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, 1997
----------------
[ ] 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
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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
--- ---
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 June 11, 1997. --------------------------
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Page 1 of 9
<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 April 30, 1997 (unaudited) and 3
January 31, 1997
Statements of Income for the Three Months Ended April
30, 1997 and 1996 (unaudited) 4
Statements of Cash Flows for the Three Months Ended
April 30, 1997 and 1996 (unaudited) 5
Notes to Consolidated Interim Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
SIGNATURES 9
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
April 30, January 31,
ASSETS 1997 1997
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 3,448,269 $ 3,793,582
Marketable securities 1,944,207 1,812,974
Accounts receivable 1,421,386 900,956
Inventory 1,301,802 1,339,081
Prepaid expenses & other current assets 301,090 403,571
............ ............
Total current assets 8,416,754 8,250,164
Property, plant, and equipment - net 898,130 912,949
Other assets 717,788 743,183
............ ............
TOTAL ASSETS $ 10,032,672 $ 9,906,296
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 479,330 $ 540,899
Notes payable to related parties 11,635 11,510
Income taxes payable 9,730 10,350
Deferred revenue 175,000 175,000
............ ............
Total current liabilities 675,695 737,759
Minority interest in subsidiaries 192,743 186,043
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, 1997 and January 31, 1997 4,883 4,883
Additional paid-in capital 3,586,145 3,586,145
Retained earnings 5,776,602 5,591,591
Cumulative translation adjustment (20,886) (17,615)
............ ............
9,346,744 9,165,004
Less: Treasury stock - 10,000 shares at cost (182,510) (182,510)
............ ............
Stockholders' equity - net 9,164,234 8,982,494
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,032,672 $ 9,906,296
============ ============
</TABLE>
See accompanying notes to consolidated
financial statements.
3
<PAGE>
Biospecifics Technologies Corp.
and Subsidiaries
Consolidated Statements of Income
Unaudited
Three Months Ended
April 30,
1997 1996
----------- -----------
Revenues:
Net sales $ 858,810 $ 850,203
Royalties 594,344 470,297
........... ...........
Total Revenues 1,453,154 1,320,500
----------- -----------
Costs and Expenses:
Cost of sales 400,425 397,299
Selling, general and administrative 384,802 367,446
Research and development 423,957 358,476
........... ...........
Total Costs and Expenses 1,209,184 1,123,221
----------- -----------
Income from operations 243,970 197,279
Other income (expense):
Investment and other income 62,599 30,029
Interest expense and other charges (599) (1,964)
........... ...........
Total Other Income - net 62,000 28,065
Income before taxes 305,970 225,344
Provision for income taxes (114,260) (83,650)
........... ...........
Income before minority interest 191,710 141,694
Minority interest in net income of subsidiaries 6,700 4,125
........... ...........
Net income $ 185,010 $ 137,569
=========== ===========
Net income per common share $ 0.04 $ 0.03
=========== ===========
Weighted average number of shares used in
computing net income per share 4,892,246 4,917,573
=========== ===========
See accompanying notes to consolidated
financial statements
4
<PAGE>
BioSpecifics Technologies Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
Three months ended
April 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
----------- -----------
<S> <C> <C>
Net income $ 185,010 $ 137,569
Adjustments to reconcile net income
to cash provided by/(used by) operating activities:
Depreciation 46,674 46,235
Loss on marketable securities - net 8,502 28,568
Minority interest in income of subsidiaries 6,700 4,125
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (520,430) 119,339
Sales of marketable securities 10,890 --
Purchases of marketable securities (150,625) (49,201)
Decrease (increase) in inventory 37,279 (15,929)
Decrease in prepaid and other current assets 102,481 13,007
Decrease in other assets 25,395 41,768
Decrease in accounts payable & accruals (61,569) (19,521)
Increase in due to related parties 125 235
Decrease in income taxes payable (620) (124,350)
Increase in cumulative translation adjustment (3,271) --
........... ...........
Net cash (used) provided by operating activities (313,459) 181,845
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant, property and equipment (31,854) (23,634)
........... ...........
Net cash used in investing activities (31,854) (23,634)
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (345,313) 158,211
CASH AND CASH EQUIVALENTS:
Beginning of Period 3,793,582 2,288,316
........... ...........
End of Period $ 3,448,269 $ 2,446,527
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during period for interest $ 559 $ 1,964
=========== ===========
Cash paid during period for income taxes $ 62,820 $ 208,000
=========== ===========
</TABLE>
See accompanying note to consolidated
financial statements
5
<PAGE>
BIOSPECIFICS TECHNOLOGIES CORP.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
APRIL 30, 1997
(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 named Collagenase ABC, which is used principally as a topical
debridement treatment for dermal ulcers; and researching, developing and
clinically testing additional products derived from Collagenase ABC 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 ABC 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.
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 April 30, 1997, the statements of income for the three
months ended April 30, 1997 and 1996, and statements of cash flows for the three
months ended April 30, 1997 and 1996. 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, 1997.
3. NET INCOME PER SHARE - Net income 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, 1997 and 1996.
6
<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, 1997.
Three months ended April 30, 1997 and 1996
- ------------------------------------------
NET SALES - Net sales for the three months ended April 30, 1997 and 1996 were
$858,810 and $850,203 respectively, representing an increase of $8,607 or 1%.
Sales of collagenase to KPC were lower during the current first fiscal quarter
versus last year, but higher sales of collagenase to foreign licensees offset
such decrease.
ROYALTIES - Royalties for the three months ended April 30, 1997 and 1996 were
$594,344 and $470,297 respectively, representing an increase of $124,047 or 26%.
The increase is due to the commensurate 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, 1997 and 1996
were $400,425 and $397,299 respectively, an increase of $3,126 due to the higher
level of foreign sales in the first quarter of 1997.
SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
("SG&A") expenses for the three months ended April 30, 1997 and 1996 were
$384,802 and $367,446, respectively, an increase of $17,356 due to greater
licensing activities being undertaken in Europe.
7
<PAGE>
RESEARCH AND DEVELOPMENT - Research and development ("R&D") expense for the
three months ended April 30, 1997 and 1996 was $423,957 and $358,476
respectively, representing an increase of $65,481 or 18%. The Company is
currently sponsoring U.S. clinical trials of its injectable collagenase for
three disease conditions. These trials were not as far advanced 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 expects its current year (fiscal 1998) R&D expense to exceed that of
last year (fiscal 1997).
OTHER INCOME (EXPENSE) NET - Other income (expense) net for the three months
ended April 30, 1997 and 1996 was $62,000 and $28,065 respectively. The increase
of $33,935 was primarily attributable to a greater amount of cash available for
investment in the current period versus last year.
PROVISION BENEFIT FOR INCOME TAXES - The provision benefit for income taxes for
the three months ended April 30, 1997 and 1996 was $114,260 and $83,650
respectively. The higher provision in the current period is due to more
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,
1997, the Company had working capital of approximately $7.7 million which
includes cash and cash equivalents, and marketable securities of approximately
$5.4 million. Net cash used by operating activities was $313,459 due to an
increase in accounts receivable of $520,430 and net purchases of marketable
securities of $139,735. At April 30, 1997 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.
8
<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: June 12, 1997
-------------
By: /s/ Edwin H. Wegman
-------------------
Edwin H. Wegman
Chairman and President
Chief Executive Officer
Date: June 12, 1997
-------------
By: /s/ Albert Horcher
-------------------
Albert Horcher
Controller, Principal Financial
and Chief Accounting Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BIOSPECIFICS TECHNOLOGIES CORP. FOR THE THREE MONTHS
ENDED APRIL 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 3,448,269
<SECURITIES> 1,944,207
<RECEIVABLES> 1,421,386
<ALLOWANCES> 0
<INVENTORY> 1,301,802
<CURRENT-ASSETS> 8,416,754
<PP&E> 2,968,311
<DEPRECIATION> 2,070,181
<TOTAL-ASSETS> 10,032,672
<CURRENT-LIABILITIES> 675,695
<BONDS> 0
0
0
<COMMON> 4,883
<OTHER-SE> 9,362,747
<TOTAL-LIABILITY-AND-EQUITY> 10,032,672
<SALES> 1,453,154
<TOTAL-REVENUES> 1,453,154
<CGS> 400,425
<TOTAL-COSTS> 400,425
<OTHER-EXPENSES> 423,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 599
<INCOME-PRETAX> 305,970
<INCOME-TAX> 114,260
<INCOME-CONTINUING> 185,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185,010
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
