-----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, WLMeQmTTCgmqmpjF3hlyMp6hKOiLtkMxGdSxvbYJzCAUA724OXy8uGIgY9A24pqF zWWUv7AuCb92AMJwSX1eiQ== 0001042910-99-001752.txt : 19991216 0001042910-99-001752.hdr.sgml : 19991216 ACCESSION NUMBER: 0001042910-99-001752 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991215 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: 99775174 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 QUARTERLY REPORT 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, 1999 ---------------- [ ] 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: 4,529,766 shares of Common Stock, $0.001 par value as of December 1, 1999. Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
INDEX ----- Page ---- PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Consolidated Financial Statements: Balance Sheets as of October 31, 1999 (unaudited) and January 31, 1999 3 Statements of Income for the Three and Nine Months Ended October 31, 1999 and 1998 (unaudited) 4 Statements of Cash Flows for the Nine Months Ended October 31, 1999 and 1998 (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 Part II - Other Information 12 Signatures 13
2
PART I. FINANCIAL INFORMATION Item 1. Financial Statements BioSpecifics Technologies Corp. and Subsidiaries Consolidated Balance Sheets (Unaudited) Oct 31, January 31, ASSETS 1999 1999 ------------------- -------------------- Cash and cash equivalents $3,839,377 $5,086,725 Marketable securities 1,090,163 2,102,951 Accounts receivable 2,172,894 1,202,003 Inventory 1,642,879 1,488,525 Deferred tax assets - net 605,351 348,206 Prepaid expenses and other current assets 91,847 135,623 Due from related party 579,206 75,000 ------------------- -------------------- Total current assets 10,021,717 10,439,033 Property, plant, and equipment - net 1,159,871 713,716 Due from related parties 173,600 170,101 Other assets 28,230 53,693 ------------------- -------------------- TOTAL ASSETS $11,383,418 $11,376,543 =================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $1,419,842 $1,179,900 Notes payable to related parties 12,885 12,510 Income taxes payable 1,820 78,566 Deferred revenue 175,000 175,000 ------------------- -------------------- Total current liabilities 1,609,547 1,445,976 Minority interest in subsidiaries 270,123 260,849 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 shares issued at October 31, 1999 and January 31, 1999 4,891 4,891 Additional paid-in capital 3,734,375 3,734,375 Retained earnings 7,680,104 7,667,141 Accumulated other comprehensive loss (4,385) (3,101) ------------------- -------------------- 11,414,985 11,403,306 Less: Treasury stock - 361,380 and 310,780 shares, at October 31, 1999 and January 31, 1999, respectively, at cost (1,911,237) (1,733,588) ------------------- -------------------- Stockholders' equity - net 9,503,748 9,669,718 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,383,418 $11,376,543 =================== ====================
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, 1999 1998 1999 1998 --------------------------------------------------------- Revenues: Net sales $ 999,410 $ 1,140,798 $ 2,743,190 $ 3,429,126 Royalties 767,265 486,256 2,038,789 1,930,720 --------------------------------------------------------- Total Revenues 1,766,675 1,627,054 4,781,979 5,359,846 --------------------------------------------------------- Costs and Expenses: Cost of sales 597,820 466,925 1,611,036 1,566,904 Selling, general and administrative 643,116 407,683 2,110,797 1,316,351 Research and development 404,618 561,381 1,377,348 1,553,022 --------------------------------------------------------- Total costs and expenses 1,645,554 1,435,989 5,099,181 4,436,277 --------------------------------------------------------- Income (loss) from operations 121,121 191,065 (317,202) 923,569 Other income (expense) Investment and other income (loss) (13,449) 122,845 117,400 254,521 Interest expense (857) (853) (3,207) (4,237) --------------------------------------------------------- Total other income (expense) - net (14,306) 121,992 114,193 250,284 --------------------------------------------------------- Income (loss) before provision for income taxes 106,815 313,057 (203,009) 1,173,853 Income tax expense (benefit) 25,260 75,076 (225,250) 336,856 --------------------------------------------------------- Income before minority interest 81,555 237,981 22,241 836,997 Less: minority interest in net income of subsidiaries 5,000 9,690 9,275 30,850 --------------------------------------------------------- Net income $ 76,555 $ 228,291 $ 12,966 $ 806,147 ========================================================= Basic net income per common share $ 0.02 $ 0.05 $ 0.00 $ 0.17 ========================================================= Weighted-average common shares outstanding 4,529,766 4,689,766 4,630,686 4,778,225 ========================================================= Diluted net income per common share $ 0.02 $ 0.05 $ 0.00 $ 0.17 ========================================================= Weighted-average common and dilutive potential common shares outstanding 4,529,766 4,734,914 4,632,373 4,847,238 =========================================================
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: 1999 1998 ---------------------------------------------- Net income $12,965 $806,147 Adjustments to reconcile net income to cash provided by/(used in) operating activities: Depreciation 143,626 141,226 (Gain) loss on marketable securities - net 77,030 (18,733) Minority interest in income of subsidiaries 9,275 30,850 Issuance of stock options - 42,000 Changes in operating assets & liabilities: Accounts receivable (970,891) 271,579 Marketable securities - net 935,758 (160,423) Inventory (154,354) 256,471 Prepaid and other current assets 43,775 (208,128) Due from related party (504,206) - Increase in deferred tax asset (257,145) - Increase in due from related parties (3,500) - Decrease in other assets 25,463 77,059 Accounts payable & accruals 239,942 (381,727) Cumulative translation adjustment (1,286) 741 Income taxes payable (76,746) 143,101 ---------------------------------------------- Net cash provided by (used in) operating activities (480,294) 1,000,163 ---------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant, property and equipment (589,780) (63,925) ---------------------------------------------- Net cash used in investing activities (589,780) (63,925) ---------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes with related parties 375 375 Treasury stock purchases (177,649) (935,142) Exercise of stock options - 20,175 ---------------------------------------------- Net cash used in financing activities (177,274) (914,592) ---------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,247,348) 21,646 CASH AND EQUIVALENTS: Beginning of Period 5,086,725 4,431,055 ---------------------------------------------- End of Period $3,839,377 $4,452,701 ============================================== SUPPLEMENTAL DISCLOSURE Cash paid during period for interest $3,209 $4,534 ============================================== Cash paid during period for income taxes $32,327 $174,371 ==============================================
See accompanying notes to consolidated financial statements 5 BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS October 31, 1999 (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. The Company, through its subsidiaries, is engaged in the business of producing and licensing for sale by others a fermentation derived enzyme named Collagenase ABC (the "product") which is approved by the U.S. Food and Drug Administration ("FDA"), and researching and developing additional products derived from this enzyme for potential use as pharmaceuticals. The product is used principally as a topical debridement treatment for dermal ulcers and severe burns. The Company currently derives substantially all revenues through a license agreement with a U.S. pharmaceutical company, Knoll Pharmaceutical Company ("KPC"). Sales of the product have been principally to KPC during the nine months ended October 31, 1999 and 1998. The license with KPC expires in 2003. The non-renewal of the license agreement by KPC in 2003 could have a material adverse impact on the financial condition of the Company unless the Company secures other licensees. In the event that KPC were to cancel the license agreement for cause, the financial condition of the Company would be materially adversely affected unless the Company were to find a similar licensee in the United States. The Company has licensing agreements with foreign companies, some of which are marketing the product and others of which will attempt to market the product in licensed territories when permitted by local governmental authorities. See "Liquidity, Capital Resources, and Changes in Financial Condition" with respect to issues raised by the FDA. 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, 1999, the statements of income for the three and nine months ended October 31, 1999 and 1998, and statements of cash flows for the nine months ended October 31, 1999 and 1998. 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, 1999. 6 3. Net income per share -------------------- Basic net income per share ("EPS") excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that would occur if common stock equivalents were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Dilutive common stock options and warrants are included in the diluted EPS calculation using the treasury stock method for the three and nine months ended October 31, 1999 and 1998. 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 involves 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, government regulation, changing market conditions, the impact of competitive products and pricing, timely development, approval by 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 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, 1999. Three months ended October 31, 1999 and 1998 -------------------------------------------- Net sales - Net sales for the three months ended October 31, 1999 and 1998 were $999,410 and $1,140,798 respectively, representing a $141,388 or 12% decrease. The decrease was due to lower sales of Collagenase ABC to KPC and foreign customers. Royalties - Royalties for the three months ended October 31, 1999 and 1998 were $767,265 and $486,255 respectively, representing a $281,010 or 58% increase. Royalties are earned on KPC's Collagenase Santyl(R) sales to 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. 7 Cost of sales - Cost of sales for the three months ended October 31, 1999 and 1998 were $597,820 and $466,925 respectively, representing an increase of $130,895 due to an increase in production personnel, particularly in the Quality Control department. Selling, general and administrative - Selling, general and administrative ("SG&A") expenses for the three months ended October 31, 1999 and 1998 were $643,116 and $407,683 respectively, representing a $235,433 or 58% increase. During the quarter ended October 31, 1999, the Company continued to engage consultants to assist in responding to FDA observations on FDA's Form 483 ("483's") from FDA inspectors, the cost of which are included in SG&A. In addition, production laboratory personnel were highly involved in the response effort as well, resulting in some level of production inactivity. Costs usually allocated to production of inventory are included in SG&A. The Company anticipates that there will be considerable consultation costs and involvement of its laboratory personnel in responding to the 483s through the foreseeable future, although such involvement should decrease in future periods. See "Liquidity, Capital Resources, and Changes in Financial Condition". Research and development - Research and development ("R&D") expenses for the three months ended October 31, 1999 and 1998 were $404,618 and $561,381 respectively, representing a decrease of $156,763 or 28%. The Company is currently sponsoring Phase 2 clinical trials of injectable collagenase for Dupuytren's disease and a Phase 1 trial for Peyronie's disease, both of which have been granted Orphan Drug status by the FDA. Internal R&D costs have declined as development moves to clinics. Also, as described above, laboratory personnel have been involved in the response effort to the 483s, including R&D personnel, whose costs have been partially allocated to SG&A. The Company anticipates that there will be continued involvement of its R&D personnel in responding to the 483s, although such involvement should decrease in future periods. Other income (expense) - net - Other income (expense) - net for the three months ended October 31, 1999 and 1998 was $(14,306) and $121,992 respectively, a decrease of $136,298. The decrease during the three months ended October 31, 1999 was due to the decrease in market value of the Company's investments in equity securities held as trading security investments. Income tax expense (benefit) - Income tax expense (benefit) for the three months ended October 31, 1999 and 1998 was $25,260 and $75,076 respectively, a decrease of $49,816. The decrease was due to lower profitability at the Company's subsidiaries. The principal reason for the difference between the United States Federal statutory tax rate of 34% and the Company's effective tax rate of 24% for both the three months ended October 31, 1999 and 1998 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. Nine months ended October 31, 1999 and 1998 ------------------------------------------- Net sales - Net sales for the nine months ended October 31, 1999 and 1998 were $2,743,190 and $3,429,126 respectively, representing a $685,936 or 20% decrease. The decrease was due to lower sales of Collagenase ABC to KPC and foreign customers. 8 Royalties - Royalties for the nine months ended October 31, 1999 and 1998 were $2,038,789 and $1,930,720 respectively, representing a $108,069 or 6% 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, 1999 and 1998 were $1,611,036 and $1,566,904 respectively, representing an increase of $44,132 or 3% due to increased production personnel, particularly in the Quality Control department. Selling, general and administrative - SG&A expenses for the nine months ended October 31, 1999 and 1998 were $2,110,797 and $1,316,351 respectively, representing a $794,446 or 60% increase. During the nine months ended October 31, 1999, the Company continued to engage consultants to assist in responding to FDA observations on FDA's Form 483 ("483's") from FDA inspectors, the cost of which are included in SG&A. In addition, production laboratory personnel were highly involved in the response effort as well, resulting in some level of production inactivity. Costs usually allocated to production of inventory are included in SG&A. The Company anticipates that there will be considerable consultation costs and involvement of its laboratory personnel in responding to the 483s through the foreseeable future, although such involvement should decrease in future periods. See "Liquidity, Capital Resources, and Changes in Financial Condition". Research and development - Research and development expenses for the nine months ended October 31, 1999 and 1998 were $1,377,348 and $1,553,022 respectively, representing a decrease of $175,674 or 11%. The Company is currently sponsoring Phase 2 clinical trials of injectable collagenase for Dupuytren's disease and a Phase 1 trial for Peyronie's disease, both of which have been granted Orphan Drug status by the FDA. Internal R&D costs have declined as development moves to clinics. Also, as described above, laboratory personnel have been involved in the response effort to the 483s, including R&D personnel, whose costs have been partially allocated to SG&A. The Company anticipates that there will be continued involvement of its R&D personnel in responding to the 483s, although such involvement should decrease in future periods. Other income (expense)- net - Other income (expense) - net for the nine months ended October 31, 1999 and 1998 was $114,193 and $250,284 respectively. The decrease during the nine months ended October 31, 1999 was due to the decrease in market value of the Company's investments in equity securities held as trading security investments. Income tax expense (benefit) - Income tax expense (benefit) for the nine months ended October 31, 1999 and 1998 was $(225,250) and $336,856 respectively. The Company generated Orphan Drug tax credits as a result of continued research expenditures for Dupuytren's and Peyronie's diseases. The benefit is available as a carryback/carryforward against income taxes paid in prior/future periods. 9 LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION - --------------------------------------------------------------- The Company's primary source of working capital is from operating activities, particularly sales and royalties. As of October 31, 1999, the Company had working capital of approximately $8.4 million, which included cash and cash equivalents, and marketable securities of approximately $4.9 million. The principal uses of cash during the period were expenditures for plant, property and equipment of approximately $590,000 and repurchases of Company stock of approximately $178,000. The Company also used approximately $480,000 in cash attributable to operating activities. At October 31, 1999 the Company had commitments for capital expenditures of approximately $350,000. The Company plans to invest between $1.5 million and $2.0 million in new equipment and renovations at its Curacao, Netherlands Antilles and Lynbrook, New York facilities over the next twelve months. In January and March of 1999, the Company was issued a List of Inspectional Observations on FDA Form 483 from FDA inspectors, citing numerous inspectional observations relating to deficiencies in the Company's "good manufacturing practice" at its Lynbrook, New York and Curacao, Netherlands Antilles facilities. In addition, on May 10, 1999, the Company received a letter from the FDA (the "FDA Letter") citing certain inspectional observations relating to deficiencies at its Lynbrook, New York facility, Curacao, Netherlands Antilles facility, and contract manufacturing facility. The FDA Letter advised the Company that the FDA will institute formal proceedings to revoke the Company's license to manufacture Collagenase Santyl(R) Ointment unless the Company provided satisfactory assurances to the FDA, including submitting to the FDA within 30 days a detailed, comprehensive plan of corrective action to address the observations listed in the 483s and the FDA Letter, and otherwise demonstrate compliance with applicable regulatory requirements. The Company did provide the FDA with a plan of corrective action and met twice with the FDA to discuss the plan of corrective action. The Company hired outside consultants, employed additional staff for the Quality Control department, continues to seek to employ additional staff for the Quality Control and Quality Assurance departments to assist in further developing and executing the plan of corrective action, and continues to reorganize the Quality Control and Quality Assurance departments. The Company plans to invest between $1.5 million and $2.0 million in new equipment and renovations at its Curacao, Netherlands Antilles and Lynbrook, New York facilities over the next twelve months. This investment is intended to ensure the efficiency of the Company's production process and address pertinent observations in the 483s and the FDA Letter. Through October 31, 1999, the Company has spent approximately $700,000 for professional fees and other expenses in connection with the remediation of the FDA's deficiency observations, and estimates it could spend an additional $200,000 to $500,000 in connection with the remediation of the FDA's deficiency observations. 10 In view of the Company's working capital position and anticipated future profitable operations, although there can be no assurances, 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. The Company and its consultant believe that it has made considerable progress in addressing FDA concerns. However, if the Company is unable to further address and remedy the observations listed in the 483s and the FDA Letter, it will be required to suspend or terminate operations. Due to the uncertainty of the outcome of the FDA issue, the Company's former independent auditors, KPMG LLP, noted in their report on the Company's consolidated financial statements as of and for the year ended January 31, 1999 that the FDA Letter raises substantial doubt about the Company's ability to continue as a going concern. Year 2000 Compliance - -------------------- The Company is preparing its computer systems and hardware to contend with the issues related to the year 2000 ("Year 2000"). The Year 2000 issue results from computer programs being written using two digits rather than four to define the applicable year and to assume that the first two digits of a year were 19. As the year 2000 approaches, systems using such programs may recognize a date ending in "00" as the year 1900 rather than the year 2000, and so may not accurately process certain date-based information. To the extent that the Company's software applications contain source code that is unable to interpret appropriately the upcoming calendar year 2000 and beyond, some level of modification or replacement of such applications will be necessary to avoid system failures and the temporary inability to process transactions or engage in other normal business activities. The Company believes that all of its mission-critical computer programs and hardware are currently Year 2000 compliant. The Company has also assessed the risk relating to manufacturing equipment which may be impacted by the Year 2000 issue. The Company believes that its manufacturing equipment will not be affected by the Year 2000 issue because its manufacturing equipment's embedded chips and software programs, if any, are not date critical. The Company has identified relationships with third parties, including customers, vendors, suppliers and service providers, which the Company believes are critical to its business operations. The Company's major customer has informed it that it believes it is Year 2000 compliant. Based on its assessment to date of the Year 2000 readiness of its key customers, suppliers, including vendors, service providers and other third parties on which it relies for business operations, the Company believes that these third parties are taking action related to the Year 2000. However, the Company has limited ability to test and control such third parties' Year 2000 readiness, and it cannot provide assurance that failure of such third parties to address the Year 2000 issue will not cause an interruption of the Company's business. The Company will continue to monitor the progress of these third parties in resolving Year 2000 issues. The cost of ensuring Year 2000 compliance is not expected to be material. The Company believes that under a worst-case scenario, it could continue its normal business activities on a manual basis; however, the Company believes its internal computer systems will be Year 2000 compliant. 11 With respect to potential Year 2000 failures of its vendors and suppliers, the Company plans to mitigate this risk by purchasing and storing critical raw materials used in the production process in advance, which the Company believes will enable it to continue normal operations for several months. There can be no assurance that the Company will fully achieve Year 2000 compliance in a timely manner, that the Company will not have to increase significantly its expenditures relating to any such non-compliance, or that its business will not be materially adversely affected by any such non-compliance. New Reporting Standard - ---------------------- In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Management does not believe the adoption of this statement will have a material effect on the Company's consolidated financial statements. This statement will not be adopted until February 1, 2001, the start of fiscal year 2002. PART II - OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity, Capital Resources, and Change in Financial Condition." 12 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, 1999 ----------------- By:/s/ Edwin H. Wegman ----------------- Edwin H. Wegman Chairman and President Date: December 15, 1999 ----------------- By: /s/ Albert Horcher ----------------- Albert Horcher Treasurer, Principal Financial and Chief Accounting Officer 13 EX-27 2 FDS --
5 6-MOS Jan-31-2000 Feb-01-1999 Oct-31-1999 3,839,377 1,090,163 2,172,894 0 1,642,879 91,847 3,749,844 2,589,973 11,383,418 1,419,842 0 0 0 4,891 11,414,479 11,383,418 4,781,979 4,781,979 1,611,036 1,611,036 1,377,348 0 3,207 (212,284) (225,250) 12,966 0 0 0 0 0.00 0.00
-----END PRIVACY-ENHANCED MESSAGE-----