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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1010397
______________________________
PHYSIOMETRIX, INC.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 77-0248588
________________________________________________________________________________
(State or other jurisdiction of (IRS Employer identification
incorporation or organization) No.)
Five Billerica Park, N. Billerica, MA 01862-1256
________________________________________________________________________________
(Address of principal executive offices) (Zipcode)
(508) 670-2422
________________________________________________________________________________
(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. ITEM 1 - Yes X No
---- ----
ITEM 2 - Yes X No
---- ----
The number of shares outstanding of each of the issuer's classes of common stock
as of
Class Outstanding at March 31, 1997
----- -----------------------------
Common Stock, $.001 par value 5,601,268
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PHYSIOMETRIX, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1 Financial Statements
Balance Sheets as of December 31, 1996 and 3
March 31, 1997
Statements of Operations for the Three Months 4
March 31, 1996 and 1997
Statements of Cash Flows for the Three Months 5
ended March 31, 1996 and 1997
Notes to Financial Statements 6
ITEM 2 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II OTHER INFORMATION 10
SIGNATURES 11
2
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PHYSIOMETRIX, INC.
BALANCE SHEETS
(Unaudited)
DECEMBER 31 MARCH 31
1996 1997
---------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 328,331 $ 211,521
Short-term investments 17,817,917 15,786,906
Accounts receivable, net 38,196 122,581
Inventories, net 279,789 306,104
Prepaid expenses 102,393 140,274
---------------- ------------
Total current assets 18,566,626 16,567,386
Property, plant and equipment 777,578 885,485
Less allowances for depreciation (284,740) (330,256)
---------------- ------------
492,838 555,229
Due from officer 84,000 84,000
Other assets 8,518 8,518
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Total assets $ 19,151,982 $ 17,215,133
---------------- ------------
---------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 691,690 $ 388,039
Accrued expenses 261,107 341,469
Demand note payable 541,334 -
Current portion of notes payable to
stockholder 82,236 49,061
---------------- ------------
Total current liabilities 1,576,367 778,569
Stockholders' equity:
Preferred stock: $.001 par value;
10,000,000 shares authorized: - -
Common stock: $.001 par value,
50,000,000 shares authorized;
5,580,324 shares in 1996 and 5,601,268
shares in 1997 issued and outstanding 5,580 5,601
Additional paid-in-capital 30,571,122 30,571,903
Accumulated deficit (13,001,087) (14,140,940)
---------------- ------------
Total stockholders' equity 17,575,615 16,436,564
---------------- ------------
Total liabilities and stockholders' equity $ 19,151,982 $ 17,215,133
---------------- ------------
---------------- ------------
SEE ACCOMPANYING NOTES.
3
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PHYSIOMETRIX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
MARCH 31
----------------------
1996 1997
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Revenues $ 136,226 $ 203,727
Costs and expenses:
Cost of goods sold 295,181 394,298
Research and development 179,115 570,780
Selling, general, and administrative 331,221 574,896
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805,517 1,539,974
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Operating loss (669,291) (1,336,247)
Interest income 4,007 215,314
Interest expense (7,869) (18,919)
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Net loss $ (673,153) $(1,139,852)
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---------- -----------
Net loss per share $ (0.18) $ (0.20)
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---------- -----------
Shares used in computing net loss per share 3,650,934 5,587,775
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4
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PHYSIOMETRIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31
-------------------------
1996 1997
---------- -------------
OPERATING ACTIVITIES:
Net loss $ (673,153) $ (1,139,852)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 22,048 45,516
Changes in operating assets and liabilities:
Accounts receivable (65,617) (84,385)
Inventories 16,569 (26,315)
Prepaid expenses and other assets (136,998) (37,881)
Accounts payable and accrued expenses 78,710 (223,289)
---------- -------------
Net cash used in operating activities (758,441) (1,466,206)
INVESTING ACTIVITIES:
Purchase of equipment (12,430) (107,908)
Purchase of available-for-sale securities - (41,813,005)
Proceeds from maturity of available-for-sale securities - 43,844,016
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Net cash provided by (used in) investing activities (12,430) 1,923,103
FINANCING ACTIVITIES:
Proceeds from notes payable to stockholders 380,460 -
Proceeds from debt financing 250,534 -
Principal payments on notes payable to stockholders (37,471) (33,175)
Principal payments on short-term debt - (541,334)
Proceeds from issuance of common stock, net 7,604 802
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Net cash provided by (used in) financing activities 601,127 (573,707)
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Net increase (decrease) in cash and cash equivalents (169,744) (116,810)
Cash and cash equivalents at beginning of period 432,126 328,331
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Cash and cash equivalents at end of period $ 262,382 $ 211,521
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SEE ACCOMPANYING NOTES.
5
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NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions for Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997 or any other interim period. The accompanying financial statements should
be read in conjunction with the audited financial statements for the period
ending December 31, 1996.
NOTE B - INVENTORIES
Inventories consist of the following:
December 31 March 31
1996 1997
----------- ---------
Raw materials $ 149,032 $ 115,308
Work-in-process 78,726 106,291
Finished goods 52,031 84,505
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$ 279,789 $ 306,104
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----------- ---------
NOTE C - NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Standard No. 128, "Earnings Per Share" (FAS 128) which
simplifies the calculation of earnings or net loss per share and creates a
standard of comparability to the recently issued International Accounting
Standard No. 33, "Earnings Per Share." Since early application is not
permitted, the Company will adopt this standard in the fourth quarter of
1997. The pro forma net loss per share calculation required under FAS 128 is
not materially different from the primary and fully diluted net loss per
share calculations presented herein.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of Physiometrix, Inc. should be read in conjunction with the
Financial Statements and related Notes thereto included elsewhere in this
Form 10-Q. This Form 10-Q contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. Actual events or results may differ
materially from those projected in the forward-looking statements as a result
of the factors described herein and other risks detailed from time to time in
the Company's SEC reports, including its annual report on Form 10-K for the
year ended December 31, 1996. Such forward-looking statements include, but
are not limited to, statements concerning (i) business strategy; (ii)
products under development; (iii) marketing and distribution; (iv) research
and development; (v) manufacturing; (vi) competition; (vii) government
regulation especially as it relates to FDA approvals; (viii) third-party
reimbursement and (ix) operating and capital requirements.
OVERVIEW
Since its inception in January 1990, Physiometrix has been engaged
primarily in the design and development and more recently the manufacture and
sale of noninvasive, advanced medical products. The Company's products which
incorporate proprietary materials and electronics technology are used in
neurological monitoring applications. The Company's initial products are its
e-Net headpiece and disposable HydroDot biosensors and custom electronics,
which are packaged as the HydroDot NeuroMonitoring System. The Company also
has two additional neurological monitoring products, the Equinox EEG System
which was commercially introduced in February 1997 and the Patient State
Analyzer, which was tested in its first phase of clinical trials and was
submitted to the FDA for 510(k) clearance notification. The Company believes
that the Patient State Analyzer, currently in its second phase of clinical
trials, will be subject to FDA 510(k) clearance notification. However, the
FDA may require the Company to submit a premarket approval application
("PMA") for this product. There can be no assurance that the Company will be
able to obtain necessary 510(k) clearance or PMA application approval to
market the Patient State Analyzer or any other products on a timely basis, if
at all.
Physiometrix has a limited history of operations and has experienced
significant operating losses since its inception. As of March 31, 1997, the
Company had an accumulated deficit of approximately $14.1 million. The
HydroDot NeuroMonitoring System and Equinox are currently the Company's
principal commercial products and are expected to account for most of the
Company's revenue through 1997. The Company anticipates that its results of
operations will fluctuate on a quarterly basis for the foreseeable future due
to several factors, including actions relating to regulatory and
reimbursement matters, the extent to which the Company's products gain market
acceptance, introduction of alternative means for neurophysiological
monitoring and competition. Results of operations will also be affected by
the progress of clinical trials and inhouse development activities, and the
extent to which the Company establishes distribution channels for its
products domestically and internationally. There can be no assurance the
Company will achieve significant commercial revenues or profitability.
7
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THREE MONTHS ENDED MARCH 31, 1996 AND 1997
REVENUES
Revenues increased 50% to $203,727 for the three months ended March 31,
1997 from $136,226 for the three months ended March 31, 1996. This increase is
primarily the result of sales of the Company's Equinox EEG System which was
commercially introduced in February 1997.
COST OF GOODS SOLD
Cost of goods sold increased 34% to $394,298 for the three months ended
March 31, 1997 from $295,181 for the three months ended March 31, 1996. This
increase was primarily due to a higher sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 74% to $574,896 for
the three months ended March 31, 1997 from $331,221 for the three months ended
March 31, 1996. This increase is primarily due to additional costs for
marketing personnel and advertising costs associated with the Equinox EEG System
introduction this quarter.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses consisting principally of salaries,
consulting fees and clinical trial expenses increased 219% to $570,780 for the
three months ended March 31, 1997 from $179,115 for the three months ended March
31, 1996. This increase is primarily the result of ongoing development and
clinical evaluation for the Patient State Analyzer, development and
enhancements to the Equinox low cost EEG System and continued enhancements to
and support for the Company's existing products.
INTEREST INCOME
Interest income increased $211,307 to $215,314 for the three months ended
March 31, 1997 from $4,007 for the three months ended March 31, 1996. This was
the result of a higher cash balance from the Company's initial public offering
which occurred on April 30, 1996. Interest expense increased $11,050 to $18,919
for the three months ended March 31, 1997 from $7,869 for the three months ended
March 31, 1996. This increase was the result of borrowings in 1997 under a
revolving line of credit.
8
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company's cash, cash equivalents and short-term
investments were $15,998,427 as compared to $18,146,248 at December 31, 1996.
The Company's operating activities used cash of $1,466,206 in the three
months ended March 31, 1997 as compared to $758,441 in the three months ended
March 31, 1996. The increase in cash used was the result of an increase in the
net loss combined with a decrease in accounts payable and accrued expenses.
The Company's investing activities provided cash of $1,923,103 for the
three months ended March 31, 1997 as compared to cash used of $12,430 for the
three months ended March 31, 1996. This increase was the result of maturing
securities which were purchased with proceeds from the Company's initial public
offering.
The Company's financing activities used cash of $573,707 for the three
months ended March 31, 1997 as compared to $601,127 of cash provided in the
three months ended March 31, 1996. This decrease was due to the repayment of
a $541,334 line of credit during the three months ended March 31, 1997 and
receiving $630,994 in debt financing during the three months ended March 31,
1996.
Although the Company believes that its capital resources together with
cash generated from the future sale of its products will be sufficient to
meet the Company's operating and capital requirements at least through 1997,
there can be no assurance that the Company will not require additional
financing within this time frame. There can be no assurance that additional
financing, if required, will be available on satisfactory terms if at all.
In addition, the Company may in the future seek to raise additional funds
through bank facilities, debt or equity offerings or other sources of
capital. The Company's future liquidity and capital requirements will depend
on numerous factors, including progress of clinical trials involving the
Patient State Analyzer, actions relating to regulatory and reimbursement
matters, the costs and timing of expansion of marketing, sales, manufacturing
and product development activities, the extent to which the Company's
products gain market acceptance, and competitive developments.
9
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PHYSIOMETRIX, INC.
MARCH 31, 1997
PART II Other Information
ITEM 1 Legal Proceedings:
Not applicable.
ITEM 2 Changes in Securities:
Not applicable.
ITEM 3 Defaults upon Senior Securities:
Not applicable.
ITEM 4 Submission of matters to a vote of security holders:
Not applicable.
ITEM 5 Other information:
None.
ITEM 6 Exhibits and reports on Form 8-K:
(a) Exhibits - None
27.1 Financial Data Schedule
(b) Reports on Form 8-K - None
10
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PHYSIOMETRIX, INC.
MARCH 31, 1997
SIGNATURE
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.
PHYSIOMETRIX, INC.
DATE: May 12, 1997
BY: /s/ John A. Williams
--------------------------------
John A. Williams
President and Chief
Executive Officer
BY: /s/ Michael J. Tubridy
--------------------------------
Michael J. Tubridy
Duly Authorized Officer and
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 211,521
<SECURITIES> 15,786,906
<RECEIVABLES> 122,581
<ALLOWANCES> 27,511
<INVENTORY> 306,104
<CURRENT-ASSETS> 16,567,386
<PP&E> 885,485
<DEPRECIATION> 330,256
<TOTAL-ASSETS> 17,215,133
<CURRENT-LIABILITIES> 778,569
<BONDS> 0
0
0
<COMMON> 5,601
<OTHER-SE> 16,430,963
<TOTAL-LIABILITY-AND-EQUITY> 17,215,133
<SALES> 203,727
<TOTAL-REVENUES> 203,727
<CGS> 394,298
<TOTAL-COSTS> 1,539,974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,336,247)
<INTEREST-EXPENSE> 18,919
<INCOME-PRETAX> (1,139,852)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,139,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,139,852)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
