<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: APRIL 30, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
Commission File number: 0-19879
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BIOSPECIFICS TECHNOLOGIES CORP.
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(Exact name of Small Business Issuer as Specified in Its Charter)
Delaware 11-3054851
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(State of Incorporation) (IRS Employer I.D. Number)
35 Wilbur St.
Lynbrook, NY 11563
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(Address of principal executive offices)
(516) 593-7000
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(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__
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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
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Stock, $0.001 par value as of May 23, 1996.
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Page 1 of 10
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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 April 30,
1996 (unaudited) and January 31,
1996 3
Statements of Operations for the Three Months
Ended April 30, 1996 and 1995 (unaudited) 4
Statements of Cash Flows for the Three Months
Ended April 30, 1996 and 1995 (unaudited) 5
Notes to Consolidated Interim 6
Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
SIGNATURES 10
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION> (Unaudited)
April 30, January 31,
ASSETS 1996 1996
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<S> <C> <C>
Cash and cash equivalents $2,446,527 $2,288,316
Marketable securities 2,416,167 2,395,534
Accounts receivable 1,067,187 1,186,526
Inventory 1,451,696 1,435,767
Prepaid expenses & other current assets 327,609 340,616
------------ ----------
Total current assets 7,709,186 7,646,759
Property, plant, and equipment - net 958,481 981,082
Other assets 597,278 639,046
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TOTAL ASSETS $9,264,945 $9,266,887
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $974,057 $993,577
Notes payable to related parties 10,805 10,570
Income taxes payable 15,740 140,090
Deferred revenue 130,000 130,000
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Total current liabilities 1,130,602 1,274,237
Minority interest in subsidiaries 152,583 148,458
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 April 30, 1996 and January 31, 1996 4,883 4,883
Additional paid-in capital 3,556,145 3,556,145
Retained earnings 4,603,242 4,465,674
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8,164,270 8,026,702
Less: Treasury stock - 10,000 shares at cost (182,510) (182,510)
Stockholders' equity - net 7,981,760 7,844,192
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,264,945 $9,266,887
============ ==========
See accompanying notes to consolidated
financial statements.
3
</TABLE>
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Biospecifics Technologies Corp.
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
April 30,
1996 1995
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<S> <C> <C>
Revenues:
Net sales $850,203 $150,825
Royalties 470,297 380,052
Total Revenues 1,320,500 530,877
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Costs & Expenses:
Cost of sales 397,299 256,837
Selling, general and administrative 367,446 384,855
Research and development 358,476 404,912
Total Costs & Expenses 1,123,221 1,046,604
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Income (loss) from operations 197,279 (515,727)
Other income (expense):
Investment & other income 30,029 163,261
Interest expense and other charges (1,964) (2,981)
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Total other income - net 28,065 160,280
Income (loss) before taxes 225,344 (355,447)
(Provision) benefit for income taxes (83,650) 91,100
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Income (loss) before minority interest 141,694 (264,347)
Minority interest in net income (loss)
of subsidiaries 4,125 (6,970)
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Net income (loss) $137,569 ($257,377)
============== ===========
Net income (loss) per common share $0.03 ($0.05)
============== ===========
Weighted average number of shares used in
computing net income (loss) per share 4,917,573 4,871,346
============== ==============
See accompanying notes to consolidated
financial statements
4
</TABLE>
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BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
Three months ended
April 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
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<S> <C> <C>
Net income (loss) $137,569 ($257,377)
Adjustments to reconcile net income (loss)
to cash provided by/(used by) operating activities:
Depreciation 46,235 47,003
(Gain)/loss on marketable securities - net 28,568 (63,713)
Costs associated with issuance of common stock o - 20,000
Minority interest in gains (losses) of subsidiar 4,125 (6,970)
Changes in operating assets and liabilities:
Net sales (purchases) of marketable securities (49,201) 382,721
Decrease in accounts receivable 119,339 1,152,792
Increase in inventory (15,929) (164,095)
Decrease (increase) in prepaid and other current 13,007 (193,165)
Decrease (increase) in other assets 41,768 (5,912)
Decrease in accounts payable & accruals (19,521) (102,147)
Increase in due to related parties 235 -
Decrease in income taxes payable (124,350) (176,441)
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Net cash provided by operating activities 181,845 632,696
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CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant, property and equipment (23,634) (19,445)
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Net cash used in investing activities (23,634) (19,445)
INCREASE IN CASH AND CASH EQUIVALENTS 158,211 613,251
CASH AND CASH EQUIVALENTS:
Beginning of Period 2,288,316 1,438,368
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End of Period $2,446,527 $2,051,619
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during period for interest $1,964 $2,982
============ ===========
Cash paid during period for income taxes $208,000 $194,000
============ ===========
See accompanying note to consolidated
financial statements
</TABLE>
5
<PAGE>
BIOSPECIFICS TECHNOLOGIES CORP.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
APRIL 30, 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 on November 1, 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 revenues through a licensing
agreement with a major pharmaceutical company, Knoll Pharmaceutical Company
("KPC"). Historically, sales of the product have been principally to KPC and
its affiliated pharmaceutical company in Germany, Knoll AG ("KAG"). The license
with KPC expires in 2003. The cancellation of the sales agreement by KPC could
have a material adverse impact upon the financial condition of the Company
unless the Company is successful in its active effort to secure other licensees.
The license with KAG expired in December 1992.
The Company has licensing agreements with foreign companies which will attempt
to market collagenase, either as a topical product or an injectable, when
permitted by local governmental authorities. The Company also sells relatively
small amounts of collagenase ABC to pharmaceutical companies in Latin America
and India.
2. Interim Financial Statements - In the opinion of management, the
----------------------------
accompanying consolidated financial statements of the Company and its
subsidiaries reflect all adjustments necessary to present fairly, in all
material respects, the Company's financial position as of April 30, 1996 and the
results of operations and cash flows for the three months ended April 30, 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 months ended
April 30, 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.
6
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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. The Statement 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.
5. Reclassifications - Certain reclassifications have been made to the April
-----------------
30, 1996 financial statements to conform to financial statement presentations
made for the year ended January 31, 1996.
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, 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 April 30, 1996 and 1995
- ------------------------------------------
Net Sales - Net sales for the three months ended April 30, 1996 and 1995 were
- ---------
$850,203 and $150,825 respectively, representing an increase of $699,378 or
464%. In 1995, KPC established a policy of "just in time" purchases of bulk
materials and reduction of finished goods on hand, and lowered its purchases of
collagenase to bring its inventory in line with its policy during that year's
first quarter. The Company believes that KPC has completed the implementation
of its policy.
Royalties and License fee - Royalties for the three months ended April 30, 1996
- -------------------------
and 1995 were $470,297 and $380,052 respectively, representing an increase of
$90,245 or 24%. The increase is due to the substantial increase in after market
sales of Collagenase ointment ("Collagenase Santyl(R)") in the United States by
KPC, as reported to the Company by KPC.
Cost of Sales - Cost of sales for the three months ended April 30, 1996 and 1995
- -------------
were $397,299 and $256,837 respectively, an increase of $140,462 due to the
higher level of sales in the first quarter 1996.
Selling, general and administrative - Selling, general and administrative
- -----------------------------------
("SG&A") expenses for the three months ended April 30, 1996 and 1995 were
$367,446 and $384,855, respectively. In the 1995 period, the Company incurred
legal fees for the arbitration of a canceled contract; such costs were not
incurred in the 1996 period. The 1996 SG&A expense includes the costs of the
Company's new subsidiary in Germany, Bio-Pharma, which was not in existence in
the 1995 period.
8
<PAGE>
Research and development - Research and development ("R&D") expense for the
- ------------------------
three months ended April 30, 1996 and 1995 was $358,476 and $404,912
respectively, representing a decrease of $46,436 or 11%. The 1995 R&D amount
includes development costs involved in registering the Company's potential
products in Europe. These costs were not incurred in the 1996 period.
The Company is focusing its R&D on developing injectable collagenase for certain
disease conditions by sponsoring clinical trials in the United States. The
Company does not expect its current year (fiscal 1997) R&D expense to exceed
that of last year (fiscal 1996).
Other income (expense) net - Other income (expense) net for the three months
- --------------------------
ended April 30, 1996 and 1995 was $28,065 and $160,280 respectively. The
decrease of $133,232 was primarily attributable to the 1995 period's realized
gains on sales of trading securities and reduction in the unrealized holding
losses of trading securities, particularly fixed income trading securities.
(Provision) benefit for income taxes - The (provision) benefit for income taxes
- ------------------------------------
for the three months ended April 30, 1996 and 1995 was ($83,650) and $91,100
respectively. The current period provision is due to profitable operations.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
- ---------------------------------------------------------------
The Company's primary source of working capital is from operations, which
includes sales of product, royalties and periodic license fees. At April 30,
1996, the Company had working capital of approximately $6,578,000 which includes
cash and cash equivalents, and marketable securities of approximately
$4,862,000. The principal source of cash during the three months ended April
30, 1996 was approximately $182,000 from operating activities. At April 30,
1996 the Company had no material commitments for capital expenditures.
In view of the Company's working capital position and anticipated future
profitable operations, although there can be no assurance, management believes
that the Company has sufficient liquidity and capital resources to meet its
immediate operating needs. The Company believes that cash on hand and cash
provided by operations will be sufficient to meet its cash needs on an ongoing
basis.
9
<PAGE>
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: June 12, 1996
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By:/s/ Edwin H. Wegman
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Edwin H. Wegman
Chairman and President
Chief Executive Officer
Date: June 12, 1996
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By: /s/ Albert Horcher
------------------
Albert Horcher
Controller, Principal Financial
and Chief Accounting Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 2,446,527
<SECURITIES> 2,416,167
<RECEIVABLES> 1,067,187
<ALLOWANCES> 0
<INVENTORY> 1,451,696
<CURRENT-ASSETS> 7,709,186
<PP&E> 2,863,683
<DEPRECIATION> 1,905,202
<TOTAL-ASSETS> 9,264,945
<CURRENT-LIABILITIES> 1,130,602
<BONDS> 0
0
0
<COMMON> 4,883
<OTHER-SE> 7,976,877
<TOTAL-LIABILITY-AND-EQUITY> 7,981,760
<SALES> 1,320,500
<TOTAL-REVENUES> 1,320,500
<CGS> 397,299
<TOTAL-COSTS> 397,299
<OTHER-EXPENSES> 358,476
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,964
<INCOME-PRETAX> 225,344
<INCOME-TAX> 83,650
<INCOME-CONTINUING> 137,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,569
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
