-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EJ89fjeDF/83mCdVttpBpeDUaLxF00mnA2Ued4OIxJqH7LyiF7VAMrbNkOgszD5I Ybv1pQT7qbg3D4/IcGinIw== 0000949459-97-000569.txt : 19971216 0000949459-97-000569.hdr.sgml : 19971216 ACCESSION NUMBER: 0000949459-97-000569 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOSPECIFICS TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000875622 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 113054851 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-19879 FILM NUMBER: 97738307 BUSINESS ADDRESS: STREET 1: 35 WILBUR ST CITY: LYNBROOK STATE: NY ZIP: 11563 BUSINESS PHONE: 5165937000 MAIL ADDRESS: STREET 1: 35 WILBUR STREET CITY: LYNBROOK STATE: NY ZIP: 11563 10QSB 1 BIOSPECIFICS TECHNOLOGIES CORP. FORM 10-QSB 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: October 31, 1997 ------------------ [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File number: 0-19879 ------- 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: 4,886,096 shares of Common Stock, $0.001 par value as of December 1, 1997. INDEX ----- Page ---- PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Consolidated Financial Statements: Balance Sheets as of October 31, 1997 (unaudited) and 3 January 31, 1997 Statements of Income for the Three and Nine Months Ended October 31, 1997 and 1996 (unaudited) 4 Statements of Cash Flows for the Nine Months Ended October 31, 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 8 SIGNATURES 11 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BioSpecifics Technologies Corp. and Subsidiaries Consolidated Balance Sheets
(Unaudited) October 31, January 31, ASSETS 1997 1997 ------------ ------------ Cash and cash equivalents $ 2,564,738 $ 3,793,582 Marketable securities 2,720,391 1,812,974 Accounts receivable 1,573,442 900,956 Inventory 1,545,926 1,339,081 Prepaid expenses & other current assets 365,554 403,571 ............ ............ Total current assets 8,770,051 8,250,164 Property, plant, and equipment - net 975,798 912,949 Other assets 663,673 743,183 ............ ............ TOTAL ASSETS $ 10,409,522 $ 9,906,296 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $ 734,172 $ 540,899 Notes payable to related parties 11,885 11,510 Income taxes payable 25,510 10,350 Deferred revenue 175,000 175,000 ............ ............ Total current liabilities 946,567 737,759 Minority interest in subsidiaries 201,158 186,043 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; 4,886,096 shares issued and outstanding at October 31, 1997 and 4,883,396 at January 31, 1997 4,886 4,883 Additional paid-in capital 3,602,004 3,586,145 Retained earnings 6,169,159 5,591,591 Cumulative translation adjustment (17,910) (17,615) ............ ............ 9,758,139 9,165,004 Less: Treasury stock - 70,800 shares at cost at October 31, 1997 and 10,000 shares at January 31, 1997 (496,342) (182,510) ............ ............ Stockholders' equity - net 9,261,797 8,982,494 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,409,522 $ 9,906,296 ============ ============
See accompanying notes to consolidated financial statements 3 Biospecifics Technologies Corp., and Subsidiaries Consolidated Statements of Income
(Unaudited) (Unaudited) Three months ended Nine months ended October 31, October 1997 1996 1997 1996 ----------------------------------------------------------- Revenues: Net sales $ 948,094 $ 1,098,056 $ 2,513,520 $ 3,098,717 Royalties 596,316 333,622 1,734,435 1,530,763 License fees -- -- -- 20,000 ........................................................... Total Revenues 1,544,410 1,431,678 4,247,955 4,649,480 ----------------------------------------------------------- Costs & Expenses: Cost of sales 445,603 444,386 1,095,640 1,296,056 Selling, general and administrative 393,598 423,577 1,168,885 1,147,126 Research and development 501,734 322,137 1,417,243 1,084,724 ........................................................... Total Costs and Expenses 1,340,935 1,190,100 3,681,768 3,527,906 ........................................................... Income from operations 203,475 241,578 566,187 1,121,574 Other income (expense) - net Investment & other income 107,551 118,998 271,278 190,502 Interest expense (1,493) (892) (2,793) (4,178) ........................................................... Total other income - net 106,058 118,106 268,485 186,324 Income before provision for income taxes 309,533 359,684 834,672 1,307,898 Provision for income taxes (102,770) (110,140) (241,990) (466,350) ........................................................... Income before minority interest 206,763 249,544 592,682 841,548 Minority interest in net income of subsidiaries 4,680 3,125 15,115 22,250 ........................................................... Net income $ 202,083 $ 246,419 $ 577,567 $ 819,298 =========================================================== NET INCOME PER COMMON SHARE $ 0.04 $ 0.05 $ 0.12 $ 0.17 =========================================================== Weighted average number of shares used in computing net income per share: 4,895,000 4,930,000 4,906,000 4,930,000 ===========================================================
See accompanying notes to consolidated financial statements 4 BioSpecifics Technologies Corp. and Subsidiaries Consolidated Statements of Cash Flows
(Unaudited) Nine months ended October 31, CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 ---------------------------- Net income $ 577,567 $ 819,298 Adjustments to reconcile net income to cash provided by/(used by) operating activities: depreciation 140,575 142,907 (gain) loss on marketable securities - net (44,447) 12,623 minority interest in income of subsidiaries 15,115 22,250 issuance of stock options 4,500 30,000 Changes in operating assets & liabilities: (increase) decrease in accounts receivable (672,486) 119,331 proceeds from sales of marketable securities 267,361 780,413 purchases of marketable securities (1,130,331) (455,579) (increase) decrease in inventory (206,845) 36,796 decrease in prepaid and other current assets 38,017 76,803 decrease in other assets 79,510 51,536 (increase) decrease in accounts payable & accruals 193,273 (534,177) increase in deferred revenues -- 45,000 increase (decrease) in cumulative translation adjustment (295) -- increase in income taxes payable 15,160 65,350 ............................ Net cash provided by (used in) operating activities (723,326) 1,212,551 ---------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant, property and equipment (203,421) (32,328) ............................ Net cash used in investing activities (203,421) (32,328) ---------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from redemption of long term securities -- -- Proceeds from notes with related parties 375 705 Treasury stock purchases (313,832) Exercise of stock options 11,360 -- ............................ Net cash (used) provided by financing activities (302,097) 705 ---------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,228,844) 1,180,928 CASH AND EQUIVALENTS: Beginning of Period 3,793,582 2,288,316 ............................ End of Period $ 2,564,738 $ 3,469,244 ============================ SUPPLEMENTAL DISCLOSURE Cash paid during period for interest $ 2,793 $ 4,179 ============================ Cash paid during period for income taxes $ 152,820 $ 378,000 ============================
See accompanying notes to consolidated financial statements 5 BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS OCTOBER 31, 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 most of its revenues through a license agreement with a major US pharmaceutical company, Knoll Pharmaceutical Company ("KPC"). Since February 1, 1996, 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 October 31, 1997, the statements of income for the three and nine months ended October 31, 1997 and 1996, and statements of cash flows for the three months ended October 31, 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. 6 3. NET INCOME PER COMMON SHARE - Net income per common share is based on net income available to common stockholders divided by the weighted average number of common shares and common stock equivalent shares outstanding, if dilutive, during the period of presentation. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Standards No. 128 "Earnings Per Share" ("SFAS No. 128") which is effective for financial statements issued for periods ending after December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per share. For the periods ended October 31, 1997 and 1996, the amount reported as net income per common and common equivalent share is not materially different than that which would have been reported for basic and diluted earnings per share in accordance with SFAS No. 128. 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 - -------------------------------------------------------------------------------- Information provided by the Company or statements contained in this report or made by its employees, if not historical, is forward looking information which involve uncertainties and risk. 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 and approval by the FDA and foreign health authorities of potential products, market acceptance of the Company's potential products, and other risks detailed herein and in other filings the Company makes with the Securities and Exchange Commission. Further, any forward looking statement or statements speak only as of the date on which such statements were made, and the Company undertakes no obligation to update any forward looking statement or statements to reflect events or circumstances after the date on which such statement or statements were made. 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. 7 Three months ended October 31, 1997 and 1996 -------------------------------------------- NET SALES - Net sales for the three months ended October 31, 1997 and 1996 were $948,094 and $1,098,056 respectively, representing a $149,962 or 14% decrease. The decrease is due to the timing of sales of collagenase ABC to KPC, as well as KPC's continual efforts to maintain as small an inventory as possible. ROYALTIES - Royalties for the three months ended October 31, 1997 and 1996 were $569,316 and $333,622 respectively, representing a $262,694 or 79% increase. Besides a general increase in sales of Collagenase Santyl(R) in fiscal 1998 versus 1997, Collagenase Santyl(R) sales had declined during last year's quarter ended October 31, 1996 due, in turn, to unusually high Collagenase Santyl(R) sales in the quarter prior to that, ended July 31, 1996. The Company believes that the fluctuations resulted from advance buying by KPC's customers in anticipation of a price increase in Collagenase Santyl(R), as reported to the Company by KPC. COST OF SALES - Cost of sales for the three months ended October 31, 1997 and 1996 were $445,603 and $444,386 respectively, representing an increase of $1,219, due to higher depreciation costs and slight increases in salaries. SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative ("SG&A") expenses for the three months ended October 31, 1997 and 1996 were $393,598 and $423,577 respectively, representing a $29,979 or 7% decrease. The decrease was primarily due to lower professional fees incurred. RESEARCH AND DEVELOPMENT - Research and development ("R&D") expenses for the three months ended October 31, 1997 and 1996 were $501,734 and $322,137 respectively, representing a increase of $179,597 or 56%. The Company is currently sponsoring Phase 2 clinical trials of injectable collagenase for Dupuytren's and Peyronie's diseases, for which the FDA has granted Orphan Drug status; keloids, and pre-clinical research of other uses of collagenase. The Company is also sponsoring clinical trials of its collagenase in Europe, but to a lesser financial extent. OTHER INCOME - NET - Other income - net for the three months ended October 31, 1997 and 1996 was $106,058 and $118,106 respectively. The decrease of $12,048 was due primarily to a slightly less favorable investment environment during the more current period. PROVISION FOR INCOME TAXES - The provision for income taxes for the three months ended October 31, 1997 and 1996 was $102,770 and $110,140 respectively, a decrease of $7,370. The decrease was due to lower taxable profit in the current period. The principal reason for the difference between the United States Federal statutory tax rate of 34% and the Company's effective tax rate is due to a 2% income tax rate applicable to earnings of the Company's primary production facility in Curacao, partially offset by the additional provision required for state income taxes where the Company's US subsidiary is domiciled. 8 Nine months ended October 31, 1997 and 1996 ------------------------------------------- NET SALES - Net sales for the nine months ended October 31, 1997 and 1996 were $2,513,520 and $3,098,717 respectively, representing a $585,197 or 19% decrease. The decrease is due to KPC's continual efforts to reduce and maintain as small an inventory as possible. ROYALTIES - Royalties for the nine months ended October 31, 1997 and 1996 were $1,734,435 and $1,530,763 respectively, representing a $203,672 or 13% increase, due to higher sales of Collagenase Santyl(R) in the United States, as reported to the Company by KPC. LICENSE FEES - The Company earned part of the advance payment from a product distribution license agreement with a German pharmaceutical company during the nine months ended October 31, 1996. There were no license fees earned during the more current period. COST OF SALES - Cost of sales for the nine months ended October 31, 1997 and 1996 were $1,095,640 and $1,296,056 respectively, representing a decrease of $200,416 or 15% due to lower net sales of collagenase ABC as described above. SELLING, GENERAL AND ADMINISTRATIVE - SG&A expenses for the nine months ended October 31, 1997 and 1996 were $1,168,885 and $1,147,126 respectively, representing a $21,759 or 2% increase. The slight increase was due to higher professional fees and salaries incurred in the more recent nine months. RESEARCH AND DEVELOPMENT - Research and development expenses for the nine months ended October 31, 1997 and 1996 were $1,417,243 and $1,084,724 respectively, representing an increase of $332,519 or 31%. The Company is currently developing injectable collagenase treatments for two conditions for which FDA has granted FDA Orphan Drug Status. During the current period, the Company completed Phase 1 and advanced to Phase 2 clinical trials of Cordase(TM) injectable collagenase for Dupuytren's disease. The Company is also sponsoring a Phase 2 trial for Peyronie's disease, Phase 1 trial for keloids, and pre-clinical research of other uses of collagenase. The Company is also sponsoring clinical trials of its collagenase in Europe, but to a much lesser financial extent. OTHER INCOME - net - Other income - net for the nine months ended October 31, 1997 and 1996 was $268,485 and $186,324 respectively. The increase of $82,161 was due primarily to realized and unrealized gains on trading securities in the more current period, due to a more favorable environment for fixed income securities. 9 PROVISION FOR INCOME TAXES - The provision for income taxes for the nine months ended October 31, 1997 and 1996 was $241,990 and $466,350 respectively, a decrease of $224,360. The decrease was due to lower taxable profit. The principal reason for the difference between the United States Federal statutory tax rate of 34% and the Company's effective tax rate is due to a 2% income tax rate applicable to earnings of the Company's primary production facility in Curacao, partially offset by the additional provision required for state income taxes where the Company's US subsidiary is domiciled. 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 October 31, 1997, the Company had working capital of approximately $8.0 million which includes cash and cash equivalents and marketable securities of approximately $5.3 million. As of October 31, 1997, the Company's cash balance declined by approximately $1.2 million versus January 31, 1997. The principal uses of cash during the nine months ended October 31, 1997 includes purchases of marketable securities, net of sales, of approximately $863,000; the purchase of treasury stock approximating $314,000; and expenditures of $203,000 for plant, property and equipment. At October 31, 1997 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. 10 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. (The Registrant) Date: December 12, 1997 ---------------- By: /s/Edwin H. Wegman ------------------ Edwin H. Wegman Chairman and President Date: December 12, 1997 By: /s/Albert Horcher ----------------- Albert Horcher Treasurer, Principal Financial and Chief Accounting Officer 11 EX-27 2 EXHIBIT 27.1 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF BIOSPECIFICS TECHNOLOGIES CORP. FOR THE NINE MONTHS ENDED OCTOBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 9-MOS JAN-31-1998 FEB-01-1997 OCT-31-1997 2,564,738 2,720,391 1,573,442 0 1,545,926 8,770,051 3,139,878 2,164,080 10,409,522 946,567 0 0 0 4,886 9,771,163 10,409,522 4,247,955 4,247,955 1,095,640 1,095,640 1,417,243 0 2,793 834,672 241,990 577,567 0 0 0 577,567 0.12 0.12
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