Table of Contents









UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 [X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For
the quarterly period ended March 31, 2008
 
 [ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the
transition 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, including zip code)
 
 516.593.7000
 (Issuer’s
telephone number, including area code)
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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
              [  ]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.  See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer
              [   ]
              Accelerated
      filer
              [   ]Non-accelerated
      filer
              [   ]
      (Do not check if a smaller reporting company)
              Smaller
      reporting company
              [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]
 
 Indicate
the number of shares outstanding of the issuer's classes of common equity, as of
the latest practicable date:
 
 Class of
      Stock
              
              Outstanding May 8,
      2008Common
      Stock ($.001 par value)
              
              5,725,801
  Table of Contents
  BIOSPECIFICS
TECHNOLOGIES CORP.
 
 TABLEOF CONTENTS
 
 
 PagePART I – FINANCIAL INFORMATIONITEM
      1.
              Consolidated Financial Statements
              2Consolidated Balance Sheet as of March 31,
      2008
              2Consolidated Statements of Operations for the Three
      Ended March 31, 2008 and 2007
              3Consolidated Statements of Cash Flows for the Three
      Months Ended March 31, 2008 and 2007
              4Notes to Consolidated Financial
    Statements
              5ITEM
      2.
              Management’s Discussion and Analysis
              11ITEM
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              17ITEM
      4.
              Controls and Procedures
              17PART II – OTHER INFORMATIONITEM
      1.
              Legal Proceedings
              17ITEM
      1A.
              Risk Factors
              17ITEM
      2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              17ITEM
      3.
              Defaults Upon Senior Securities
              17ITEM
      4.
              Submission of Matters to a Vote of Security
      Holders
              18ITEM
      5.
              Other Information
              18ITEM
      6.
              Exhibits
              18
  Table of Contents
  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 subsidiary, Advance Biofactures Corporation (“ABC-NY”). 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.
 
 Table of Contents
 
 PARTI – FINANCIAL INFORMATION
 
 Item1:  Consolidated Financial
Statements
 
 BIOSPECIFICSTECHNOLOGIES CORP. AND
      SUBSIDIARIESConsolidated
      Balance Sheets
 
 Three
      Months
                Ended
                March
      31,
              
              
              Fiscal
      Year
                Ended
                December
      31,2008
              
              
              2007(unaudited)
              
              
              (audited)AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              2,552,182
              
              
              $
              68,564Short-term
      investments-(1)
              
              
              -
              
              
              
              975,000Accounts
      receivable, net
              
              
              91,578
              
              
              
              108,809Prepaid
      expenses and other current assets
              
              
              56,558
              
              
              
              73,158Total
      current assets
              
              
              2,700,318
              
              
              
              1,225,531Long-term
      investments-(1)
              
              
              1,512,613
              
              
              
              -Property,
      plant and equipment, net
              
              
              27,642
              
              
              
              35,680Total
      assets
              
              
              4,240,573
              
              
              
              1,261,211Liabilities
      and Stockholders' DeficitCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              
              1,097,463
              
              
              
              873,460Accrued
      third-party development expenses
              
              
              2,272,969
              
              
              
              2,272,969Accrued
      tax liability
              
              
              453,553
              
              
              
              453,553Deferred
      revenue
              
              
              1,345,125
              
              
              
              1,437,116Accrued
      tax and other accrued liabilities of discontinued
    operations
              
              
              78,138
              
              
              
              78,138Total
      current liabilities
              
              
              5,247,248
              
              
              
              5,115,236Long-term
      deferred revenue
              
              
              2,837,343
              
              
              
              2,881,633Stockholders'
      deficit:Series
      A Preferred stock, $.50 par value, 700,000 shares authorized; none
      outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 par value; 10,000,000 shares authorized; 5,853,768 shares
      issued and outstanding at March 31, 2008
              
              
              5,854
              
              
              
              5,481Additional
      paid-in capital
              
              
              7,693,012
              
              
              
              4,751,447Accumulated
      deficit
              
              
              (10,636,539
              )
              
              
              (10,172,855
              )Accumulated
      other comprehensive loss
              
              
              (212,388
              )
              
              
              -Treasury
      stock, 131,267 shares at cost at March 31, 2008
              
              
              (693,957
              )
              
              
              (693,957
              )Notes
      receivable from former CEO, shareholder and Chairman and other related
      party
              
              
              -
              
              
              
              (625,774
              )Total
      stockholders' deficit
              
              
              (3,844,018
              )
              
              
              (6,735,658
              )Total
      liabilities and stockholders’ deficit
              
              $
              4,240,573
              
              
              $
              1,261,211
 
 (1)
      As discussed in note 2 to the consolidated financial statements, we have
      classified all of our auction rates securities held as of March
      31,
                2008
      as long-term investments as our ability to liquidate such securities in
      the next 12 months is uncertain.  We classified all of our
      auction
                rate
      securities held as of December 31, 2007 as short-term
      investments.
                
                See
      accompanying notes to consolidated financial
  statements
  2
 Table of Contents
  BIOSPECIFICSTECHNOLOGIES CORP. AND
      SUBSIDIARIESConsolidated
      Statements of Operations(unaudited)
 
 Three
      Months Ended
                March
      31,2008
              
              
              2007Revenues:Net
      sales
              
              $
              12,753
              
              
              $
              1,100Licensing
      fees
              
              
              266,281
              
              
              
              289,279Consulting
      fees
              
              
              122,185
              
              
              
              70,000401,219
              
              
              
              360,379Costs
      and expenses:General
      and administrative
              
              
              800,456
              
              
              
              1,097,467Research
      and development
              
              
              94,271
              
              
              
              386,359894,727
              
              
              
              1,483,827Operating
      loss from continuing operations
              
              
              (493,508
              )
              
              
              (1,123,448
              )Other
      income (expense):Interest
      income
              
              
              30,275
              
              
              
              41,249Interest
      expense
              
              
              (451
              )
              
              
              -29,824
              
              
              
              41,249Loss
      from continuing operations before benefit (expense) for income
      tax
              
              
              (463,683
              )
              
              
              (1,082,199
              )Income
      tax benefit (expense)
              
              
              -
              
              
              
              3,600Net
      loss from continuing operations
              
              
              (463,683
              )
              
              
              (1,085,799
              )Basic
      net loss per share
              
              $
              (0.08
              )
              
              $
              (0.21
              )Diluted
      net loss per share
              
              $
              (0.08
              )
              
              $
              (0.21
              )Shares
      used in computation of basic net loss per share
              
              
              5,633,177
              
              
              
              5,235,149Shares
      used in computation of diluted net loss per share
              
              
              5,633,177
              
              
              
              5,235,149
 
 See
      accompanying notes to consolidated financial
  statements
 
 3
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 BIOSPECIFICSTECHNOLOGIES CORP. AND
      SUBSIDIARIESConsolidated
      Statements of Cash Flows(unaudited)
 
 Three
      Months Ended
                March
      31,Cash
      flows from operating activities:
              
              2008
              
              
              2007Net
      loss
              
              $
              (463,683
              )
              
              $
              (1,085,799
              )Adjustments
      to reconcile net loss to net cash providedby
      operating activities:Depreciation
      and amortization
              
              
              8,037
              
              
              
              8,036Stock-based
      compensation expense
              
              
              158,579
              
              
              
              138,547Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              17,231
              
              
              
              21,484Prepaid
      expenses and other current assets
              
              
              16,600
              
              
              
              (40,977
              )Accounts
      payable and accrued expenses
              
              
              224,002
              
              
              
              370,056Deferred
      revenue
              
              
              (136,281
              )
              
              
              40,721Net
      cash used in operating activities from continuing
    operations
              
              
              (175,515
              )
              
              
              (547,932
              )Net
      cash used in discontinued operations
              
              
              -
              
              
              
              (321,037
              )Cash
      flows from investing activities:Purchases
      of long-term investments
              
              
              (750,000
              )
              
              
              -Net
      cash used in investing activities
              
              
              (750,000
              )
              
              
              -Cash
      flows from financing activities:Proceeds from issuance of capital stock
              
              
              2,093,650
              
              
              
              -Proceeds
      from stock option exercises
              
              
              198,925
              
              
              
              27,000Proceeds
      from pay-off of notes receivable from former CEO and
    Chairman
              
              
              1,116,558
              
              
              
              -Net
      cash provided by financing activities from continuing
      operations
              
              
              3,409,133
              
              
              
              27,000Increase
      in cash and cash equivalents
              
              
              2,483,618
              
              
              
              (841,969
              )Cash
      and cash equivalents at beginning of year
              
              
              68,564
              
              
              
              4,367,178Cash
      and cash equivalents at end of period
              
              $
              2,552,182
              
              
              $
              3,525,209Supplemental
      disclosures of cash flow information:Cash
      paid during the periods for:Interest
              
              $
              451
              
              
              $
              -Taxes
              
              $
              -
              
              
              $
              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
      Company’s former CEO and Chairman by $98,253 and increasing additional
      paid in capital by $206,145.
                See
      accompanying notes to consolidated financial statements
 
 4
 Table of Contents
 
 BIOSPECIFICSTECHNOLOGIES CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  March
31, 2008
 (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.  XIAFLEX is in a Phase III trial for
treatment of Dupuytren’s disease and top line results are expected to be
released in June 2008.
 
 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”). 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.
 
 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. At the closing, DFB
paid to us a partial payment of $400,000 in respect of the technical assistance
to be provided by us. To date, we have received a total of $1,000,000 in
payments from DFB. The consulting obligations generally expire during March
2011.
  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.
  5
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 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, 2007 filed with the
SEC on May 2, 2008 and our Quarterly Reports on Form 10-QSB for the quarterly
periods ended March 31, 2007, June 30, 2007 and September 30, 2007.
 
 Principles
of Consolidation
 
 The
audited consolidated financial statements include the accounts of the Company
and its subsidiaries, ABC-NY, ABC-Curacao, which was sold in March 2006,
BioSpecifics of Curacao N.V. and Biota N.V. and its wholly-owned subsidiary,
which were both liquidated in January 2007. Due to the sale of ABC-Curacao 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.
 
 Cash,
Cash Equivalents and Long-term Investments
 
 Cash,
cash equivalents and long-term investments are stated at market value. Cash
equivalents include only securities having a maturity of three months or less at
the time of purchase. The Company limits its credit risk associated with cash,
cash equivalents and long-term investments by placing its investments with banks
it believes are highly creditworthy and with highly rated money market funds,
U.S. government securities, or short-term commercial paper.
 
 Long-term
investments consist of taxable auction rate securities, or ARS, with original
maturities ranging up to 40 years. ARS have interest reset dates of 28 or 35
days. The reset date is the date in which the underlying interest rate is
revised based on a Dutch auction and the underlying security may be sold. The
Company classifies ARS as available for sale under SFAS No. 115. Dutch auctions
have historically provided a liquid market for the type of ARS owned by the
Company. However, with liquidity issues experienced in global credit and capital
markets, all ARS held by the Company as of April 30, 2008 experienced failed
auctions, beginning in February 2008, as the amount of securities submitted for
sale exceeded the amount of purchase orders. Given the recent disruptions in the
credit markets and the fact that the liquidity for these types of securities
remains uncertain, we have classified all of our auction rate securities held as
of March 31, 2008 as long-term investments in our consolidated balance sheet as
our ability to liquidate such securities in the next 12 months is uncertain. The
cost value of these securities held as of April 30, 2008 amounts to
approximately $1.7 million with a current market value of approximately $1.5
million, of which $975,000 were held as of December 31, 2007. We recorded a
temporary impairment within other accumulated comprehensive loss of
approximately $0.2 million for the three months ended March 31, 2008 related to
these auction rate securities. The Company will continue to assess its long-term
investments if uncertainties in the credit and capital markets
continue.
 
 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.”
  6
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  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.
 
 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.
 
 Royalty
Revenue
 
 We
recognize royalties under the earn-out provision of the Asset Purchase Agreement
with DFB. We have the right to receive earn out payments in the future based on
sales of certain products.  Royalties are recognized as earned in
accordance with the contract terms when royalties can be reliably measured, and
collectibility is reasonably assured, such as upon the receipt of a royalty
statement from our licensees. We have historically recognized royalty revenue in
the quarter in which the sale was made by our licensees.
 
 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
  7
 Table of Contents
  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.
 
 Consulting
and Technical Assistance Services
 
 We
recognize revenues from a consulting and technical assistance contracts
primarily as a result of our agreements with DFB and Auxilium. Consulting
revenues are recognized ratably over the term of the contract. The consulting
obligations to DFB generally expire during March 2011.
 
 Reimbursable
Third-Party Development Costs
 
 We accrue
expenses to research and development for estimated third-party development costs
that are reimbursable under our agreement with Auxilium. Estimates are based on
contractual terms, historical development costs, reviewing third-party data and
expectations regarding future development for certain products. Further, we
monitor the activities and clinical trials of our development
partners.
 
 If
conditions or other circumstances change, we may take actions to revise our
reimbursable third-party development cost estimates. These revisions could
result in an incremental increase in research and development costs. For
example, Amendment No.1 to the Development and License Agreement, dated May 5,
2006 provides that Auxilium and BioSpecifics will share equally in third-party
costs for the development of the lyophilization of the injection formulation. On
April 11, 2008, we received an invoice for approximately $2.3 million from
Auxilium, which represents an amount that Auxilium believes is owed by
us through year end 2007 under this provision. We have not had
adequate time to verify the accuracy or validity of the charges and have
informed Auxilium that we cannot pay the invoice until we have done so.
 Based on our preliminary review, we believe that only a portion of the
amount charged actually relates to the development of the lyophilization of the
injection formulation and, therefore, reserve all rights related to this matter,
including but not limited to our right to contest the amount charged by
Auxilium.
  Actual
results have differed in the past, and may differ in the future, from our
estimates and could impact our earnings in any period during which an adjustment
is made.
 
 Research and Development
Expenses
 
 Our
research and development (“R&D”) costs are expensed as incurred. R&D
includes, but is not limited to, internal costs, such as salaries and benefits,
costs of materials, lab expense, facility costs and overhead. R&D also
consists of third-party costs, such as medical professional fees, contract
manufacturing costs for material used in clinical trials, consulting fees and
costs associated with clinical study R&D arrangements. We fund R&D at
medical research institutions under agreements that are generally cancelable.
All of these costs are charged to R&D as incurred, which may be measured by
percentage of completion, contract milestones, patient enrollment, or the
passage of time.
 
 Clinical
Trial Expenses
 
 Our cost
accruals for clinical trials are based on estimates of the services received and
efforts expended pursuant to contracts with various clinical trial centers and
clinical research organizations. In the normal course of business we contract
with third parties to perform various clinical trial activities in the ongoing
development of potential drugs. The financial terms of these agreements are
subject to negotiation and
  8
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  vary from
contract to contract and may result in uneven payment flows. Payments under the
contracts depend on factors such as the achievement of certain events, the
successful enrollment of patients, the completion of portions of the clinical
trial, or similar conditions. The objective of our accrual policy is to match
the recording of expenses in our financial statements to the actual cost of
services received and efforts expended. As such, expenses related to each
patient enrolled in a clinical trial are recognized ratably beginning upon entry
into the trial and over the course of the patient’s continued participation in
the trial. In the event of early termination of a clinical trial, we accrue an
amount based on our estimate of the remaining non-cancelable obligations
associated with the winding down of the clinical trial. Our estimates and
assumptions could differ significantly from the amounts that may actually be
incurred.
 
 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. The weighted-average assumptions used were as
follows:
 
 Quarter
      Ended March 31,
              
              
              Year
      Ended December 31,2008
              
              
              2007Stock
      Option PlansExpected
      life, in years
              
              
              5
              
              
              
              5.0Risk
      free interest rate
              
              
              2.9
              %
              
              
              5
              %Volatility
              
              
              61
              %
              
              
              106
              %Dividend
      yield
              
              
              —
              
              
              
              —
 
 Further,
SFAS 123(R) requires that employee stock-based compensation costs to 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
                March
      31,2008
              
              
              2007Research
      and development
              
              $
              4,979
              
              
              $
              2,580General
      and administrative
              
              
              153,600
              
              
              
              135,967Total
      stock-based compensation expense
              
              $
              158,579
              
              
              $
              138,547
  9
 Table of Contents
  Stock
Option Activity
  A summary
of our stock option and warrant activity during the three months ended March 31,
2008 is presented below:
 Option
              
              Total Number
                of
      Shares
              
              
              Weighted-Average
                Exercise
      PriceOutstanding
      as of December 31, 2007
              
              
              1,409,700
              
              
              $
              1.86Granted
              
              
              30,000
              
              
              $
              13.24Forfeited
              
              
              -
              
              
              
              -Exercised
              
              
              (173,000
              )
              
              $
              1.22Expired
              
              
              (1,500
              )
              
              $
              4.38Outstanding
      as of March 31, 2008
              
              
              1,265,200
              
              
              $
              2.23Exercisable
      as of March 31, 2008
              
              
              1,083,325
              
              
              $
              1.72
  The
weighted-average grant-date fair value for options granted during the three
months ended March 31, 2008 was $13.24 per share and $4.11 per share in the
corresponding three month period of 2007. During the three months ended March
31, 2008 and 2007, $198,925 and $27,000 were received from stock options
exercised by employees, respectively.
  The
aggregate intrinsic value of options outstanding and exercisable as of March 31,
2008 was approximately $15,182,000. Aggregate intrinsic value represents the
total pre-tax intrinsic value, based on the closing price of our common stock of
$12.00 on March 31, 2008, 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 non-vested stock options outstanding
as of March 31, 2008 was approximately $467,000 which we expect to recognize
over a weighted-average period of 1.1 years.
 
 Property,
Plant and Equipment
 
 Property,
plant and equipment are stated at cost, less accumulated depreciation. Machinery
and equipment, furniture and fixtures, and autos are depreciated on the
straight-line basis over their estimated useful lives of 5 to 10 years.
Leasehold improvements are being amortized over the lesser of their estimated
useful lives or the life of the lease, which is approximately 8 to 10
years.
 
 Recent
Accounting Pronouncements
  In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133.” SFAS No. 161
requires enhanced disclosures about an entity’s derivative and hedging
activities. Entities will be required to provide enhanced disclosures about: (a)
how and why an entity uses derivative instruments; (b) how derivative
instruments and related hedge items are accounted for under SFAS No. 133 and its
related interpretations; and (c) how derivative instruments and related hedge
items affect an entity’s financial position, financial performance and cash
flows. The Company is required to adopt SFAS No. 161 beginning in fiscal year
2009. The Company is currently evaluating the impact the new disclosure
requirements will have on its consolidated financial statements and notes
thereto.
  3.
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 months ended March 31, 2008 and 2007, 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.
  10
 Table of Contents
 
 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
                March
      31,2008
              
              
              2007Stock
      options
              
              
              1,235,200
              
              
              
              1,336,725Warrants
              
              
              -
              
              
              
              10,000Total
              
              
              1,235,200
              
              
              
              1,346,725
 
 4.
TOTAL COMPREHENSIVE LOSS
 
 Comprehensive
loss is comprised of net loss and other comprehensive loss.  Specifically,
we include in other comprehensive loss the changes in unrealized gains and
losses on our holdings of available-for-sale securities, which are excluded from
our net loss. The following table presents the calculation of our comprehensive
loss:
  
 Three
      Months Ended
                March
      31,2008
              
              
              2007Net
      loss
              
              $
              463,683
              
              
              $
              1,085,799Other
      comprehensive loss:Change
      in unrealized losses on marketable securities
              
              
              212,388,
              
              
              
              -Total
      Comprehensive Loss
              
              $
              676,071
              
              
              $
              1,085,799
  5.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  Accounts
payable and accrued expenses consisted of the following:
  March
      31,
                2008
              
              
              December 31,
                2007Trade
      accounts payable and accrued expenses
              
              $
              869,131
              
              
              $
              686,742Accrued
      legal and other professional fees
              
              
              100,816
              
              
              
              98,438Accrued
      payroll and related costs
              
              
              127,516
              
              
              
              88,280Total
              
              $
              1,097,463
              
              
              $
              873,460
 
 6.
INCOME TAXES
 
 We
recorded minimum income tax provisions for the three month periods ended March
31, 2008 of zero and $3,600 for the comparable period of 2007.
 
 7.
RELATED PARTY TRANSACTIONS
  On
February 1, 2008, the Estate of Edwin H. Wegman (the “Estate”) sold an aggregate
of 344,114 shares of the Company's common stock, par value $0.001, at a purchase
price of $12.00 per share to certain private investors. The Estate used certain
of the proceeds of the transaction to repay the loan owed to the
  11
 Table of Contents
  Company
by Edwin H. Wegman, our former Chairman and CEO. The total loan repayment amount
was $1,116,558, which represents the principal amount of $625,774 owed to the
Company and accrued interest through January 31, 2008 of $490,784.
  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
 
 As of May
8, 2008, the Company estimates that the clinical trial for treatment of lipoma
with collagenase will not occur in the first half of 2008. The Company cannot
forecast when or if the clinical trial will take place.
 
 Item2: Management’s Discussion and Analysis or Plan of
Operation
 
 The
following discussion should be read in conjunction with the consolidated
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 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.  XIAFLEX is in a Phase III trial for
treatment of Dupuytren’s disease and top line results are expected to be
released in June 2008.
 
 Outlook
  We
foresee the potential to generate income from limited sources in the next
several years. Under the terms of our agreement with DFB Biotech, Inc and its
affiliates (“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”).
  On
January 14, 2008, the Company sold 200,000 shares of its common stock in a
private placement offering to Apis Capital Advisors LLC on behalf of various
funds advised by them at a purchase price of $10.50 per share, for aggregate
proceeds to the Company of $2,100,000.  The shares were offered and
sold in reliance on Section 4(2) of the Securities Act of 1933 (the “Act”) as
private placements of securities that are exempt from the registration
requirements of the Act.
  On
February 1, 2008, the Estate of Edwin H. Wegman (the “Estate”) sold an aggregate
of 344,114 shares of the Company's common stock, par value $0.001, at a purchase
price of $12.00 per share to certain private investors. The Estate used certain
of the proceeds of the transaction to repay the loan owed to the Company by
Edwin H. Wegman, our former Chairman and CEO. The total loan repayment amount
was $1,116,558, which represents the principal amount of $625,774 owed to the
Company and accrued interest through January 31, 2008 of $490,784.
  12
 Table of Contents
  Based on
our current business model, we expect to have adequate cash reserves until the
fourth quarter of 2008 depending on the amount actually owed to Auxilium, as
discussed in Item 1A, “Risk Factors”, included in our Annual Report on Form
10-KSB for the year ended December 31, 2007. As a significant portion of our
revenues is tied directly to the success of Auxilium in commercializing XIAFLEX,
we cannot reasonably forecast our financial condition beyond this
time.
  Effective
January 29, 2008, the Company obtained listing on the Over-the-Counter-Bulletin
Board under the trading symbol BSTC.OB. On April 16, 2008 we received notice
that our symbol was changed to BSTCE.OB due to the untimely filing of our Annual
Report on Form 10-KSB for the fiscal year ended December 31,
2008.  Our Annual Report was filed with the SEC on May 2, 2008 and our
symbol subsequently returned to BSTC.OB.
  Significant
Risks
 
 In recent
history we have had operating losses and may not achieve sustained
profitability. As of March 31, 2008, we had an accumulated deficit from
continuing operations of $10,636,539.
 
 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.
 
 As of
April 30, 2008, we held $1.7 million of taxable auction rate securities, or ARS,
which are classified as long-term investments with a current market value of
approximately $1.5 million. We
recorded a temporary impairment within other accumulated comprehensive loss of
approximately $0.2 million for the three months ended March 31, 2008 related to
these auction rate securities.The Dutch auctions have in the past
provided a liquid market for these types of securities. With the liquidity
issues experienced in global credit and capital markets, auctions of all the ARS
we hold experienced failed auctions, beginning in February 2008, as the amount
of securities submitted for sale exceeded the amount of purchase orders. If the
uncertainties in the credit and capital market continue, these markets
deteriorate further or there are ratings downgrades on any of the ARS we hold,
we may be required to adjust the value of these investments through an
impairment charge to earnings, if the fair value of these securities has
declined to below their cost and such decline is assessed to be “other than
temporary” under SFAS No. 115. Further, we may not be able to liquidate these
investments until successful auctions occur, a buyer outside the auction process
is found, the issuer calls these debt securities, or the securities
mature.
 
 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 March 31, 2008 and for
the three months ended March 31, 2008 and 2007 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, 2007 balance sheet amounts and
disclosures included herein have been derived from the Company’s
December 31, 2007 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, 2007
  13
 Table of Contents
  and 2006
included in the Company’s Form 10-KSB filed with the SEC on May 2, 2008 and our
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2007, June 30,
2007 and September 30, 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 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. At the closing,
DFB paid to us a partial payment of $400,000 in respect of the technical
assistance to be provided by us. To date, we have received a total of $1,000,000
in payments from DFB. The consulting obligations generally expire during March
2011. As of March 31, 2008 the remaining accounts receivable balance due was
$400,000 for future services and was offset by the associated deferred revenues
to be recognized in future periods of $400,000.
 
 Reimbursable
Third-Party Development Costs. We accrue expenses to research and
development for estimated third-party development costs that are reimbursable
under our agreement with Auxilium. Estimates are based on contractual terms,
historical development costs, reviewing third-party data and expectations
regarding future development for certain products. Further, we monitor the
activities and clinical trials of our development partners.
  14
 Table of Contents
 
 If
conditions or other circumstances change, we may take actions to revise our
reimbursable third-party development cost estimates. These revisions could
result in an incremental increase in research and development costs. For
example, Amendment No.1 to the Development and License Agreement, dated May 5,
2006 provides that Auxilium and BioSpecifics will share equally in third-party
costs for the development of the lyophilization of the injection formulation. On
April 11, 2008, we received an invoice for approximately $2.3 million from
Auxilium, which represents an amount that Auxilium believes is owed by
us through year end 2007 under this provision. We have not had
adequate time to verify the accuracy or validity of the charges and have
informed Auxilium that we cannot pay the invoice until we have done so.
 Based on our preliminary review, we believe that only a portion of the
amount charged actually relates to the development of the lyophilization of the
injection formulation and, therefore, reserve all rights related to this matter,
including but not limited to our right to contest the amount charged by
Auxilium.
  Actual
results have differed in the past, and may differ in the future, from our
estimates and could impact our earnings in any period during which an adjustment
is made.
  Stock Based
Compensation.
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 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
 
 THREE-MONTHS
ENDED MARCH 31, 2008 AND 2007
 
 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 March 31, 2008 and 2007 product revenues were $12,753 and
$1,100, respectively. This increase of $11,653 was primarily related to the
amount of material required to perform testing by our customers.
  15
 Table of Contents
 
 Licensing
Revenues
 
 For the
three months ended March 31, 2008 and 2007, we recognized licensing revenue of
$266,281 and $289,279, respectively.  This decrease of $22,998 or 8%
was primarily related to the extension of the development timeline for a certain
indication for injectable collagenase under the Auxilium Agreement. Licensing
revenues recognized are related to the cash payments received under the Auxilium
Agreement in prior years 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 consulting and technical assistance contracts primarily
as a result of the Asset Purchase Agreement and an Auxilium consulting
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 March 31, 2008
and 2007 consulting revenues were $122,185 and $70,000, respectively. This
increase of $52,185 or 75% was primarily due to the recognition of revenues
earned in connection with the October 2007 consulting agreement with
Auxilium.
 
 Costs
and Expenses
 
 Research
and Development Activities
 
 Research
and development expenses were $94,271 and $386,359 respectively, for the three
months ended March 31, 2008 and 2007. This decrease of $292,088 or 76% in
research and development expenses was primarily due to lower reimbursable
third-party development costs.
 
 General
and Administrative Expenses
 
 General
and administrative expenses were $800,456 and $1,097,467 for the three months
ended March 31, 2008 and 2007, respectively. The decrease in general and
administrative expenses of $297,011 or 27% was primarily due to lower legal
fees, administrative personnel costs and consulting fees partially offset by
increased stock-based compensation expense.
 
 Other
Income (expense), net
 
 Other
income, net, was $29,824 and $41,249 for the three months ended March 31, 2008
and 2007, respectively. The decrease in other income, net of $11,425 or 28%
during the first quarter of 2008 as compared to the 2007 period was primarily
due to lower invested balances during the 2008 period.
  Income
Taxes
 
 The
expense for income taxes for the three months ended March 31, 2008 was zero and
$3,600 in the comparable period of 2007. Income taxes in the first quarter of
2007 primarily represent minimum payments of state franchise taxes.
  16
 Table of Contents
 
 Liquidity
and Capital Resources
 
 To date,
we have financed our operations primarily through product sales, debt
instruments, licensing revenues, royalties under agreements with third parties
and sales of our common stock. At March 31, 2008 and December 31, 2007, we
had cash and cash equivalents in the aggregate of $2,552,182 and $68,564,
respectively.
 
 Continuing
Operations
 
 Net cash
used in operating activities for the three months ended March 31, 2008 was
$175,515 as compared to net cash used in operating activities in the 2007 period
of $547,931.  In the 2008 period, as compared to the 2007 period, the
changes in net cash used in operating activities was primarily attributable to
decreases in operational expenses, lower accounts payable and accrued expenses
partially offset by deferred revenue and prepaid expenses.
 
 Net cash
used in investing activities for the three months ended March 31, 2008 was
$750,000 as compared to net cash used in investing activities in the 2007 period
of zero. The increase in net cash used in investing activities for the 2008
period, reflect our investment in auction rate securities.
 
 Net cash
provided by financing activities for the three months ended March 31, 2008 was
$3,409,133 as compared to net cash used in financing activities for the 2007
period of $27,000. The increase in net cash provided by financing activities for
the 2008 consisted of proceeds from the sale of our common stock in January 2008
of $2,093,650, repayment of an outstanding loan from our former Chairman and CEO
of $1,116,558 and proceeds received from stock option exercises of $198,925. Net
cash provided by financing activities in the 2007 period was from proceeds
received from stock option exercises.
 
 Discontinued
Operations
 
 Net cash
used in operating activities from discontinued operations for the three months
ended March 31, 2008 was zero as compared to $321,038 in the comparable period
of 2007.
 
 Item3: Quantitative and Qualitative Disclosures About Market
Risk.
 
 Pursuant
to Item 305(c) of Regulation S-K, the information under this Item 3 is not
required to be disclosed until after the first fiscal year end in which Item 305
is applicable.  Item 305 will be first applicable to the Company in
its annual report for the fiscal year ended December 31, 2008.
 
 Item4. Controls and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 The
Company, under the supervision and with the participation of Thomas L. Wegman,
the Company’s President, Principal Executive Officer and Principal Financial
Officer, evaluated the effectiveness of its disclosure controls and procedures
as of the end of the period covered by this Report. Based on that evaluation,
management has concluded that the Company’s disclosure controls and procedures
are effective to ensure that information required to be disclosed in reports
filed under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that such information is
accumulated and communicated to the Company’s management to allow timely
decisions regarding required disclosure. Because of the inherent limitations in
all control systems, any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Furthermore, our controls and procedures can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control, and misstatements due to error or fraud may occur and
not be detected on a timely basis.
  17
 Table of Contents
 
 Changes
in Internal Controls
 
 There
were no changes in our internal controls over financial reporting during the
three month period ended March 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 PARTII:   OTHER INFORMATION
 
 Item1. Legal Proceedings
 
 None.
 
 Item1A. Risk Factors
 
 Please
see Item 1A, “Risk Factors,” included in our Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2007 filed with the SEC on May 2,
2008.
 
 Item2. Unregistered Sales of Equity Securities and Use of
Proceeds
 
 None.
 
 Item3. Defaults Upon Senior Securities
 
 None.
 
 Item4. Submission of Matters to a Vote of Security
Holders
 
 None.
 
 Item5. Other Information
 
 None.
 
 Item6. 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*
              Certification of Principal Executive Officer and
      Principal Financial Officer pursuant to
      Rule13a-14(a)/15d-14(a).*
 32*
              Certification of Principal Executive Officer and
      Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act
      of 2002.*
 _____________
 * filed herewith
  18
 Table of Contents
  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:  May
      15, 2008
              
              /s/ Thomas L. WegmanThomas
      L. Wegman
                President
                (Principal
      Executive and Financial
Officer)




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