-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FceWgZiGPEUllP/UzUxfV0rc0Zd3JlyTvfnt9+VkU4ntiqE7USiqhzYOcsaeHuVX KqHf7+ZDt9PPLyjGD1YT0w== /in/edgar/work/20000817/0000919015-00-000005/0000919015-00-000005.txt : 20000922 0000919015-00-000005.hdr.sgml : 20000922 ACCESSION NUMBER: 0000919015-00-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOSPHERE MEDICAL INC CENTRAL INDEX KEY: 0000919015 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 043216867 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-23678 FILM NUMBER: 704967 BUSINESS ADDRESS: STREET 1: 1050 HINGHAM STREET CITY: ROCKLAND STATE: MA ZIP: 02370 BUSINESS PHONE: 7816817900 MAIL ADDRESS: STREET 1: 1050 HINGHAM STREET CITY: ROCKLAND STATE: MA ZIP: 02370 FORMER COMPANY: FORMER CONFORMED NAME: BIOSEPRA INC DATE OF NAME CHANGE: 19940215 10-Q/A 1 0001.txt BIOSPHERE MEDICAL, INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q/A --------------- (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2000 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 0-23678 BIOSPHERE MEDICAL, INC. (Exact Name of Registrant as Specified in its Charter) --------------- Delaware 04-3216867 - ------------------------------- ----------------------------------- (State or Other Jurisdiction of (IRS Employer Identification Number) Organization or Incorporation) 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 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 ------- -------- The number of shares outstanding of the registrants Common Stock as of July 28, 2000: 10,470,922 shares. - -------------------------------------------------------------------------------- 2 BioSphere Medical, Inc. Part I - Financial Information BioSphere Medical, Inc. is filing this Quarterly Report on Form 10-Q/A solely for the purpose of revising footnote 6 of the Notes to Consolidated Financial Statements set forth in Part I, Item 1 - Consolidated Financial Statements. 2 3 BIOSPHERE MEDICAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands)
June 30, December 31, ASSETS 2000 1999 ------------ ------------ Current assets: Cash and cash equivalents $ 6,929 $ 5,368 Accounts receivable, net of allowance for doubtful accounts of $43 and $0 as of June 30, 2000 and December 31, 1999, respectively 672 645 Inventories 639 389 Prepaid and other current assets 151 51 ------------ ------------ Total current assets 8,391 6,453 Property and equipment, net 551 322 Goodwill, net 1,108 713 Other assets 646 8 ------------ ------------ Total assets $ 10,696 $ 7,496 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 692 $ 616 Payable to Sepracor 6 68 Accrued expenses 2,028 1,279 Current portion of long-term debt 27 -- ------------ ------------ Total current liabilities 2,753 1,963 Minority interest acquisition obligation 406 945 Long-term debt 111 -- ------------ ------------ Total liabilities 3,270 2,908 Stockholders' equity: Common stock, $0.01 par value, 25,000 shares authorized; issued and outstanding: 9,256 as of June 30, 2000 and 8,456 as of December 31, 1999 93 84 Additional paid-in capital 46,983 40,587 Accumulated deficit (39,691) (36,068) Cumulative translation adjustment 41 (15) ------------ ------------ Total stockholders' equity 7,426 4,588 ============ ============ Total liabilities and stockholders' equity $ 10,696 $ 7,496 ============ ============
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 4 BIOSPHERE MEDICAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Product revenue $ 815 $ 713 $ 1,589 $ 993 Costs and expenses: Cost of product revenue 404 428 686 574 Research and development 564 182 1,113 199 Selling, general and administrative 2,118 1,141 3,668 1,744 --------- --------- --------- --------- Total costs and expenses 3,086 1,751 5,467 2,517 --------- --------- --------- --------- Loss from continuing operations (2,271) (1,038) (3,878) (1,524) Other income/ (expense) 104 16 255 (5) --------- --------- --------- --------- Loss before taxes and minority interest (2,167) (1,022) (3,623) (1,529) Income tax -- (2) -- (20) --------- --------- --------- --------- Loss before minority interest (2,167) (1,024) (3,623) (1,549) Minority interest 20 (1) -- (15) --------- --------- --------- --------- Net loss from continuing operation (2,147) (1,025) (3,623) (1,564) Loss from discontinued operations -- (103) -- (539) --------- --------- --------- --------- Net loss $ (2,147) $ (1,128) $ (3,623) $ (2,103) ========= ========= ========= ========= Basic and diluted net loss per share from continuing operations $ (0.23) $ (0.12) $ (0.40) $ (0.19) Basic and diluted net loss per share from discontinued operations -- (0.01) -- (0.06) --------- --------- --------- --------- Basic and diluted net loss per share $ (0.23) $ (0.13) $ (0.40) $ (0.25) ========= ========= ========= ========= Weighted average common shares outstanding Basic and diluted 9,250 8,456 9,087 8,456 ========= ========= ========= =========
The accompanying notes are an integral part of the consolidated condensed financial statements. 4 5 BIOSPHERE MEDICAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
SIX MONTHS ENDED JUNE 30, --------------------- 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: $ (3,623) $ (2,103) Net loss Less: Net loss from discontinued operations -- 539 --------- --------- Net loss from continuing operations (3,623) (1,564) Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: Provision for doubtful accounts 43 -- Depreciation and amortization 118 20 Minority interest- BioSphere Medical, S.A. -- 15 Non-cash interest expense 20 -- Foreign currency translation gain (85) -- Stock-based compensation 270 -- Changes in operating assets and liabilities: Accounts receivable (70) 40 Inventories (250) (20) Prepaid and other current assets (100) (24) Accounts payable 76 (72) Payable to Sepracor (62) (384) Accrued expenses 736 9 --------- --------- Net cash used in operating activities (2,927) (1,980) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (296) (64) Increase in restricted cash -- (1,000) Change in other assets (138) 1 Cash paid for 34% interest of Biosphere Medical, S.A. (920) -- Proceeds from acquisition of Biosphere Medical, S.A. -- 283 --------- --------- Net cash used in investing activities (1,354) (780) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash provided by the issuance of common stock in a private placement 5,785 -- Cash provided by the exercise of stock options 350 -- Deferred financing costs (500) -- Net proceeds from long-term borrowings 138 -- Net Proceeds/(payments) under line of credit agreement 13 (2,000) Payments made on capital lease obligations -- (180) --------- --------- Net cash provided by financing activities 5,786 (2,180) --------- --------- Effect of exchange rate changes on cash and cash equivalents 56 (5) --------- --------- NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,561 (4,945) NET CASH PROVIDED BY DISCONTINUED OPERATIONS -- 9,655 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,368 2,235 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,929 $ 6,945 ========= ========= ACQUISITION OF 51% OF BIOSPHERE MEDICAL, S.A: Liabilities Assumed $ -- $ (1,493) Fair Value of Assets Acquired -- 1,493 Put Option of Minority Interest -- 771 --------- --------- Goodwill $ -- $ 771 ========= =========
The accompanying notes are an integral part of the consolidated condensed financial statements. 5 6 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 microspheres for medical applications. In February 1999, the Company acquired a 51% ownership interest in Biosphere Medical S.A., ("BMSA") a French societe anonyme (See Note 3). BMSA has the license to the embolotherapy device that is the main focus of the Company's business. In May 1999, the Company sold substantially all of its assets relating to its former core business, chromatography, and changed its name to BioSphere Medical, Inc. In April 2000, the Company increased its ownership interest in Biosphere Medical, S.A. to 85%. The Company has an option to acquire the remaining 15% at a later date. The Company expects to spend substantial funds and to experience increasing losses for the foreseeable future in connection with this refocus of its business and execution of its business plan. As of August 1, 2000, Sepracor Inc., a specialty pharmaceutical company, beneficially owned approximately 56% of our outstanding common stock. B) Basis of Presentation The accompanying consolidated condensed financial statements are unaudited and have been prepared on a basis substantially consistent with Company's annual audited financial statements included in the Company's Form 10-K. The consolidated condensed financial statements include the accounts of the Company and its subsidiary, BMSA. All material intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the Company's annual statements have been condensed or omitted. The consolidated condensed financial statements, in the opinion of management, reflect all adjustments (including normal recurring accruals) necessary for a fair statement of the results for the three-month and six-month periods ended June 30, 2000 and 1999. The results of operations for the periods 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, 1999. Certain prior period amounts have been reclassified to conform to current reporting, including the impact of the operations of the Company that were discontinued. C) New Accounting Pronouncements In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial Statements," which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. The effective date of this bulletin was deferred until the fourth fiscal quarter beginning after December 15, 1999. SAB 101 requires companies to report any changes in revenue recognition as a cumulative change in accounting principle at the time of implementation in accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes." Adoption of SAB 101 is not expected to have a material impact on the Company's financial position and results of operations. 6 7 In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's financial position or results of operations. D) Comprehensive Income /(Loss) The Company applies Statement of Financial Account Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income (loss) and its components in the financial statements. The Company's only item of other comprehensive income (loss) relates to foreign currency translation adjustments, and is presented separately on the balance sheet as required. If presented on the statement of operations comprehensive loss due to foreign currency translation adjustments would be approximately $56,000 less than reported for the six months ended June 30, 2000 and approximately $1,000 greater than reported in the six months ended June 30, 1999. 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 equivalent options, warrants and other convertible securities. Total warrants and options convertible into Common stock as of June 30, 2000 and 1999, equaled 4,112,448 and 3,252,736, 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) Revenue Recognition The Company recognizes revenue from the sale of its products when the products are shipped to its customers. Reserves for sales returns are provided for potential returns at the time of revenue recognition. 2. BALANCE SHEET CAPTIONS Components of other selected captions in the condensed consolidated balance sheet consist of the following: 7 8
June 30, December 31, December 31, (In Thousands) 2000 1999 1998 -------------------------------------- --------- --------- --------- TRADE ACCOUNTS RECEIVABLE Accounts receivable $ 715 $ 645 $ - Allowance for doubtful accounts (43) - - --------- --------- --------- $ 672 $ 645 ========= ========= ========= INVENTORIES Raw material $ 112 $ 119 $ - Work in progress 39 25 - Finished goods 488 245 - --------- --------- --------- $ 639 $ 389 - ========= ========= ========= PROPERTY AND EQUIPMENT Office equipment $ 493 $ 289 $ 77 Laboratory and manufacturing equipment 120 72 - Leasehold improvements 89 45 - --------- --------- --------- 702 406 77 Less accumulated depreciation (151) (84) (35) --------- --------- --------- $ 551 $ 322 42 ========= ========= ========= GOODWILL Excess of cost over net assets acquired $ 1,217 $ 771 $ - Less accumulated amortization (109) (58) - --------- --------- --------- $ 1,108 $ 713 - ========= ========= ========= ACCRUED EXPENSES Accrued compensation $ 910 $ 400 $ 161 Accrued private placement equity costs 315 - - Accrued research and development costs 150 - - Other 653 879 631 --------- --------- --------- $ 2,028 $ 1,279 792 ========= ========= =========
3. MINORITY INTEREST ACQUISITION OBLIGATION On February 25, 1999, the Company acquired 51% of the outstanding common stock of BMSA. Accordingly, the results of operations of BMSA have been included in the consolidated condensed statements as of the date of acquisition. In accordance with a February 25, 1999 purchase agreement, the Company acquired a 51% ownership interest by granting to BMSA an exclusive sales and manufacturing license to certain patents and technology primarily relating to the Company's Embosphere(TM) Microsphere technology. The Company was also granted an option to purchase the remaining 49% interest in BSMA through December 31, 2004 for an amount equal to the product of the percentage interest to be purchased and the sum of BMSA's rolling nine-month sales and worldwide Embosphere Microsphere sales as of the date of exercise (the "Purchase Option"). Moreover, the holder of the remaining 49% interest was also granted an option (the "Put Option") to require the Company to purchase the remaining 49% interest from December 31, 2003 until December 31, 2004 for an amount equal to the greater of an agreed upon price (in French Francs) for each percentage interest to be sold or the amount payable under the Purchase Option. The Put Option represents a contingent purchase consideration and the Company is accreting the value of this Put Option over the period ending December 31, 2003. 8 9 On April 7, 2000, the Company purchased an additional 34% of BMSA for approximately $920,000. The transaction was accounted for as a step acquisition of a minority interest whereby the fair value in excess of the then recorded accrued acquisition obligation was treated as an increase to goodwill. As a result of this step-acquisition, the Company's total ownership interest in BMSA increased to 85%. As of June 30, 2000, the holder of the 15% minority interest retains its Put Option with respect to the remaining 15% of the outstanding equity interest in BMSA pursuant to the terms of the original purchase agreement. The Company also retains its Purchase Option with respect to the remaining 15% equity interest in BMSA. As of June 30, 2000 the Company estimated the present value of the Put Option to be $406,000. The Company has applied the purchase method of accounting to the purchase of the interest in BMSA and has allocated the purchase price to the assets acquired and liabilities assumed. The purchase price in excess of the fair value of the tangible assets has been allocated to goodwill. Goodwill as of June 30, 2000 and December 31, 1999 of $1,108,000 and $713,000, respectively, is being amortized through February 2010. 4. RELATED PARTY TRANSACTIONS The related party payable represents amounts due for certain administrative services provided on an arms-length basis by Sepracor Inc., the Company's majority stockholder. 5. DISCONTINUED OPERATIONS On May 17, 1999, the Company sold substantially all of its assets and business, relating to its former core business, chromatography, for approximately $11.0 million in cash, and the assumption of certain liabilities. Upon the consummation of the sale, the Company changed its name from BioSepra Inc. to BioSphere Medical, Inc. The Company utilized a portion of the proceeds to pay approximately $880,000 of transaction costs, to repay approximately $2.0 million of outstanding bank debt, and to repay approximately $143,000 due to Sepracor. The net assets included in the sale had a net book value of approximately $10.5 million on May 17, 1999, which was included in calculating a net loss for the sale of approximately $70,000. The operations, assets and liabilities of the business have been presented in accordance with Accounting Principles Board (APB) Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions in the accompanying consolidated financial statements. Accordingly, the operating results of the discontinued business for the three and six months ended June 30, 1999 have been segregated from the continuing operations and reported as a separate line item on the consolidated condensed statements of operations. 6. COMMON STOCK FINANCING On February 4, 2000, the Company completed a private equity placement of common stock and warrants for net proceeds of approximately $5,785,000. Investors purchased 653,887 shares of the Company's common stock at a price of $9.00 per share, that included warrants to purchase up to an additional 163,468 shares of common stock. Of the total 653,887 common shares sold, unrelated third-party institutional investors purchased 609,445, or 93%, and 44,442, or 7%, were purchased by members of the Company's Board of Directors. The warrants have an exercise price equal to $20.00 per share and expire on February 4, 2005. In accordance with the Black-Scholes option-pricing model, the Company valued the warrants at approximately $929,000 and has included such amount as a component of additional paid in capital. The Company estimates that the $4,956,000 net proceeds allocated to the common stock issued represents a 23% discount to the Nasdaq quoted market value at the time the Company negotiated the private equity placement. Management believes that the 23% discount is consistent with similar sales of private equity securities. The Company intends to use the net proceeds from this private placement for general corporate purposes, including research and development, sales and marketing activities. 7. SALES BY REGIONAL AREA Sales from continuing operations by geographic region for the years ended December 31, 1999 and 1998 are as follows; 9 10
Year Ended December 31, -------------------- 1999 1998 -------- -------- France 86% 100% Spain 5 - All other 9 - -------- -------- -------- -------- 100% 100% ======== ========
8. SUBSEQUENT EVENT On July 28, 2000, the Company completed a private equity placement of common stock for gross proceeds of approximately $13,364,000. Investors purchased 1,214,900 shares of common stock at $11.00 per share. Of the total shares sold, Sepracor, Inc. the Company's parent company, purchased 454,545 shares. All proceeds from this equity placement are to be used for general corporate purposes, including research and development, sales and marketing activities. 11 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. BioSphere Medical, Inc. Date: August 16, 2000 /s/ Robert M. Palladino ----------------------------------------- Robert M. Palladino Chief Financial Officer (Principal Financial & Accounting Officer) 11 -----END PRIVACY-ENHANCED MESSAGE-----