FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

o 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
incorporation or organization)	identification No.)

Five Billerica Park, N. Billerica, MA	01862-1256
(Address of principal executive offices)	(Zip code)

(978) 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 ý No o ITEM 2 - Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class		Outstanding at October 29, 2004
Common Stock, $.001 par value		13,654,266

UNAUDITED CONDENSED BALANCE SHEETS

	December 31				September 30
	2003				2004
ASSETS
Current assets:
Cash and cash equivalents	$	4,099,155			$		1,258,565
Short-term investments	3,526,894				2,511,923
Accounts receivable, net	304,392				187,650
Inventories	560,294				142,079
Prepaid expenses	101,798				137,113
Total current assets	8,592,533				4,237,330

Property, plant and equipment	1,360,960				1,397,687
Less allowances for depreciation	(1,181,292			)	(1,270,117			)
	179,668				127,570

Total assets	$		8,772,201		$	4,364,900

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$		147,762		$	163,273
Accrued expenses	823,519				611,496
Warrant derivative contract	11,342,730				—
Total current liabilities	12,314,011				774,769

Stockholders’ equity (deficit)
Preferred stock: $.001 par value; 10,000,000 shares authorized; none issued and outstanding	—				—
Common stock: $.001 par value; 50,000,000 shares authorized; 13,380,481 shares in 2003 and 13,654,266 shares in 2004 issued and outstanding	13,380				13,654
Additional paid-in capital	56,098,127				68,405,645
Unrealized loss on available-for-sale securities	—				(2,489			)
Accumulated deficit	(59,653,317			)	(64,826,679			)
Total stockholders’ equity (deficit)	(3,541,810			)	3,590,131
Total liabilities and stockholders’ equity (deficit)	$		8,772,201		$	4,364,900

See accompanying notes

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2003			2004			2003			2004
Revenues	$	609,095		$	437,791		$	1,048,363		$	1,466,108
Cost of products sold	657,332			510,085			1,328,578			1,549,176
Gross deficit	(48,237		)	(72,294		)	(280,215		)	(83,068		)

Costs and expenses:
Research and development	391,822			542,933			1,189,246			1,329,305
Selling, general and administrative	685,731			908,430			2,156,304			2,761,836
	1,077,553			1,451,363			3,345,550			4,091,141
Operating loss	(1,125,790		)	(1,523,657		)	(3,625,765		)	(4,174,209		)
Other income (expense):

PART I	FINANCIAL INFORMATION

	Item 1		Unaudited Condensed Financial Statements

			Unaudited Condensed Balance Sheets as of December 31, 2003 and September 30, 2004

			Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2004

			Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2004

			Notes to Unaudited Condensed Financial Statements

	Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3		Quantitative and Qualitative Disclosures about Market Risk
	Item 4		Controls and Procedures

PART II	OTHER INFORMATION

	Item 1	Legal Proceedings
	Item 2	Changes in Securities
	Item 3	Defaults upon Senior Securities
	Item 4	Submission of Matters to a Vote of Security Holders
	Item 5	Other Information
	Item 6	Exhibits and Reports on Form 8-K

SIGNATURES

EXHIBIT INDEX