BIOSPECIFICS TECHNOLOGIES CORP (Form: 10-Q, Received: 05/11/2020 15:03:45)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from __________________to __________________

001-34236

(Commission file number)

BIOSPECIFICS TECHNOLOGIES CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	11-3054851
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2 Righter Parkway, Suite 200, Wilmington, DE 19803

(Address of Principal Executive Offices) (Zip Code)

302.842.8450

(Registrant’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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an 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 ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	BSTC	The Nasdaq Capital Market

As of May 11, 2020, there were 7,335,974 shares of Common Stock, par value $0.001 per share, outstanding.

BIOSPECIFICS TECHNOLOGIES CORP.

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
ITEM 1.	Financial Statements Unaudited Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Income Statements	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4.	Controls and Procedures	25

	PART II – OTHER INFORMATION
ITEM 1.	Legal Proceedings	26
ITEM 1A.	Risk Factors	26
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
ITEM 6.	Exhibits	29
	Signatures	30

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Introductory Comments – Terminology

Throughout this Quarterly Report on Form 10-Q, the terms “BioSpecifics,” “Company,” “we,” “our,” and “us” refer to BioSpecifics Technologies Corp. and its subsidiary, Advance Biofactures Corp.

Throughout this Quarterly Report on Form 10-Q, Endo Global Ventures, a Bermuda unlimited liability company, an affiliate of Endo International plc, and Endo International plc are referred to collectively as “Endo.”

Introductory Comments – Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of, and made pursuant to the safe harbor provisions of, the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, expected revenue growth, and the assumptions underlying or relating to such statements, are “forward-looking statements.” The forward-looking statements in this Quarterly Report on Form 10-Q include statements concerning, among other things, (i) the opportunity for the minimally invasive non-surgical treatment XIAFLEX® in several potential pipeline indications; (ii) whether and when the Company will receive from Endo the results of their full commercial assessment and analysis regarding the XIAFLEX® research and development (R&D) pipeline; (iii) the Company’s ability to achieve its future growth initiatives with regard to Dupuytren’s Contracture and Peyronie’s disease; (iv) the expansion of the market for XIAFLEX® through future growth initiatives; (v) whether treating uterine fibroids with XIAFLEX® will achieve the advantages over major surgery identified by the Company; (vi) Endo’s interest in currently unlicensed indications, including capsular contracture of the breast, Dercum’s disease, knee arthrofibrosis, urethral strictures, hypertrophic scars and keloids; (vii) whether XIAFLEX® will be the only U.S. Food and Drug Administration (FDA) approved nonsurgical therapy for frozen shoulder (adhesive capsulitis); (viii) the projected receipt of payments from Endo and sublicense income payments based on Endo’s partnerships; (ix) the strength of the Company’s IP portfolio; and (x) the impacts of the novel coronavirus (COVID-19) global pandemic.

In some cases, these statements can be identified by forward-looking words such as “anticipate,” “believe,” “project,” “expect,” “plan,” “anticipate,” “potential,” “estimate,” “can,” “will,” “continue,” the negative or plural of these words, and other similar expressions. These forward-looking statements are predictions based on our current expectations and our projections about future events and various assumptions. There can be no assurance that we will realize our expectations or that our beliefs will prove correct. There are a number of important factors that could cause BioSpecifics’ actual results to differ materially from those indicated by such forward-looking statements, including the timing of regulatory filings and action; the market for XIAFLEX® in, and timing, initiation and outcome of clinical trials for, additional indications, which will determine the amount of milestone, royalty, mark-up on cost of goods sold, license and sublicense income that BioSpecifics may receive; the potential of XIAFLEX® to be used in additional indications; Endo modifying its objectives or allocating resources other than to XIAFLEX®; and other risk factors identified herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), specifically in Part I, Item IA of the 2019 Annual Report under the heading “Risk Factors” and under the section “Management’s Discussion and Analysis.” All forward-looking statements included in this Quarterly Report on Form 10-Q for the three month period ended March 31, 2020 are made as of the date hereof, are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q and, except as may be required by law, we assume no obligation to update these forward-looking statements.

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PART I – FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

BioSpecifics Technologies Corp.

Condensed Consolidated Balance Sheets

	March 31, 2020			December 31, 2019
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	19,134,304		$	4,999,183
Short term investments		85,084,651			84,239,918
Accounts receivable		17,750,829			19,065,919
Prepaid expenses and other current assets		898,598			966,456
Total current assets		122,868,382			109,271,476

Long-term investments		9,385,996			16,569,024
Property and equipment, net		68,313			-
Operating lease right-of-use asset		220,530			239,491
Patent costs, net		564,301			573,277
Other assets		139,265			-

Total assets	$	133,246,787		$	126,653,268

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	1,628,515		$	998,409
Income tax payable		1,640,478			354,984
Current portion of lease obligation		77,358			69,099
Total current liabilities		3,346,351			1,422,492

Lease obligation		146,994			167,014
Deferred tax liability, net		484,259			572,660
Total liabilities		3,977,604			2,162,166

Commitments and Contingencies
Stockholders’ equity:
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding		-			-
Common stock, $.001 par value; 10,000,000 shares authorized; 7,815,230 and 7,813,230 shares issued, 7,337,511 and 7,339,578 shares outstanding as of March 31, 2020 and December 31, 2019, respectively		7,815			7,813
Additional paid-in capital		39,856,101			39,355,797
Retained earnings		101,145,333			96,646,527
Treasury stock, 477,720 and 473,653 shares at cost as of March 31, 2020 and December 31, 2019, respectively		(11,740,066	)		(11,519,035	)
Total stockholders’ equity		129,269,183			124,491,102

Total liabilities and stockholders’ equity	$	133,246,787		$	126,653,268

See accompanying notes to condensed consolidated financial statements.

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BioSpecifics Technologies Corp.

Condensed Consolidated Income Statements

(unaudited)

	Three Months Ended March 31,
	2020			2019
Revenues:
Royalties	$	9,668,667		$	8,129,141
Total Revenues		9,668,667			8,129,141

Costs and expenses:
Research and development		121,970			149,536
General and administrative		3,168,046			2,907,160
Restructuring charges		1,146,045			-
Total Costs and Expenses		4,436,061			3,056,696

Operating income		5,232,606			5,072,445

Other income:
Interest income		479,709			449,425

Income before income tax expense		5,712,315			5,521,870
Provision for income tax expense		(1,213,509	)		(1,105,275	)

Net income	$	4,498,806		$	4,416,595

Basic net income per share	$	0.61		$	0.61
Diluted net income per share	$	0.61		$	0.60

Shares used in computation of basic net income per share		7,337,668			7,276,885
Shares used in computation of diluted net income per share		7,361,533			7,338,128

See accompanying notes to condensed consolidated financial statements.

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BioSpecifics Technologies Corp.

Condensed Consolidated Statements of Stockholders’ Equity

	Common Stock
	Shares Amount				Additional Paid in Capital		Retained Earnings		Treasury Stock			Stockholders’ Equity Total
Balances - December 31, 2018		7,738,167	$	7,738	$	36,302,446	$	72,176,719	$	(10,898,383	)	$	97,588,520
Issuance of common stock upon stock option exercise		2,000		2		58,418		-		-			58,420
Stock compensation expense		-		-		141,788		-		-			141,788
Net income		-		-		-		4,416,595		-			4,416,595
Balances – March 31, 2019		7,740,167	$	7,740	$	36,502,652	$	76,593,314	$	(10,898,383	)	$	102,205,323

	Common Stock
	Shares Amount				Additional Paid in Capital			Retained Earnings		Treasury Stock			Stockholders’ Equity Total
Balances - December 31, 2019		7,813,230	$	7,813	$	39,355,797		$	96,646,527	$	(11,519,035	)	$	124,491,102
Stock compensation expense		-		-		500,306			-		-			500,306
Issuance of common stock upon vesting of RSUs		2,000		2		(2	)		-		-			-
Repurchases of common stock		-		-		-			-		(221,031	)		(221,031	)
Net income		-		-		-			4,498,806		-			4,498,806
Balances – March 31, 2020		7,815,230	$	7,815	$	39,856,101		$	101,145,333	$	(11,740,066	)	$	129,269,183

See accompanying notes to condensed consolidated financial statements.

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BioSpecifics Technologies Corp.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended March 31,
Cash flows from operating activities:	2020			2019
Net income	$	4,498,806		$	4,416,595
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		22,234			203,731
Stock-based compensation expense		500,306			141,788
Deferred tax expense (credit)		(88,401	)		-
Non-cash lease expense		18,961			-
(Accretion) amortization of bond (discount) premium		132,663			(50,470	)
Changes in operating assets and liabilities:
Accounts receivable		1,315,090			41,897
Income tax payable		1,285,494			1,097,913
Prepaid expenses and other current assets		(71,408	)		42,359
Patent costs		(12,101	)		-
Accounts payable and accrued expenses		630,107			146,073
Lease obligation		(11,761	)		-
Net cash provided by operating activities		8,219,990			6,039,886

Cash flows from investing activities:
Purchases of property and equipment		(69,470	)		-
Maturities of marketable investments		35,263,937			20,152,229
Purchases of marketable investments		(29,058,305	)		(21,829,557	)
Net cash provided by (used in) investing activities		6,136,162			(1,677,328	)

Cash flows from financing activities:
Proceeds from stock option exercises		-			58,420
Payments for repurchase of common stock		(221,031	)		-
Net cash (used in) provided by financing activities		(221,031	)		58,420

Increase in cash and cash equivalents		14,135,121			4,420,978
Cash and cash equivalents at beginning of year		4,999,183			13,176,452
Cash and cash equivalents at end of period	$	19,134,304		$	17,597,430

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		-			-
Taxes	$	16,416		$	7,362

See accompanying notes to condensed consolidated financial statements.

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BIOSPECIFICS TECHNOLOGIES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(Unaudited)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum (“CCH”) for multiple indications. We maintain intellectual property with respect to an injectable CCH that treats, among other indications, Dupuytren’s contracture (“DC”), Peyronie’s disease (“PD”), cellulite, frozen shoulder syndrome, plantar fibromatosis, and uterine fibroids. Injectable CCH currently is approved and marketed in the U.S. under the trademark XIAFLEX® for the treatment of both DC and PD. We generate revenue primarily from our license agreement with Endo, under which we receive license, sublicense income, royalties, milestones, and mark-up on cost of goods sold payments related to the sale, regulatory submissions, and approval of XIAFLEX®.

We have developed injectable CCH for 12 clinical indications to date, and currently are evaluating CCH as a treatment for uterine fibroids. Under our license agreement with Endo, Endo has the right to further develop CCH for frozen shoulder and plantar fibromatosis, as well as certain other licensed indications. Endo has a right to opt-in for use of CCH in the treatment of uterine fibroids.

On August 31, 2011, we entered into the Second Amended and Restated Development and License Agreement (as amended, the “License Agreement”) with Auxilium Pharmaceuticals, Inc. (“Auxilium”), an entity that was acquired by Endo in 2015. The License Agreement originally was entered into in June 2004 to obtain exclusive worldwide rights to develop, market, and sell certain products containing our enzyme CCH, which Endo markets for approved indications under the trademark XIAFLEX®. Endo’s licensed rights concern the development and commercialization of products, other than dermal formulations labeled for topical administration. Currently, Endo’s licensed rights cover the indications of DC, PD, cellulite, frozen shoulder, plantar fibromatosis, and other potential indications. We and Endo may further expand the License Agreement to cover other indications as they are developed.

On February 26, 2019, we entered into the Second Amendment to the Second Amended and Restated Development and License Agreement (the “Second Amendment”) (effective as of January 1, 2019) to amend certain provisions of the License Agreement to, among other things, require Endo to provide timely estimates of royalties to assist us in complying with our financial reporting obligations. Pursuant to the terms of the Second Amendment, we have consented to the assignment of the License Agreement by Endo Global Ventures to Endo Global Aesthetics Limited, an Irish private company and an affiliate of Endo Global Ventures that is indirectly wholly-owned by Endo.

Under the License Agreement, Endo is responsible, at its own cost and expense, for developing the formulation and finished dosage form of products and arranging for the clinical supply of products. Endo has the option to license development and marketing rights to these indications based on a full analysis of the data from the clinical trials, which would transfer responsibility for the future development costs to Endo and trigger opt-in payments and potential future milestone and royalty payments to us.

The License Agreement extends, on a country-by-country and product-by-product basis, for the longer of the patent life, the expiration of any regulatory exclusivity period or twelve years from the effective date. Either party may terminate the License Agreement as a result of the other party’s breach or bankruptcy.

Endo must pay us on a country-by-country and product-by-product basis a specified percentage, which typically is in the low double digits, of net sales for products covered by the License Agreement. This royalty applies to net sales by Endo or its sublicensees. Endo also is obligated to pay a percentage of any future regulatory or commercial milestone payments received from such sublicensees. In addition, Endo and its affiliates pay us an amount equal to a specified mark-up on certain cost of goods related to supply of XIAFLEX® (which mark-up is capped at a specified percentage of the cost of goods of XIAFLEX®) for products sold by Endo and its affiliates.

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Endo had previously collaborated with partners to commercialize XIAFLEX® and Xiapex® outside of the United States; however, Endo is in the process of terminating third party partnership agreements for markets outside of the United States, which will reduce the amount of royalty revenues received by us. We do not believe that this reduction will have a material effect on our future consolidated statements of operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2020, as compared to the significant accounting policies disclosed in Note 2 of the Consolidated Financial Statements in the Company’s 2019 Annual Report.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that 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 U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reporting.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the risk factors discussed herein and in Part I, Item 1A. Risk Factors in our 2019 Annual Report filed with the SEC on March 16, 2020.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the BioSpecifics and its subsidiary, Advance Biofactures Corp. All intercompany balances and transactions have been eliminated.

Risks and Uncertainties

We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences.

Critical Accounting Policies, Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its revenues, income taxes and third party royalties. We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. For further details, see notes “Revenue Recognition,” “Provision for Income Taxes,” and “Third-Party Royalties.”

Revenue Recognition

Under Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s).

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Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our license agreement with Endo, are as follows:

Royalty / Mark-Up on Cost of Goods Sold

We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our condensed consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs.

Licensing Revenue

We include revenue recognized from upfront licensing, sublicensing, and milestone payments in “License Revenues” in our condensed consolidated statements of income.

The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer.

For each development and/or commercialization agreement that result in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities, and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

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Development and Regulatory Milestone Payments

Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted

We adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as of January 1, 2020. This standard modifies certain disclosure requirements on fair value measurements. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendment revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. The Company is required to adopt this standard starting in the first quarter of fiscal year 2023. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. This standard removes certain exceptions to the general principles of ASC 740 and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company is required to adopt this standard starting in the first quarter of fiscal year 2021. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures.

Cash, Cash Equivalents, and Investments

Cash equivalents include only securities having a maturity of 90 days or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents, and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit, commercial paper, U.S. government agency bonds, municipal bonds, and corporate bonds. All investments are classified as held to maturity. As of March 31, 2020 and December 31, 2019, the amortized cost of these investments was $94.5 million and $100.8 million, respectively. No unrealized gains or losses were recorded in either period.

Fair Value Measurements

Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held-to-maturity investments, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the duration of those instruments. As of March 31, 2020 and December 31, 2019, there were no recorded unrealized gains or losses on our investments as they are classified as held-to-maturity. As of March 31, 2020 and December 31, 2019, amortized cost basis of the investments approximated their fair value. At March 31, 2020 and December 31, 2019, the amortized net discount / (net premium) included in interest income was approximately $134,000 and $32,000, respectively. At March 31, 2020 and December 31, 2019, the remaining unamortized net premium / (net discount) was approximately $221,000 and $285,000, respectively.

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The schedule of maturities at March 31, 2020 and December 31, 2019 are as follows:

	Maturities as of March 31, 2020				Maturities as of December 31, 2019
	1 Year or Less		Greater than 1 Year		1 Year or Less		Greater than 1 Year
Municipal bonds	$	8,749,716	$	-	$	11,341,249	$	-
Government agency bonds		3,423,351		3,242,692		11,950,738		6,231,804
US Treasury bonds		6,027,090		-		-		-
Corporate bonds		62,633,006		3,636,086		57,321,784		6,675,958
Certificates of deposit		4,251,488		2,507,218		3,626,147		3,661,262
Total	$	85,084,651	$	9,385,996	$	84,239,918	$	16,569,024

The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists.

As of March 31, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of March 31, 2020 and December 31, 2019:

March 31, 2020	Type of Instrument	Fair Value		Level 1		Level 2		Level 3
Cash equivalents	Institutional Money Market	$	8,456,598	$	8,456,598	$	-	$	-
Investments	Certificates of Deposit		6,758,706		6,758,706		-		-
Cash equivalents	Municipal Bonds		1,003,616		-		1,003,616		-
Investments	Municipal Bonds		8,749,716		-		8,749,716		-
Investments	Government Agency Bonds		6,666,043		-		6,666,043		-
Investments	US Treasury Bonds		6,027,090		-		6,027,090		-
Cash equivalents	Corporate Bonds		5,075,742		-		5,075,742		-
Investments	Corporate Bonds		66,269,092		-		66,269,092		-

December 31, 2019	Type of Instrument	Fair Value		Level 1		Level 2		Level 3
Cash equivalents	Institutional Money Market	$	950,658	$	950,658	$	-	$	-
Investments	Certificates of Deposit		7,287,409		7,287,409		-		-
Investments	Municipal Bonds		11,341,249		-		11,341,249		-
Investments	Government Agency Bonds		18,182,542		-		18,182,542		-
Investments	Corporate Bonds		63,997,742		-		63,997,742		-

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Concentration of Credit Risk and Major Customers

The Company maintains investments in FDIC insured certificates of deposits, municipal bonds, and corporate bonds.

The Company is currently dependent on one customer, Endo, which generates almost all the Company’s revenues. For the three-month periods ended March 31, 2020 and 2019, licensing, sublicensing, milestones, and royalty revenues under the License Agreement with Endo were approximately $9.7 million and $8.1 million, respectively.

At March 31, 2020 and December 31, 2019, our accounts receivable balances from Endo were $17.8 million and $19.1 million, respectively.

Treasury Stock

The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the three months ended March 31, 2020, we repurchased 4,067 shares at an average price of $54.35 aggregating approximately $221,000. For the three months ended March 31, 2019, there were no shares repurchased.

Receivables and Doubtful Accounts

Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our single large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At March 31, 2020 and December 31, 2019, our accounts receivable balance was $17.8 million and $19.1 million, respectively, and was from one customer, Endo.

Third-Party Royalties

We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are generally expensed under general and administrative in the quarter that the net sales have occurred. For the three-month periods ended March 31, 2020 and 2019, third-party royalty expenses were $0.2 million and $0.4 million, respectively. As of March 31, 2019, we have no further third-party royalties in connection with PD as the agreement has expired.

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Royalty Buy-Down

On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations in connection with PD. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, all of which have been paid as of January 1, 2018. Royalty obligations terminate five years after first commercial sale, which occurred in January 2014. Accordingly, we ceased paying royalties in February 2019. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX® and Xiapex® for PD on an annual basis as measured by the proportion of the total estimated sales over the five year period. For the three months ended March 31, 2019, we amortized approximately $0.2 million related to this agreement and is recorded as part of general and administrative expenses. As of both March 31, 2020 and December 31, 2019, there were no remaining capitalized balances outstanding related to this agreement.

Research and Development Expenses

R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs, and overhead. R&D expenses also consist of third-party costs, such as medical professional fees, product costs used in clinical trials, consulting fees, and costs associated with clinical study arrangements. We may 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 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 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

ASC 718, Compensation - Stock Compensation (“ASC 718”), requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock awards including stock options and common stock issued to our employees and directors under our stock plans. ASC 718 requires companies to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The fair value of each service-based restricted stock unit granted is estimated on the day of grant based on the closing price of the Company’s common stock. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our condensed consolidated statements of operations.

On June 13, 2019, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”). Upon the 2019 Plan’s approval, approximately 1,247,598 shares of Company common stock were available for issuance thereunder, consisting of 1,100,000 shares authorized for issuance under the 2019 Plan and 147,598 shares then remaining available for issuance under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2019 Plan replaced the 2001 Plan. No new awards may be granted under the 2001 Plan; however, awards outstanding under the 2001 Plan remain subject to and will be settled under the applicable 2001 Plan. As of March 31, 2020, options to purchase 61,687 shares of common stock were outstanding under the 2001 Plan.

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Grants under the 2019 Plan may consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, or cash awards. Employees, key advisors, or non-employee directors are eligible to participate in the 2019 Plan. Grants under the 2019 Plan vest over periods ranging from one to four years and expire ten years from date of grant. As of March 31, 2020, options to purchase 120,000 shares of common stock and 9,450 restricted stock awards were outstanding under the 2019 Plan, and a total of 1,154,648 shares remain available for grant under the 2019 Plan.

2019 Omnibus Incentive Compensation Plan (2019 Plan)

Restricted Stock Awards

A summary of the restricted stock awards activity during the three months ended March 31, 2020 is presented below:

	Restricted Stock			Weighted-Average Grant Date Fair Value Per Share
Nonvested at December 31, 2019		10,450		$	60.47
Granted		1,000			50.51
Vested		(2,000	)		53.69
Forfeited					-
Nonvested at March 31, 2020		9,450		$	60.85

Stock-based compensation expense related to restricted stock awards recognized in general and administrative expense was approximately $144,000 and zero for the three-month periods months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, there was approximately $144,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to restricted stock. This cost is expected to be recognized over the vesting periods of the restricted stock, with a weighted-average period of approximately 0.25 years.

Stock Option Activity

For the three months ended March 31, 2020, we granted a total of 30,000 stock options with a weighted average grant date fair value of $22.70 per share.

The assumptions used in the valuation of stock options granted during the three months ended March 31, 2020 were as follows:

		Three Months Ended March 31, 2020
Risk-free interest rate		0.70% - 1.61%
Expected term of option		5.5 - 6.25 years
Expected stock price volatility		39.5% - 40.6%
Expected dividend yield	$	0.0

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A summary of our stock option activity during the three months ended March 31, 2020 is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2019		189,187		$	46.79		8.62	$	1.920,684
Grants		30,000			56.11		-		-
Exercised		-			-		-		-
Forfeited		(37,500	)		57.48		-		-
Outstanding at March 31, 2020		181,687		$	46.12		7.49	$	1,898,560
Exercisable at March 31, 2020		54,187		$	39.74		2.69	$	911,735

During the three-month periods months ended March 31, 2020 and 2019, the Company received approximately zero and $58,000, respectively, from stock options exercised by option holders.

Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $56.57 on March 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $2.3 million in unrecognized compensation cost related to stock options outstanding as of March 31, 2020, which we expect to recognize over the next 3.75 years.

Stock-based compensation expense related to stock options recognized in general and administrative expenses was approximately $166,000 and $142,000 for the three-month periods ended March 31, 2020 and March 31, 2019, respectively. In addition, stock compensation expense related to restructuring associated with the acceleration of vesting of certain stock options and restricted stock units was approximately $190,000 for the three months ended March 31, 2020 (see Note 7).

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on a straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. At March 31, 2020, total property and equipment consisted of furniture and fixtures of approximately $68,000 with an expected useful life of five years. As of December 31, 2019, all property and equipment were fully depreciated.

Comprehensive Income

For each of the three-month periods ended March 31, 2020 and 2019, we had no components of other comprehensive income other than net income itself.

Provision for Income Taxes

We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of March 31, 2020 and December 31, 2019, the Company has not recorded any unrecognized tax benefits. We classify interest associated with income taxes under interest expense and tax penalties under other.

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Lease Obligation

We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2019 due to the short-term nature of our existing lease in Lynbrook, New York.

In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware.

The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

	March 31, 2020			December 31, 2019
2020	$	61,815		$	75,352
2021		84,893			84,893
2022		87,428			87,428
Total lease payments		234,136			247,673
Less: interest		(9,784	)		(11,560	)
Total lease obligation	$	224,352		$	236,113

On January 7, 2020, the Company provided three months’ notice to 35 Wilbur Street Associates, LLC of the Company’s intent to terminate the lease agreement for our former corporate headquarters, located at 35 Wilbur St., Lynbrook, New York 11563. Accordingly, the lease terminated on April 7, 2020. As the lease provided the Company the option to cancel the lease by giving three months’ prior written notice, the Company did not incur any termination penalties.

Operating lease expenses amounted to approximately $57,000 and $34,000 for the three-month periods ended March 31, 2020 and 2019, respectively.

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3. NET INCOME PER SHARE

In accordance with ASC 260, Earnings Per Share, basic net income per share amount is computed using the weighted-average number of shares of common stock outstanding during the periods presented, while diluted net income 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 restricted stock awards using the treasury stock method. For the three-month periods ended March 31, 2020 and 2019, there were 23,865 and 61,243, respectively of common equivalent shares attributable to stock options and restricted stock awards that were included in the calculation of diluted net income per share. There were 180,500 and 50,000 stock options and restricted stock awards excluded from the calculation of diluted net income per share for the periods ended March 31, 2020 and 2019, respectively, because their effects are anti-dilutive.

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	March 31, 2020		December 31, 2019
Trade accounts payable	$	216,453	$	197,077
Accrued legal and other professional fees		333,558		330,787
Accrued payroll and related costs		18,293		209,330
Third party royalties		169,000		228,000
Restructuring accrual (See Note 7)		866,377		-
Other accruals		24,834		33,215
Total	$	1,628,515	$	998,409

5. PATENT COSTS

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from one to nine years, and review for impairment on a quarterly basis and when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As of March 31, 2020 and December 31, 2019, no impairment existed, and no adjustments were warranted.

Additions to our capitalized patent costs during the three-month periods months ended March 31, 2020 and 2019 were approximately $12,000 and zero, respectively. Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of:

	March 31, 2020			December 31, 2019
Patents	$	1,284,725		$	1,272,625
Accumulated amortization		(720,424	)		(699,348	)
	$	564,301		$	573,277

The amortization expense for patents for the three-month periods months ended March 31, 2020 and 2019 was approximately $21,000 and $19,000, respectively. The estimated aggregate amortization expense for the remaining nine months of 2020 and each of the years below is approximately as follows:

April 1, 2020 – December 31, 2020	$	63,000
2021		66,500
2022		66,500
2023		66,500
2024		66,500
Thereafter		235,000

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6. PROVISION FOR INCOME TAXES

Our deferred tax liabilities and deferred tax assets are impacted by events and transactions arising in the ordinary course of business, R&D activities, vesting of nonqualified options and other items. The provision for income taxes is based on an estimated effective tax rate derived from our consolidated earnings before taxes, adjusted for nondeductible expenses and other permanent differences for the fiscal year. For the three-month periods months ended March 31, 2020 and 2019, the provision for income taxes was $1.2 million and $1.1 million, respectively. As of March 31, 2020 and December 31, 2019, our remaining deferred tax liabilities were approximately $0.5 million and $0.6 million, respectively.

The estimated effective tax rate for the three-month periods ended March 31, 2020 and 2019 was 21.2% and 20.0%, respectively, of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2020 and 2019 plus the effects, if any, of certain discrete items occurring in 2020 and 2019.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act made various tax law changes including, among other things, (i) increasing the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid taxes. The income tax provisions of the CARES Act had limited applicability to the Company as of March 31, 2020, and therefore, the enactment of the CARES Act did not have a material impact on the Company’s consolidated financial statements as of, and for the three months ended, March 31, 2020. We will continue to evaluate the impact of tax legislation and will update our disclosures as additional information and interpretative guidance becomes available.

7. RESTRUCTURING COSTS

As a result, we recorded a restructuring charge of approximately $1.1 million in the first quarter of fiscal 2020. The restructuring charge is primarily associated with $0.9 million of one-time termination benefits that we expect to pay out in cash, $0.2 million of one-time non-cash termination expenses associated with the acceleration of vesting of certain stock options and restricted stock units, and facility exit expenses. We expect to pay the cash termination benefits over a period of six months beginning April 2020. The estimated liability for termination benefits which will be paid out over six months was recorded at fair value during the first quarter of 2020 as a current liability in the consolidated balance sheet. These termination benefits consist of severance payments, reimbursement of benefits payments, and guaranteed consulting payments. Total charges and payments related to the restructuring plan recognized in the condensed consolidated statement of operations are as follows:

	Three Months Ended March 31,
	2020
Restructuring accrual, January 1, 2020	$	-
Termination costs		1,070,024
Facility exit costs		76,020
Payments		(89,235	)
Stock compensation expense charged to additional paid-in-capital		(190,432	)
Restructuring accrual, March 31, 2020	$	866,377

8. SUBSEQUENT EVENTS

On April 6, 2020, the Company and Mr. J. Kevin Buchi mutually agreed that Mr. Buchi would step down as Chief Executive Officer and as a director of the Company, effective immediately. The Company and Mr. Buchi have entered into a separation agreement that details the termination benefits to which he is entitled. The Company will pay approximately $0.6 million in termination benefits over the next 12 months related to this agreement.

In connection with Mr. Buchi’s separation from the Company, on April 6, 2020, the Board approved the appointment of Mr. Joseph Truitt to serve as the Company’s Chief Executive Officer on an interim basis. Mr. Truitt was also appointed as a Class I member of the Board. On May 11, 2020, the Company announced Mr. Truitt’s appointment as the permanent Chief Executive Officer, effective May 7, 2020.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and is qualified by reference to them.

Overview

We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum (“CCH”) for multiple indications. Collagenases are naturally occurring enzymes responsible for the breakdown of collagen, which is the main structural protein in the extracellular matrix in the various connective tissues of the body and is the most abundant protein in mammals. Local accumulations of excess collagen are associated with a number of medical conditions.

We maintain intellectual property with respect to an injectable CCH that treats, among other indications, Dupuytren’s contracture (“DC”), Peyronie’s disease (“PD”), cellulite, frozen shoulder syndrome, plantar fibromatosis, and uterine fibroids. Injectable CCH currently is marketed in the U.S. by our partner Endo Pharmaceuticals under the trademark XIAFLEX® for the treatment of both DC and PD. XIAFLEX® is the first and only FDA-approved nonsurgical treatment for these two indications.. We generate revenue primarily from our license agreement with Endo, under which we receive license, sublicense income, royalties, milestones and mark-up on cost of goods sold payments related to the sale, regulatory submissions and approval of XIAFLEX®.

We have developed injectable CCH for 12 clinical indications to date. Under our license agreement with Endo, Endo has the right to further develop CCH for frozen shoulder and plantar fibromatosis, as well as certain other licensed indications. Endo has a right to opt-in for use of CCH in the treatment of uterine fibroids.

First Quarter Highlights and Outlook

•

XIAFLEX^® royalty revenue increased by approximately 19% for the first quarter of 2020 as compared to the same period in 2019, which increase was attributable to royalties associated with higher net sales of XIAFLEX^® by Endo in DC and PD.

•

Endo has filed a biologics license application for CCH for the treatment of cellulite with the FDA. The Prescription Drug User Fee Act date for CCH for the treatment of cellulite is expected to be July 6, 2020, with a postponed commercial launch now anticipated to be in the first quarter of 2021. This delay decision was made as a result of the anticipated impact of COVID-19 on medical aesthetics physician office closures and a related decline in consumer spending.

•

Endo expects to initiate studies in adhesive capsulitis and plantar fibromatosis in the second half of 2020. Adhesive capsulitis, also known as frozen shoulder, is an inflammation and thickening of the shoulder capsule due to collagen which causes decreased motion in the shoulder. Plantar fibromatosis is a non-malignant thickening of the feet’s deep connective tissue or fascia. There are currently no FDA-approved pharmaceutical therapies available to treat either condition.

Impact of COVID-19

The outbreak of COVID-19 has adversely impacted the U.S. and global economies. Based on public disclosures made by Endo, we currently anticipate that revenues from our license agreement with Endo will decline in the second quarter of 2020 compared to the first-quarter of 2020, due to decreased demand for physician administered products because of office closures and a decline in patients electing to be treated. We also currently expect full year 2020 revenues to decline compared to full-year 2019 revenues.

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License Agreement with Endo

We generate revenue from one source, our license agreement with Endo (the “License Agreement”), under which we receive license, sublicense income, royalties, milestones, and mark-up on cost of goods sold payments related to the sale, regulatory submissions, and approval of XIAFLEX® as described above. Currently, Endo’s licensed rights cover the indications of DC, PD, cellulite, frozen shoulder, plantar fibromatosis, and other potential indications. We and Endo may further expand the License Agreement to cover other indications as they are developed.

Endo had previously collaborated with partners to commercialize XIAFLEX® and Xiapex® outside of the United States; however, Endo is in the process of terminating third-party partnership agreements for markets outside of the United States, which will reduce the amount of royalty revenues received by us. We do not believe that this reduction will have a material effect on our future consolidated statements of operations.

Significant Risks

We are dependent on third parties, and our licensee, Endo, may not be able to continue successfully commercializing XIAFLEX® for DC and PD, successfully develop XIAFLEX® for additional indications, obtain required regulatory approvals, manufacture XIAFLEX® 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.

The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains its investment in money market funds, certificates of deposit, commercial paper, U.S. government agency bonds, municipal bonds, and corporate bonds.

The Company is subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences.

For more information regarding the risks facing the Company, please see the risk factors discussed under the heading “Risk Factors” under Part II, Item 1A. herein and Item 1A. of Part 1 of our 2019 Annual Report.

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Critical Accounting Policies, Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on historical experience, interim data provided by Endo, and on various other assumptions that we believe are reasonable under the circumstances. The financial information at March 31, 2020 and for the three-month periods ended March 31, 2020 and 2019 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, 2019 balance sheet amounts and disclosures included herein have been derived from the Company’s December 31, 2019 audited consolidated financial statements. The interim results are not necessarily indicative of results to be expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s 2019 Annual Report.

As described in Note 2 to our accompanying Condensed Consolidated Financial Statements, there have been no significant changes to our critical accounting policies for the three months ended March 31, 2020, compared to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2019 Annual Report.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2020 COMPARED TO THREE MONTHS ENDED MARCH 31, 2019

Revenues

We generate revenue primarily from royalties under the License Agreement and, to a lesser degree, licensing fees, sublicensing fees, and milestones.

Royalties

Royalties consist of royalties and the mark-up on cost of goods sold under the License Agreement. Total royalty and mark-up on cost of goods sold for the three-month period ended March 31, 2020 were $9.7 million as compared to $8.1 million in the corresponding 2019 period, an increase of $1.6 million or 19%. The increase in total revenues for the quarterly period was primarily due to royalties associated with higher net sales of XIAFLEX® in DC and PD.

Research and Development Activities and Expenses

R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expenses, facility costs, and overhead. R&D expenses also consist of third-party costs, such as medical professional fees, product costs used in clinical trials, consulting fees, and costs associated with clinical study arrangements. For the three-month periods ended March 31, 2020 and 2019, R&D expenses were approximately $122,000 and $150,000, respectively. The decrease in the 2020 period as compared to the 2019 period was mainly due to decreases in the costs associated with clinical and other R&D programs.

We manage the development of XIAFLEX® for uterine fibroids and initiate the development of XIAFLEX® in new potential indications, not licensed by Endo. We presented data from the Phase 1 clinical trial of CCH for the treatment of uterine fibroids at the 66^th Annual Meeting of the Society of Reproductive Investigation on March 14, 2019 in Paris, France. This presentation follows positive top-line results announced in October 2018 demonstrating that CCH significantly reduced collagen content in uterine fibroids. We intend to use the Phase 1 data to inform the development of future clinical studies. BioSpecifics and its clinical partners continue to analyze the full Phase 1 data to guide the design of a Phase 2 study of CCH for the treatment of uterine fibroids. Costs related to the uterine fibroids program for the three months ended March 31, 2019 were approximately $60,000. There were no costs associated with the uterine fibroids program in the 2020 period.

The successful development of drugs is inherently difficult and uncertain. Our business requires investments in R&D over many years, often for drug candidates that may fail during the R&D process. Even if the Company is able to successfully complete the development of our drug candidates, our long-term prospects depend upon our ability and the ability of our partners, particularly with respect to XIAFLEX®, to continue to commercialize these drug candidates.

There is significant uncertainty regarding our ability to successfully develop drug candidates in other indications. These risks include the uncertainty of:

•

the nature, timing, and estimated costs of the efforts necessary to complete the development of our drug candidate projects;

•

the anticipated completion dates for such drug candidate projects;

•

the scope, rate of progress, and cost of such clinical trials that we may commence in the future with respect to such drug candidate projects;

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the scope, rate of progress of preclinical studies, and other R&D activities related to such drug candidate projects;

•

clinical trial results for such drug candidate projects;

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the cost of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights relating to such drug candidate projects;

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the terms and timing of any strategic alliance, licensing, and other arrangements that we have or may establish in the future relating to our drug candidate projects;

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costs relating to future product opportunities;

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the cost and timing of regulatory approvals with respect to such drug candidate projects; and

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the cost of establishing clinical supplies for our drug candidate projects.

We believe that our current resources and liquidity are sufficient to advance our current clinical and R&D projects.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs for personnel, third-party royalty fees, amortization of deferred royalty buy-down, consultant costs, legal fees, investor relations, professional fees, and overhead costs. General and administrative expenses for the three-month periods ended March 31, 2020 and 2019 were $3.2 million and $2.9 million, respectively. Increases in general and administrative expenses was mainly due to the higher personnel expenses, stock compensation expense, and consulting fees partially offset by lower third-party royalties associated with XIAFLEX® and the amortization associated with deferred royalty buy-down related to PD.

Restructuring Charges

On January 7, 2020, we announced that we would be relocating our corporate headquarters from Lynbrook, New York to Wilmington, Delaware as of April 7, 2020. On January 6, 2020, in connection with the relocation, we notified five employees and one consultant that their services would no longer be required effective March 31, 2020. On March 23, 2020, the five employees and one consultant were given separation agreements detailing the termination benefits to which they would be entitled. As a result, we recorded a one-time restructuring charge of $1.1 million in the first quarter of fiscal 2020. The restructuring charge is primarily associated with $0.9 million of one-time termination benefits that we expect to pay out in cash over the six-month period beginning April 2020 and $0.2 million of one-time non-cash termination expenses associated with the acceleration of vesting of certain stock options and restricted stock units.

Other Income

Other income for the three months ended March 31, 2020 was approximately $480,000 compared to $449,000 in the corresponding 2019 period. Other income consists of interest earned on our investments.

Provision for Income Taxes

Our deferred tax liabilities and deferred tax assets are impacted by events and transactions arising in the ordinary course of business including stock-based compensation, revenue and leases. For the three-month period ended March 31, 2020, our provision for income taxes was $1.2 million. Our deferred tax liabilities as of March 31, 2020 were $0.5 million. The estimated effective tax rate for the three months ended March 31, 2020 was 21.2% of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2020 plus the effects of certain discrete items occurring in 2020. For the three-month period ended March 31, 2019, our provision for income taxes was $1.1 million. Our deferred tax assets as of March 31, 2019 were $0.3 million. Our effective tax rate for the three months ended March 31, 2019 was 20.0%. Our effective tax rate was impacted by the discrete impact of current period stock option exercises which impacts the effective rate in the period in which it occurs.

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Net Income

For the three months ended March 31, 2020, we recorded net income of $4.5 million, or $0.61 per basic common share and per diluted common share, compared to a net income of $4.4 million, or $0.61 per basic common share and $0.60 per diluted common share, for the same period in 2019.

Liquidity and Capital Resources

To date, we have financed our operations primarily through product sales, licensing revenues and royalties under agreements with third parties and sales of our common stock. As of March 31, 2020 and December 31, 2019, we had cash and cash equivalents and investments in the aggregate of approximately $113.6 million and $105.8 million, respectively. We currently anticipate that our available funds and cash flow from operations will be sufficient to meet our operational cash needs for at least the next 12 months from the date of this filing.

Net cash provided by operating activities for the three months ended March 31, 2020 was $8.2 million as compared to net cash provided by operating activities of $6.0 million in the 2019 period. Net cash provided by operating activities in the 2020 period was primarily attributable to our net income, accrued tax liability of $1.3 million, and accrued restructuring charges of $0.9 million. Non-cash items used to reconcile net income to net cash provided by operating activities of $0.6 million was due primarily to stock-based compensation expense. Net cash provided by operating activities in the 2019 period was primarily attributable to our net income and accrued tax liability of $1.1 million. Non-cash items used to reconcile net income to net cash provided by operating activities of $0.3 million included amortization of patent costs and bond premiums and discounts and stock-based compensation expense.

Net cash provided by investing activities for the three months ended March 31, 2020 was $6.1 million as compared to net cash used in investing activities of $1.7 million for the corresponding 2019 period. The net cash provided by investing activities in the 2020 period primarily reflects the investment of $29.1 million and the maturing of $35.3 million in marketable securities. The net cash provided by investing activities in the 2020 period also includes $70,000 of purchases of property and equipment. The net cash used in investing activities in the 2019 period reflects the investment of $21.8 million and the maturing of $20.2 million in marketable securities.

Net cash used in financing activities for the three months ended March 31, 2020 was approximately $221,000 as compared to net cash provided by financing activities of $58,000 in the corresponding 2019 period. In the 2020 period, net cash used in financing activities was due to payments for the repurchase of common stock. In the 2019 period, net cash provided by financing activities was due to proceeds received from stock option exercises.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports 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 SEC’s rules and forms, and that such information is accumulated and communicated to the management of the Company (the “Management”), including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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The Company, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this Quarterly Report, that the Company’s disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing, and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our Management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal control over financial reporting (as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) that occurred during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

Our business may be adversely affected by the ongoing coronavirus pandemic.

In December 2019, a novel strain of the coronavirus (COVID-19) emerged in China and the virus has now spread to other countries, including the U.S., and infections have been reported globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. COVID-19 has resulted in global business and economic disruption and extreme volatility in the financial markets as many jurisdictions have placed restrictions on travel and non-essential business operations and implemented social distancing, shelter-in-place, quarantine, and other similar measures for their residents to contain the spread of the virus. The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity, and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak.

The continued spread of COVID-19 globally could materially and adversely impact our operations including without limitation, future clinical trial operations, regulatory approval and the timing thereof, the operations of our collaboration partners, travel, and employee health and availability which may have a material and adverse effect on our business, financial condition, and results of operations. Specifically, depending upon the length and severity of the pandemic, COVID-19 could impact:

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Our future clinical trial plans, specifically with respect to uterine fibroids;

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Endo’s development programs for the CCH treatment of plantar fibromatosis and adhesive capsulitis;

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Endo’s commercialization and launch of CCH treatment for cellulite; and

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Endo’s ability to manufacture, market, and sell XIAFLEX® with respect to DC and PD.

In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the financial markets, our business, the value of our common stock and our ability to obtain on favorable terms, or at all, or the monetization of our royalty streams. The coronavirus pandemic continues to rapidly evolve. The ultimate impact of the coronavirus pandemic on us is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted.

COVID-19 could material and adversely affect Endo’s business, which in turn would impact our business.

As we are dependent upon revenue from Endo, Endo’s operating success or failure has a significant impact on our potential royalty stream and other payment rights. Accordingly, the following impacts of COVID-19 on Endo’s business, could materially affect our business.

In response to public health directives and orders, Endo has implemented alternative working practices and mandatory work-from-home requirements for appropriate employees, as well as social distancing, modified schedules, shift rotation, and other similar policies at its manufacturing facilities, and has transitioned to a “virtual” engagement model to continue supporting healthcare professionals, patient care, and access to medicines. Endo has also suspended international and domestic travel. The effects of COVID-19, including these public health directives and orders, have had an impact on Endo’s business and may in the future materially disrupt its business, including its manufacturing and supply chain operations by significantly reducing its output, negatively impacting its productivity, and delaying its product development programs.

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COVID-19 may have significant impacts on third-party arrangements, including those with Endo’s manufacturing, supply chain, and distribution partners, information technology and other vendors and other service providers and business partners. For example, there may be significant disruptions in the ability of any or all of Endo’s third-party providers to meet their obligations to Endo on a timely basis, or at all, which may be caused by their own financial or operational difficulties, including any closures of their facilities pursuant to a governmental order or otherwise. As a result of these disruptions and other factors, including changes in Endo’s workforce availability, Endo’s ability to meet its obligations to third-party distribution partners may be negatively impacted. As a result, Endo has recently delivered, and in the future Endo or its third-party providers may deliver, notices of the occurrence of a force majeure or similar event under certain of its third-party contracts, which could result in prolonged commercial disputes and ultimately legal proceedings to enforce contractual performance and/or recover losses. Further, the publicity of any such dispute could harm Endo’s reputation and make the negotiation of any replacement contracts more difficult and costly, thereby prolonging the effects of any resulting disruption in Endo’s operations. Such disruptions could be acute with respect to certain of its raw material suppliers where Endo may not have readily accessible alternatives or alternatives may take longer to source than usual. Any of these disruptions could harm Endo’s ability to manufacture XIAFLEX®.

Endo has experienced, and may continue to experience, changes in customer demand as the COVID-19 pandemic evolves. The current economic crisis and rising unemployment rates resulting from COVID-19 have the potential to significantly reduce individual disposable income and depress consumer confidence, which could limit the ability of some consumers to purchase certain pharmaceutical products and reduce consumer spend on certain medical procedures in both the short- and medium-term. Additionally, as part of the measures to address COVID-19, certain healthcare providers are not currently performing various medical procedures, including those that use XIAFLEX®. For example, during the last two weeks of the first quarter of 2020, Endo experienced decreased demand for XIAFLEX®.

Additionally, Endo’s product development programs may be adversely affected by the global pandemic and the prioritization of production during this pandemic. The public health directives in response to COVID-19 requiring social distancing and restricting non-essential business operations have in certain cases caused and may continue to cause delays, increased costs, and additional challenges in Endo’s product development programs, including obtaining adequate patient enrollment and successfully bringing product candidates to market. In addition, Endo may face additional challenges receiving regulatory approvals as previously scheduled dates or anticipated deadlines for action by the FDA on its applications and products in development, including dates scheduled for 2020, could be subject to delays beyond Endo’s control as regulators such as the FDA focus on COVID-19. For example, as a result of COVID-19 and its impact on medical aesthetics physician office closures and consumer spending, Endo is planning on changing the anticipated product launch of CCH for the treatment of cellulite in the buttocks, if approved, to 2021. In addition, Endo has assessed and expects to continue to assess the timeline for the development and commercialization of other products, which could include CCH treatment for frozen shoulder and plantar fibromatosis.

The magnitude of the effect of COVID-19 on Endo’s business will depend, in part, on the length and severity of the restrictions (including the effects of recently announced “re-opening” plans following a recent slowdown of the virus infection rate in certain countries and localities) and other limitations on Endo’s ability to conduct its business in the ordinary course. The extent, length and consequences of the pandemic are uncertain and impossible to predict, but could be material.

In addition to the other information contained elsewhere in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in “Part I, Item 1A. Risk Factors” in our 2019 Annual Report, which could materially affect our business, financial condition or future results.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three-month period ended March 31, 2020, we did not issue any unregistered shares of securities.

Issuer Purchases of Equity Securities

On May 23, 2019, the Company announced the authorization of a new stock repurchase program under which we can repurchase up to $4.0 million of our outstanding common stock. Pursuant to the repurchase program, from time to time we repurchase stock through a broker in the open market, provided that the timing, actual number and price per share of the common stock to be purchased will be subject to market conditions, applicable legal requirements, including Rule 10b-18 of the Exchange Act, and various other factors.

The following table presents a summary of share repurchases made by us during the quarter ended March 31, 2020.

Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number (or Dollar Value) of Shares that May Yet be Purchased under the Plan⁽³⁾
Remaining balance as of December 31, 2019						$	3,379,349
January 1, 2020 – January 31, 2020	1,709	$	56.66		13,096		3,282,509
February 1, 2020 – February 29, 2020	848	$	61.39		13,944		3,230,446
March 1, 2020 – March 31, 2020	1,510	$	47.77		15,454	$	3,158,318
Total	4,067

(1)	The purchases were made in open-market transactions in compliance with Exchange Act Rule 10b-18 or under the company’s 10b-18 plan.

(2)	Includes commissions paid, if any, related to the stock repurchase transactions.

(3)	On May 23, 2019, we announced that our Board of Directors had authorized the repurchase of up to $4.0 million of our common stock under the stock repurchase program, which program is not subject to an expiration date.

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Item 6.

Exhibits

	3.1	Certificate of Designation of Series C Junior Participating Preferred Stock of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed April 10, 2020 (File No. 001-34236))
	4.1	Rights Agreement, dated as of April 10, 2020, by and between the Company and Worldwide Stock Transfer, LLC, as rights agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed April 10, 2020 (File No. 001-34236))
	10.1	Employment Letter Agreement, dated January 6, 2020, by and between the Company and Patrick Hutchison (incorporated by reference to Exhibit 10.30 of the Company’s Annual Report on Form 10-K filed March 16, 2020 (File No. 001-34236))
	10.2*	Separation of Employment Agreement and General Release, dated March 31, 2020, by and between the Company and Patrick Caldwell
	10.3*	Separation of Employment Agreement and General Release, dated April 6, 2020, by and between the Company and J. Kevin Buchi
	10.4*	Letter Agreement, dated April 6, 2020, by and between the Company and Joseph Truitt
	10.5*	Employment Agreement, dated May 7, 2020, by and between the Company and Joseph Truitt
	10.6*	Confidentiality and Inventions Assignment Agreement, dated April 1, 2020, by and between the Company and Joseph Truitt
	31.1**	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2**	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1**	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002

* filed herewith

** furnished herewith

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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: May 11, 2020	/s/ Joseph Truitt
	Joseph Truitt
	Chief Executive Officer and Principal Executive Officer

Agreement and General Release

BioSpecifics Technologies Corp. (the “Company”) and Pat Caldwell, his heirs, executors, administrators, successors, and assigns (collectively referred to throughout this agreement as “you” or “your”), hereby enter into this Separation Agreement and General Release (the “Agreement”) to settle all issues arising out of, or related to, your provision of services to the Company and termination thereof. You and the Company agree that:

1. Last Day of Services. Your engagement with the Company will terminate on March 31, 2020 (such date is your “Last Day of Services”). You are being provided with this Agreement prior to the Last Day of Services, but in order for it to be valid and enforceable you may not sign it until after the Last Day of Services. You will continue to receive your fees at your current regular rate through the Last Day of Services or while you remain engaged to provide services to the Company. We expect that you will assist the Company with the transition of your services for the period of time through your Last Day of Services. You acknowledge and understand that nothing in this Agreement alters the termination provisions set forth in Section 5.1 of the Consulting Agreement dated effective April 1, 2019 between you and the Company (the “Consulting Agreement”). During your remaining engagement with the Company, you are required to continue to abide by all Company policies and rules. Any material violation of such policies and rules prior to the Last Day of Services may result in immediate termination of your contract, and in such event, you will not be eligible to sign this Agreement and receive the severance benefits provided in Paragraph 2.

2. Severance Payment. Provided you timely execute and do not revoke this Agreement (as provided below), which includes a general release and waiver of claims and other promises herein, and otherwise comply with its terms, the Company will provide you with the following severance benefits:

Severance Payment. No later than thirty (30) days after the Effective Date of this Agreement (as defined below), the Company will pay you a lump sum severance payment of Three Hundred Sixty Thousand and 00/100 Dollars ($360,000), representing twelve (12) months of your fees as of the Last Day of Services.

Treatment of Equity. Upon your termination of service with the Company, 100% of your unvested and outstanding restricted stock units granted pursuant to the Company’s 2019 Omnibus Incentive Compensation Plan (the “Equity Plan”) shall immediately vest (the “Accelerated RSUs”). Pursuant to the terms of your Consulting Agreement, the remaining 500 restricted stock units that are scheduled to be granted to you on April 1, 2020, shall be granted immediately prior to your termination of service with the Company and shall be 100% vested upon such termination of service (the “Accelerated RSU Grant”). Except as provided herein, the Accelerated RSUs and the Accelerated RSU Grant shall otherwise remain subject to the applicable terms and conditions of the Equity Plan and the applicable restricted stock unit award agreement.

3. Taxes. You acknowledge and warrant that you are, and shall be, responsible for all federal, state, and local tax liabilities that may result from the payments described in Section 2 above and you hereby warrant that the Company shall bear no responsibility for any such tax liabilities. You further agree and acknowledge that you shall indemnify, defend, and hold harmless the Company for any possible federal, state, or local tax liabilities that may result from such payments and that you shall reimburse any taxes, interest and/or penalties assessed against the Company for any such tax liabilities caused by such payments.

4. Release.

In consideration of the severance benefits set forth in Paragraph 2, to the fullest extent permitted by law you waive, release and forever discharge the Company, Advance Biofactures Corp., and each of their respective past and current parents, subsidiaries, affiliates, and each of its and their respective past and current directors, officers, members, trustees, employees, representatives, agents, attorneys, employee benefit plans and such plans’ administrators, fiduciaries, trustees, recordkeepers and service providers, and each of its and their respective successors and assigns, each and all of them in their personal and representative capacities (collectively the “Company Releasees”) from any and all claims legally capable of being waived, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, attorneys’ fees, costs, damages, or any right to any monetary recovery or any other personal relief, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which you now have, ever have had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to you, from the beginning of time until the date of execution of this Agreement, including without limitation such claims arising out of or relating in any way to the Consulting Agreement, your provision of services to the Company or the termination thereof (the “Released Claims”).

Without limiting the generality of the foregoing, and notwithstanding that, as an independent contractor to, and not an employee of, the Company you are unable to assert claims under statutes that provide rights to employees, out of an abundance of caution this waiver, release, and discharge includes any claim or right, to the extent legally capable of being waived, based upon or arising under any federal, state or local fair employment practices or equal opportunity laws, including, but not limited to, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act (“OWBPA”), the Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, 42 U.S.C. Section 1981, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Employee Retirement Income Security Act (“ERISA”) (including, but not limited to, claims for breach of fiduciary duty under ERISA), the Uniformed Services Employment and Reemployment Rights Act of 1994, the Americans With Disabilities Act, the Family and Medical Leave Act of 1993, California’s Fair Employment and Housing Act; the Unruh Civil Rights Act; the California Business and Professions Code; California Equal Pay Law; California Family Rights Act; California Pregnancy Disability Leave Law; California WARN law; any applicable California Industrial Welfare Commission Wage Order; wrongful termination in violation of public policy (Tameny claims); and the California Constitution.

California Civil Code Section 1542. You acknowledge that you have been advised to consult with legal counsel and you are familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

Being aware of said code section, you agree to expressly waive any rights you may have thereunder, as well as under any other statute or common law principles of similar effect.

You also agree that you waive any right to bring, maintain, or participate in a class action, collective action, or representative action against the Company and/or the Company Releasees to the fullest extent permitted by law. You agree that you may not serve as a representative of a class action, collective action, or representative action, may not participate as a member of a class action, collective action, or representative action, and may not recover any relief from a class action, collective action, or representative action. You further agree that if you are included within a class action, collective action, or representative action, you will take all steps necessary to opt-out of the action or refrain from opting in, as the case may be. You are not waiving any right to challenge the validity of this Paragraph 4(b) on any grounds that may exist in law and equity. However, the Company and the Company Releasees reserve the right to attempt to enforce this Agreement, including this Paragraph 4(b), in any appropriate forum.

You hereby represent and warrant that you are not aware of any claims you have or might have against the Company and/or the Company Releasees that are not included in the Released Claims. Moreover, you acknowledge that you have not made any claims or allegations, the factual foundation for which involves discrimination, retaliation, sexual harassment or sexual assault or abuse.

Notwithstanding the generality of the foregoing, and notwithstanding your agreement and acknowledgment that, as an independent contractor to, and not an employee of, the Company you are unable to assert claims under statutes that provide rights to employees, out of an abundance of caution nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting: (i) any claim or right you may have under COBRA; (ii) any claim or right you may have for unemployment insurance or workers’ compensation benefits (other than for retaliation under workers’ compensation laws); (iii) any claim to vested benefits under the written terms of a qualified employee pension benefit plan; (iv) any medical claim incurred during your engagement that is payable under applicable medical plans or an employer-insured liability plan; and further, nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting (v) any claim or right that may arise after the execution of this Agreement; (vi) any claim or right you may have under this Agreement; or (vii) any claim that is not otherwise waivable under applicable law.

5. No Additional Entitlements. You agree and represent that you have received all entitlements due from the Company relating to your engagement with the Company, including but not limited to, all fees earned, and that no other entitlements are due to you other than as set forth in this Agreement.

6. Return of Property. Upon termination of your engagement, you agree to promptly return to the Company all of its property, including, but not limited to, computers, cell phones, files, and documents, including any correspondence or other materials containing trade secrets of the Company, identification cards, credit cards, keys, equipment, software and data, however stored. To the extent you have any Company information or material stored on any PDA, personal computer, personal email, hard drive, thumb drive, cloud or other electronic storage device, you agree to cooperate with the Company in permanently deleting such information from such devices, subject to any Company litigation preservation directive then in effect.

7. Nondisclosure.

You recognize that during your affiliation with the Company, the Company provided you with, and you had access to, information of substantial value to the Company, which is not otherwise generally known in the trade, and which gives the Company an advantage over its competitors who do not know or use it, including but not limited to Proprietary Information (defined below). You acknowledge that the Company expended substantial time and money to create, acquire, gather and maintain the confidentiality of its Proprietary Information, and that it would take significant time and money to acquire and duplicate this Proprietary Information. You represent that at all times during your engagement with the Company you held, and you covenant and agree that at all times after your engagement with the Company you will hold, in strictest confidence and you have not and you will not disclose, use, lecture upon, or publish any of the Company’s Proprietary Information (defined below), except as permitted in Paragraph 9 of this Agreement, unless an officer or other authorized representative of the Company expressly authorizes such in writing. You will obtain the Company’s prior written approval before publishing or submitting for publication any material (written, oral, or otherwise) that relates to your work for the Company or incorporates any Proprietary Information. Notwithstanding the foregoing, disclosure of any Proprietary Information shall not be prohibited if such disclosure is directly related to a valid and existing order of a court or other governmental body or agency within the United States; provided, however, that you shall have first given prompt notice to the Company of any possible or prospective order and the Company shall have been afforded a reasonable opportunity to prevent or limit any such disclosure. You hereby assign to the Company any rights you may have or acquire in any Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns.

The term “Proprietary Information” means any and all confidential or proprietary knowledge, data or information of the Company, Advance Biofactures Corp. or any of their subsidiaries or controlled affiliates. By way of illustration but not limitation, “Proprietary Information” includes: (a) developments, inventions, ideas, data, programs, other works of authorship, designs and techniques, trade secrets, mask works, processes, formulas, source and object codes, algorithms, compositions of matter, methods (including, without limitation, methods of use or delivery), know-how, technology, improvements and discoveries (hereinafter collectively referred to as “Inventions”); (b) information regarding plans for research, development, new services or products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, clients, customers, and suppliers; and (c) information regarding the skills and compensation of the employees and/or consultants of the Company or any of its subsidiaries or controlled affiliates. For purposes of this Agreement, the term “Proprietary Information” shall not include information which is or becomes publicly available without breach of: (i) this Agreement; (ii) any other agreement or instrument to which the Company or any of its subsidiaries or controlled affiliates is a party or a beneficiary; or (iii) any duty owed to the Company or any of its subsidiaries or controlled affiliates by you or by any third party; provided, however, that if you shall seek to disclose, use, lecture upon, or publish any Proprietary Information, you shall bear the burden of proving that any such information shall have become publicly available without any such breach.

You understand that during your engagement with the Company, the Company received from third parties confidential or proprietary information (“Third Party Information”) subject to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes. You represent that at all times during your engagement with the Company you held, and you covenant and agree that at all times after your engagement with the Company you will hold, Third Party Information in the strictest confidence and that you have not, and will not, disclose to anyone (other than personnel of the Company or any of its subsidiaries or controlled affiliates who need to know such information in connection with their work for the Company or any of its subsidiaries or controlled affiliates) or use, Third Party Information unless expressly authorized by an officer or other authorized representative of the Company in writing. You hereby assign to the Company any rights you may have in any Third Party Proprietary Information.

8. Confidentiality of the Agreement. Except as permitted in Paragraph 9 of this Agreement or if otherwise required by law, you agree that you shall not disclose the terms of this Agreement, or the circumstances giving rise to this Agreement, to any person other than your attorney, immediate family members, accountant, or financial advisor. Should you disclose any of the terms of this Agreement to your attorneys, immediate family members, accountants, or financial advisors, you agree to use your best efforts to ensure that those individuals abide by the confidentiality terms of this section. In the event that an action is brought pursuant to this section, all of the remaining provisions of this Agreement shall remain in full force and effect.

9. Permitted Conduct.

Nothing in this Agreement prohibits or prevents you from filing a charge with or participating, testifying, or assisting in any investigation, hearing, or other proceeding before the U.S. Equal Employment Opportunity Commission or a similar agency enforcing federal, state or local anti-discrimination laws. However, to the maximum extent permitted by law, you agree that if such an administrative claim or charge is made to such an anti-discrimination agency, you shall not be entitled to recover any individual monetary relief or other individual remedies in connection with such claim or charge, and in the event you obtain such monetary relief the Company will be entitled to an offset for the payments made pursuant to this Agreement. In addition, nothing in this Agreement restricts or prohibits you from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including without limitation, the U.S. Department of Labor, the National Labor Relations Board, the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Commodities Futures Trading Commission, the Financial Industry Regulatory Authority, the Occupational Safety and Health Administration, the U.S. Congress, any other federal, state, or local government agency or commission, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation. You do not need the prior authorization of the Company to engage in conduct protected by this paragraph, and you do not need to notify the Company that you have engaged in such conduct. This agreement does not limit your right to receive an award from any Regulator that provides awards for providing information relating to a potential violation of the law. You recognize and agree that, in connection with any such activity outlined above, you must inform the Regulators, your attorney, a court or a government official that the information you are providing is confidential. Despite the foregoing, you are not permitted to reveal to any third-party, including any governmental, law enforcement, or regulatory authority, information you came to learn during the course of your engagement with the Company that is protected from disclosure by any applicable privilege, including but not limited to the attorney-client privilege and/or attorney work product doctrine. The Company does not waive any applicable privileges or the right to continue to protect its privileged attorney-client information, attorney work product, and other privileged information.

Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made to your attorney in relation to a lawsuit for retaliation against you for reporting a suspected violation of law; or (iii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nor does this Agreement require you to obtain prior authorization from the Company before engaging in any conduct described in this paragraph, or to notify the Company that you have engaged in any such conduct

10. Non-Disparagement: Except as permitted in Paragraph 9 of this Agreement, you agree that you shall not at any time make any written or oral comments or statements of a defamatory or disparaging nature regarding the Company and/or any of the Company Releasees and you shall not make any statement or take any action that would cause or contribute to their being held in disrepute.

11. Non-Admission. It is understood and agreed that neither the execution of this Agreement nor the terms of this Agreement constitute an admission of liability to you by the Company or the Company Releasees, and such liability is expressly denied. It is further understood and agreed that no person shall use the Agreement, or the consideration paid pursuant thereto, as evidence of an admission of liability, inasmuch as such liability is expressly denied

12. Notice to Company. Subject to Paragraph 9 above, upon service on you, or anyone acting on your behalf, of any order or other legal process requiring you to divulge information prohibited from disclosure under this Agreement, you shall immediately notify the Company in writing (attention: Chief Executive Officer), of such service and of the content of any testimony or information to be provided pursuant to such order or process and will cooperate with the Company if the Company shall contest or seek to quash such order or other legal process.

13. Cooperation. You agree that upon the Company’s reasonable notice to you, you shall cooperate with the Company and its counsel (including, if necessary, preparation for and appearance at depositions, hearings, trials or other proceedings) with regard to matters that in its sole discretion the Company determines relate to or arise out of matters about which you have knowledge or with which you were involved during your engagement with the Company. In the event that such cooperation is required, you will be reimbursed for any reasonable lost income and reasonable travel expenses incurred in connection therewith.

14. Review of Separation Agreement: You acknowledge that:

you have been provided at least forty-five (45) calendar days to review and consider this Agreement (and its Exhibits) and, if you knowingly and voluntarily choose to do so, you may accept the terms of this Agreement before the forty-five (45) day consideration period has expired, but under no circumstances should you sign this Agreement prior to your Last Day of Services;

you agree that changes to the Company’s offer contained in this Agreement, whether material or immaterial, will not re-start the forty-five (45) day consideration period provided for above;

you may revoke this Agreement within seven (7) calendar days of signing this document by giving written notice to the undersigned. Any revocation must be submitted in writing, and state: “I hereby revoke my acceptance of our agreement” or words to that effect. The revocation must be personally delivered to, or mailed to the undersigned and postmarked within seven (7) calendar days after you sign this Agreement;

the Company advises you to consult with an attorney of your choice prior to signing this Agreement;

you fully understand the significance of all of the terms and conditions of this Agreement (and its Exhibits);

in accordance with the OWBPA, you have received (as Exhibit A hereto) a listing of the ages and titles of the employees in your decisional unit who were selected for termination and eligible to receive severance payments and benefits in exchange for signing an Agreement and General Release, and employees who were not selected for termination and not eligible to receive severance payments and benefits in exchange for signing an Agreement and General Release; and

you are signing this Agreement voluntarily and of your own free will and agree to all of the terms and conditions contained in it.

15. Complete Agreement. This Agreement sets forth the entire agreement between you and the Company with respect to the subject matter hereof and supersedes all prior negotiations, understandings and agreements, whether written or oral, relating to such subject matter, between you and the Company, except for any award documents, and the Insider Trading Plan, which are incorporated herein by reference and remain in full force and effect, except as otherwise specifically provided herein. You acknowledge that neither the Company nor the Company Releasees or their agents or attorneys have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is not contained in this Agreement for the purpose of inducing you to execute the Agreement, and you acknowledge that you have executed this Agreement in reliance only upon such promises, representations and warranties as are contained herein, and that you are executing this Agreement voluntarily, free of any duress or coercion.

16. Governing Law. This Agreement shall be construed, performed, enforced and in all respects governed in accordance with the laws of the State of California, without giving effect to the principles of conflicts of law thereof.

17. Severability. The provisions of this Agreement are severable, and if any part of it is found to be invalid or unenforceable, the other parts shall remain fully valid and enforceable. Specifically, should a court, arbitrator, or government agency conclude that a particular claim may not be released as a matter of law, it is the intention of the parties that the general release and the waiver of claims set forth above shall otherwise remain effective to release any and all other Released Claims.

18. Modification; Counterparts; Facsimile/PDF Signatures. It is expressly agreed that this Agreement may not be altered, amended, modified, or otherwise changed in any respect except by another written agreement that specifically refers to this Agreement, executed by authorized representatives of each of the parties to this Agreement. This Agreement may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. Execution of a facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be admissible in any legal proceeding as if an original.

19. Breach. You acknowledge that if you breach your commitments to the Company agreed upon in Paragraphs 4, 6, 7, 8, 10, 12 or 13 you will forfeit the severance benefits set forth in Paragraph 2 and be subject to suit by the Company for damages and equitable relief relating to such breach. You further acknowledge that any breach by you of Paragraphs 7, 8 or 10 will cause irreparable damage to the Company and that in the event of such breach the Company shall have, in addition to any and all remedies at law, the right to an injunction, specific performance or other equitable relief to prevent the violation of your obligations hereunder.

20. Waiver. A waiver by either party hereto of a breach of any term or provision of the Agreement shall not be construed as a waiver of any subsequent breach.

21. Section 409A. This Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and its corresponding regulations with respect to amounts, if any, subject thereto and shall be interpreted, construed and performed consistent with such intent. Severance benefits under this Agreement are intended to be exempt from Section 409A under the “short-term deferral” exception, to the maximum extent applicable, and then under the “separation pay” exception, to the maximum extent applicable. For purposes of Section 409A, each payment hereunder shall be treated as a separate payment, and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may you, directly or indirectly, designate the taxable year of a payment. Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of your execution of this Agreement, directly or indirectly, result in you designating the taxable year of payment of any amounts of deferred compensation subject to Section 409A, and if a payment could be made in more than one taxable year, payment shall be made in the later taxable year, to the extent required by Section 409A. All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits contemplated under this Agreement are exempt from Section 409A and in no event shall Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with the requirements of Section 409A.

22. Effective Date: This Agreement is effective on the eighth (8th) day after you sign and do not revoke this Agreement (the “Effective Date”).

23. Expiration of Offer: The offer set forth in this Agreement expires at 11:59 p.m. New York local time on the later of (i) the forty-fifth (45th) day after delivery of this Agreement to you; or (ii) the seventh (7th) day after your Last Day of Services. If you fail to execute and return this Agreement to the Company within the time specified in this paragraph, or if you timely execute this Agreement and then timely revoke it, the promises and agreements made by the Company herein will be revoked.

If the above accurately states our agreement, including the waiver and release, kindly sign below and return the original Agreement to me on or after, but not before, your Last Day of Services. Thank you for your efforts on behalf of the Company and I wish you the best in your future endeavors. If you should have any questions, please call me.

	BIOSPECIFICS TECHNOLOGIES CORP.

/s/ Patrick Caldwell	/s/ J. Kevin Buchi
Employee Signature	J. Kevin Buchi
	Chief Executive Officer
Patrick Caldwell
Print Name

4/3/2020	3/23/2020
Date	Date

SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE

This Agreement sets forth the terms of your separation of employment with Advance Biofactures Corporation (the “Employer”), a wholly-owned subsidiary of BioSpecifics Technologies Corporation (the “Company”). If you understand and agree with these terms, please sign in the space provided below. If you, the Employer and the Company sign below, this will be a legally binding document representing the entire agreement between you, the Employer and the Company regarding the subjects it covers. We will refer to this document as the “Agreement.”

Termination Date. Your last day of work with the Company and the Employer was April 6, 2020 (the “Termination Date”).

Consideration. Provided you have timely executed this Agreement (which includes a general release and waiver of claims and other promises herein), do not revoke it, and otherwise comply with its terms, the Employer will provide you with the following severance benefits:

Salary Continuation. A cash payment equal to one (1) times your current annual base salary, payable in installments over a period of twelve (12) months following the Termination Date (the “Cash Severance Payments”). Your Cash Severance Payments will be reduced by any taxes and other amounts that the Employer is legally required to withhold and will be made in accordance with the payroll practices of the Employer. The first payment will be retroactive to the Termination Date.

COBRA Continuation. Subject to your eligibility for, and timely election of, continued health care coverage under COBRA, the Employer will reimburse you in cash an amount equal to one hundred percent (100%) of the COBRA premiums you incur for you, or on behalf of your eligible dependents, under the health plans of the Employer during the twelve (12) month period following the Termination Date. Such reimbursement shall be provided on the payroll date immediately following the date on which you remit the applicable premium payment, and reasonable evidence of such payment; provided, that where such remittance makes it impractical to include such reimbursement on the payroll date immediately following such remittance, then such reimbursement shall be provided in the next subsequent payroll date. Reimbursements under this paragraph shall commence within sixty (60) days following the Termination Date, with the first payment including any reimbursements that would have otherwise been payable during the period between the Termination Date and the first reimbursement payment. Reimbursement payments shall be treated as taxable compensation to the extent required by law and shall not be made with respect to any month following the date on which you either become ineligible for COBRA coverage or you become eligible for group health insurance coverage in connection with new employment (a “Disqualifying Event”). You are required to notify the Employer within five (5) business days of becoming aware that a Disqualifying Event has occurred or will occur. For the avoidance of doubt, following the expiration of the Continuation Period, you may continue your health insurance coverage under COBRA at your own expense to the extent permitted under applicable law. Whether you choose to elect COBRA coverage continuation is your choice, and you are encouraged to consider all of your benefits options before making any decision, as this may impact your ability to later obtain alternative coverage outside of open enrollment periods.

Release of Claims. In exchange for the payment(s) described in the Consideration clause above, you hereby waive all claims available under federal, state or local law against the Company and the Employer and the directors, officers, employees, employee benefit plans and agents of the Company and the Employer arising out of your employment with the Employer and service with the Company or the termination of that employment and service, including but not limited to all claims arising under the Age Discrimination in Employment Act (29 U.S.C. Section 621, et seq.) (“ADEA”), the Older Workers’ Benefits Protection Act, Title VII of the Civil Rights Act of 1964 the Employee Retirement Income Security Act of 1974, the Equal Pay Act of 1963, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Worker Adjustment and Retraining Notification Act of 1989, the Delaware Discrimination in Employment Act, the Delaware Handicapped Persons Employment Protection Act, the Delaware Persons With Disabilities Employment Protections Act, the Delaware Whistleblower’s Act, the Delaware Wage Payment and Collection Act, the Delaware Fair Employment Practices Act, and the Delaware Constitution, all as amended, provided, however, that nothing in this agreement shall be construed as a requirement for or condition to any payment due under the Wage Payment and Collection Act, the New York State Executive Law (including its Human Rights Law), the New York Equal Pay Law, the New York Equal Rights Law, the New York Off-Duty Conduct Lawful Activities Discrimination Law, the New York State Labor Relations Act, the New York Whistleblower Statute, the New York Family Leave Law, the New York Wage and Hour Laws, the New York WARN Laws, the New York Civil Rights Law, the New York State Corrections Law, the retaliation provisions of the New York State Workers’ Compensation Law, the New York State False Claims Act, the New York State Rights of Persons with Disabilities Law, the New York State Nondiscrimination Against Genetic Disorders Law, the New York State Smokers’ Rights Law, the New York AIDS Testing Confidentiality Act, the New York Genetic Testing Confidentiality Law, the New York Discrimination by Employment Agencies Law, the New York Bone Marrow Leave Law, the New York Adoptive Parents Child Care Leave Law, and the New York State Constitution, all as amended, as well as wrongful termination claims, breach of contract claims, discrimination claims, harassment claims, retaliation claims, whistleblower claims (to the fullest extent they may be released under applicable law), defamation or other tort claims, and claims for attorneys’ fees and costs. You are not waiving your right to vested benefits under the written terms of the retirement plan, claims for unemployment or workers’ compensation benefits, any medical claim incurred during your employment that is payable under applicable medical plans or an employer-insured liability plan, claims arising after the date on which you sign this Agreement, or claims that are not otherwise waivable under applicable law. You represent that you have not made any claim or allegation related to unlawful discrimination, harassment, retaliation or sexual abuse, and none of the payments set forth in this Agreement relate to unlawful discrimination, harassment, retaliation or sexual abuse.

Restrictive Covenants. You represent and agree that you have complied with and will continue to comply with all restrictive covenants between you and the Company and any of its affiliates (including without limitation the restrictive covenants set forth in Section 15 of your Employment Agreement dated as of October 8, 2019, a copy of which is attached hereto as Exhibit A), for the duration of such covenants, including any non-compete, non-solicit, and non-disparagement provisions, with respect to the Company and its affiliates, to which you are a party.

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Medicare Disclaimer. You represent that you are not a Medicare beneficiary as of the time you enter into this Agreement. To the extent that you are a Medicare beneficiary, you agree to contact a Human Resources Representative of the Company or the Employer for further instruction.

Limit on Disclosures. You shall not disclose or cause to be disclosed the terms of this Agreement to any person (other than your spouse or domestic/civil union partner, attorney and tax advisor), except pursuant to a lawful subpoena, as set forth in the Reports to Government Entities clause below, or as otherwise permitted by law. This provision is not intended to restrict your legal right to discuss the terms and conditions of your employment.

Reports to Government Entities. Nothing in this Agreement, including the Limit on Disclosures or Release of Claims clause, restricts or prohibits you from initiating communications directly with, responding to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. However, to the maximum extent permitted by law, you are waiving your right to receive any individual monetary relief from the Company, the Employer or any others covered by the Release of Claims resulting from such claims or conduct, regardless of whether you or another party has filed them, and in the event you obtain such monetary relief, the Company and Employer will be entitled to an offset for the payments made pursuant to this Agreement. This Agreement does not limit your right to receive an award from any Regulator that provides awards for providing information relating to a potential violation of law. You do not need the prior authorization of the Company or the Employer to engage in conduct protected by this paragraph, and you do not need to notify the Company or the Employer that you have engaged in such conduct.

Please take notice that federal law provides criminal and civil immunity to federal and state claims for trade secret misappropriation to individuals who disclose trade secrets to their attorneys, courts, or government officials in certain, confidential circumstances that are set forth at 18 U.S.C. §§ 1833(b)(1) and 1833(b)(2), related to the reporting or investigation of a suspected violation of the law, or in connection with a lawsuit for retaliation for reporting a suspected violation of the law.

Nonadmission of Liability. Nothing in this Agreement is an admission of any wrongdoing, liability or unlawful activity by you, the Employer or by the Company.

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No Other Amounts Due. You acknowledge that the Company or the Employer has paid you all wages, salaries, bonuses, benefits and other amounts earned and accrued, less applicable deductions, and that the Company and the Employer have no obligation to pay any additional amounts other than the payment(s) described in the Consideration clause of this Agreement. For the avoidance of doubt, you acknowledge and agree that as of the Termination Date, no portion of your outstanding equity awards under the Biospecifics Technologies Corp. 2019 Omnibus Incentive Compensation Plan have vested, and 100% of such awards shall terminate and be forfeited in accordance with their terms.

Signature. The Company and the Employer hereby advise you to consult with an attorney prior to signing this Agreement. You acknowledge that you have had a reasonable amount of time to consider the terms of this Agreement and you sign it with the intent to be legally bound. This Agreement may be executed in two counterparts, each of which shall be considered one and the same instrument and shall become effective when both counterparts have been signed by each of the parties and delivered to the other party. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

Section 409A. This Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and its corresponding regulations with respect to amounts, if any, subject thereto and shall be interpreted, construed and performed consistent with such intent. Severance benefits under this Agreement are intended to be exempt from Section 409A under the “short-term deferral” exception, to the maximum extent applicable, and then under the “separation pay” exception, to the maximum extent applicable. For purposes of Section 409A, each payment hereunder shall be treated as a separate payment, and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may you, directly or indirectly, designate the taxable year of a payment. Notwithstanding the foregoing, the Company and the Employer make no representations that the payments and benefits contemplated under this Agreement are exempt from Section 409A and in no event shall the Company or the Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with the requirements of Section 409A.

Effective Date. This Agreement will become effective and enforceable on the eighth (8th) day after you sign and do not revoke this Agreement (the “Effective Date”). If you fail to return an executed original by midnight on April 27, 2020, this Agreement, including but not limited to the obligation of the Employer to provide the severance benefits provided in the Consideration clause above, shall be deemed automatically null and void.

Entire Agreement. This Agreement sets forth the entire agreement between you, the Company, and the Employer and replaces any other oral or written agreement between you, the Company, and the Employer relating to the subject matter of this Agreement, including, without limitation, any prior offer letters and/or employment agreements, except for your continuing obligations under Sections 12, 15, 16, 17, 18, 20, 21, 22, 23, 27, and 28, and the Company’s continuing obligations under Section 25, of the Employment Agreement.

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Acknowledgment of Voluntariness and Time to Review. You acknowledge that:

•

you read this Agreement and you understand it;

•

you are signing this Agreement voluntarily in order to release your claims against the Company and the Employer in exchange for payment that is greater than you would otherwise have received;

•

you are signing this Agreement after the date of your separation from the Company and the Employer; and you were offered at least twenty-one (21) days to consider your choice to sign this Agreement;

•

the Company and the Employer advise you to consult with an attorney;

•

you know that you can revoke this Agreement within seven (7) days of signing it and that the Agreement does not become effective until that seven-day period has passed. To revoke, contact Jenn Chao at ____________; and

•

you agree that changes to this Agreement before its execution, whether material or immaterial, do not restart your time to review this Agreement.

Employee: /s/ J. Kevin Buchi	Date: April 6, 2020

Employer: /s/ Jennifer Chao	Date: April 6, 2020
Name: Jennifer Chao
Title: Attorney-in-Fact

Company: /s/ Jennifer Chao	Date: April 6, 2020
Name: Jennifer Chao
Title: Chairperson of the Board of Directors

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EXHIBIT 10.4

April 1, 2020

BY EMAIL AND OVERNIGHT MAIL

Joseph E. Truitt

Dear Joe:

On behalf of BioSpecifics Technologies Corp. (“BioSpecifics” or the “Company”), I am pleased to offer you employment with the Company on the terms and subject to the conditions set forth in this letter agreement (the “Agreement”), including satisfactory references, a background check, and submission of satisfactory proof of your identity and your legal authorization to work in the United States:

Position:	Interim Chief Executive Officer (“Interim CEO”)

Reporting to:	Board of Directors

Start Date:	April 7, 2020

Location:	It is expected that you will work primarily out of the Company’s office in Wilmington, DE, subject to working remotely during any mandated period, and you may be required to travel as part of your position.

Term:	From the Start Date, your position as Interim CEO shall continue until the earlier of (a) three (3) months after the Start Date; and (b) the date on which a permanent Chief Executive Officer commences employment with the Company (the “Interim Term”). Notwithstanding the foregoing, your employment is “at will,” and may be terminated by you or the Company at any time with or without cause and with or without advance notice. We ask, however, that you provide the Company with as much advance written notice as possible in the event that you intend to resign your employment.

Board Service:	While you serve as Interim CEO, you will also serve on the Company’s Board of Directors (the “Board”) as an Executive Director. During this period you will not receive any additional compensation for your service on the Board.

	In the event that, following your service as Interim CEO, you remain on the Board as an independent non-executive director, you shall be eligible to earn equity and cash compensation as earned by similarly situated members of the Board and in accordance with the Company’s Board compensation practices.

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Compensation:	For your service as Interim CEO, the Company shall pay you the total amount of Two Hundred Fifty Thousand Dollars and No Cents ($250,000.00) (the “Total Interim CEO Compensation”), which shall be paid at the rate of Eighty Three Thousand Thirty-Three Dollars and Thirty-Three Cents ($83,333.33) for each of the three (3) months in which you serve as Interim CEO. Your position is classified as exempt from overtime. You will be paid in regular periodic payments, less applicable deductions and withholdings, in accordance with the Company’s regular payroll practices.

Representations and Contingencies:	This offer is contingent on your representation that you are free to accept employment with BioSpecifics without any contractual restrictions, express or implied, of any kind (including, without limitation, any confidentiality, non-competition agreement or any other similar type of restriction that may affect your ability to devote full time and attention to your work at the Company).

	This offer is also conditioned on you not having been, and by signing below you represent and warrant that you have not been, debarred or received notice of any action or threat with respect to debarment under the provisions of the Generic Drug Enforcement Act of 1992, 21 U.S.C. § 335(a) or any similar legislation applicable in the U.S. or in any other country where the Company intends to develop its activities.

	This offer is also contingent on your agreement to the Company’s Confidentiality and Inventions Assignment Agreement (the “Confidentiality Agreement”), which you will be provided with and required to sign upon commencement of your employment.

Compliance:	You are required to familiarize yourself with and adhere to, all Company policies which may be in effect from time to time. Failure to comply with all such policies and procedures shall be grounds for disciplinary action by the Company, up to and including termination of employment.

Termination Without Cause:	If the Company terminates your employment without Cause (as defined below) prior to the end of the Interim Term, the Company shall pay you any earned but unpaid portion of the Total Interim CEO Compensation through the date of termination, less standard deductions and withholdings. In addition, if you: (i) furnish to the Company an executed waiver and general release of claims in a form to be provided to you by the Company (a “Release”), (ii) allow the Release to become effective in accordance with its terms, and (iii) otherwise comply with the Release, then the Company will pay you the unpaid balance of the Total Interim CEO Compensation, less standard deductions and withholdings, through the date that is three (3) months after the Start Date (the “Severance Amount”).

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	“Cause” shall mean the occurrence of any of the following, your: (1) breach of a material term of this letter agreement or any confidentiality or inventions assignment agreement with the Company; (2) commission of an act of fraud, embezzlement, theft, or material dishonesty; (3) willful engagement in conduct that causes, or is likely to cause, material damage to the property or reputation of the Company; (4) failure to perform satisfactorily the material duties of your position (other than by reason of disability) after receipt of a written warning from the Company; (5) commission of a felony or any crime of moral turpitude; or (6) material failure to comply with the Company’s code of conduct or employment policies.

Other Termination:	If you resign from employment with the Company at any time or the Company terminates your employment at any time for Cause or due to death or Disability (as defined below), the Company shall pay you any earned but unpaid portion of the Total Interim CEO Compensation through the date of such resignation or termination, less standard deductions and withholdings. The Company shall thereafter have no further obligations to you, except as may otherwise be required by law.

	“Disability” shall mean your inability to perform your duties and responsibilities hereunder, with or without reasonable accommodation, due to any physical or mental illness or incapacity, which condition has continued for a period of one hundred eighty (180) days (including weekends and holidays) in any consecutive three hundred sixty-five (365) day period.

Resignation From all Positions:	You agree that, effective as of the date of any resignation or termination of your employment, you shall be deemed to have resigned, as of the date of such resignation or termination, from all Company-related positions, including as an officer and director of the Company and its parents, subsidiaries and affiliates.

Section 409A:	To the extent permitted by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), any severance to which you are otherwise entitled pursuant to this offer letter shall be (i) reduced by amounts outstanding under any indebtedness, obligations or liabilities owed by you to the Company; (ii) paid in lieu of any severance pay or benefits under any other severance pay plan, program, or policy of the Company, and (iii) reduced and offset by any severance pay or benefits, or similar amounts, payable to you due to your termination of employment under any labor, social or other governmental plan, program, law or policy, and should such other payments or benefits described above be payable, the Severance Amount shall be reduced accordingly or, alternatively, payments of Severance Amounts previously made or provided will be treated as having been paid or provided to satisfy such other obligations.

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	Each installment payment provided under this letter shall at all times be considered a separate and distinct payment for purposes of Section 409A of the Code. Notwithstanding anything in this letter to the contrary, to the extent required to avoid a prohibited distribution under Section 409A of the Code, the benefits provided under this letter will not be provided to you until the earlier of (a) the expiration of the six-month period measured from the date of termination of your employment with the Company or (b) the date of your death. Upon the first business day after expiration of the relevant period, all payments delayed pursuant to the preceding sentence will be paid in a lump sum and any remaining payments due will be paid as otherwise provided herein. In no event may you, directly or indirectly, designated the calendar year of any payment to be made to you under this letter, to the extent such payment is subject to Section 409A of the Code. The Company makes no representations or warranty and shall have no liability to you or any other person if any provisions of this letter are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, Section 409A of the Code.

Agreement to Arbitrate Claims:	Except as otherwise set forth in this Agreement in connection with equitable remedies, any dispute, claim or controversy arising out of or relating to this Agreement or the Executive’s employment with the Company (collectively, “Disputes”), including, without limitation, any dispute, claim or controversy concerning the validity, enforceability, breach or termination of this Agreement, if not resolved by the parties, shall be finally settled by arbitration in accordance with the then-prevailing Employment Arbitration Rules and Procedures of JAMS, as modified herein (“Rules”). Further, the Executive hereby waives any right to bring on behalf of persons other than the Executive, or to otherwise participate with other persons in, any class, collective, or representative action (including but not limited to any representative action under any federal, state or local statute or ordinance). The requirement to arbitrate covers all Disputes (other than disputes which by statute are not arbitrable) including, but not limited to, claims, demands or actions under the Age Discrimination in Employment Act (including the Older Workers Benefit Protection Act); Americans with Disabilities Act; Civil Rights Act of 1866; Civil Rights Act of 1991; Employee Retirement Income Security Act of 1974; Equal Pay Act; Family and Medical Leave Act of 1993; Title VII of the Civil Rights Act of 1964; Fair Labor Standards Act; Fair Employment and Housing Act; and any other law, ordinance or regulation regarding discrimination or harassment or any terms or conditions of employment. There shall be one arbitrator who shall be jointly selected by the parties. If the parties have not jointly agreed upon an arbitrator within twenty (20) calendar days after respondent’s receipt of claimant’s notice of intention to arbitrate, either party may request JAMS to furnish the parties with a list of names from which the parties shall jointly select an arbitrator. If the parties have not agreed upon an arbitrator within ten (10) calendar days after the transmittal date of such list, then each party shall have an additional five (5) calendar days in which to strike any names objected to, number the remaining names in order of preference, and return the list to JAMS, which shall then select an arbitrator in accordance with the Rules. The place of arbitration shall be New York, New York.

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By agreeing to arbitration, the parties hereto do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, including, without limitation, with respect to the provisions of the Confidentiality Agreement. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgment upon the award of the arbitrator may be entered in any court of competent jurisdiction. The arbitrator shall: (a) have authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The Company shall pay all administrative fees of JAMS in excess of $435 (a typical filing fee in court) and the arbitrator’s fees and expenses. Each party shall bear its, his or her own costs and expenses (including attorney’s fees) in any such arbitration and the arbitrator shall have no power to award costs and attorney’s fees except as provided by statute or by separate written agreement between the parties. In the event any portion of this arbitration provision is found unenforceable by a court of competent jurisdiction, such portion shall become null and void leaving the remainder of this arbitration provision in full force and effect. The parties agree that all information regarding the arbitration, including any settlement thereof, shall not be disclosed by the parties hereto, except as otherwise required by applicable law.

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This Agreement, along with any agreements relating to confidentiality or inventions assignment between you and the Company, set forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your interviews, whether written or oral. This Agreement shall be governed by the law of the State of Delaware, without regard to its choice of law provisions. This Agreement, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed on behalf of the Board of Directors and by you. This Agreement may be executed in two counterparts, each of which shall be considered one and the same instrument and shall become effective when both counterparts have been signed by each of the parties and delivered to the other party. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

Joe, we are very excited about having you join BioSpecifics as its Interim CEO. Your experience and judgment will have a great impact on the Company’s growth and success, and we believe that you will derive a great deal of enjoyment out of your role and responsibilities.

If you have any questions about this information, please contact me. Otherwise, please confirm your acceptance of this offer of at-will employment with Biospecifics by signing below and returning a copy no later than 12:00 noon EDT on April 2, 2020.

Accepted:	BIOSPECIFICS TECHNOLOGIES CORP.

/s/ Joseph Truitt	/s/ Jennifer Chao
Joseph Truitt	By: Jenn Chao
Title: Chairman of the Board

Date: April 2, 2020	Date: April 1, 2020

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between BioSpecifics Technologies Corp. (the “Company”) and Joseph Truitt (the “Executive”) as of May 7, 2020 (the “Effective Date”).

WHEREAS, the Company desires to employ the Executive as the Company’s Chief Executive Officer and the Executive desires to serve in such capacity.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Company and the Executive hereby agree as follows:

(a) Term. The term of this Agreement shall begin on the Effective Date and shall continue until the termination of the Executive’s employment. The period commencing on the Effective Date and ending on the date on which the Executive’s employment terminates is referred to herein as the “Term.”

(b) Duties. During the Term, the Executive shall serve as the Chief Executive Officer of the Company, with duties, responsibilities and authority commensurate therewith, and shall report to the Board of Directors of the Company (the “Board”). The Executive shall perform all duties and accept all responsibilities incident to such position as may be reasonably assigned to the Executive by the Board. The Executive represents to the Company that the Executive is not subject to or a party to any employment agreement, noncompetition covenant, or other agreement that would be breached by, or prohibit the Executive from, executing this Agreement and performing fully the Executive’s duties and responsibilities hereunder.

(c) Best Efforts. During the Term, the Executive shall devote his best efforts and full time and attention to promote the business and affairs of the Company and its affiliated entities, and shall be engaged in other business activities only to the extent that such activities do not materially interfere or conflict with the Executive’s obligations to the Company and its affiliated entities hereunder, including, without limitation, obligations pursuant to Section 15 below. The foregoing shall not be construed as preventing the Executive from (1) serving on civic, educational, philanthropic or charitable boards or committees, or, with the prior written consent of the Board, in its sole discretion, on corporate boards, and (2) managing personal investments, so long as the activities set forth in the preceding clauses (1) and (2) are permitted under the Company’s code of conduct and employment policies and do not violate the provisions of Section 15 below; provided that, the activities set forth in the preceding clauses (1) and (2) do not materially interfere or conflict with the Executive’s duties or obligations to the Company and its affiliated entities and his time commitments with respect thereto, as determined by the Board.

(d) Principal Place of Employment. The Executive understands and agrees that his principal place of employment will be in the Company’s offices located in Wilmington, Delaware and that the Executive will be required to travel for business in the course of performing his duties for the Company, it being understood that Executive may telecommute from his home office from time to time in accordance with the Company’s guidelines regarding same.

(a) Base Salary. During the Term, the Company shall pay the Executive a base salary (“Base Salary”), at the annual rate of $625,000, which shall be paid in installments in accordance with the Company’s normal payroll practices. The Executive’s Base Salary shall be reviewed annually by the Board pursuant to the normal performance review policies for senior-level executives and may be adjusted from time to time as the Compensation Committee deems appropriate. The Compensation Committee of the Board (the “Compensation Committee”) may take any actions of the Board pursuant to this Agreement.

(b) Annual Bonus. The Executive shall be eligible to receive an annual bonus for each fiscal year during the Term, commencing with the fiscal year 2021, based on the attainment, as determined by the Board in its sole discretion, of individual and corporate performance goals and targets established by the Board in its sole discretion (“Annual Bonus”). The target amount of the Executive’s Annual Bonus for any full fiscal year during the Term is sixty percent (60%) of the Executive’s annual Base Salary. Any Annual Bonus shall be paid after the end of the fiscal year to which it relates, at the same time as the bonuses for other executives employed by the Company; provided that the Executive remains employed by the Company through the last day of the fiscal year to which the Annual Bonus relates and provided further that in no event shall the Executive’s Annual Bonus be paid later than two and a half months after the last day of the fiscal year to which the Annual Bonus relates. Notwithstanding any provision of this Agreement, in the event the Executive’s employment is terminated for Cause, the Executive shall not be eligible to receive any unpaid Annual Bonus.

(c) 2020 Annual Bonus. The Executive shall be eligible to receive a pro-rated annual bonus for fiscal year 2020 with a target amount equal to the target amount of the Executive’s Annual Bonus described in Section 2(b), multiplied by a fraction, the numerator which is the number of days that elapsed from the Effective Date until December 31, 2020, and the denominator of which is 366 (the “2020 Bonus”). The amount of the 2020 Bonus shall be determined based on the attainment of objectives determined by the Compensation Committee, after good faith consultation with the Executive. Any 2020 Bonus shall be paid to the Executive no later than March 15, 2021; provided that any 2020 Bonus shall be paid only if the Executive remains employed by the Company through December 31, 2020 and provided further that in no event shall the Executive be eligible to receive any unpaid 2020 Bonus in the event the Executive’s employment is terminated for Cause.

(d) Equity Compensation. As soon as practicable following the Effective Date, the Executive shall receive a stock option grant with respect to 130,000 shares of Company Stock (the “Option”) pursuant to the Company’s 2019 Omnibus Incentive Compensation Plan (the “Equity Plan”). The Option shall vest in equal annual installments over the four (4)-year period immediately following the date of grant and will be subject to the terms and conditions established by the Board and the terms and conditions of the Equity Plan.

3. Retirement and Welfare Benefits. During the Term, the Executive shall be eligible to participate in the Company’s health, life insurance, long-term disability, retirement and welfare benefit plans and programs, in each case as may be available to employees of the Company, pursuant to their respective terms and conditions. Nothing in this Agreement shall preclude the Company or any Affiliate of the Company from terminating or amending any employee benefit plan or program from time to time after the Effective Date.

4. Vacation. During the Term, the Executive shall be entitled to five (5) weeks of vacation each year and holiday and sick leave at levels commensurate with those provided to other senior executives of the Company, in accordance with the Company’s vacation, holiday and other pay-for-time-not-worked policies. Upon termination of employment, Executive shall be paid any accrued unused vacation for the year in which Executive’s employment terminates.

5. Business and Commuting Expenses.

(a) Business Expenses. The Company shall reimburse the Executive for all necessary and reasonable travel (which does not include commuting expenses which are addressed in subsection (b) below) and other business expenses incurred by the Executive in the performance of his duties hereunder in accordance with such policies and procedures as the Company may adopt generally from time to time for executives.

(b) Commuting Expenses. The Company shall reimburse the Executive for commuting expenses reasonably incurred in accordance with the Company’s policies and procedures. Such reimbursements will be taxable to the Executive to the extent required by law.

6. Termination Without Cause; Resignation for Good Reason. The Company may terminate the Executive’s employment at any time without Cause. The Executive may initiate a termination of employment by resigning for Good Reason as described below. Upon termination by the Company without Cause or resignation by the Executive for Good Reason, which in either case occurs at any time other than upon or within one (1) year following a Change of Control, if the Executive executes and does not revoke a written Release (as defined below), the Executive shall be entitled to receive, in lieu of any payments under any severance plan or program for employees or executives, the following:

(a) a cash payment equal to one (1) times the Executive’s annual Base Salary as in effect on the termination date, payable in installments over the twelve (12) month period following the Executive’s termination date in accordance with the Company’s normal payroll practices (but no less frequently than monthly). Payment will begin within sixty (60) days after the Executive’s termination date, and any installments not paid between the termination date and the date of the first payment will be paid with the first payment;

(b) a cash payment equal to a pro-rated portion of Executive’s target Annual Bonus, which shall be calculated by taking the target bonus amount described in Section 2(b) above and multiplying it by a fraction, the numerator which is the number of days that elapsed during the fiscal year in which termination of employment occurs, and the denominator of which is the number of calendar days in such fiscal year, with such amount payable in a lump sum within sixty (60) days following the Executive’s termination date.

(c) reimbursement in cash equal to 100% of the monthly COBRA premiums incurred by the Executive for the Executive and his eligible dependents under the Company’s health plans during the eighteen (18) month period following the Executive’s termination of employment. Such reimbursement shall be provided on the payroll date immediately following the date on which the Executive remits the applicable premium payment and shall commence within sixty (60) days after the Executive’s termination date; provided that the first payment shall include any reimbursements that would have otherwise been payable during the period beginning on the Executive’s termination date and ending on the date of the first reimbursement payment. Reimbursement payments shall be treated as taxable compensation to the Executive to the extent required by law;

(d) accelerated vesting of twenty-five percent (25%) of the original number of shares subject to the Option granted pursuant to Section 2(d), or to the extent the number of shares subject to the Option that remain unvested at the time of termination is fewer than twenty-five percent (25%) of the original number of shares subject to the Option, accelerated vesting of the remaining unvested portion of the Option, in each case, subject to the terms and conditions of the Equity Plan, including, for the avoidance of doubt, the minimum vesting provisions set forth therein, and the applicable grant agreement; and

(e) any accrued but unpaid Base Salary and any benefits accrued and due under any applicable benefit plans and programs of the Company (“Accrued Obligations”), and any accrued but unpaid annual bonus awarded and payable pursuant to Section 2(b) or Section 2(c) for the fiscal year preceding termination (the “Accrued Annual Bonus”), with such Accrued Obligations and Accrued Annual Bonus paid regardless of whether the Executive executes or revokes the Release.

For the avoidance of doubt, any outstanding equity awards, other than the Option that vests in accordance with this Section 6, that the Executive holds on the date of the Executive’s termination of employment pursuant to this Section 6 shall be forfeited, unless otherwise provided in the applicable grant agreement.

7. Termination in Connection with a Change of Control. In the event that the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, in each case upon or within one (1) year following a Change of Control, if the Executive executes and does not revoke a written Release (as defined below), the Executive shall be entitled to receive, in lieu of any payments under any severance plan or program for employees or executives and in lieu of the payments and benefits set forth in Section 6 of this Agreement, the following:

(a) a cash payment equal to one and one-half (1.5) times the Executive’s annual Base Salary as in effect on the Change of Control, payable in a lump sum within sixty (60) days following the Executive’s employment termination date;

(b) a cash payment equal to the target amount of the Executive’s Annual Bonus as described in Section 2(b) for the year in which termination occurs, payable in a lump sum within sixty (60) days following the Executive’s employment termination date;

(d) accelerated vesting of the portion of the Option granted pursuant to Section 2(d) that remains unvested as of the date of the Executive’s termination of employment, subject to the terms and conditions of the Equity Plan and the applicable grant agreement; and

(e) the Accrued Obligations and any Accrued Annual Bonus, with such Accrued Obligations and Accrued Annual Bonus paid regardless of whether the Executive executes or revokes the Release;

Notwithstanding the foregoing, if and to the extent required by Section 409A of the Code, if a Change of Control does not constitute a “change in control event” as defined by Section 409A of the Code or the lump sum payment in Section 7(a) would otherwise cause the Executive to incur penalties under Section 409A of the Code, such payment shall not be paid in a lump sum but shall be paid in equal installments in accordance with the payroll practices over the eighteen (18)-month period following Executive’s termination date.

8. Cause. The Company may terminate the Executive’s employment at any time for Cause upon written notice to the Executive, in which event all payments under this Agreement shall cease, except for any Accrued Obligations.

9. Voluntary Resignation Without Good Reason. The Executive may voluntarily terminate employment without Good Reason. In such event, after the effective date of such termination, no payments shall be due under this Agreement, except that the Executive shall be entitled to any Accrued Obligations and any Accrued Annual Bonus.

10. Disability. If the Executive incurs a Disability during the Term, the Company may terminate the Executive’s employment on or after the date of Disability. If the Executive’s employment terminates on account of Disability, the Executive shall be entitled to receive any Accrued Obligations and any Accrued Annual Bonus. For the avoidance of doubt, in the event of such termination, the Executive shall not be eligible to receive any payments or benefits pursuant to Section 6 or Section 7. For purposes of this Agreement, the term “Disability” shall have the same meaning ascribed to such term in Section 22(e)(3) of the Code.

11. Death. If the Executive dies during the Term, the Executive’s employment shall terminate on the date of death and the Company shall pay to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, any Accrued Obligations and any Accrued Annual Bonus. Otherwise, the Company shall have no further liability or obligation under this Agreement to the Executive’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through the Executive.

12. Resignation of Positions. Effective as of the date of any termination of employment, the Executive will resign from all Company-related positions, including as an officer and director of the Company and its parents, subsidiaries and Affiliates.

13. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(a) “Cause” shall mean the Executive’s (1) breach of a material term of this Agreement or any confidentiality, nonsolicitation, noncompetition or inventions assignment agreement with the Company; (2) commission of an act of fraud, embezzlement, theft, or material dishonesty; (3) willful engagement in conduct that causes, or is likely to cause, material damage to the property or reputation of the Company; (4) failure to perform satisfactorily the material duties of the Executive’s position (other than by reason of disability) after receipt of a written warning from the Board; (5) commission of a felony or any crime of moral turpitude; or (6) material failure to comply with the Company’s code of conduct or employment policies.

With regard to any event constituting Cause pursuant to clauses (1), (3), (4) or (6), the Executive shall have a period of 15 days after receiving written notice from the Company of such event in which he may correct such event if it is reasonably subject to cure (“Cure Period”). Cause shall not exist for purposes of this Section 13(a) unless the Board determines that: (i) the event constituting Cause is not subject to cure or (ii) after the Cure Period, the Executive has failed to cure the event constituting Cause.

(b) “Change of Control” shall be deemed to have occurred if:

(1) a person, or any two or more persons acting as a group, and all affiliates of such person or persons, who prior to such time owned less than fifty percent (50%) of the Company’s then outstanding shares of Company Stock, shall acquire such additional shares of Company Stock in one or more transactions, or series of transactions, such that following such transaction or transactions such person or group and affiliates beneficially own fifty percent (50%) or more of the Company Stock outstanding;

(2) closing of the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity;

(3) individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Company’s Board (for this purpose, “Incumbent Board” means at any time those persons who are then members of the Company’s Board of Directors and who are either (y) members of the Company’s Board of Directors on the Effective Date, or (z) have been elected, or have been nominated for election by the Company’s stockholders, by the affirmative vote of at least two-thirds of the directors comprising the Incumbent Board at the time of such election or nomination (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination)); or

(4) the consummation of any merger, reorganization, consolidation or share exchange unless the persons who were the beneficial owners of the Company’s outstanding shares of Company Stock immediately before the consummation of such transaction beneficially own more than fifty percent (50%) of the outstanding shares of the common stock of the successor or survivor entity in such transaction immediately following the consummation of such transaction. For purposes of this definition, the percentage of the beneficially owned shares of the successor or survivor entity described above shall be determined exclusively by reference to the shares of the successor or survivor entity which result from the beneficial ownership of Company Stock by the persons described above immediately before the consummation of such transaction.

(d) “Good Reason” shall mean the occurrence of one or more of the following without the Executive’s consent, other than on account of the Executive’s disability:

(1) A material diminution by the Company of the Executive’s title, authority, duties or responsibilities, or a requirement that the Executive report to someone other than the Board;

(2) A material change in the geographic location at which the Executive must perform services under this Agreement (which, for purposes of this Agreement, means any change of more than 40 miles from the Executive’s principal place of employment as set forth in Section 1(d)), excluding for the avoidance of doubt, (i) any travel for business in the course of performing the Executive’s duties for the Company, and (ii) any change of more than 40 miles from the Executive’s principal place of employment as set forth in Section 1(d) that reduces the Executive’s commute from his principal residence to such principal place of employment;

(3) A material diminution in the Executive’s Base Salary, except for any diminution that is part of a broad-based diminution of base salary applicable to a majority of officers of the Company; or

(4) Any action or inaction that constitutes a material breach by the Company of this Agreement.

The Executive must provide written notice of termination for Good Reason to the Company within 30 days after the event constituting Good Reason. The Company shall have a period of 30 days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Executive’s notice of termination. If the Company does not correct the act or failure to act, the Executive’s employment will terminate for Good Reason on the first business day following the Company’s 30-day cure period.

(e) “Release” shall mean a separation agreement and general release of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive’s employment by the Company, and the termination thereof (other than claims for any entitlements under the terms of this Agreement or under any plans or programs of the Company under which the Executive has accrued and is due a benefit). The Release will be in the form attached hereto as Exhibit A, subject to such legally required changes, as determined by the Company.

(a) This Agreement is intended to comply with section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and its corresponding regulations, or an exemption thereto, and payments may only be made under this Agreement upon an event and in a manner permitted by section 409A of the Code, to the extent applicable. Severance benefits under this Agreement are intended to be exempt from section 409A of the Code under the “short-term deferral” exception, to the maximum extent applicable, and then under the “separation pay” exception, to the maximum extent applicable. Notwithstanding anything in this Agreement to the contrary, if required by section 409A of the Code, if the Executive is considered a “specified employee” for purposes of section 409A of the Code and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to section 409A of the Code, payment of such amounts shall be delayed as required by section 409A of the Code, and the accumulated amounts shall be paid in a lump-sum payment within 10 days after the end of the six-month period. If the Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’s estate within sixty (60) days after the date of the Executive’s death.

(b) All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under section 409A of the Code. For purposes of section 409A of the Code, each payment hereunder shall be treated as a separate payment, and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event may the Executive, directly or indirectly, designate the taxable year of a payment. Notwithstanding any provision of this Agreement to the contrary, in no event shall the timing of the Executive’s execution of the Release, directly or indirectly, result in the Executive’s designating the taxable year of payment of any amounts of deferred compensation subject to section 409A of the Code, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year.

(c) All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement be for expenses incurred during the period specified in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a fiscal year not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other fiscal year, (iii) the reimbursement of an eligible expense be made no later than the last day of the fiscal year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits not be subject to liquidation or exchange for another benefit.

15. Restrictive Covenants.

(a) Noncompetition. The Executive agrees that during the Executive’s employment with the Company and its Affiliates and the twelve (12)-month period following the date on which the Executive’s employment terminates for any reason (the “Restriction Period”), the Executive will not, without the Board’s express written consent, engage (directly or indirectly) in any Competitive Business in the United States. The term “Competitive Business” means any entity or person that is engaged in a business, in the United States, in which the Company or its subsidiaries engaged during the Executive’s employment, or that the Company is actively considering and as to which the Company has entered into a confidentiality agreement (including the business of pharmaceutical products containing Collagenase ABC, and any variants or derivatives thereof, as an active ingredient and any reformulation, improvement, enhancement, combination, refinement or modification thereof). The Executive understands and agrees that, given the nature of the business of the Company and its Affiliates (as defined below) and the Executive’s position with the Company, the foregoing geographic scope is reasonable and appropriate. For purposes of this Agreement, the term “Affiliate” means any subsidiary of the Company or other entity under common control with the Company.

(b) Nonsolicitation of Company Personnel. The Executive agrees that during the Restriction Period, the Executive will not, either directly or through others, hire or attempt to hire any employee, consultant or independent contractor of the Company or its Affiliates, or solicit or attempt to solicit any such person to change or terminate his or her relationship with the Company or an Affiliate or otherwise to become an employee, consultant or independent contractor to, for or of any other person or business entity, unless more than twelve (12) months shall have elapsed between the last day of such person’s employment or service with the Company or Affiliate and the first day of such solicitation or hiring or attempt to solicit or hire. If any employee, consultant or independent contractor is hired or solicited by any entity that has hired or agreed to hire the Executive, such hiring or solicitation shall be presumed to be a violation of this subsection (b).

(c) Nonsolicitation of Customers. The Executive agrees that during the Restriction Period, the Executive will not, either directly or through others, solicit, divert, appropriate or do business with, or attempt to solicit, divert, appropriate or do business with, any customer or actively sought prospective customer of the Company or an Affiliate for the purpose of providing such customer or actively sought prospective customer with services or products competitive with those offered by the Company or an Affiliate during the Executive’s employment with the Company or an Affiliate.

(d) Proprietary Information. At all times, the Executive will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Proprietary Information (defined below) of the Company or an Affiliate, except as such disclosure, use or publication may be required in connection with the Executive’s work for the Company or an Affiliate or as described in Section 15(e) below, or unless the Company expressly authorizes such disclosure in writing. “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company and its Affiliates and shareholders, including but not limited to information relating to financial matters, investments, budgets, business plans, marketing plans, personnel matters, business contacts, products, processes, know-how, designs, methods, improvements, discoveries, inventions, ideas, data, programs, and other works of authorship.

(e) Reports to Government Entities. Nothing in this Agreement shall prohibit or restrict the Executive from initiating communications directly with, responding to any inquiry from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, Congress, any agency Inspector General or any other federal, state or local regulatory authority (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. The Executive does not need the prior authorization of the Company to engage in conduct protected by this subsection, and the Executive does not need to notify the Company that the Executive has engaged in such conduct. Please take notice that federal law provides criminal and civil immunity to federal and state claims for trade secret misappropriation to individuals who disclose trade secrets to their attorneys, courts, or government officials in certain, confidential circumstances that are set forth at 18 U.S.C. §§ 1833(b)(1) and 1833(b)(2), related to the reporting or investigation of a suspected violation of the law, or in connection with a lawsuit for retaliation for reporting a suspected violation of the law.

(f) Inventions Assignment. The Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, reports, and all similar or related information which relates to the Company’s or its Affiliates’ actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Executive while employed by the Company or an Affiliate (“Work Product”) belong to the Company. The Executive will promptly disclose such Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). If requested by the Company, the Executive agrees to execute any inventions assignment and confidentiality agreement that is required to be signed by employees of the Company and its Affiliates generally.

(g) Return of Company Property. Upon termination of the Executive’s employment with the Company for any reason, and at any earlier time the Company requests, the Executive will deliver to the person designated by the Company all originals and copies of all documents and property of the Company and its Affiliates that is in the Executive’s possession or under the Executive’s control or to which the Executive may have access. The Executive will not reproduce or appropriate for the Executive’s own use, or for the use of others, any property, Proprietary Information or Work Product.

16. Legal and Equitable Remedies; Arbitration.

(a) Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become and will continue to become acquainted with the Proprietary Information of the Company and its Affiliates, and because any breach by the Executive of any of the restrictive covenants contained in Section 15 would result in irreparable injury and damage for which money damages would not provide an adequate remedy, the Company shall have the right to enforce Section 15 and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach, or threatened breach, of the restrictive covenants set forth in Section 15. The Executive agrees that in any action in which the Company seeks injunction, specific performance or other equitable relief, the Executive will not assert or contend that any of the provisions of Section 15 are unreasonable or otherwise unenforceable.

(b) Except as otherwise set forth in this Agreement in connection with equitable remedies, any dispute, claim or controversy arising out of or relating to this Agreement or the Executive’s employment with the Company (collectively, “Disputes”), including, without limitation, any dispute, claim or controversy concerning the validity, enforceability, breach or termination of this Agreement, if not resolved by the parties, shall be finally settled by arbitration in accordance with the then-prevailing Employment Arbitration Rules and Procedures of JAMS, as modified herein (“Rules”). Further, the Executive hereby waives any right to bring on behalf of persons other than the Executive, or to otherwise participate with other persons in, any class, collective, or representative action (including but not limited to any representative action under any federal, state or local statute or ordinance). The requirement to arbitrate covers all Disputes (other than disputes which by statute are not arbitrable) including, but not limited to, claims, demands or actions under the Age Discrimination in Employment Act (including Older Workers Benefit Protection Act); Americans with Disabilities Act; Civil Rights Act of 1866; Civil Rights Act of 1991; Employee Retirement Income Security Act of 1974; Equal Pay Act; Family and Medical Leave Act of 1993; Title VII of the Civil Rights Act of 1964; Fair Labor Standards Act; Fair Employment and Housing Act; and any other law, ordinance or regulation regarding discrimination or harassment or any terms or conditions of employment. There shall be one arbitrator who shall be jointly selected by the parties. If the parties have not jointly agreed upon an arbitrator within twenty (20) calendar days after respondent’s receipt of claimant’s notice of intention to arbitrate, either party may request JAMS to furnish the parties with a list of names from which the parties shall jointly select an arbitrator. If the parties have not agreed upon an arbitrator within ten (10) calendar days after the transmittal date of such list, then each party shall have an additional five (5) calendar days in which to strike any names objected to, number the remaining names in order of preference, and return the list to JAMS, which shall then select an arbitrator in accordance with the Rules. The place of arbitration shall be New York, New York. By agreeing to arbitration, the parties hereto do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, including, without limitation, with respect to the provisions of Section 15. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgment upon the award of the arbitrator may be entered in any court of competent jurisdiction. The arbitrator shall: (a) have authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The Company shall pay all administrative fees of JAMS in excess of $435 (a typical filing fee in court) and the arbitrator’s fees and expenses.

(c) The Executive irrevocably and unconditionally (1) agrees that any legal proceeding arising out of this Agreement shall be brought solely in the United States District Court for the Southern District of New York, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the State of New York, (2) consents to the exclusive jurisdiction of such court in any such proceeding, and (3) waives any objection to the laying of venue of any such proceeding in any such court. The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers.

(d) Notwithstanding anything in this Agreement to the contrary, if the Executive is found to have breached any of the Executive’s obligations under Section 15 by an arbitrator or court of law after a full evidentiary hearing on the merits of the Company’s claim of breach, the Company shall be obligated to provide only the Accrued Obligations, and all payments under Section 2, Section 6, or Section 7 hereof, as applicable, shall cease. In such event and after the conclusion of all appeals, the Company may require that the Executive repay all amounts theretofore paid to him pursuant to Section 6 or Section 7 hereof (other than the Accrued Obligations), and in such case, the Executive shall promptly repay such amounts on the terms determined by the Company.

(e) If a party to this Agreement shall bring any action, arbitration, suit, counterclaim or appeal against the other party, declaratory or otherwise, to enforce the terms hereof or to declare rights hereunder (an “Action”), the non-prevailing party in such Action shall pay to the prevailing party in such Action the prevailing party’s administrative fees, reasonable attorney’s fees and third-party expenses actually incurred in prosecuting or defending such Action and/or enforcing any judgment, order, ruling or award, granted therein, all of which shall be deemed to have accrued from the commencement of such Action. The prevailing party shall be determined based upon an assessment of which party’s arguments or positions can fairly be said to have prevailed over the other party’s arguments or positions on the major disputed issues in the Action. Such assessment should include evaluation of the following: the amount of the net recovery; the primary issues disputed by the parties; whether the amount of the award comprises a significant percentage of the amount sought by the claimant; and the most recent settlement positions of the parties. The court or arbitrator, as applicable, may fix the amount of reasonable attorneys’ fees and third-party expenses upon the request of any party. The terms of this Section 16(e) shall survive following termination of this Agreement.

17. Survival. The respective rights and obligations of the parties under this Agreement (including, but not limited to, under Sections 15 and 16) shall survive any termination of the Executive’s employment or termination or expiration of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

18. No Mitigation or Set-Off. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the Executive obtains other employment. The Company’s obligations to make the payments provided for in this Agreement and otherwise to perform their respective obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

19. Section 280G. In the event of a change in ownership or control under section 280G of the Code, if it shall be determined that any payment or distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of section 280G of the Code, the aggregate present value of the Payments under the Agreement shall be reduced (but not below zero) to the Reduced Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide the Executive with a greater net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide Executive with a greater net after-tax benefit. The determinations under this Section shall be made as follows:

(a) The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Payments under this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax (defined below), determined in accordance with section 280G(d)(4) of the Code. The term “Excise Tax” means the excise tax imposed under section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(b) Payments under this Agreement shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the economic value deliverable to the Executive. Where more than one payment has the same value for this purpose and they are payable at different times, they will be reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section.

(c) All determinations to be made under this Section shall be made by an independent certified public accounting firm selected by the Company in consultation with the Executive immediately prior to the change-in-ownership or -control transaction (the “Accounting Firm”). The Accounting Firm shall provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the transaction. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section shall be borne solely by the Company.

20. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:

BioSpecifics Technologies Corp.

Delaware Corporate Center II

2 Righter Parkway, Suite 200

Wilmington, DE 19803

Attn: Chair of the Board of Directors

With a copy (which shall not constitute notice) to:

Morgan, Lewis & Bockius LLP

One Federal Street, Boston MA 02110-1726

Carl.Valenstein@morganlewis.com

If to the Executive, to the most recent address on file with the Company, or to such other names or addresses as the Company or the Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.

21. Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

22. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

23. Assignment. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive. The Company may assign its respective rights, together with their respective obligations hereunder (which such obligations must be assigned), in connection with any sale, transfer or other disposition of all or substantially all of its business and assets, and such rights and obligations shall inure to, and be binding upon, any successor to the business or any successor to substantially all of the assets of the Company, whether by merger, purchase of stock or assets or otherwise, which successor shall expressly assume such obligations, and the Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Section 15, will continue to apply in favor of the successor.

24. Company Policies. The compensation payable under this Agreement shall be subject to any applicable clawback, recoupment, and share trading policies, and other policies of the Company to the extent such other policies are required by law, that may be implemented by the Board from time to time with respect to all executive officers of the Company (as determined by the Company for purposes of Section 16 of the Securities Exchange Act of 1934).

25. Indemnification. In the event the Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, including any governmental or regulatory proceedings or investigations, by reason of the fact that the Executive is or was a director or officer of the Company or any of its Affiliates, the Executive shall be indemnified by the Company, and the Company shall pay the Executive’s related expenses when and as incurred, to the fullest extent permitted by applicable law and the Company’s articles of incorporation and bylaws. During the Executive’s employment with the Company or any of its Affiliates and after termination of employment for any reason, the Company shall cover the Executive under the Company’s directors’ and officers’ insurance policy applicable to other officers and directors according to the terms of such policy.

26. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto and supersedes any and all prior agreements and understandings concerning the Executive’s employment by the Company, including the offer letter agreement of employment dated April 1, 2020, from the Company to the Executive and executed by the Executive on April 2, 2020. This Agreement may be changed only by a written document signed by the Executive and the Company.

27. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement, which can be given effect without the invalid or unenforceable provision or application, and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

28. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive and procedural laws of the State of New York without regard to rules governing conflicts of law.

29. Counterparts; Facsimile/PDF Signatures. This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an original, but all of which together shall constitute one instrument. Execution of a facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be admissible in any legal proceeding as if an original.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	BIOSPECIFICS TECHNOLOGIES CORP.

	/s/ Jennifer Chao
	Name: Jennifer Chao
	Title: Chair of the Board of Directors

	EXECUTIVE

	/s/ Joseph Truitt
	Name: Joseph Truitt

BIOSPECIFICS TECHNOLOGIES CORP.

CONFIDENTIALITY AND INVENTIONS ASSIGNMENT AGREEMENT

March 30, 2020

In consideration and as a condition of my employment, or continued employment, by BioSpecifics Technologies Corp., a Delaware corporation (the “Company”), and the compensation now and hereafter paid to me, I hereby agree as follows:

1. Employment with Company.

1.1 Employment shall commence on April 7, 2020. It is understood and agreed that this is an employment at will and either party may terminate this Agreement without cause on notice. Any notice of termination shall be in writing, given personally or by Certified Mail, Return Receipt Requested.

1.2 During the term of my employment with the Company, I agree to devote my entire time and attention and to give my best and undivided efforts and service to the business and the interests of the Company (and its subsidiaries and affiliates) in such capacities and in performance of such duties as the Company may from time to time direct, which may include but not be limited to improving, developing and/or inventing processes, products, assays and analytic methods. Notwithstanding the foregoing, I may serve as a director on the board of another company or companies, with the prior written consent of the Board, which will not unreasonably be withheld; provided that such other board service does not materially interfere or conflict with my duties or obligations to the Company or its affiliated entities, and my time commitments thereto, as reasonably determined by the Board.

2. Nondisclosure

2.1 Recognition of Company’s Rights; Nondisclosure. At all times during my employment by the Company and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon, or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use, lecture, or publication may be required in connection with my work for the Company, or unless an officer or other authorized representative of the Company (other than me) expressly authorizes such in writing. I will obtain the Company’s prior written approval before publishing or submitting for publication any material (written, oral, or otherwise) that relates to my work at the Company or incorporates any Proprietary Information. Notwithstanding the foregoing, disclosure of any Proprietary Information shall not be prohibited if such disclosure is directly related to a valid and existing order of a court or other governmental body or agency within the United States; provided, however, that I shall have first given prompt notice to the Company of any possible or prospective order and the Company shall have been afforded a reasonable opportunity to prevent or limit any such disclosure. I hereby assign to the Company any rights I may have or acquire in any Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns.

2.2 Proprietary Information. The term “Proprietary Information” means any and all confidential or proprietary knowledge, data or information of the Company or any of its subsidiaries or controlled affiliates. By way of illustration but not limitation, “Proprietary Information” includes: (a) developments, inventions, ideas, data, programs, other works of authorship, designs and techniques, trade secrets, mask works, processes, formulas, source and object codes, algorithms, compositions of matter, methods (including, without limitation, methods of use or delivery), know-how, technology, improvements and discoveries (hereinafter collectively referred to as “Inventions”); (b) information regarding plans for research, development, new services or products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, clients, customers, and suppliers; and (c) information regarding the skills and compensation of the employees and/or consultants of the Company or any of its subsidiaries or controlled affiliates. For purposes of this Confidentiality and Inventions Assignment Agreement (this “Agreement”), the term “Proprietary Information” shall not include information which is or becomes publicly available without breach of: (i) this Agreement; (ii) any other agreement or instrument to which the Company or any of its subsidiaries or controlled affiliates is a party or a beneficiary; or (iii) any duty owed to the Company or any of its subsidiaries or controlled affiliates by me or by any third party; provided, however, that if I shall seek to disclose, use, lecture upon, or publish any Proprietary Information, I shall bear the burden of proving that any such information shall have become publicly available without any such breach.

2.3 Third Party Information. I understand that the Company or any of its subsidiaries or controlled affiliates has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment by the Company and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company or any of its subsidiaries or controlled affiliates who need to know such information in connection with their work for the Company or any of its subsidiaries or controlled affiliates) or use, except in connection with my work for the Company or any of its subsidiaries or controlled affiliates, Third Party Information unless expressly authorized by an officer or other authorized representative of the Company (other than me) in writing. I hereby assign to the Company any rights I may have or acquire in any Third Party Proprietary Information during my employment with the Company.

2.4 No Improper Use of Information of Prior Employers and Others. During my employment by the Company, I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company or any of its subsidiaries or controlled affiliates any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties to the Company or any of its subsidiaries or controlled affiliates only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by, or on behalf of, the Company or any of its subsidiaries or controlled affiliates.

2.5 Reports to Government Entities. Nothing in this Agreement restricts or prohibits me from initiating communications directly with, responding to inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with a self-regulatory authority or a government agency or entity, including without limitation, the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Commodities Futures Trading Commission, the Financial Industry Regulatory Authority, the Occupational Safety and Health Administration, the U.S. Congress, any other federal, state, or local government agency or commission, and any agency Inspector General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation. I do not need the prior authorization of the Company to engage in conduct protected by this paragraph, and I do not need to notify the Company that I have engaged in such conduct. This agreement does not limit my right to receive an award from any Regulator that provides awards for providing information relating to a potential violation of the law. However, to the maximum extent permitted by law, I am waiving my right to receive any individual monetary relief from the Company resulting from such claims or conduct, regardless of whether I or another party filed the claim or reported the conduct. I recognize and agree that, in connection with any such activity outlined above, I must inform the Regulators, my attorney, a court or a government official that the information I am providing is confidential. Despite the foregoing, I am not permitted to reveal to any third-party, including any governmental, law enforcement, or regulatory authority, information I came to learn during the course of my employment with the Company that is protected from disclosure by any applicable privilege, including but not limited to the attorney-client privilege and/or attorney work product doctrine. The Company does not waive any applicable privileges or the right to continue to protect its privileged attorney-client information, attorney work product, and other privileged information.

2.6 Defend Trade Secrets Act. Pursuant to 18 U.S.C. § 1833(b), I will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of the Company or any of its subsidiaries or controlled affiliates that (a) I make (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to my attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) I make in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If I file a lawsuit for retaliation by the Company for reporting a suspected violation of law, I may disclose any such trade secret to my attorney and use any such trade secret information in the court proceeding, if I (x) file any document containing any such trade secret under seal, and (y) do not disclose any such trade secret, except pursuant to court order. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

3. Assignment of Inventions

3.1 Proprietary Rights. The term “Proprietary Rights” means all trade secret, patent, copyright, mask work and other intellectual property rights throughout the world.

3.2 Prior Inventions. Any and all Inventions (whether patented or unpatented) that I have, alone or jointly with others, conceived, developed or reduced to practice, or caused to be conceived, developed or reduced to practice, prior to the commencement of my employment with the Company (collectively referred to as “Prior Inventions”) are either my property or the property of third parties and are excluded from the scope of this Agreement, except if and to the extent the provisions set forth below in this Section 2.2 are made expressly applicable to Prior Inventions. To preclude any possible uncertainty, I have set forth on Exhibit A (Prior Inventions) attached hereto a list of Prior Inventions. If disclosure of any Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to disclose such Prior Invention or to list such Prior Inventions in Exhibit A but am only to disclose a cursory name for each such invention, a listing of the party or parties to whom it belongs, and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit A for such purpose. If I do not attach such disclosure, I am representing thereby that there are no Prior Inventions. Notwithstanding the foregoing provisions of this Section 2.2 that provide that Prior Inventions are excluded from the scope of this Agreement, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions (as defined in Section 2.3 below), or any product, process or machine of the Company or any of its subsidiaries or controlled affiliates, without the Company’s prior written consent. If, in the course of my employment with the Company, I incorporate a Prior Invention into any Company Inventions or into a product, process or machine of the Company or any of its subsidiaries or controlled affiliates, then, notwithstanding the foregoing provisions of this Section 2.2 that provide that Prior Inventions are excluded from the scope of this Agreement, the Company is hereby granted and shall have a nonexclusive, royalty free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, cause to be made, modify, cause to be modified, use, cause to be used and sell or cause to be sold such Prior Invention. In addition, and notwithstanding anything express or implied in the foregoing provisions of this Section 2.2 to the contrary, any Invention that would otherwise be a Prior Invention for purposes of this Section 2.2 shall not be deemed or treated as a Prior Invention for purposes of this Section 2.2 if the Company or any of its subsidiaries or controlled affiliates acquires ownership of such Invention, or if the Company or any of its subsidiaries or controlled affiliates licenses such Invention, pursuant to the provisions of a separate agreement entered into by the Company or any of its subsidiaries or controlled affiliates with me or any other person.

3.3 Assignment of Inventions. Subject to this Section 2.3 and to Sections 2.5 and 2.6, I hereby assign to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto), whether or not patentable or registrable under copyright or similar statutes that are made, conceived, reduced to practice or learned by me, either alone or jointly with others, whether or not during regular business hours, if: (i) such Invention is made, conceived, reduced to practice, or learned by me during the term of my employment with the Company or within 1 year after my resignation or termination from the Company; or (ii) such Inventions arise out of, are based upon, or result from the use of, any Proprietary Information or Third Party Information made available to me or to which I had access as an employee of the Company. Inventions assigned pursuant to this Section 2 to the Company, or to a third party as directed by the Company pursuant to Section 2.5 below, are hereinafter referred to as “Company Inventions.” At the request of the Company at any time and from time to time, I will execute and deliver any and all instruments, documents and agreements reasonably requested by the Company for purposes of confirming my assignment to the Company of all of my right, title and interest in and to any and all Company Inventions (and all Proprietary Rights with respect thereto), including, without limitation, at any time when any such Company Inventions (or any Proprietary Rights with respect thereto) are first reduced to practice or first fixed in a tangible medium, as applicable.

For the avoidance of doubt, notwithstanding any contrary provision contained herein, nothing contained in this Agreement shall require the assignment of any Invention (or Proprietary Right with respect thereto) made or conceived by me during the period of my employment with the Company to the extent such assignment is prohibited by any applicable state or federal law.

3.4 Letters Patent. I agree to accept as full consideration the sum of one hundred dollars ($100.00) for the assignment to the Company of all my rights, title and interest in and to each such invention, discovery and improvement described in Section 3.3, including all patent applications filed thereon and patents issued on such applications and will give to the Company the right to have United States Letters Patent issued thereon in its name and the right to apply for and obtain patents on any such inventions in any and all countries foreign to the United States as the Company may select, and to claim the right of priority under any applicable International Convention or treaty.

3.5 Obligation to Keep Company Informed. During the period of my employment with the Company and thereafter, I will promptly disclose to the Company fully and in writing all Company Inventions authored, conceived or reduced to practice by me, either alone or jointly with others. In addition, during the period of my employment with the Company, I will promptly disclose to the Company all patent applications filed by me or on my behalf that claim any Company Invention.

3.6 Government or Third Party. I also agree to assign all my right, title and interest in and to any particular Company Invention to a third party, including without limitation the United States, as directed by the Company.

3.7 Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment with the Company and which are protectable by copyright are “works made for hire,” pursuant to the United States Copyright Act (17 U.S.C., Section 101).

3.8 Enforcement of Proprietary Rights. I will assist the Company in every proper way in obtaining, and from time to time enforcing, United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end I will promptly execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will promptly execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment with the Company, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact, subject to full power of substitution and resubstitution, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

4. Records. I agree to keep and maintain adequate and current records (in the form of notes, memoranda, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information and all Company Inventions made, conceived, developed or reduced to practice by me, which records shall be available to and remain the sole property of the Company at all times.

5. No Conflicting Obligation. I represent that my performance of all the terms of this Agreement and as an employee of the Company has not breached, and does not and will not breach, any agreement to keep in confidence information acquired by me in confidence or in trust prior to, or outside the scope of, my employment by the Company and any agreement not to compete with the business of any third party. I have not entered into, and I agree I will not enter into, any agreement, either written or oral, in conflict herewith.

6. Return of Company Documents. When I leave the employ of the Company, I will deliver to the Company any and all notes, memoranda, specifications, drawings, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I further agree that, during the term of my employment with the Company or at any time thereafter, any property situated on the premises of the Company or any of its subsidiaries or controlled affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

7. Legal and Equitable Remedies. Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance, or other equitable relief which may be available in aid of, or in addition to, any proceeding pursuant to my Agreement to Arbitrate Claims, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. The seeking or availability of such equitable relief shall not affect the Company’s right to seek and obtain damages or other relief from a court of competent jurisdiction or pursuant to my Agreement to Arbitrate Claims on account of any actual or threatened breach by you of this Agreement. In the event that the Company enforces the provisions of Section 4 or Section 5 hereof through a court order, I agree that the restrictions contained in Section 4 or Section 5, as the case may be, shall remain in effect for a period of one year from the effective date of such court order.

8. Notices. Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery to the appropriate address, one (1) business day after dispatch if sent by nationally recognized courier or overnight delivery service, on the date of dispatch if sent by facsimile or electronic mail for which confirmation of transmission is provided or, if sent by certified or registered mail, three (3) business days after the date of mailing.

9. General Provisions

9.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by and construed according to the laws of Delaware, as such laws are applied to agreements entered into and to be performed entirely within Delaware between Delaware residents. I hereby expressly consent to the exclusive personal jurisdiction of the state and federal courts located in Delaware for any lawsuit filed there against me by the Company arising from or related to this Agreement.

9.2 Severability. In the event any provision or portion of this Agreement may be held to be invalid, prohibited or unenforceable for any reason, unless such provision is narrowed by judicial construction, this Agreement shall be construed as if such provision has been more narrowly drawn so as not to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any provision may nevertheless be held to be invalid, prohibited or unenforceable for any reason then, and to that extent only, such provision shall be ineffective without affecting or invalidating the remaining portion of such provision or the other provisions of this Agreement.

9.3 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. Without limiting the generality of the foregoing, if I become an employee of any subsidiary or controlled affiliate of the Company, then (i) such subsidiary or controlled affiliate shall be deemed and treated as an intended third party beneficiary of this Agreement to the same extent as if such subsidiary or controlled affiliate were a party to this Agreement and (ii) each reference in this Agreement to the term “Company” shall be deemed to be a reference to whichever of BioSpecifics Technologies Corp. and/or such subsidiary or controlled affiliate is my employer.

9.4 Survival. The provisions of this Agreement shall survive the termination of my employment with the Company and the assignment of this Agreement by the Company to any successor in interest or other assignee.

9.5 Employment. I agree and understand that nothing in this Agreement shall confer any right on me or the Company with respect to continuation of my employment with the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause.

9.6 Waiver. No waiver by the Company of any breach of this Agreement shall be valid unless in writing and signed by the party giving such waiver and no such waiver shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

9.7 Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements relating to the subject matter hereof and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

9.8 Counterparts. This Agreement may be signed in counterparts, each shall be deemed an original and shall together constitute one agreement.

9.9 Acknowledgement. I acknowledge that this Agreement is a condition to my employment with the Company and that I have had a full and adequate opportunity to read, understand and discuss with my advisors, including legal counsel, the terms and conditions contained in this Agreement prior to signing hereunder.

[Remainder of page intentionally left blank]

I have read this Agreement carefully and understand its terms. I have completely filled out Exhibit A to this Agreement.

/s/ Joseph Truitt
Joseph Truitt

Address:
Date: April 2, 2020

Accepted and Agreed:
BioSpecifics Technologies Corp.

By: /s/ Jennifer Chao
Name: Jennifer Chao
Title: Chairman of the Board

Address:
Date: April 1, 2020

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

I, Joseph Truitt, Principal Executive Officer, certify that:

I have reviewed this annual report on Form 10-K of BioSpecifics Technologies Corp. for the quarterly period ended March 31, 2020;

Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 11, 2020

/s/ Joseph Truitt

Joseph Truitt

Principal Executive Officer

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

I, Patrick Hutchison, Principal Financial Officer, certify that:

I have reviewed this annual report on Form 10-K of BioSpecifics Technologies Corp. for the quarterly period ended March 31, 2020;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 11, 2020

/s/ Patrick Hutchison

Patrick Hutchison

Principal Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BioSpecifics Technology Corp. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, J. Kevin Buchi, Principal Executive Officer of the Company, and Patrick Hutchison, Principal Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on each of our knowledge:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 11, 2020

	/s/ Joseph Truitt
	Joseph Truitt
	Principal Executive Officer

	/s/ Patrick Hutchison
	Patrick Hutchison
	Principal Financial Officer