-----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, JfpUGgr4TEXF56XO2++BAdGYp5kcR99doP9ELB/GW+igBQT31RJpWAl9UanqCkFB SHi/5OghQdJ9kRgGJPVMpw== 0001042910-98-001218.txt : 19981216 0001042910-98-001218.hdr.sgml : 19981216 ACCESSION NUMBER: 0001042910-98-001218 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 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: 98769691 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 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, 1998 ---------------- [ ] 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: 4,891,146 shares of Common Stock, $0.001 par value as of December 1, 1998. Page 1 of 11 INDEX -----
Page ---- PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Consolidated Financial Statements: Balance Sheets as of October 31, 1998 (unaudited) and January 31, 1998 3 Statements of Income for the Three and Nine Months Ended October 31, 1998 and 1997 (unaudited) 4 Statements of Cash Flows for the Nine Months Ended October 31, 1998 and 1997 (unaudited) 5 Notes to Consolidated Interim Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 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 1998 1998 ----------------- ------------------ Cash and cash equivalents $4,452,701 $4,431,055 Marketable securities 2,522,957 2,343,801 Accounts receivable 1,041,418 1,312,997 Inventory 1,226,249 1,482,720 Deferred tax assets - net 179,000 179,000 Prepaid expenses & other current assets 477,144 269,016 ----------------- ------------------ TOTAL CURRENT ASSETS 9,899,469 10,018,589 Property, plant, and equipment - net 796,300 873,600 Other assets 229,392 306,451 ----------------- ------------------ TOTAL ASSETS $10,925,161 $11,198,640 ================= ================== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $928,245 $1,309,972 Notes payable to related parties 12,385 12,010 Income taxes payable 204,941 61,840 Deferred revenue 175,000 175,000 ----------------- ------------------ TOTAL CURRENT LIABILITIES 1,320,571 1,558,822 Minority interest in subsidiaries 251,198 220,349 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; 4,891,146 and 4,886,096 shares issued and out- standing at October 31, 1998 and January 31, 1998, respectively 4,891 4,886 Additional paid-in capital 3,679,174 3,617,005 Retained earnings 7,233,580 6,427,433 Cumulative translation adjustment (2,610) (3,354) ----------------- ------------------ 10,915,035 10,045,970 Less: Treasury stock - 270,380 and 96,800 shares, at cost (1,561,643) (626,501) ----------------- ------------------ STOCKHOLDERS' EQUITY - NET 9,353,392 9,419,469 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,925,161 $11,198,640 ================= ==================
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 31, 1998 1997 1998 1997 ------------------------------------------------------------------- Revenues: Net sales $1,140,798 $948,094 $3,429,126 $2,513,520 Royalties 486,256 596,316 1,930,720 1,734,435 ------------------------------------------------------------------- Total Revenues 1,627,054 1,544,410 5,359,846 4,247,955 ------------------------------------------------------------------- Costs and Expenses: Cost of sales 466,925 445,603 1,566,904 1,095,640 Selling, general and administrative 407,683 393,598 1,316,351 1,168,885 Research and development 561,381 501,734 1,553,022 1,417,243 ------------------------------------------------------------------- Total Costs and expenses 1,435,989 1,340,935 4,436,277 3,681,768 ------------------------------------------------------------------- Income from operations 191,065 203,475 923,569 566,187 Other income (expense) Investment and other income 122,845 107,551 254,521 271,278 Interest expense (853) (1,493) (4,237) (2,793) ------------------------------------------------------------------- Total other income - net 121,992 106,058 250,284 268,485 ------------------------------------------------------------------- Income before provision for income taxes 313,057 309,533 1,173,853 834,672 Provision for income taxes (75,076) (102,770) (336,856) (241,990) ------------------------------------------------------------------- Income before minority interest 237,981 206,763 836,997 592,682 Less: minority interest in net income of subsidiaries 9,690 4,680 30,850 15,115 ------------------------------------------------------------------- Net income $228,291 $202,083 $806,147 $577,567 =================================================================== Basic net income per common share $0.05 $0.04 $0.17 $0.12 =================================================================== Weighted-average common shares outstanding 4,689,766 4,822,229 4,778,225 4,850,279 =================================================================== Diluted net income per common share $0.05 $0.04 $0.17 $0.12 =================================================================== Weighted-average common and dilutive potential common shares outstanding 4,734,914 4,929,478 4,847,238 4,922,493 ===================================================================
See accompanying notes to consolidated financial statements 4
BioSpecifics Technologies Corp. and Subsidiaries (Unaudited) Consolidated Statements of Cash Flows Nine months ended October 31, CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 ----------------------------------------------- Net income $806,147 $577,567 Adjustments to reconcile net income to cash provided by/(used by) operating activities: Depreciation 141,226 140,575 (Gain) loss on marketable securities - net (18,733) (44,447) Minority interest in income of subsidiaries 30,850 15,115 Issuance of stock options 42,000 4,500 Changes in operating assets & liabilities: Accounts receivable 271,579 (672,486) Marketable securities - net (160,423) (862,970) Inventory 256,471 (206,845) Prepaid and other current assets (208,128) 38,017 Decrease in other assets 77,059 79,510 Accounts payable & accruals (381,727) 193,273 Cumulative translation adjustment 741 (295) Income taxes payable 143,101 15,160 ----------------------------------------------- Net cash provided by (used in) operating activities 1,000,163 (723,326) ----------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant, property and equipment (63,925) (203,421) ----------------------------------------------- Net cash used in investing activities (63,925) (203,421) ----------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes with related parties 375 375 Treasury stock purchases (935,142) (313,832) Exercise of stock options 20,175 11,360 ----------------------------------------------- Net cash (used) provided by financing activities (914,592) (302,097) ----------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 21,646 (1,228,844) CASH AND EQUIVALENTS: Beginning of Period 4,431,055 3,793,582 ----------------------------------------------- End of Period $4,452,701 $2,564,738 =============================================== SUPPLEMENTAL DISCLOSURE Cash paid during period for interest $4,534 $2,793 =============================================== Cash paid during period for income taxes $174,371 $152,820 ===============================================
See accompanying notes to consolidated financial statements 5 BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS OCTOBER 31, 1998 (UNAUDITED) 1. Description of Business and Basis of Presentation - BioSpecifics Technologies Corp. (the "Company") is the parent company of Advance Biofactures Corporation (ABC-New York), Advance Biofactures of Curacao, N.V. and subsidiaries (ABC-Curacao), and Biospecifics Pharma GmbH (Bio Pharma), Germany. 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 U.S. pharmaceutical company, Knoll Pharmaceutical Company ("KPC"). Sales of Collagenase ABC have been principally to KPC, which markets it as an ointment in the United States and Canada 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 sells Collagenase ABC to pharmaceutical companies in countries outside the United States. This business represented approximately 20% of net sales during the nine months ended October 31, 1998. The Company has undertaken efforts to secure additional customers and licensees outside the United States, and has licensing agreements with foreign companies to market Collagenase ABC, either as a topical product or an injectable, when permitted by local governmental authorities. 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, 1998, the statements of income for the three and nine months ended October 31, 1998 and 1997, and statements of cash flows for the nine months ended October 31, 1998 and 1997. 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, 1998. 6 3. Basic and Diluted Income per Share - Basic earnings per share ("EPS") excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding during the periods of presentation. Diluted EPS reflects the dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. 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, was 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, 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. 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, 1998. 7 THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997 -------------------------------------------- Net sales - Net sales for the three months ended October 31, 1998 and 1997 were $1,140,798 and $948,094 respectively, representing a $192,704 or 20% increase. The increase was due to higher sales of Collagenase ABC to KPC and foreign customers. Royalties - Royalties for the three months ended October 31, 1998 and 1997 were $486,255 and $596,316 respectively, representing a $110,061 or 18% decrease. Royalties are earned on KPC's Collagenase Santyl(R) sales to wholesalers, which were higher than usual for the quarter ended July 31, 1998 due to inventory stocking by the wholesalers, as reported to the Company by KPC. During the quarter ended October 31, 1998, wholesalers chose to reduce their inventories and therefore bought less from KPC, as reported to the Company by KPC. Cost of sales - Cost of sales for the three months ended October 31, 1998 and 1997 were $466,925 and $445,603 respectively, representing an increase of $21,322 due to higher net sales. Selling, general and administrative - Selling, general and administrative ("SG&A") expenses for the three months ended October 31, 1998 and 1997 were $407,683 and $393,598 respectively, representing a $14,085 or 4% increase. The increase was primarily due to higher professional fees. Research and development - Research and development ("R&D") expenses for the three months ended October 31, 1998 and 1997 were $561,381 and $501,734 respectively, representing an increase of $59,647 or 12%. 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, 1998 and 1997 was $121,992 and $106,058 respectively. The increase of $15,934 was due primarily to the recovery of financial markets during the latter part of the current quarter. Provision for income taxes - The provision for income taxes for the three months ended October 31, 1998 and 1997 was $75,076 and $102,770 respectively, a decrease of $27,694. The decrease was due to a larger portion of taxable income earned by ABC-Curacao during the more current period versus last year. 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 ABC-Curacao, the Company's primary production facility, partially offset by the additional provision required by ABC-New York for state income taxes. 8 NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997 ------------------------------------------- Net sales - Net sales for the nine months ended October 31, 1998 and 1997 were $3,429,126 and $2,513,520 respectively, representing a $915,606 or 36% increase. The increase was due to higher sales of Collagenase ABC to KPC and to a lesser extent a foreign customer. Royalties - Royalties for the nine months ended October 31, 1998 and 1997 were $1,930,720 and $1,734,435 respectively, representing a $196,285 or 11% increase, due to higher sales of Collagenase Santyl(R) in the United States, as reported to the Company by KPC. Cost of sales - Cost of sales for the nine months ended October 31, 1998 and 1997 were $1,566,904 and $1,095,640 respectively, representing an increase of $471,264 or 43% due to higher net sales as described above. Selling, general and administrative - SG&A expenses for the nine months ended October 31, 1998 and 1997 were $1,316,351 and $1,168,885 respectively, representing a $147,466 or 13% increase. The increase was due to higher professional fees and salaries during the nine months ended October 31, 1998. Research and development - Research and development expenses for the nine months ended October 31, 1998 and 1997 were $1,553,022 and $1,417,243 respectively, representing an increase of $135,779 or 10%. 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 lesser financial extent. Other income - net - Other income - net for the nine months ended October 31, 1998 and 1997 was $250,284 and $268,485 respectively. The decrease of $18,201 was due primarily to greater volatility in financial markets during the current period. Provision for income taxes - The provision for income taxes for the nine months ended October 31, 1998 and 1997 was $336,856 and $241,990 respectively, an increase of $94,866. The increase was due to higher taxable income at the Company's subsidiaries ABC-New York and ABC-Curacao. 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 ABC-Curacao, the Company's primary production facility, partially offset by the additional provision required by ABC-New York for state income taxes. 9 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, 1998, the Company had working capital of approximately $8.6 million which included cash and cash equivalents and marketable securities of approximately $7.0 million. As of October 31, 1998, the Company's cash balance increased slightly versus January 31, 1998. The principal source of cash during the nine months ended October 31, 1998 was net income of approximately $800,000. The principal use of cash during the nine months ended October 31, 1998 was the purchase of 173,580 shares of treasury stock including a block of 106,000 shares, at a total cost approximating $935,000. At October 31, 1998 the Company had commitments for capital expenditures of approximately $150,000. 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. Year 2000 Issue - --------------- The Company has not incurred and, based on information available to it at this time, does not expect to incur significant expenditures to address the Year 2000 issue. As part of its Year 2000 program, the Company plans to complete in 1999 a contingency plan, which addresses the most likely "business critical" worst case scenarios. During the course of developing the contingency plan, the Company will orally discuss the Year 2000 issue with suppliers and other third parties with which it does business to attempt to ascertain such third parties' Year 2000 compliance. However, the Company cannot be certain that third parties supporting the Company's systems or providing goods and services to the Company have resolved or will resolve all Year 2000 issues in a timely manner. The Company could be adversely affected by any disruptions to third parties with which it does business, if suppliers of goods and services to those third parties have not successfully addressed their Year 2000 issues. Failure by the Company or any such third party to successfully address the relevant Year 2000 issues could result in disruptions to the Company's business and the incurrence of significant expenses by the Company. 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 15, 1998 ----------------- By:/s/Edwin H. Wegman ----------------------- Edwin H. Wegman Chairman and President Date: December 15, 1998 ----------------- By: /s/Albert Horcher ---------------------- Albert Horcher Treasurer, Principal Financial and Chief Accounting Officer 11 EX-27 2 FDS --
5 9-MOS Jan-31-1999 Feb-01-1998 Oct-31-1998 4,452,701 2,522,957 1,041,418 0 1,226,249 477,144 3,108,323 2,312,023 10,925,161 1,320,571 0 0 0 4,891 10,912,754 10,925,161 5,359,846 5,359,846 1,566,904 1,566,904 1,553,022 0 4,237 1,173,853 336,856 806,147 0 0 0 806,147 0.17 0.17
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