 31, 1996.
Three months ended July 31, 1996 and 1995
-----------------------------------------
NET SALES - Net sales for the three months ended July 31, 1996 and 1995 were
$1,150,458 and $999,310 respectively, representing a $151,148 or 15% increase.
The increase was primarily due to higher sales to the Company's customer in
Latin America.
ROYALTIES - Royalties for the three months ended July 31, 1996 and 1995 were
$726,844 and $465,176 respectively, representing a $261,668 or 56% increase from
higher sales of Collagenase Santyl(R) in the United States, as reported to the
Company by KPC.
LICENSE FEES - The Company earned a license fee during the quarter ended July
31, 1996 due to a product distribution agreement with a German pharmaceutical
company. There were no license fees earned in the quarter ended July 31, 1995
period.
COST OF SALES - Cost of sales for the three months ended July 31, 1996 and 1995
were $454,371 and $330,650 respectively, representing an increase of $123,721 or
37%, due to higher net sales. Cost of sales in the 1995 period were reduced by
the waiver of an FDA fee which had been previously accrued.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
("SG&A") expenses for the three months ended July 31, 1996 and 1995 were
$356,103 and $444,460 respectively, representing an $88,357 or 20% decrease. The
decrease was due to lower professional fees incurred in the more recent quarter,
the effect of which was partially offset by SG&A expenses of the Company's
subsidiary Bio Pharma, which did not exist during the second quarter of 1995.
RESEARCH AND DEVELOPMENT - Research and development ("R&D") expenses for the
three months ended July 31, 1996 and 1995 were $404,111 and $534,037
respectively, representing a decrease of $129,926 or 24%. The decrease was due
to completion of most R&D activities in Europe for Collagenase ABC and
Nucleolysin(R). Most R&D expense in the more recent period were incurred in the
United States, for clinical trials of injectable collagenase for Peyronie's
disease, keloids, and Dupuytren's contracture, and for pre-clinical research of
other uses of collagenase.
OTHER INCOME - NET - Other income - net for the three months ended July 31, 1996
and 1995 was $40,153 and $110,502 respectively. The decrease of $70,349 was due
primarily to realized gains on sales of trading securities and reduction in the
unrealized holding losses of trading securities in the 1995 period.
PROVISION FOR INCOME TAXES - The provision for income taxes for the three months
ended July 31, 1996 and 1995 was $272,560 and $117,050 respectively, an increase
of $155,510. The increase was due to higher profitability of the Company's
United States subsidiary, primarily as a result of higher royalty revenues. The
principal reason for the difference between the United States Federal statutory
tax rate of 34% and the Company's effective tax rate is the additional provision
required for state income taxes where the Company's US subsidiary is domiciled,
and the non-deductibility of losses incurred by foreign subsidiaries when
calculating US taxes.
Six months ended July 31, 1996 and 1995
---------------------------------------
NET SALES - Net sales for the six months ended July 31, 1996 and 1995 were
$2,000,661 and $1,150,135 respectively, representing an $850,525 or 74%
increase. The increase in net sales is primarily due to significantly higher
sales to KPC in the first three months of the July 31, 1996 fiscal period versus
1995. Also, the Company's Latin America and India customers purchased more
collagenase in the 1996 period.
9
<PAGE>
ROYALTIES - Royalties for the six months ended July 31, 1996 and 1995 were
$1,197,141 and $845,228 respectively, representing a $351,913 or 42% increase,
from higher sales of Collagenase Santyl(R) in the United States, as reported to
the Company by KPC.
LICENSE FEES - The Company earned a license fee during the six months ended July
31, 1996 due to a product distribution agreement with a German pharmaceutical
company. There were no license fees earned in the six months ended July 31,
1995.
COST OF SALES - Cost of sales for the six months ended July 31, 1996 and 1995
were $851,670 and $587,487 respectively, representing an increase of $264,183 or
45% due to higher net sales as described above.
SELLING, GENERAL AND ADMINISTRATIVE - SG&A expenses for the six months ended
July 31, 1996 and 1995 were $723,549 and $829,315 respectively, representing a
$105,766 or 13% decrease. The decrease is due to lower professional fees
incurred in the more recent six months, the effect of which was partially offset
by the SG&A expenses of the Company's subsidiary Bio Pharma, which did not exist
during the first six months of 1995.
RESEARCH AND DEVELOPMENT - Research and development expenses for the six months
ended July 31, 1996 and 1995 were $762,587 and $938,949 respectively,
representing a decrease of $176,362 or 19%. The decrease was due to completion
of most R&D activities in Europe for Collagenase ABC and Nucleolysin(R). Most
R&D expense in the more recent period was incurred in the United States, for
clinical trials of injectable collagenase for Peyronie's disease, keloids, and
Dupuytren's contracture, and for pre-clinical research of other uses of
collagenase.
PROVISION FOR INCOME TAXES - The provision for income taxes for the six months
ended July 31, 1996 and 1995 was $356,210 and $25,950 respectively, an increase
of $330,260. The increase was due to profitability of the Company's United
States and Curacao subsidiaries, due to higher sales and royalties. The
principal reason for the difference between the United States Federal statutory
tax rate of 34% and the Company's effective tax rate is the additional provision
required for state income taxes where the Company's US subsidiary is domiciled,
and the non-deductibility of losses incurred by foreign subsidiaries when
calculating US taxes.
10
<PAGE>
OTHER INCOME - NET - Other income - net for the six months ended July 31, 1996
and 1995 was $68,218 and $270,782 respectively. The decrease of $202,546 was due
primarily to realized gains on sales of trading securities and reduction in the
unrealized holding losses of trading securities in the 1995 period. Gains were
not as extensive in the more current six months, nor are they expected to be in
the future.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
- ---------------------------------------------------------------
The Company's primary source of working capital is from operating activities,
including sales, royalties, and new license fees. As of July 31, 1996, the
Company had working capital of approximately $7,082,000 which includes cash and
cash equivalents and marketable securities of approximately $4,932,000. The
principal source of cash during the six months ended July 31, 1996 was
approximately $780,000 from operating activities, which includes proceeds from
sales of investments, net of purchases, of $454,000. At July 31, 1996 the
Company had no material commitments for capital expenditures.
Although there can be no assurance, management believes that in view of the
Company's working capital position and anticipated positive cash flow from
operating activities, the Company has sufficient liquidity and capital resources
to meet its immediate operating needs. The Company believes that cash on hand
and cash from operations will be sufficient to meet the Company's cash needs on
an ongoing basis.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
(a.) The annual meeting of stockholders was held July 11, 1996. The purpose
of the meeting was to elect three directors of the Company.
(b.) The directors elected at the stockholders' meeting were Edwin H. Wegman,
Harold Stern and Rainer Friedel, whose terms expire in 1999. The other directors
whose terms of office as director continued after the meeting are Henry Morgan
and Sherman Vogel, whose terms expire in 1998, and Paul A. Gitman, MD and Thomas
L. Wegman, whose terms of office expire in 1997.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BioSpecifics Technologies Corp.
(Registrant)
Date: September 11, 1996
------------------
By:/s/Edwin H. Wegman
------------------
Edwin H. Wegman
Chairman and President
Date: September 11, 1996
------------------
By:/s/Albert Horcher
-----------------
Albert Horcher
Controller, Principal Financial and
Chief Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BIOSPECIFICS TECHNOLOGIES CORP. FOR THE SIX MONTHS ENDED
JULY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 3,044,514
<SECURITIES> 1,887,708
<RECEIVABLES> 1,212,257
<ALLOWANCES> 0
<INVENTORY> 1,519,220
<CURRENT-ASSETS> 8,039,436
<PP&E> 2,865,280
<DEPRECIATION> 1,959,224
<TOTAL-ASSETS> 9,542,006
<CURRENT-LIABILITIES> 957,353
<BONDS> 0
0
0
<COMMON> 4,883
<OTHER-SE> 8,412,187
<TOTAL-LIABILITY-AND-EQUITY> 9,542,006
<SALES> 3,197,802
<TOTAL-REVENUES> 3,217,802
<CGS> 836,670
<TOTAL-COSTS> 836,670
<OTHER-EXPENSES> 762,587
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,286
<INCOME-PRETAX> 948,214
<INCOME-TAX> 356,210
<INCOME-CONTINUING> 572,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572,879
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
