Table
        of Contents
  
  **UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **FORM
        10-QSB**
 
 (Mark
        One)
 [X]
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
        ACT OF 1934
 **For
        the quarterly period ended June 30, 2007**
 
 [
        ]
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT
        OF
        1934
 For
        the
        transitional period from __________________ to __________________
 
 **BIOSPECIFICS
                  TECHNOLOGIES CORP.**
 (Exact
        name of small business issuer as specified in its charter)
 
 **Delaware**
              **0-19879**
              **11-3054851**(State
                  or other jurisdiction
              (Commission
                  file number)
              (I.R.S.
                  Employerof
                  incorporation or organization)
              
              Identification
                  No.)
  **35
        Wilbur Street**
 **Lynbrook,
        NY 11563**
 (Address
        of principal executive office)
 
 **516.593.7000**
 (Issuer’s
        telephone number)
 
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or 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
        [  ]  No  [X]
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
  Yes
        [  ]  No  [X]
  State
        the
        number of shares outstanding of the issuer's classes of common equity, as
        of the
        latest practicable date:
 
 Class
                  of Stock
              Outstanding September
                  4, 2007Common
                  Stock ($.001 par value)
              5,316,101
  
 Transitional
        Small Business Disclosure Format (Check one): Yes [  ] No
        [X]


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**BIOSPECIFICS
      TECHNOLOGIES CORP.**





**TABLE
      OF CONTENTS**





**Page****PART
                  I – FINANCIAL INFORMATION****ITEM
                  1.**
              Consolidated
                  Financial
                  Statements
              2Consolidated
                  Balance Sheet as of June 30,
                  2007
              2Consolidated
                  Statements of Operations for
                  the Three and Six Months Ended June 30, 2007 and 2006
              3Consolidated
                  Statements of Cash Flows for
                  the Six Months Ended June 30, 2007 and 2006
              4Notes
                  to Consolidated Financial
                  Statements
              5**ITEM
                  2.**
              Management’s
                  Discussion and
                  Analysis
              13**ITEM
                  3.**
              Controls
                  and Procedures
              20**PART
                  II – OTHER INFORMATION**
              20**ITEM
                  1.**
              Legal
                  Proceedings
              20**ITEM
                  2.**
              Unregistered
                  Sales of Equity Securities and Use
                  of Proceeds
              20**ITEM
                  3.**
              Defaults
                  Upon Senior
                  Securities
              20**ITEM
                  4.**
              Submission
                  of Matters to a Vote of Security
                  Holders
              20**ITEM
                  5.**
              Other
                  Information
              20**ITEM
                  6.**
              Exhibits
              20









**Introductory
      Comments – Terminology**





Throughout
      this quarterly report on Form 10-QSB (this “Report”), the terms “BioSpecifics,”
“Company,” “we,” “our,” and “us” refer to BioSpecifics Technologies Corp. and
      its subsidiaries, Advance Biofactures Corporation (“ABC-NY”), which it still
      currently owns, Advance Biofactures of Curacao, N.V. (“ABC-Curacao”), which was
      sold in 2006, and BioSpecifics Pharma GmbH, which was liquidated in 2005. We
      also owned two dormant companies, BioSpecifics N.V. and Biota N.V., which were
      liquidated in January 2007.





**Introductory
      Comments – Forward Looking Statements**





This
      Report includes “forward-looking statements” within the meaning of
      Section 27A of the Securities Act of 1933, as amended, and Section 21E
      of the Securities and Exchange Act of 1934, as amended. All statements other
      than statements of historical facts are “forward looking statements” for
      purposes of these provisions, including any projections of earnings, revenues
      or
      other financial items, any statements of the plans and objectives of management
      for future operations, any statements concerning proposed new products or
      licensing or collaborative arrangements, any statements regarding future
      economic conditions or performance, and any statement of assumptions underlying
      any of the foregoing. In some cases, forward-looking statements can be
      identified by the use of terminology such as “may,” “will,” “expects,” “plans,”
“anticipates,” estimates,” “potential,” or “continue” or the negative thereof or
      other comparable terminology. Although we believe that the expectations
      reflected in the forward-looking statements contained in this Report are
      reasonable, there can be no assurance that such expectations or any of the
      forward-looking statements will prove to be correct, and actual results could
      differ materially from those projected or assumed in the forward-looking
      statements. Our future financial condition and results of operations, as well
      as
      any forward-looking statements, are subject to inherent risks and uncertainties,
      including but not limited to the risk factors set forth below, and for the
      reasons described elsewhere in this Report. All forward-looking statements
      and
      reasons why results may differ included in this Report are made as of the date
      hereof, and we assume no obligation to update these forward-looking statements
      or reasons why actual results might differ.








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**PART
      I– FINANCIAL INFORMATION**





**Item
      1:  Consolidated Financial
      Statements**





**BIOSPECIFICS
                TECHNOLOGIES CORP. AND SUBSIDIARIES****Consolidated
                Balance
                Sheets**




**June
                30,****2007**(unaudited)**Assets****Current
                assets:**


Cash
                and cash equivalents
            
            $
            2,624,246Accounts
                receivable, net
            
            
            47,058Prepaid
                expenses and other current assets
            
            
            124,162**Total
                current assets**
            
            ****
            **2,795,466**Property,
                plant and equipment, net
            
            
            51,751**Total
                assets**
            
            ****
            **2,847,217****Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable and accrued expenses
            
            
            1,909,453Deferred
                revenue
            
            
            1,437,116Accrued
                tax and other accrued liabilities of discontinued
                operations
            
            
            78,138**Total
                current liabilities**
            
            ****
            **3,424,707**Long-term
                deferred revenue
            
            
            3,625,192**Stockholders'
                equity (deficit):**Series
                A Preferred stock, $.50 par value, 700,000 shares authorized; none
                outstanding
            
            
            -Common
                stock, $.001 par value; 10,000,000 shares authorized; 5,447,368 and
              5,365,816
                shares issued and outstanding at June 30, 2007 and December 31,
              2006,
                respectively
            
            
            5,447Additional
                paid-in capital
            
            
            4,303,927Retained
                earnings (deficit)
            
            
            (7,192,325
            )Treasury
                stock, 131,267 shares at cost at June 30, 2007 and December 31,
                2006
            
            
            (693,957
            )Notes
                receivable from former CEO and Chairman and other related
                party
            
            
            (625,774
            )**Total
                stockholders' equity (deficit)**
            
            ****
            **(4,202,682**
            **)****Total
                liabilities and stockholders’ equity**
            
            **$**
            **2,847,217**


**See
                accompanying notes to consolidated financial
                statements**







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**BIOSPECIFICS
                TECHNOLOGIES CORP. AND SUBSIDIARIES****Consolidated
                Statements of
                Operations**(unaudited)


**Three
                Months Ended**
              **June
                30,**
            
            
            **Six
                Months Ended**
              **June
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Revenues:**Net
                sales
            
            $
            10,832
            
            
            $
            6,883
            
            
            $
            11,932
            
            
            $
            13,676Licensing
                fees
            
            
            289,279
            
            
            
            289,279
            
            
            
            578,558
            
            
            
            578,558Consulting
                fees
            
            
            70,000
            
            
            
            70,000
            
            
            
            140,000
            
            
            
            93,333370,111
            
            
            
            366,162
            
            
            
            730,490
            
            
            
            685,567**Costs
                and expenses:**General
                and administrative
            
            
            812,947
            
            
            
            845,271
            
            
            
            1,910,414
            
            
            
            1,817,666Research
                and development
            
            
            72,060
            
            
            
            247,847
            
            
            
            458,419
            
            
            
            993,212885,007
            
            
            
            1,093,118
            
            
            
            2,368,833
            
            
            
            2,810,878**Operating
                loss from continuing operations**
            
            
            (514,896
            )
            
            
            (726,956
            )
            
            
            (1,638,343
            )
            
            
            (2,125,311
            )**Other
                income (expense):**Interest
                income
            
            
            36,894
            
            
            
            64,313
            
            
            
            78,143
            
            
            
            82,138Interest
                expense
            
            
            -
            
            
            
            (16
            )
            
            
            -
            
            
            
            (521
            )36,894
            
            
            
            64,297
            
            
            
            78,143
            
            
            
            81,617Loss
                from continuing operations before benefit (expense) for income
                tax
            
            
            (478,002
            )
            
            
            (662,659
            )
            
            
            (1,560,200
            )
            
            
            (2,043,694
            )Income
                tax benefit (expense)
            
            
            -
            
            
            
            -
            
            
            
            (3,600
            )
            
            
            -**Net
                income (loss) from continuing operations**
            
            ****
            **(478,002**
            **)**
            
            ****
            **(662,659**
            **)**
            
            ****
            **(1,563,800**
            **)**
            
            ****
            **(2,043,694**
            **)****Discontinued
                operations:**Net
                loss from discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,115,704
            )Net
                gain on the sale of assets
            
            
            -
            
            
            
            (31
            )
            
            
            -
            
            
            
            3,601,071**Net
                income (loss)**
            
            **$**
            **(478,002**
            **)**
            
            **$**
            **(662,690**
            **)**
            
            **$**
            **(1,563,800**
            **)**
            
            **$**
            **441,673****Basic
                net income (loss) per share:**From
                continuing operations
            
            $
            (0.09
            )
            
            $
            (0.13
            )
            
            $
            (0.30
            )
            
            $
            (0.39
            )From
                discontinued operations
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            0.48**Basic
                net income (loss) per share**
            
            **$**
            **(0.09**
            **)**
            
            **$**
            **(0.13**
            **)**
            
            **$**
            **(0.30**
            **)**
            
            **$**
            **0.09****Diluted
                net income (loss) per share:**From
                continuing operations
            
            $
            (0.09
            )
            
            $
            (0.13
            )
            
            $
            (0.30
            )
            
            $
            (0.39
            )From
                discontinued operations
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            0.48**Diluted
                net income (loss) per share**
            
            **$**
            **(0.09**
            **)**
            
            **$**
            **(0.13**
            **)**
            
            **$**
            **(0.30**
            **)**
            
            **$**
            **0.09****Shares
                used in computation of basic net income (loss) per
                share**
            
            ****
            **5,275,337**
            
            
            ****
            **5,231,679**
            
            
            ****
            **5,255,354**
            
            
            ****
            **5,205,147****Shares
                used in computation of diluted net income (loss) per
                share**
            
            ****
            **5,275,337**
            
            
            ****
            **5,231,679**
            
            
            ****
            **5,255,354**
            
            
            ****
            **5,205,295****See
                accompanying notes to consolidated financial
                statements**




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**BIOSPECIFICS
                TECHNOLOGIES CORP. AND SUBSIDIARIES****Consolidated
                Statements of Cash
                Flows**(unaudited)


**Six
                Months Ended June 30,****Cash
                flows from operating activities:**
            
            **2007**
            
            
            **2006**Net
                loss
            
            $
            (1,563,800
            )
            
            $
            (2,043,694
            )Adjustments
                to reconcile net loss to net cash providedby
                operating activities:Depreciation
                and amortization
            
            
            16,072
            
            
            
            19,412Issuance
                of restricted stock for services
            
            
            -
            
            
            
            7,875Stock-based
                compensation expense
            
            
            248,144
            
            
            
            423,762Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (234
            )
            
            
            (27,457
            )Prepaid
                expenses and other current assets
            
            
            (75,448
            )
            
            
            (32,499
            )Accounts
                payable and accrued expenses
            
            
            194,556
            
            
            
            541,009Employee
                bonus plan liability
            
            
            -
            
            
            
            (6,600
            )Deferred
                revenue
            
            
            (318,558
            )
            
            
            (246,891
            )**Net
                cash provided by (used in) operating activities from continuing
                operations**
            
            ****
            **(1,499,269**
            **)**
            
            ****
            **(1,365,083**
            **)****Net
                cash provided by (used in) discontinued
                operations**
            
            ****
            **(321,037**
            **)**
            
            ****
            **982,502****Net
                cash provided by investing activities from discontinued
                operations**
            
            ****
            **-**
            
            
            ****
            **6,058,713****Cash
                flows from financing activities:**Proceeds
                received from stock option exercises
            
            
            77,374
            
            
            
            -Payment
                to minority
                shareholders
            
            
            -
            
            
            
            (83,406
            )**Net
                cash provided by (used in) financing activities from continuing
                operations**
            
            ****
            **77,374**
            
            
            ****
            **(83,406**
            **)****Net
                cash used in financing activities from discontinued
                operations**
            
            ****
            **-**
            
            
            ****
            **-**Increase
                in cash and cash equivalents
            
            
            (1,742,932
            )
            
            
            5,592,726Cash
                and cash equivalents at beginning of year
            
            
            4,367,178
            
            
            
            539,380**Cash
                and cash equivalents at end of period**
            
            **$**
            **2,624,246**
            
            
            **$**
            **6,132,106****Supplemental
                disclosures of cash flow information:**Cash
                paid during the periods for:Interest
            
            $
            -
            
            
            $
            521Taxes
            
            $
            3,600
            
            
            $
            -





**Supplemental
              disclosures of non-cash transactions:**
              In
                March 2007, in full repayment of the $304,398 loan owed to the Company
                by
                Wilbur Street Corporation (“WSC”),
                WSC
                offset $304,398 in back rent due from the Company in repayment of
                the
                loan.  The transaction was recorded by reducing the rent payable by
                $304,398 and the receivable from the former CEO and Chairman by $98,253
                and increasing additional paid in capital by $206,145.For
              the year ended December 31, 2006, the Company reduced its liability
              to the
              employee stock bonus plan by issuing $162,300 of common stock. The
              remaining balance of $6,600 was cancelled.In
                March 2006, we sold our topical collagenase business to DFB. In order
                to
                effectuate the transaction with DFB, we repurchased all of the outstanding
                shares of ABC-NY and ABC-Curacao held by minority shareholders in
                exchange
                for a combination of approximately $83,000 in cash and 102,574 restricted
                shares of our treasury stock.**See
                accompanying notes to consolidated financial
                statements**








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**BIOSPECIFICS
      TECHNOLOGIES CORP.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**June
      30, 2007**


**(Unaudited)**





**1.    ORGANIZATION
      AND DESCRIPTION OF BUSINESS**







We
      are a
      biopharmaceutical company that has been involved in the development of
      injectable collagenase for multiple indications. We have a development and
      license agreement with Auxilium Pharmaceuticals, Inc. (“Auxilium”) for
      injectable collagenase (which Auxilium has named “XIAFLEX TM”
(formerly
      known
      as “AA4500”)) for clinical indications in Dupuytren’s disease, Peyronie’s
      disease and frozen shoulder (*adhesive capsulitis*), and Auxilium has an
      option to acquire additional indications that we may pursue, including cellulite
      and lipomas.  Injectable collagenase has completed a pivotal clinical
      trial for the treatment of Dupuytren’s disease. A Phase III clinical trial had
      been initiated and was put on clinical hold.  In a press release dated
      September 10, 2007, Auxilium announced that it has restarted
      its  Phase III clinical trials for XIAFLEX TMfor the
      treatment
      of Dupuytren’s disease.







**DISCONTINUED
      OPERATIONS**





Prior
      to
      March 2006, we were a party to an exclusive license agreement with Abbott
      Laboratories, Inc. and its subsidiaries (“Abbott”), for the production of the
      active pharmaceutical ingredient (“API” or “API Enzyme”) for topical
      collagenase. In March 2006, we sold our topical collagenase business to DFB
      Biotech, Inc. and its affiliates (“DFB”), including all rights to the exclusive
      license agreement and we were released of any obligations
      thereunder.





In
      addition, DFB acquired all of the issued and outstanding shares of Advance
      Biofactures of Curacao, N.V. (“ABC-Curacao“), pursuant to the Asset Purchase
      Agreement (the “Asset Purchase Agreement”) between us, DFB and Advance
      Biofactures Corp. (“ABC-NY”). ABC-Curacao manufactured the API Enzyme, which in
      its final formulation was marketed by Abbott. The operating results of
      ABC-Curacao and certain operations of ABC-NY have been classified as
      discontinued operations in the Consolidated Financial Statements for all periods
      presented.





At
      the
      closing of the Asset Purchase Agreement, DFB (i) acquired from us certain
      inventory and manufacturing equipment used in the topical collagenase business,
      (ii) was granted a perpetual royalty free license to use, solely in connection
      with the topical collagenase business, certain intangible assets retained by
      us
      and (iii) was granted the right (for a limited period of time) to use, solely
      in
      connection with the topical collagenase business, certain tangible assets
      retained by us. As part of the sale, we transferred to DFB our FDA manufacturing
      license.





As
      consideration for the purchased assets including our API inventory we received
      $8 million in cash, DFB’s assumption of certain liabilities, and the right to
      receive earn out payments in the future based on sales of certain products.
      In
      connection with the closing of the Asset Purchase Agreement, we agreed to
      provide certain technical assistance and certain transition services to DFB
      in
      consideration of fees and costs totaling over $1.4 million. DFB paid to us
      a
      partial payment of $425,000 in respect to the technical assistance to be
      provided by us. The consulting obligations generally expire during March
      2011.





On
      January 8, 2007, we entered into an Amendment to the Asset Purchase Agreement
      with ABC-NY and DFB (the “Amendment”) in order to clarify the intent of the
      parties with respect to certain provisions of




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the
      Asset
      Purchase Agreement and the parties are discussing further clarifications to
      address certain concerns raised by Auxilium.




**2.    SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




**Basis
      of Presentation**




The
      accompanying consolidated financial statements are unaudited, but include all
      adjustments (consisting only of normal, recurring adjustments) which we consider
      necessary for a fair presentation of our financial position at such dates and
      the operating results and cash flows for those periods. Although we believe
      that
      the disclosures in our financial statements are adequate to make the information
      presented not misleading, certain information normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      (“GAAP”) in the United States (the “U.S.”) has been condensed or omitted
      pursuant to the rules and regulations of the Securities and Exchange Commission
      (the “SEC”) for quarterly reporting.





The
      information included in this Report should be read in conjunction with the
      consolidated financial statements and accompanying notes included in our Annual
      Report on Form 10-KSB for the year ended December 31, 2006 filed with the
      SEC on September 26, 2007 and our Quarterly Report on Form 10QSB for the quarter
      ended March 31, 2007 filed with the SEC on September 26, 2007. The Consolidated
      Balance Sheet as of December 31, 2006 is derived from our audited
      consolidated financial statements as of that date.





**Principles
      of Consolidation**





The
      unaudited consolidated financial statements include the accounts of the Company
      and its majority-owned subsidiaries, Advance Biofactures Corp., (“ABC-NY”),
      which it still currently owns, Advance Biofactures of Curacao, N.V.
      (“ABC-Curacao”) which was sold in 2006, BioSpecifics of Curacao N.V. and Biota
      N.V. and its wholly-owned subsidiary, which were liquidated in January 2007,
      BioSpecifics Pharma GmbH ("Bio Pharma") of Germany, which was liquidated during
      December 2005, after elimination of inter-company accounts and transactions.
      Due
      to the sale of Advanced Biofactures of Curacao N.V. in March 2006 to DFB all
      accounts of this former subsidiary and certain operations of ABC-NY are
      classified as discontinued operations in all periods presented.





**Management
      Estimates**





The
      preparation of unaudited consolidated financial statements in conformity with
      accounting principles generally accepted in the U.S. requires the use of
      management’s estimates and assumptions that affect the amounts reported in the
      unaudited consolidated financial statements and accompanying notes. Actual
      results could differ from those estimates.





**Revenue
      Recognition**




We
      recognize revenues resulting from product sales, from licensing and use of
      our
      technology, and from other services we sometimes perform in connection with
      the
      licensed technology under the guidance of Staff Accounting Bulletin (SAB)
      No. 104, “Revenue Recognition.”




If
      we
      determine that separate elements exist in a revenue arrangement under Emerging
      Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple
      Deliverables” (EITF 00-21), we recognize revenue for delivered elements only
      when the fair values of undelivered elements are known, when the associated
      earnings process is complete, when payment is reasonably assured and, to the
      extent the milestone amount relates to our performance obligation, when our
      customer confirms that we have met the requirements under the terms of the
      agreement.




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Revenues,
      and their respective treatment for financial reporting purposes, are as
      follows:





***Product
      Sales***





We
      recognize revenue from product sales when there is persuasive evidence that
      an
      arrangement exists, title passes, the price is fixed or determinable and
      collectability is reasonably assured. No right of return exists for our products
      except in the case of damaged goods. To date, we have not experienced any
      significant returns of our products.





Net
      sales
      include the sales of the API Enzyme that are recognized at the time the product
      is shipped to customers for laboratory use.





***License
      Fees***





We
      include revenue recognized from upfront licensing and milestone payments in
      “License Fees” in our unaudited consolidated statements of operations in this
      Report.





*Upfront
      License Fees*





We
      generally recognize revenue from upfront fees when the agreement is signed,
      we
      have completed the earnings process and we have no ongoing performance
      obligation with respect to the arrangement. Nonrefundable upfront technology
      license fees for product candidates for which we are providing continuing
      services related to product development are deferred and recognized as revenue
      over the development period.





*Milestones*





Milestones,
      in the form of additional license fees, typically represent nonrefundable
      payments to be received in conjunction with the achievement of a specific event
      identified in the contract, such as completion of specified development
      activities and/or regulatory submissions and/or approvals. We believe that
      a
      milestone represents the culmination of a distinct earnings process when it
      is
      not associated with ongoing research, development or other performance on our
      part. We recognize such milestones as revenue when they become due and
      collection is reasonably assured. When a milestone does not represent the
      culmination of a distinct earnings process, we recognize revenue in a manner
      similar to that of a nonrefundable upfront license fee.





The
      timing and amount of revenue that we recognize from licenses of technology,
      either from upfront fees or milestones where we are providing continuing
      services related to product development, is primarily dependent upon our
      estimates of the development period. We define the development period as the
      point from which research activities commence up to regulatory approval of
      either our, or our partners’, submission assuming no further research is
      necessary. As product candidates move through the development process, it is
      necessary to revise these estimates to consider changes to the product
      development cycle, such as changes in the clinical development plan, regulatory
      requirements, or various other factors, many of which may be outside of our
      control. Should the FDA or other regulatory agencies require additional data
      or
      information, we would adjust our development period estimates accordingly.
      The
      impact on revenue of changes in our estimates and the timing thereof is
      recognized prospectively over the remaining estimated product development
      period.




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***Consulting
      and Technical Assistance Services***





We
      recognize revenues from a consulting and technical assistance contract primarily
      as a result of our agreement with DFB. Consulting revenues are recognized
      ratably over the term of the contract. The consulting obligations to DFB
      generally expire during March 2011.





**Stock-Based
      Compensation**





Under
      the
      provisions of Statement of Financial Accounting Standards (SFAS)
      No. 123(R), we estimate the fair value of our employee stock awards at the
      date of grant using the Black-Scholes option-pricing model, which requires
      the
      use of certain subjective assumptions. The most significant of these assumptions
      are our estimates of the expected volatility of the market price of our stock
      and the expected term of the award. When establishing an estimate of the
      expected term of an award, we consider the vesting period for the award, our
      recent historical experience of employee stock option exercises (including
      forfeitures) and the expected volatility. As required under the accounting
      rules, we review our valuation assumptions at each grant date and, as a result,
      our valuation assumptions used to value employee stock-based awards granted
      in
      future periods may change.




Further,
      SFAS 123(R) requires that employee stock-based compensation costs be recognized
      over the requisite service period, or the vesting period, in a manner similar
      to
      all other forms of compensation paid to employees. The allocation of employee
      stock-based compensation costs to each operating expense line are estimated
      based on specific employee headcount information at each grant date and
      estimated stock option forfeiture rates and revised, if necessary, in future
      periods if actual employee headcount information or forfeitures differ
      materially from those estimates. As a result, the amount of employee stock-based
      compensation costs we recognize in each operating expense category in future
      periods may differ significantly from what we have recorded in the current
      period.





Employee
      stock-based compensation expense recognized under SFAS 123(R) was as
      follows:





**Three Months Ended**
              **June 30,**
            
            
            **Six
                Months Ended**
              **June 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Research
                and development
            
            
            $            1,660
            
            
            
            $                 -
            
            
            
            $         4,240
            
            
            $
            60,605General
                and administrative
            
            
            107,937
            
            
            
            4,785
            
            
            
            243,904
            
            
            
            363,155Total
                stock-based compensation expense
            
            
            $       109,597
            
            
            
            $         4,785
            
            
            
            $    248,144
            
            
            
            $    423,760





*Stock
      Option Activity*




A
      summary
      of our stock option and warrant activity during the six months ended June 30,
      2007 is presented below:




**Option**
            
            **Total Number**
              **of
                Shares**
            
            
            **Weighted-Average**
              **Exercise
                Price**Outstanding
                as of December 31, 2006
            
            1,281,125
            
            
            $1.17Granted
            
            152,000
            
            
            $4.30Forfeited
            
            (32,273)
            
            
            $1.99Exercised
            
            (81,552)
            
            
            $1.14Expired
            
            -
            
            
            -Outstanding
                as of June 30, 2007
            
            1,319,300
            
            
            $1.32Exercisable
                as of June 30, 2007
            
            1,016,300
            
            
            $1.51




The
      weighted-average grant-date fair value for options granted during the six months
      ended June 30, 2007 was $4.30 per share and $1.02 per share in the corresponding
      six month period of 2006. During the six




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months
      ended June 30, 2007 and 2006, $77,374 and zero was received from stock options
      exercised by employees, respectively.




The
      aggregate intrinsic value of options outstanding and exercisable as of June
      30,
      2007 was approximately $3,191,182. Aggregate intrinsic value represents the
      total pre-tax intrinsic value, based on the closing prices of our common stock
      of $4.65 on June 30, 2007, which would have been received by the option holders
      had all option holders exercised their options as of that date. Total
      unrecognized compensation cost related to nonvested stock options outstanding
      as
      of June 30, 2007 was $397,608 which we expect to recognize over a
      weighted-average period of 1.2 years.





**Recent
      Accounting Pronouncements**





In
      July
      2006, FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes,” (“SFAS No. 48”) which is effective for fiscal years beginning
      after December 15, 2006. The Interpretation prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      The
      Interpretation also provides guidance on derecognition, classification, interest
      and penalties, accounting for interim periods, disclosure, and transition.
      We
      adopted the Interpretation on January 1, 2007. The application of SFAS No.
      48 is not expected to have a material effect on our financial position
      and results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”). SFAS No. 157 provides a framework for measuring fair value in
      accordance with GAAP, and expands disclosures regarding fair value measurements
      and the effect on earnings. SFAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those fiscal years. We are in the process of evaluating the impact SFAS
      No. 157 will have on our financial position and results of
      operations.





**3.    DISCONTINUED
      OPERATIONS**





Prior
      to
      March 2006, we were a party to an exclusive license agreement with Abbott for
      the production of the API for topical collagenase.In
      March 2006 we sold our topical collagenase business to DFB, including all rights
      to the exclusive license agreement and we were released of any obligations
      thereunder.





In
      addition, DFB acquired all of the issued and outstanding shares of ABC-Curacao,
      pursuant to the Asset Purchase Agreement between us, DFB and ABC-NY. ABC-Curacao
      manufactured the API Enzyme, which in its final formulation was marketed by
      Abbott.





At
      the
      closing of the Asset Purchase Agreement, DFB (i) acquired from us certain
      inventory and manufacturing equipment used in the topical collagenase business,
      (ii) was granted a perpetual royalty free license to use, solely in connection
      with the topical collagenase business, certain intangible assets retained by
      us
      and (iii) was granted the right (for a limited period of time) to use, solely
      in
      connection with the topical collagenase business, certain tangible assets
      retained by us. As part of the sale, we transferred to DFB our FDA manufacturing
      license.





As
      consideration for the purchased assets including our API inventory we received
      $8 million in cash, DFB’s assumption of certain liabilities, and the right to
      receive earn out payments in the future based on sales of certain products.
      In
      connection with the closing of the Asset Purchase Agreement, we agreed to
      provide certain technical assistance and certain transition services to DFB
      in
      consideration of fees and costs totaling over $1.4 million. DFB paid to us
      a
      partial payment of $425,000 in respect to the technical assistance to be
      provided by us. In March 2007, DFB paid us an additional $400,000 under the
      terms of the agreement. The consulting obligations generally expire during
      March
      2011.




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For
      accounting purposes, the operating results of ABC-Curacao and certain operations
      of ABC-NY have been classified as discontinued operations in the Consolidated
      Statement of Operations for all periods presented.




**Three
                  Months Ended**
                **June
                  30,**
              
              
              **Six
                  Months Ended**
                **June
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Income
                  (loss) from discontinued operations
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (1,115,704
              )Pre-tax
                  gain (loss) on disposal of discontinued operations (1)
              
              
              -
              
              
              
              (31
              )
              
              
              -
              
              
              $
              3,601,071Income
                  (loss) from discontinued operations
              
              $
              -
              
              
              $
              (31
              )
              
              $
              -
              
              
              $
              2,485,367







(1)
      We
      did not record any tax liability associated with the gain on the disposal of
      discontinued operations in 2006 due to our large net operating loss
      carryforwards.




**4.NET
      LOSS PER SHARE**




In
      accordance with SFAS No. 128, “Earnings Per Share” (SFAS 128), basic net
      loss per share amount is computed using the weighted-average number of shares
      of
      common stock outstanding during the periods presented, while diluted net
      loss per share is computed using the sum of the weighted-average number of
      common and common equivalent shares outstanding. Common equivalent shares used
      in the computation of diluted earnings per share result from the assumed
      exercise of stock options, and warrants using the if converted method. For
      the
      three and six months ended June 30, 2007 and 2006, we incurred a net loss from
      continuing operations and, as such, we did not include the effect of outstanding
      stock options or warrants in the diluted net loss per share calculations, as
      their effect would have been anti-dilutive.





The
      following table summarizes the number of common equivalent shares excluded
      from
      the calculation of diluted net loss per share from continuing operations
      reported in the consolidated statement of operations as their effect would
      have
      been anti-dilutive:




**Three
                Months Ended**
              **June
                30,**
            
            
            **Six
                Months Ended**
              **June
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Stock
                options
            
            
            1,266,967
            
            
            
            1,061,925
            
            
            
            1,235,384
            
            
            
            996,925Warrants
            
            
            10,000
            
            
            
            10,000
            
            
            
            10,000
            
            
            
            10,000Total
            
            
            1,276,967
            
            
            
            1,071,123
            
            
            
            1,245,384
            
            
            
            1,006,925




**5.
      OTHER ACCRUED LIABILITIES**




Other
      accrued liabilities consisted of the following:




**June
                    30,**
                  **2007**
              
              
              **December
                    31,**
                  **2006**Trade
                  accounts payable and accrued expenses
              
              $
              1,681,727
              
              
              $
              1,751,014Accrued
                  legal and other professional fees
              
              
              125,800
              
              
              
              120,030Accrued
                  payroll and related costs
              
              
              101,926
              
              
              
              148,252Total
              
              $
              1,909,953
              
              
              $
              2,019,296




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**6.
      INCOME TAXES**





We
      recorded minimum income tax provisions for the three and six month period ended
      June 30, 2007 of $3,600 and zero for the comparable period of 2006.





**7.
      RELATED PARTY TRANSACTIONS**





In
      March
      2007, in full repayment of the $304,398 loan owed to the Company by Wilbur
      Street Corporation (“WSC”), WSC offset $304,398 in back rent due from the
      Company in repayment of the loan.





**8.SUBSEQUENT EVENTS**




None.




**Item
      2:  Management’s Discussion and
      Analysis
      or Plan of Operation**





*The
      following discussion should be read in conjunction with the Financial Statements
      and related notes thereto included elsewhere in this Report.*





***Overview***




We
      are a
      biopharmaceutical company that has been involved in the development of
      injectable collagenase for multiple indications. We have a development and
      license agreement with Auxilium for injectable collagenase (which Auxilium
      has
      named “XIAFLEX TM”) for clinical
      indications in Dupuytren’s disease, Peyronie’s disease and frozen shoulder
      (*adhesive capsulitis*), and Auxilium has an option to acquire additional
      indications that we may pursue, including cellulite and lipomas. A Phase III
      clinical trial had been initiated and was put on clinical hold.  In a
      press release dated September 10, 2007, Auxilium announced that it has restarted
      its Phase III clinical trials for XIAFLEX TMfor the
      treatment
      of Dupuytren’s disease.




In
      March
      2006, we sold the collagenase topical business to DFB to refocus our efforts
      on
      the clinical indications related to our collagenase injection business. Sales
      of
      this topical collagenase had declined significantly since the peak year of
      1999.
      Under the terms of the Asset Purchase Agreement, DFB assumed ownership and
      operation of our wholly-owned subsidiary, ABC-Curacao, where the API is
      manufactured, along with certain other assets, including our FDA manufacturing
      license.




Prior
      to
      the sale of our collagenase topical business in March 2006, we had been in
      the
      business of manufacturing the API for a topical collagenase prescription
      product.  This topical collagenase product is a FDA approved biologic
      product indicated for debridement of chronic dermal ulcers and severely burned
      areas.  Under the terms of our agreement with Abbott, Abbott
      compounded the API into a topical collagenase ointment utilizing the API Enzyme
      manufactured by us. The topical collagenase was sold primarily to long-term
      care
      centers.




**Outlook**




We
      foresee the potential to generate income from limited sources in the next
      several years. Under the terms of our agreement with DFB, we are scheduled
      to
      receive certain contractual anniversary payments and, if DFB exceeds a certain
      sales target, we would be entitled to an earn out on sales. Under the terms
      of
      our agreement with Auxilium, we may receive milestone payments upon their
      achieving certain regulatory progress and if Auxilium elects to pursue
      additional indications for injectable collagenase (“Additional
      Indications”).  In addition, as a result of our transaction with DFB
      in the first quarter of




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2006,
      our
      costs have been significantly reduced due mainly to the reduction in our
      workforce.  Based on our current business model, we expect to have
      adequate cash reserves until the third quarter of 2008. In the longer term,
      a
      significant portion of our revenues are tied directly to the success of Auxilium
      in commercializing XIAFLEX TM.




**Significant
      Risks**





We
      are
      dependent to a significant extent on third parties, and our principal licensee,
      Auxilium, may not be able to successfully develop products, obtain required
      regulatory approvals, manufacture products at an acceptable cost, in a timely
      manner and with appropriate quality, or successfully market products or maintain
      desired margins for products sold, and as a result we may not achieve sustained
      profitable operations.





**Critical
      Accounting Policies, Estimates and Assumptions**





The
      preparation of unaudited consolidated financial statements in conformity with
      accounting principles generally accepted in the U.S. requires management to
      make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the unaudited consolidated financial statements and the reported amounts of
      revenues and expenses during the reporting period. These estimates are based
      on
      historical experience and on various other assumptions that we believe are
      reasonable under the circumstances. The information at June 30, 2007 and for
      the
      three and six months ended June 30, 2007 and 2006 is unaudited but includes
      all
      adjustments (consisting only of normal recurring adjustments) which, in the
      opinion of management, are necessary to state fairly the financial information
      set forth herein. The December 31, 2006 balance sheet amounts and
      disclosures included herein have been derived from the Company’s
      December 31, 2006 audited consolidated financial statements. The interim
      results are not necessarily indicative of results to be expected for the full
      fiscal year. These unaudited consolidated financial statements should be read
      in
      conjunction with the audited consolidated financial statements for the years
      ended December 31, 2006 and 2005 included in the Company’s Form 10-KSB
      filed with the SEC on September 26, 2007 and our Quarterly Report on Form 10QSB
      for the quarter ended March 31, 2007 filed with the SEC on September 26, 2007.
      While our significant accounting policies are described in more detail in the
      notes to our unaudited consolidated financial statements, we believe the
      following accounting policies to be critical to the judgments and estimates
      used
      in the preparation of our unaudited consolidated financial
      statements.





***Revenue
      Recognition****.* We recognize revenues from product sales
      when there is persuasive evidence that an arrangement exists, title passes,
      the
      price is fixed and determinable, and payment is reasonably assured. We currently
      recognize revenues resulting from the licensing and use of our technology and
      from services we sometimes perform in connection with the licensed
      technology.




We
      enter
      into product development licenses, and collaboration agreements that may contain
      multiple elements, such as upfront license fees, and milestones related to
      the
      achievement of particular stages in product development and royalties. As a
      result, significant contract interpretation is sometimes required to determine
      the appropriate accounting, including whether the deliverables specified in
      a
      multiple-element arrangement should be treated as separate units of accounting
      for revenue recognition purposes, and if so, how the aggregate contract value
      should be allocated among the deliverable elements and when to recognize revenue
      for each element.




We
      recognize revenue for delivered elements only when the fair values of
      undelivered elements are known, when the associated earnings process is complete
      and, to the extent the milestone amount relates to our performance obligation,
      when our licensee confirms that we have met the requirements under the terms
      of
      the agreement, and when payment is reasonably assured. Changes in the allocation
      of the contract value between various deliverable elements might impact the
      timing of revenue recognition, but in any event, would not change the total
      revenue recognized on the contract. For example, nonrefundable




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upfront
      product license fees, for product candidates where we are providing continuing
      services related to product development, are deferred and recognized as revenue
      over the development period.





Milestones,
      in the form of additional license fees, typically represent nonrefundable
      payments to be received in conjunction with the achievement of a specific event
      identified in the contract, such as completion of specified clinical development
      activities and/or regulatory submissions and/or approvals. We believe that
      a
      milestone represents the culmination of a distinct earnings process when it
      is
      not associated with ongoing research, development or other performance on our
      part. We recognize such milestones as revenue when they become due and payment
      is reasonably assured. When a milestone does not represent the culmination
      of a
      distinct earnings process, we recognize revenue in a manner similar to that
      of
      an upfront product license fee.





We
      recognize revenues from a consulting and technical assistance contract primarily
      as a result of the Asset Purchase Agreement. Consulting revenues are recognized
      ratably over the term of the contract. The consulting obligations under the
      Asset Purchase Agreement generally expire during March 2011.





***Receivables
      and Deferred Revenue.*******Under our agreement
      with DFB, we agreed to provide certain technical assistance and transitional
      services in consideration of fees and costs totaling over $1.4 million. DFB
      paid
      to us a partial payment of $425,000 in respect to the technical assistance
      to be
      provided by us. In March 2007, DFB paid us an additional $400,000 under the
      terms of the agreement. The consulting obligations generally expire during
      March
      2011.  As of March 31, 2007 the remaining accounts receivable balance
      due was $575,000 for future services and was offset by the associated deferred
      revenues to be recognized in future periods of $575,000.





***Inventory
      and Warranty Provisions*****.** Our inventories are
      stated at the lower of cost or realizable market value. In assessing the
      ultimate realization of inventories, we are required to make judgments as to
      future demand requirements and compare that with the current inventory
      levels.  In March 2006 we sold our topical collagenase business to
      DFB, including certain product inventory. As of a result of this sale our
      product inventory for the three and six months ended June 30, 2007 was
      zero.




***Stock
      Based Compensation*****.** Effective January 1, 2006, we
      account for employee stock-based compensation in accordance with SFAS No. 123,
      “Share Based Payment (Revised 2004)” (“SFAS 123(R)”), which supersedes our
      previous accounting under Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB 25”), and related
      interpretations. We adopted SFAS 123(R) using the modified prospective
      application transition method, which requires that compensation expense be
      recognized in the financial statements for all awards granted after the date
      of
      adoption as well as for existing awards for which the requisite service has
      not
      been rendered as of the date of adoption. The modified prospective transition
      method does not require restatement of prior periods to reflect the impact
      of
      SFAS 123(R).




Under
      the
      provisions of SFAS 123(R), we estimate the fair value of our employee stock
      awards at the date of grant using the Black-Scholes option-pricing model, which
      requires the use of certain subjective assumptions. The most significant
      assumptions are our estimates of the expected volatility of the market price
      of
      our stock and the expected term of the award. Expected volatility is based
      on
      the historical volatility of our common stock. When establishing an estimate
      of
      the expected term of an award, we consider the vesting period for the award,
      our
      historical experience of employee stock option exercises (including forfeitures)
      and the expected volatility. As required under the accounting rules, we review
      our valuation assumptions at each grant date and, as a result, we are likely
      to
      change our valuation assumptions used to value employee stock-based awards
      granted in future periods.





Further,
      SFAS 123(R) requires that employee stock-based compensation costs be recognized
      over the requisite service period, or the vesting period, in a manner similar
      to
      all other forms of compensation paid to employees. The allocation of employee
      stock-based compensation costs to each operating expense line




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are
      estimated based on specific employee headcount information at each grant date
      and estimated stock option forfeiture rates and revised, if necessary, in future
      periods if actual employee headcount information or forfeitures differ
      materially from those estimates. As a result, the amount of employee stock-based
      compensation costs we recognize in each operating expense category in future
      periods may differ significantly from what we have recorded in the current
      period.





**RESULTS
      OF OPERATIONS**





As
        a
        result of selling our topical collagenase business in March 2006, we treated
        this disposition as discontinued operations and reclassified the financial
        information reported for all periods presented. Discontinued operations are
        more
        fully discussed in Note 3 to our consolidated financial statements,
        included in this Report.





**THREE-MONTHS
      ENDED JUNE 30, 2007 AND JUNE 30, 2006**





**Revenues**





*Product
      Revenues, net*





Product
      revenues include the sales of the API Enzyme recognized at the time it is
      shipped to customers. From continuing operations, we had a small amount of
      revenue from the sale of collagenase for laboratory use.  For the
      three months ended June 30, 2007 and 2006 product revenues were $10,832 and
      $6,883, respectively. This increase of $3,949 or 57% was primarily related
      to
      the amount of material required to perform testing by our
      customers.





*Licensing
      Revenues*





For
      each
      of the three months ended June 30, 2007 and 2006 we recognized licensing revenue
      of $289,279.  Licensing revenues recognized are related to the cash
      payments received under the Auxilium Agreement in calendar years 2005 and 2004
      and amortized over the expected development period.





Under
      current accounting guidance, nonrefundable upfront license fees for product
      candidates where we are providing continuing services related to product
      development, are deferred and recognized as revenue over the development period.
      The remaining balance will be recognized over the respective development periods
      or when we determine that we have no ongoing performance
      obligations.





*Consulting
      Services*





We
      recognize revenues from a consulting and technical assistance contract primarily
      as a result of the Asset Purchase Agreement. Consulting revenues are recognized
      ratably over the term of the contract. The consulting obligations under the
      Asset Purchase Agreement generally expire during March 2011. For the three
      months ended June 30, 2007 and 2006 consulting revenues were $70,000 in each
      period.





**Costs
      and Expenses**





*Research
      and Development Activities*





Research
      and development expenses were $72,060 and $247,847 respectively, for the three
      months ended June 30, 2007 and 2006. This decrease of $175,787 or 71% in
      research and development expenses was primarily due to lower external
      development and clinical costs.




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*General
      and Administrative Expenses*





General
      and administrative expenses were $812,947and $845,271 for the three months
      ended
      June 30, 2007 and 2006, respectively. The decrease in general and administrative
      expenses of $32,324 or 11% was lower employee-consulting and administrative
      personnel costs partially offset by increased legal and patent
      fees.





*Other
      Income (expense), net*





Other
      income (expense), net, was $36,894 and $64,297 for the three months ended June
      30, 2007 and 2006, respectively. The decrease in other income, net of $27,403
      or
      43% during the second quarter of 2007 as compared to the 2006 period was
      primarily due to lower invested balances during the 2007 period.




*Income
      Taxes*





The
      expense for income taxes for the three months ended June 30, 2007 and 2006
      was
      zero, in both periods.





**SIX-MONTHS
      ENDED JUNE 30, 2007 AND JUNE 30, 2006**





**Revenues**





*Product
      Revenues, net*





Product
      revenues include the sales of the API Enzyme recognized at the time it is
      shipped to customers. From continuing operations, we had a small amount of
      revenue from the sale of collagenase for laboratory use.  For the six
      months ended June 30, 2007 and 2006 product revenues were $11,932 and $13,676,
      respectively. This decrease of $1,744 or 13% was primarily related to the amount
      of material required to perform testing by our customers.





*Licensing
      Revenues*





For
      the
      six months ended June 30, 2007 and 2006 we recognized licensing revenue of
      578,558 in each period.  Licensing revenues recognized are related to
      the cash payments received under the Auxilium Agreement in calendar years 2005
      and 2004 and amortized over the expected development period.





Under
      current accounting guidance, nonrefundable upfront license fees for product
      candidates where we are providing continuing services related to product
      development, are deferred and recognized as revenue over the development period.
      The remaining balance will be recognized over the respective development periods
      or when we determine that we have no ongoing performance
      obligations.





*Consulting
      Services*





We
      recognize revenues from a consulting and technical assistance contract primarily
      as a result of the Asset Purchase Agreement. Consulting revenues are recognized
      ratably over the term of the contract. The consulting obligations under the
      Asset Purchase Agreement generally expire during March 2011. For the six months
      ended June 30, 2007 and 2006 consulting revenues were $140,000 and $93,333,
      respectively. This increase of $46,667 or 50% in consulting revenues was
      primarily the result of the timing of the Asset Purchase Agreement.




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**Costs
      and Expenses**





*Research
      and Development Activities*





Research
      and development expenses were $458,419 and $993,212 respectively, for the six
      months ended June 30, 2007 and 2006. This decrease of $534,793 or 54% in
      research and development expenses was primarily due to lower licensing fees,
      employee stock-based compensation expense and research and development personnel
      costs which were partially offset by an increase in external development
      costs.





*General
      and Administrative Expenses*





General
      and administrative expenses were $1,910,414 and $1,817,666 for the six months
      ended June 30, 2007 and 2006, respectively. The increase in general and
      administrative expenses of $92,748 or 5% was primarily due to increased
      employee-consulting and legal expenses partially offset by lower employee
      stock-based compensation expense and general and administrative personnel
      costs.





*Other
      Income (expense), net*





Other
      income (expense), net, was $78,143 and $81,617 for the six months ended June
      30,
      2007 and 2006, respectively. The decrease in other income, net of $3,474 or
      4%
      during the 2007 period as compared to the 2006 period reflects the amount of
      time during each of the six month periods that our cash was invested. Although
      our invested balances were higher in the 2006 period, our cash was invested
      for
      a shorter period of time during the six month period.




*Income
      Taxes*





The
      expense for income taxes for the six months ended June 30, 2007 and 2006 was
      $3,600 and zero, respectively. The income tax recorded in the 2007 period was
      primarily related to the minimum income taxes required under state
      regulations.





**Liquidity
      and Capital Resources**




To
      date,
      we have financed our operations primarily through product sales, debt
      instruments and licensing revenues and royalties under agreements with third
      parties. At June 30, 2007 and December 31, 2006, we had cash and cash
      equivalents in the aggregate of $2,624,246 and $4,367,178,
      respectively.





*Continuing
      Operations*





Net
      cash
      used in operating activities for the six months ended June 30, 2007 was
      $1,499,269 as compared to net cash used in operating activities in the 2006
      period of $1,365,083.  In the 2007 period, as compared to the 2006
      period, the changes in net cash used in operating activities was primarily
      attributable to a decrease in accounts payable and accrued
      expenses.





Net
      cash
      provided by financing activities for the six months ended June 30, 2007 was
      $77,374 as compared to net cash used in financing activities for the 2006 period
      of $83,406. Net cash provided by financing activities for the 2007 period was
      primarily the result of stock option exercises. Net cash used in financing
      activities for the 2006 period was primarily the result of the issuance of
      treasury stock to the minority shareholders of ABC-Curacao and ABC-NY related
      to
      the Asset Purchase Agreement.




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*Discontinued
      Operations*





Cash
      flow
      changes from discontinued operations are primarily due to the operating results
      of ABC-Curacao and certain operations of ABC-NY, which have been classified
      as
      discontinued operations.





Net
      cash
      used in operating activities from discontinued operations in the 2007 was
      $321,037 as compared to net cash provided by operating activities of $982,502
      in
      the comparable period of 2006.





Net
      cash
      provided by investing activities from discontinued operations in the 2007 and
      2006 periods was zero and $6,058,713, respectively.





Net
      cash
      used in financing activities from discontinued operations in each period of
      2007
      and 2006 was zero in each period.





**Risk
      Factors**





See
“Risk
      Factors” under Item 1, “Description of Business” included in our Annual Report
      on Form 10-KSB for the year ended December 31, 2006.





**Item
      3.  Controls and
      Procedures**




***Evaluation
      of disclosure controls and procedures.*** Under the supervision
      and with the participation of our management, including our Principal Executive
      and Accounting Officer, we evaluated the effectiveness of the design and
      operation of our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
      Act) as of the end of the period covered by this report. Based on this
      evaluation, our Principal Executive and Accounting Officer concluded that our
      disclosure controls and procedures are effective in reaching a reasonable level
      of assurance that information required to be disclosed by us in the reports
      that
      we file or submit under the Exchange Act is recorded, processed, summarized
      and
      reported within the time period specified in the Securities and Exchange
      Commission’s rules and forms.




***Changes
      in internal controls.*** There were no changes in our internal
      controls over financial reporting during the six month period ended June 30,
      2007 that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.




***Limitations
      on the effectiveness of controls.*** A control system, no matter
      how well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the control system are met. Because of inherent
      limitations in all control systems, no evaluation of controls can provide
      absolute assurance that all control issues, if any, within an organization
      have
      been detected. We continue to improve and refine our internal controls and
      our compliance with existing controls is an ongoing process.





Additionally,
      following the death of our former Chairman and CEO, Edwin H. Wegman, on February
      16, 2007 and the termination of our Chief Financial Officer, Lawrence Dobroff,
      on May 7, 2007, the Audit Committee adopted the following two
      procedures:





·
            Any
                payment by the Company in excess of $10,000 other than payments for
                previously approved reoccurring expenses requires the written approval
                of
                any member of the Audit Committee in addition to the signature of
                our
                President, Thomas L. Wegman; and





·
            Any
                payment by the Company for the business expenses of our President,
                Thomas
                L. Wegman requires the written approval of any member of the Audit
                Committee.




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**PART
      II:   OTHER
      INFORMATION**





**Item
      1.   Legal
      Proceedings**





None.





**Item
      2.   Unregistered Sales of Equity
      Securities and Use of Proceeds**





None.





**Item
      3.  Defaults Upon Senior
      Securities**





None.





**Item
      4.   Submission of Matters
      to a Vote
      of Security Holders**





None.





**Item
      5.   Other
      Information**





None.





**Item
      6.   Exhibits**





3.1
              Articles
                  of Incorporation of the Registrant (incorporated by reference to
                  Exhibit
                  3.1 to the Registrant's Annual Report on Form 10-KSB for the fiscal
                  years
                  ended December 31, 2005, 2004 and
                  2003).
 3.2
              Bylaws
                  of the Registrant (incorporated by reference to Exhibit 3.2 to
                  the
                  Registrant’s Annual Report on Form 10-KSB for the fiscal years ended
                  December 31, 2005, 2004 and 2003).
 31.1
              Certification
                  of Principal Executive Officer and
                  Principal Financial Officer pursuant to
                  Rule13a-14(a)/15d-14(a).
 32.1
              Certification
                  of Principal Executive Officer and
                  Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley
                  Act
                  of 2002.




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**SIGNATURES**





Pursuant
      to the requirements of the
      Securities Exchange Act of 1934, the registrant has duly caused this report
      to
      be signed on its behalf by the undersigned thereunto duly
      authorized.




**BIOSPECIFICS
                TECHNOLOGIES CORP.**
              (Registrant)Date:  September
                  26, 2007
            By:
            /s/ Thomas
              L. WegmanThomas
              L. WegmanPresident(Principal
              Executive and
              Financial Officer)