Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended: March 31, 2004

OR

FOR THE TRANSITION PERIOD FROM                  TO                 

Commission File Number 0-23678

BIOSPHERE MEDICAL, INC.

(Exact Name of Registrant as Specified in its Charter)

1050 Hingham St., Rockland, Massachusetts 02370

(Address of Principal Executive Offices) (Zip Code)

(781) 681-7900

(Registrant’s Telephone Number, Including Area Code)

Indicate by a 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  x    NO  ¨

Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The number of shares outstanding of the Registrant’s Common Stock as of May 1, 2004 was 14,024,176 shares.

Table of Contents

BioSphere Medical, Inc.

INDEX

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

BIOSPHERE MEDICAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

The accompanying notes are an integral part of these consolidated condensed financial statements.

3

Table of Contents

BIOSPHERE MEDICAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data / unaudited)

The accompanying notes are an integral part of these consolidated condensed financial statements.

4

Table of Contents

BIOSPHERE MEDICAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands / unaudited)

The accompanying notes are an integral part of these consolidated condensed financial statements.

5

Table of Contents

BIOSPHERE MEDICAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) Nature of Business

BioSphere Medical, Inc. (the “Company”) was incorporated in Delaware in December 1993. During 1999, the Company strategically refocused its business on the development and commercialization of its proprietary Embosphere^® Microspheres and other ancillary embolotherapy products for use in treating uterine fibroids, hypervascularized tumors and arteriovenous malformations. Between February 1999 and November 2001, the Company acquired all ownership interests in Biosphere Medical S.A. (“BMSA”), a French societe anonyme. BMSA holds the license to the embolotherapy platform device that is the main focus of the Company’s business. In May 1999, the Company sold substantially all of the assets relating to its former core business, chromatography, and changed its name from BioSepra, Inc. to BioSphere Medical, Inc.

The Company believes that existing working capital, together with anticipated sales proceeds from its microspheres and other medical device products, will provide liquidity sufficient to allow the Company to meet its expected spending obligations into the first quarter of 2005, while also allowing the further development and testing of other product candidates and technologies. Should the Company not realize some or all of its revenue projections, or otherwise fail to have sufficient capital for its planned operations, it may be required to secure alternative financing arrangements or pursue additional strategic partners, neither of which may be available to the Company on favorable terms or at all, and/or defer or limit some or all of its planned sales, marketing, research, development and/or clinical expenditures.

B) Basis of Presentation

The accompanying consolidated condensed financial statements are unaudited and have been prepared on a basis consistent with the Company’s annual audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. The consolidated condensed financial statements include the accounts of the Company, and its three wholly owned subsidiaries, BMSA, Biosphere Medical Japan, Inc. and BSMD Ventures, Inc. All material inter-company balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the Company’s annual audited financial statements have been condensed or omitted. The consolidated condensed financial statements, in the opinion of management, reflect all adjustments (including normal recurring adjustments) necessary for a fair statement of the results for the three months ended March 31, 2004 and 2003. The results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire fiscal year. These consolidated condensed financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

C) Cash, Cash equivalents and Marketable Securities

The Company considers all highly liquid investments with an original maturity of ninety days or less, as of the date of purchase, to be cash equivalents. In accordance with the Company’s investment policy, surplus cash is invested in investment grade corporate and U.S. government debt as well as certain asset backed securities. The Company determines the appropriate classification of marketable securities at each balance sheet date. Available-for-sale marketable securities are carried at their fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in the accompanying balance sheet.

D) Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net loss, specifically, the effects of foreign currency translation adjustments and any unrealized gains or losses on available for sale securities, that are reflected separately in accumulated other comprehensive income as stockholders’ equity. For the three months ended March 31, 2004 and 2003, the Company’s comprehensive loss was as follows:

6

Table of Contents

BIOSPHERE MEDICAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

D) Comprehensive Loss (continued)

E) Net Loss Per Share

Basic net loss per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net loss per share incorporates the dilutive effect of common stock options and warrants. Common stock equivalents, as determined in accordance with the treasury-stock method, equaled 2,375,903 and 3,002,715 as of March 31, 2004 and 2003, respectively. The average price of BioSphere Medical common stock used in determining common stock equivalents equaled $4.66 and $4.60 as of March 31, 2004 and 2003, respectively. Total common stock options and warrants outstanding as of March 31, 2004 and 2003 equaled 2,875,000 and 3,941,000, respectively. Common stock equivalents have been excluded from the calculation of weighted average number of diluted common shares, as their effect would be antidilutive for all periods presented.

F) Impairment of Long-Lived Assets

The Company evaluates the potential impairment of its long-lived assets, including goodwill, to determine whether events or changes in circumstances may indicate that the carrying amount of a recorded asset may not be recoverable. Based on management’s assessment as of March 31, 2004, the Company has determined that no impairment of long-lived assets exists.

2. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following as of:

Included in inventory is an excess and obsolete product valuation allowance of $718,000 and $519,000 as of March 31, 2004 and December 31, 2003.

3. SEGMENT AND GEOGRAPHIC DATA

The Company develops its microspheres and other accessory embolotherapy products for use in the treatment of uterine fibroids, hypervascularized tumors and arteriovenous malformations. The Company operates exclusively in the medical device business, which the Company considers as one business segment. Operations are primarily conducted in two geographic regions: North America and Europe. Operations by geographic region for the three months ended March 31, 2004 and 2003 are as follows:

7

Table of Contents

BIOSPHERE MEDICAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

3. SEGMENT AND GEOGRAPHIC DATA (continued)