UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2016
Commission File Number 000-55473
BIOSIG TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation
or organization)
8441 Wayzata Blvd, Suite 240
Minneapolis, MN
(Address of principal executive office)
26-4333375
(IRS Employer Identification No.)
55426
(Zip Code)
(763) 999-7331
(Registrant’s telephone number, Including area code)
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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 and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☐
(Do not check if a smaller reporting company)
Accelerated filer ☐
Smaller reporting company ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2016, based on the price at
which the common stock was last sold on such date, is $17,803,853. For purposes of this computation, all officers, directors, and 5
percent beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such
directors, officers, or 5 percent beneficial owners are, in fact, affiliates of the registrant.
As of March 30, 2017, there were 24,091,363 shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Item 12.
Item 13.
Item 14.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibits, Financial Statement Schedules
Signatures
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PART I
Unless the context indicates otherwise, references in this Annual Report to “BioSig,” the “Company,” “we,” “our” and “us” mean
BioSig Technologies, Inc., and its predecessor entities.
Note on Forward-Looking Statements
This Annual Report on Form 10-K (including the section regarding Management’s Discussion and Analysis of Financial
Condition and Results of Operations) contains forward-looking statements regarding our business, financial condition, results of
operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar
expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-
inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements
concerning future matters are forward-looking statements.
Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management,
such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently
subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or
anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include,
without limitation, those specifically addressed under the heading “Risks Factors” below, as well as those discussed elsewhere in this
Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of
the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission (“SEC”). You can read and
copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can
obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that
may arise after the date of this Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures
made throughout the entirety of this Annual Report on Form 10-K, which attempt to advise interested parties of the risks and factors that
may affect our business, financial condition, results of operations and prospects.
ITEM 1 – BUSINESS
Corporate Structure
We were formed as BioSig Technologies, Inc., a Nevada corporation, in February 2009 and in April 2011 we merged with our
wholly-owned subsidiary, BioSig Technologies, Inc., a Delaware corporation, with the Delaware corporation continuing as the surviving
entity. We are principally devoted to improving the quality of cardiac recordings obtained during ablation of atrial fibrillation (“AF”) and
ventricular tachycardia (“VT”). We have not generated any revenue to date and consequently our operations are subject to all risks
inherent in the establishment of a new business enterprise.
Business Overview
We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and
artifacts from cardiac recordings during electrophysiology studies and ablation. We are developing the PURE (Precise Uninterrupted
Real-time evaluation of Electrograms) EP System, a surface electrocardiogram and intracardiac multichannel recording and analysis
system that acquires, processes and displays electrocardiogram and electrograms required during electrophysiology studies and ablation
procedures.
3
The PURE EP System is designed to assist electrophysiologists in making clinical decisions in real-time by providing
information that, we believe, is not always easily obtained, if at all, from any other equipment presently used in electrophysiology labs.
The PURE EP System’s ability to acquire high fidelity cardiac signals will potentially increase these signals’ diagnostic value, and
therefore offer improved accuracy and efficiency of the electrophysiology studies and related procedures. We are developing signal
processing tools within the PURE EP System. We believe that these will assist electrophysiologists in further differentiating true signals
from noise, and will provide guidance in identifying ablation targets.
Since June 2011, we have collaborated with physicians affiliated with the Texas Cardiac Arrhythmia Institute at St. David’s
Medical Center in Austin, Texas for initial technology validation. The physicians affiliated with the Texas Cardiac Arrhythmia Institute
have provided us with digital recordings obtained with conventional electrophysiology recording systems during different stages of
electrophysiology studies. Using our proprietary signal processing tools that are part of the PURE EP System, we analyzed these
recordings and successfully removed baseline wander, noise and artifacts from the data thereby providing better diagnostic quality signals.
We are focused on improving the quality of cardiac recordings obtained during ablation of atrial fibrillation, the most common
cardiac arrhythmia, and ventricular tachycardia, an arrhythmia evidenced by a fast heart rhythm originating from the lower chambers of
the heart, which can be life-threatening. Cardiac ablation is a procedure that corrects conduction of electrical impulses in the heart that
cause arrhythmias. During this invasive procedure, a catheter is usually inserted using a venous access into a specific area of the heart. A
special radiofrequency generator delivers energy through the catheter to small areas of the heart muscle that cause the abnormal heart
rhythm. According to a 2009 article in Circulation: Arrhythmia and Electrophysiology, ablation is superior to pharmacological treatments
and is becoming a first line of therapy for certain patients with arrhythmias (“Treatment of Atrial Fibrillation With Antiarrhythmic Drugs
or Radiofrequency Ablation,” Circulation: Arrhythmia and Electrophysiology (2009) 2: 349-361).
Our overall goal is to establish our proprietary technology as a new platform that will have the following advantages over the
electrophysiology recording systems currently available on the market:
●
●
●
●
Higher quality cardiac signal acquisition for accurate and more efficient electrophysiology studies;
Precise, uninterrupted, real time evaluations of electrograms;
Reliable cardiac recordings to better determine precise ablation targets, strategy and end point of
procedures; and
A portable device that can be fully integrated into existing electrophysiology lab environments.
If we are able to develop our product as designed, we believe that the PURE EP System and its signal processing tools will
contribute to an increase in the number of procedures performed in each electrophysiology lab and possibly improved patient outcomes.
Our significant scientific achievements to date include:
● Initial system concept validation was performed in collaboration with physicians at the Texas Cardiac Arrhythmia Institute at St.
David’s Medical Center in Austin, Texas in June 2011. The Texas Cardiac Arrhythmia Institute provided challenging recordings
obtained with electrophysiology recording systems presently in use at the institute during various electrophysiology studies. Our
technology team successfully imported the data into the PURE EP System software and using proprietary signal processing, the
PURE EP System software was able to reduce baseline wander, noise, and artifacts from the data and therefore provide better
diagnostic quality signals.
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● We have established clinical and/or advisory relationships for both technology development and validation studies with physicians
and researchers affiliated with the following medical centers: Texas Cardiac Arrhythmia Institute, Austin, TX; Cardiac Arrhythmia
Center at the University of California at Los Angeles, Los Angeles, CA; Mount Sinai Medical Center, New York, NY; University
Hospitals Case Medical Center, Cleveland, OH; Bringham & Women’s Hospital in Boston, MA; and Mayo Clinic, Rochester, MN.
● The Cardiac Arrhythmia Center at the University of California at Los Angeles and Dr. Kalyanam Shivkumar, a former member of
our board of directors, have played a significant role in the initial functional testing of our hardware. Dr. Shivkumar and his team
have enabled us to learn the connectivity of the lab and its devices that pertain to where our PURE EP System will fit in. In June
2013, we commenced our first proof of concept pre-clinical study with the assistance of Dr. Shivkumar in order to further test the
components of the PURE EP System hardware, as further explained below.
● We are developing signal processing tools within the PURE EP System that will assist electrophysiologists in further
differentiating true signals from noise, which may potentially provide guidance in identifying ablation targets. The signal
processing tools are expected to be an integral part of the software of the PURE EP System, which we believe will significantly
facilitate the locating of ablation targets.
● In the second and third quarters of 2013, we performed and finalized testing of our proof of concept unit by initially using an
electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the
University of California at Los Angeles. As part of the testing, we simultaneously recorded electrocardiogram and intracardiac
signals on our proof of concept unit and GE’s CardioLab recording system. An identical signal was applied to the input of both
systems and the monitor of our proof of concept unit was positioned next to the monitor of GE’s CardioLab recording system to
allow for visual comparison. We believe that our proof of concept unit performed well as compared to GE’s CardioLab recording
system, in that the electrocardiogram and intracardiac signals displayed on our proof of concept unit showed less baseline wander,
noise and artifacts compared to signals displayed on GE’s CardioLab recording system. However, because this was a proof of
concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any
independent verification or peer review of these findings.
● In the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of the PURE EP
System prototype, which has since been completed.
● In September 2014, we performed additional tests on the PURE EP System prototype at the University of California at Los
Angeles.
● In the fourth quarter of 2014, we appointed Dr. Samuel J. Asirvatham from Mayo Clinic as a member of our Scientific Advisory
Board and initiated plans for pre-clinical studies at Mayo Clinic.
● In the first quarter of 2015, we appointed Dr. K. L. Venkatachalam from Mayo Clinic as a member of our Scientific Advisory
Board. On March 31, 2015 Drs. Asirvatham and Venkatachalam performed our first pre-clinical study at Mayo Clinic in Rochester,
Minnesota.
● On June 10, 2015, Dr. Asirvatham performed our second pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On November 17, 2015, Dr. Asirvatham performed our third pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On February 22, 2016, we signed an agreement to initiate development of its PURE EP System with Minnetronix, Inc.
(“Minnetronix”) and are taking steps toward its 510(k) submission.
5
● On March 28, 2016, we announced an Advanced Research Program with Dr. Asirvatham at Mayo Clinic beginning June 2016.
● On March 8, 2016, Dr. Ammar Killu from Mayo Clinic presented our preclinical data at the 13 th Annual Dead Sea Symposium on
Innovations in Cardiac Arrhythmias and Device Therapy in Tel Aviv, Israel entitled “Enhanced Electrophysiology Recording
Improves Signal Acquisition and Differentiation”.
● On June 2, 2016, Dr. Asirvatham performed our fourth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On June 23 and August 25 and 26, 2016, Dr. Vivek Reddy performed a pre-clinical study on a ventricular scar model at the Mount
Sinai Hospital in New York, NY.
● On July 27, 2016, Dr. Asirvatham performed our fifth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On September 14, 2016, Dr. Asirvatham performed our sixth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On August 19, 2016, we presented a poster at the IEEE Engineering in Medicine and Biology Society annual conference (IEEE
EMBC 2016) entitled “Enhanced Electrophysiology Recording System”.
● In December 2016, the Journal of the American College of Cardiology (JACC): Clinical Electrophysiology (Vol.2, No.7, pp.850)
published the article entitled, “Novel Electrophysiology Signal Recording System Enables Specific Visualization of the Purkinje
Network and Other High-Frequency Signals”, submitted by the Mayo Clinic team.
● On December 9, 2016, we filed a provisional patent application entitled “Assessment of Catheter Position by Local Electrogram”.
● On December 9, 2016, we filed a provisional patent application entitled “Visualization of Conduction Tissue Signals”.
We conducted our first, second and third pre-clinical studies on March 31, 2015, June 10, 2015 and November 17, 2015
respectively, and began additional pre-clinical studies as part of an advanced research program in June 2016, at Mayo Clinic in Rochester,
Minnesota with the PURE EP System prototype. We also conducted a pre-clinical study at the Mount Sinai Hospital in New York, NY
with emphasis on the ventricular tachycardia (VT) model.
We intend to conduct a pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles with
emphasis on the ventricular tachycardia (VT) model. We intend to conduct further pre-clinical studies, end-user preference studies, and
research studies. The main objective of these studies is to demonstrate the clinical potential of the PURE EP System.
We have initiated technology development with Minnetronix, a medical technology and innovation company, and are
implementing steps for obtaining 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) for the PURE EP System.
We believe that by the second half of 2017, we will have obtained 510(k) marketing clearance from the FDA and will be able to
commence marketing and commercialization of the PURE EP System. Our ability to achieve the aforementioned milestones will be
principally determined by our ability to obtain necessary financing and regulatory approvals, among other factors.
6
We have chosen and are working with the National Standards Authority of Ireland, or NSAI, as our Notified Body to obtain the
CE Mark. CE marking is a mandatory approval for medical devices sold in Europe and Canada. We plan on submitting for CE Mark in
2017.
Because we are a development stage company, with our initial product under development, we currently do not have any
customers. We anticipate that our initial customers will be hospitals and other health care facilities that operate electrophysiology labs.
Our Industry
Electrophysiology is the study of the propagation of electrical impulses throughout the heart. Electrophysiology studies are
focused on the diagnosis and treatment of arrhythmias, a medical condition in which conduction of electrical impulses within the heart
vary from the normal. Such conditions may be associated with significant health risks to patients. The invasive cardiac electrophysiology
study for the evaluation of cardiac conduction disorders has evolved rapidly from a research tool to an established clinical treatment. This
technique permits detailed analyses of the mechanism underlying cardiac arrhythmias and determines precise locations of the sites of
origin of these arrhythmias, thereby aiding in treatment strategies.
Pharmacological, or medicine-based, therapies have traditionally been used as initial treatments, but they often fail to adequately
control the arrhythmia and may have significant side effects. Catheter ablation is now often recommended for an arrhythmia that
medicine cannot control. Catheter ablation involves advancing several flexible catheters into the patient’s blood vessels, usually either in
the femoral vein, internal jugular vein or subclavian vein. The catheters are then advanced towards the heart. Electrical impulses are then
used to induce the arrhythmia and local heating or freezing is used to ablate (destroy) the abnormal tissue that is causing it. Catheter
ablation of most arrhythmias has a high success rate and multiple procedures per patient have been found to be more successful.
One study found that arrhythmia-free survival rates after a single catheter ablation procedure were 40%, 37%, and 29% at one,
two and five years, respectively, with most recurrences over the first six months (“Catheter Ablation for Atrial Fibrillation - Are Results
Maintained at 5 Years of Follow-Up?” J Am Coll Cardiol. (2011) 57(2):160-166). Another study stated that catheter ablation of atrial
fibrillation has been shown to be effective in approximately 80% of patients after 1.3 procedures per patient, with approximately 70% of
such patients requiring no further antiarrhythmic drugs during intermediate follow-up (Updated Worldwide Survey on the Methods,
Efficacy, and Safety of Catheter Ablation for Human Atrial Fibrillation Circulation: Arrhythmia and Electrophysiology (2010) 3: 32-38).
Catheter ablation is usually performed by an electrophysiologist (a specially trained cardiologist) in a catheterization lab or a
specialized electrophysiology lab. It is estimated that there are about 3,000 electrophysiology labs in the U.S. and 1,500 electrophysiology
labs outside the U.S., each with an electrophysiology recording system costing an average of $250,000. We believe that the current value
of the electrophysiology recording device market in the U.S. is approximately $500 million, based upon the number of electrophysiology
labs in U.S. and the average cost of the recording system in each lab. With the potential of 12 million atrial fibrillation patients by the year
2050 (according to the Atrial Fibrillation Fact Sheet, February 2010, published by the Centers for Disease Control and Prevention) and
improvements in technology for atrial fibrillation ablation therapy, significant growth is predicted for the number of hospitals building
electrophysiology labs. A July 2012 report published by the Millennium Research Group predicted rapid growth in the U.S. market for
electrophysiology mapping and ablation devices from 2012 to 2016, due to the medical community’s growing focus on treating atrial
fibrillation. The report further predicts that even with advances in drug treatments and management devices to treat or manage
arrhythmias, the electrophysiology mapping and ablation device market will be sustained by the continued development of advanced
technologies that decrease ablation procedure times and improve success rates. According to the 2016 HRI Global Opportunities in
Medical Devices & Diagnostics report, analysts forecast the global market for electrophysiology devices will grow at a 10.3 percent
compound annual growth rate, from $3.68 billion in 2015 to $6.015 billion in 2020.
7
Treatment of Atrial Fibrillation and Ventricular Tachycardia
We believe that the clearer recordings and additional information provided by the PURE EP System may improve outcomes
during electrophysiology studies and ablation procedures for a variety of arrhythmias. For patients who are candidates for ablation, an
electrophysiology study is necessary to define the targeted sites for the ablation procedure. Two common, yet complex, conditions for
which ablation procedures are performed are atrial fibrillation and ventricular tachycardia. We believe that in the near future, the PURE
EP System may have a meaningful impact on assisting ablation strategies for these conditions.
Most cardiac arrhythmias are well understood and ablation simply requires destroying a small area of heart tissue possessing
electrical abnormality. In contrast, complex arrythmias, such as atrial fibrillation and ventricular tachycardia, have complex
pathophysiology and, because knowledge of their origins and mechanisms are incomplete, ablation treatments for these arrhythmias are
largely empirical. Catheter ablation is now an important option to control recurrent ventricular tachycardias (“EHRA/HRS Expert
Consensus on Catheter Ablation of Ventricular Arrhythmias,” Europace (2009) 11 (6): 771-817). Catheter ablation of ventricular
tachycardia in nonischemic heart diseases can be challenging, and outcomes across different diseases are incompletely defined (“Catheter
Ablation of Ventricular Tachycardia in Nonischemic Heart Disease,” Circulation: Arrhythmia and Electrophysiology (2012) 5: 992-1000).
In addition, limitations of atrial fibrillation ablation include the use of catheters designed for pinpoint lesions to perform large area
ablations in a point-by-point fashion, and the dexterity required to perform the procedure (“New Technologies in Atrial Fibrillation
Ablation,” Circulation (2009)). Furthermore, the length of these procedures exposes the physician and staff to extensive radiation,
requiring them to wear heavy lead vests. Consequently, ablating atrial fibrillation and ventricular tachycardia has been regarded as being
extremely difficult. Therefore, access to these procedures has traditionally been limited to being performed by only especially well-
trained cardiologists; however, advancements in new technologies and techniques show a strong growth rate for these procedures.
According to the National Institute of Health National Heart Lung and Blood Institute, there are more than 3 million Americans
suffering with atrial fibrillation and about 850,000 patients are hospitalized annually. As many as 600,000 new cases of atrial fibrillation
are diagnosed each year. Despite the fact that physicians have been performing radiofrequency ablations since the 1990s, catheter-based
treatment is offered to less than 3% of the atrial fibrillation patient population in the U.S. and Europe. According to Millennium Research
Group (MRG), an increasing proportion of diagnosed atrial fibrillation cases are now being treated via ablation, as both physician
confidence and the devices used in these procedures improve. A growing amount of positive clinical data has demonstrated the efficacy
of AF ablation when compared to the traditional first-line treatment of anti-arrhythmic drugs. As a result, AF ablation is becoming the
fastest growing procedure type in this market, increasing at an average annual rate of 16 percent from 2012 to 2016. The American
College of Cardiology Foundation/American Heart Association Task Force reported that catheter-directed ablation of atrial fibrillation
represents a substantial achievement that promises better therapy for a large number of patients presently resistant to pharmacological or
electrical conversion to sinus rhythm (“2011 ACCF/AHA/HRS Focused Update on the Management of Patients With Atrial Fibrillation
(Updating the 2006 Guideline)”). However, rates of success and complications may vary, sometimes considerably.
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According to the Heart Rhythm Society, ventricular tachycardia is the most dangerous arrhythmia since it may result in
ventricular fibrillation, a rapid chaotic heartbeat in the lower chambers of the heart. Because the fibrillating muscle cannot contract and
pump blood to the brain and vital organs, ventricular fibrillation is the number one cause of sudden cardiac death accounting for more
than 350,000 deaths in the U.S. each year. Ventricular tachycardia is typically treated with implantable cardioverter defibrillators, or
ICDs, or a combination of ablation along with an ICD. The American College of Cardiology/American Heart Association Task Force on
Practice Guidelines/European Society of Cardiology Committee for Practice Guidelines, or ACC/AHA/ESC, 2009 guidelines recommend
ablation in patients who either have sustained predominantly monomorphic ventricular tachycardia that is drug resistant, are drug
intolerant or do not wish for long-term drug therapy. According to a recent study, catheter ablation has been found to reduce ventricular
tachycardia/ventricular fibrillation recurrences and thereby ICD interventions, including ICD shocks, by approximately 75% in patients
that have undergone multiple ICD shocks (Kuck, “Should Catheter Ablation be the Preferred Therapy for Reducing ICD Shocks?
Ventricular Tachycardia in Patients With an Implantable Defibrillator Warrants Catheter Ablation,” Circulation: Arrhythmia and
Electrophysiology (2009) 2: 713-720). More importantly, according to Kuck, catheter ablation is the only treatment that can terminate and
eliminate incessant ventricular tachycardia and acutely abolish electrical storm in ICD patients. Typically, patients who receive ICDs are
at high risk for recurrent arrhythmia; hence, most patients receive one or more ICD therapies for spontaneous arrhythmias after
implantation. Despite the technological evolution of ICD systems, more than 20% of shocks are due to supraventricular arrhythmia and
hence are inappropriate. Although the ICD aborts ventricular tachycardia/ventricular fibrillation, many patients continue to have
symptoms. These shocks are physically and emotionally painful and lead to poor quality of life and adverse psychological outcomes in
patients and their families.
According to Dr. Srijoy Mahapatra, the status of ventricular tachycardia ablation is growing at a 14-17% compound annual
growth rate due to the fact that ablation of ventricular tachycardia may help patients feel better and live longer, despite the risks, including
the occurrence of stroke, and the modest success rates. The success of ventricular tachycardia ablation varies, depending on the patient’s
specific heart condition that caused ventricular tachycardia. The procedure is most effective in patients with otherwise normal hearts, in
whom the success rate exceeds 90%. In patients with structural heart disease resulting from scar or cardiomyopathy, success rates range
between 50% and 75% at six to 12 months. In cases in which a patient experiences a recurrence, two of three patients will still have less
ventricular tachycardia than before the initial ablation (Circulation (2010) 122: e389-e391). Therefore, we believe that ablation will
continue to become a preferred treatment for ventricular tachycardia, especially in light of the challenges presented by ICD therapies; this
increase in demand for ablation procedures will likely also increase the demand for technological advances in medical devices essential to
ablation procedures, including electrophysiology recorders, in order to better support and ablation procedures.
Electrophysiology Lab Environment and Electrophysiology Recording Systems
The electrophysiology lab environment and recording systems create significant amounts of noise and artifacts during
electrophysiology procedures. Current surface and intracardiac recording systems typically consist of large workstations interconnected
by a complex set of cables that contribute to significant amounts of noise during signal acquisition. Additional noise and artifacts
generated from the electrophysiology lab equipment further hamper recordings of small electrophysiological potentials. Preserving
spaciotemporal (space and time) characteristics of the signal in a very challenging electrophysiology recording environment is a difficult
task. To remove noise and artifacts, recorders that are currently on the market offer a family of low pass, high pass and notch filters, but
these filters alter signal information context.
The shape and amplitude of electrocardiograms, unipolar and bipolar electrograms, and, consequently, reconstructed endocardial
and epicardial maps, are influenced not only by electrophysiological and structural characteristics of the myocardial tissue involved, but
also by characteristics of the recording system. Amplitude and morphology of electrocardiogram and intracardiac signals are significantly
affected by filters used to remove noise. Because of the number of amplitude and interval measurements made during an
electrophysiology study, it is imperative that the recording system faithfully acquires surface electrocardiogram and intracardiac
electrograms. We believe that the recording systems that are currently available on the market are ineffective in preserving the optimal
amount of original information contained in the cardiac signals.
9
In addition, the electrophysiology lab consists of sophisticated equipment that requires an electrophysiologist to mentally
integrate information from a number of sources during procedures. There are numerous monitors in an electrophysiology lab that provide
and display this variety of information. An electrophysiologist needs to evaluate the acquired cardiac signals and the patient’s responses to
any induced arrhythmias during the procedure. However, it is difficult for an electrophysiologist to synthesize the disparate information
produced by the numerous monitors in the lab and calculate the real-time, three-dimensional orientation of the anatomy and the location
of the recording and ablation catheters. As the number of electrophysiology procedures increase, a variety of diagnostic and therapeutic
ablation catheters are becoming more widely available and new highly specialized catheters are being developed. In addition, remote
robotic and magnetic navigation systems are being developed to address limitations of dexterity in controlling the catheter tip, especially
during complex arrhythmia ablation procedures. We believe that, considering the improvements being made with respect to other
equipment used in the electrophysiology lab and the continual increase of ablation procedures, the electrophysiology recorders currently
available on the market are not sufficiently advanced with respect to the quality of their recordings to deliver adequate results. We believe
that the PURE EP System will be able to deliver superior quality of recordings that will allow it to successfully integrate with the other
advanced equipment found in the electrophysiology lab.
The requirement for optimal signal integrity is further amplified during ablation treatments of atrial fibrillation and ventricular
tachycardia. Presently, one of the main objectives of the atrial fibrillation ablation procedure is to precisely identify, ablate and eliminate
pulmonary vein potentials and one of the main objectives of the ventricular tachycardia procedure is to map the arrhythmia substrate and
precisely identify, ablate and eliminate small abnormal potentials. The information provided by recorders is essential for an
electrophysiologist to determine ablation strategy during termination of both pulmonary vein potentials and ventricular tachycardia.
Therefore, it is important that the recording system’s noise removal technique does not alter the appearance and fidelity of these
potentials. As a result, it is necessary that any new signal processing technology preserves signal fidelity as much as possible during
electrophysiology recordings; otherwise, the signals that are needed to guide the ablation procedures will be difficult to distinguish due to
noise interference.
Our Products
We intend to bring to the electrophysiology market the PURE EP System, an electrocardiogram/intracardiac recorder that will be
coupled with an array of software tools intended for electrophysiology studies and procedures ranging from simple diagnostic tests to
ablation for the most complex cases of arrhythmias. We believe that this system will provide unique recording capabilities because we are
developing it to allow precise, uninterrupted, real-time evaluations of electrocardiograms and electrograms, and allow electrophysiologists
to obtain data that cannot be acquired from present day recorders.
The PURE EP System uses a combination of analog and digital signal processing to acquire and display cardiac data. Because
our technology consists of proprietary hardware, software and algorithms, the original cardiac data is not distorted. In addition, we are
developing a library of software tools that are designed to be configured to fit the needs of electrophysiologists in different settings and/or
for different arrhythmia treatments. With the software, the PURE EP System can be positioned to provide information that can be used by
electrophysiologists to help guide the ablation catheter; shorten procedure times; and reduce the complexity of maneuvers necessary for
identifying ablation targets for various arrhythmias, including atrial fibrillation and ventricular tachycardia. The PURE EP System is
intended to be used in addition to existing electrophysiology recorders. We believe that the less distorted cardiac data provided by the
PURE EP System will increase the workload ability and enhance the capabilities of the typical electrophysiology laboratory.
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Initial Analysis
According to S. J. Asirvatham, MD, et. al. (“Signals and Signal Processing for the Electrophysiologist,” Circ Arrhythm
Electrophysiol. (2011) 4:965-973), recording environments in a typical electrophysiology laboratory present challenging situations. S. J.
Asirvatham, MD, et. al., state, “successful mapping and ablation in the electrophysiology laboratory is critically dependent on acquiring
multiple, low-amplitude, intracardiac signals in the presence of numerous sources of electric noise and interference and displaying these
signals in an uncomplicated and clinically relevant fashion, with minimal artifacts. This represents a significant engineering challenge
and, in real-life electrophysiology laboratory, is not always successful.”
To determine and validate the state of present electrophysiology recording technology in the field, we completed a detailed
analysis of the effect of filters used by existing electrophysiology recorders to reduce noise on spaciotemporal characteristics of
electrocardiograms and intracardiac electrograms. We used a custom built electrocardiogram/intracardiac simulator with a database of
various electrocardiogram signals combined with electrophysiology signals, along with waveforms from publicly available databases. The
ability to faithfully reproduce database waveforms generated by an electrocardiogram/intracardiac simulator was tested using the PURE
EP System and conventional electrophysiology recorders, the CardioLab produced by GE Healthcare (the “GE CardioLab”) and the EP-
WorkMate produced by St. Jude Medical, Inc.
We evaluated the signal quality (amplitude, morphology and duration) of the different recorders, along with the ability of the
recorders to reduce noise level and remove baseline wander, which are the cardiac signals that have shifted from the isoelectric line (the
base line of the signal tracing). The electrocardiogram and intracardiac signals subjected to the PURE EP System’s signal processing
showed less baseline wander, noise and artifacts compared to the conventional electrophysiology recorders. Further, spaciotemporal
characteristics of signals were greatly distorted by the conventional electrophysiology system, particularly when a notch filter was used, as
compared to the recording of the same spaciotemporal characteristics by the PURE EP System. A notch filter is used to remove a specific
frequency from the signal, especially either 60Hz in the U.S. and 50Hz in Europe, and can be implemented in hardware or software.
During our initial analysis, we did not subject the evaluation of the data produced by our technology to any third-party review, as
would be required for the publication of a formal study.
Proof of Concept Testing
We developed the PURE EP System’s proof of concept unit, which is the version of the product prior to prototype. The proof of
concept unit was designed using separate analog and digital boards to allow for easier debugging and to demonstrate single channel
electrocardiogram and intracardiac acquisition capabilities. The proof of concept unit was built to (i) verify that the PURE EP System
performs in line with our intended design of the product, (ii) validate a portion of the hardware design that we intend to use in the
prototype, and (iii) verify the software used by the PURE EP System. The main objectives of the proof of concept unit were to
demonstrate that the system’s hardware and software have the ability to faithfully record small cardiac signals in an electrophysiology
laboratory environment and to obtain initial performance results.
In the second and third quarters of 2013, we performed and finalized the testing of our proof of concept unit by initially using an
electrocardiogram/intracardiac simulator at our lab, and subsequently by obtaining pre-clinical recordings from the lab at the University
of California at Los Angeles. As part of the testing, we simultaneously recorded electrocardiogram and intracardiac signals on our proof
of concept unit and the GE Cardiolab. An identical signal was applied to the input of both systems and the monitor of our proof of concept
unit was positioned next to the monitor of the GE Cardiolab to allow for visual comparison. We believe that our proof of concept unit
performed well as compared to the GE Cardiolab, in that the electrocardiogram and intracardiac signals displayed on our proof of concept
unit showed less baseline wander, noise and artifacts compared to signals displayed on the GE Cardiolab. However, because this was a
proof of concept test, without any clearly established protocols, we cannot present this data for publication and we do not have any
independent verification or peer review of these findings.
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Subsequently, in the third quarter of 2013, we analyzed the results of our proof of concept unit to determine the final design of
the PURE EP System prototype. Because the proof of concept unit was designed to verify the capabilities of the main components of the
PURE EP System, we established a list of tasks necessary to complete the prototype (which we intend to use for end-user preference
studies, additional pre-clinical studies and research studies), which has since been completed.
Proof of Concept Testing at UCLA’s EP Lab
The current PURE EP System prototype
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Growth Strategy
Technology and Development Plan
Our technology team consists of six engineers with expertise in digital signal processing, low power analog and digital circuit
design, software development, embedded system development, electromechanical design, testing and system integration, and the
regulatory requirements for medical devices. We have also entered into collaboration agreements with advisors and medical institutions in
the fields of cardiology and electrophysiology, including Mayo Clinic, Mount Sinai Hospital in New York, NY and the Texas Cardiac
Arrhythmia Institute in Austin, TX (see “–Strategic Alliances”). We envision outsourcing manufacturing of the complete PURE EP
System to Minnetronix and identify a second medical device manufacturer in California.
We conducted our first, second and third pre-clinical studies on March 31, 2015, June 10, 2015 and November 17, 2015
respectively, and began additional pre-clinical studies as part of an advanced research program in June 2016, at Mayo Clinic with the
PURE EP System prototype. We also conducted a pre-clinical study at the Mount Sinai Hospital in New York, NY with emphasis on the
ventricular tachycardia (VT) model.
We intend to conduct a pre-clinical study at the Cardiac Arrhythmia Center at the University of California at Los Angeles with
emphasis on the ventricular tachycardia (VT) model. We intend to conduct further pre-clinical studies, end-user preference studies, and
research studies. The main objective of these studies is to demonstrate the clinical potential of the PURE EP System.
We have initiated technology development with Minnetronix, a medical technology and innovation company, and are
implementing steps for obtaining 510(k) clearance from the FDA for the PURE EP System.
We believe that by the second half of 2017, we will have obtained 510(k) marketing clearance from the FDA and will be able to
commence marketing and commercialization of the PURE EP System. Our ability to achieve the aforementioned milestones will be
principally determined by our ability to obtain necessary financing and regulatory approvals, among other factors.
We have chosen and are working with the NSAI as our Notified Body to obtain the CE Mark. CE marking is a mandatory
approval for medical devices sold in Europe and Canada. We plan on submitting for CE Mark in 2017.
Because we are a development stage company, with our initial product under development, we currently do not have any
customers. We anticipate that our initial customers will be hospitals and other health care facilities that operate electrophysiology labs.
Competition
The electrophysiology market is characterized by intense competition and rapid technological advances. There are currently four
large companies that share the majority of the electrophysiological recording market share. They produce the following electrophysiology
recording systems, each with a unit price of approximately $250,000 per unit:
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GE Healthcare’s family of CardioLab Recording Systems were initially developed in the early 1990s by
Prucka Engineering, which was acquired by General Electric Company in 1999.
The LabSystem PRO EP Recording System was originally designed in the late 1980s by C.R. Bard. C.R.
Bard’s electrophysiology business was acquired by Boston Scientific Corporation in 2013.
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Siemens AG developed the Axiom Sensis XP in 2002.
St. Jude Medical, Inc.’s EP-WorkMate Recording System was acquired from EP MedSystems, Inc. in
2008, which had received clearance for the product from the FDA in 2003. In January 2017, Abbott
Laboratories acquired St Jude Medical, Inc.
Based upon our analysis of data taken from patent applications filed with the U.S. Patent and Trademark Office (“USPTO”) and
510(k) approval applications filed with the FDA, we believe that the above recording systems are built on relatively old technologies and
all use the identical approach in applying digital filters to remove noise and artifacts. We are of the opinion that such an approach
sacrifices cardiac signal fidelity and, in the case of ablation, the filters have a direct impact on the ablation strategy of an
electrophysiologist. The imprecise method to remove noise and artifacts used by the old recorders could be a contributing factor to the
multiple (or repeated) ablation procedures that are frequently required in order to completely cure patients from atrial fibrillation and
ventricular tachycardia. We are not currently aware of any other companies that are developing new recording technology for
electrophysiology recorders.
Suppliers
The PURE EP System contains proprietary hardware and software modules that are assembled into the system. Hardware boards
contain components that are available from different distributors. The parts used to manufacture analog and digital boards are readily
available from a number of distributors or manufacturers. We obtained components from various suppliers and have assembled our first
prototype in-house. We envision outsourcing manufacturing of the complete PURE EP System to Minnetronix and identify a second
medical device manufacturer in California.
Research and Development Expenses
Research and development expenses for the fiscal years ended December 31, 2016, 2015 were $2,654,501 and $1,506,989,
respectively.
Sales, Marketing and Customer Service
We plan to implement a market development program prior to launch of our PURE EP System. As the product progresses
through development and testing, we intend to gather the data produced by the PURE EP System’s processing and presenting
electrocardiogram and intracardiac signals and use such data for posters, presentations at cardiology conferences, and, if appropriate,
submissions to scientific journals. We believe that as we gather additional data from our existing proof of concept tests and our planned
pre-clinical and clinical studies and user preference studies, we will be able to better determine the focus of our marketing efforts. We also
plan to leverage our relationships with cardiac research and treatment centers to gain early product evaluation and validation. We believe
that through these efforts, we may be able to gain preliminary acceptance of our PURE EP product by experienced professionals and
academics in the electrophysiology field.
We also intend to simultaneously develop a branding strategy to introduce and support the PURE EP System. The strategy may
include our presence at major relevant cardiology meetings on a national and regional basis to engage and educate physicians concerning
the PURE EP System and any of our other products, as well as engaging in a variety of other direct marketing methods. We also intend to
develop a small direct sales force together with a distribution network that has existing relationships with hospitals and
electrophysiologists. We believe that we may be able to begin commercial sales of the PURE EP System in 2018.
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Intellectual Property
Patents
Our success depends in large part on our ability to establish and maintain the proprietary nature of our technology. Our co-
founder and former chief technology officer, Budimir S. Drakulic, Ph.D., conceived of the proprietary elements of the PURE EP System
in 2009 and 2010. We filed a patent application with the USPTO in December 2013 directed at systems and methods for the evaluation of
electrophysiology systems. In March 2014, the inventors listed on the patent application filed in December 2013 assigned all of their
rights to the patent application to us. In December 2014, we filed this patent application under the Patent Cooperation Treaty (PCT) with
the U.S. Receiving Office. Our patent application filed in December 2013 represents a significant portion of our core proprietary
intellectual property. Our patent application filed in December 2013 describes a system that can show comparative output of any two
cardiac signal systems—such as the PURE EP System as compared to a competitor system, thus showing the value of the PURE EP
System.
This patent application describes signal processing evaluators that assess how well a cardiac signal system reading a cardiac
signal (such as the PURE EP System or another system) filters out noise, such as non-cardiac signals or other body-generated artifacts.
Such noise is filtered by such systems with varying success, thus, an evaluator such as described in the patent application may be used to
provide comparison data for a particular system versus another given the same or similar input. The patent application also describes a
simulator that can send a simulated signal to a cardiac signal system (the PURE EP System or another system) in order to challenge such
cardiac signal system to filter out typical noise. These are adjunct technologies that can be used to show the value of the PURE EP System
as compared to other systems existing in the market. The additional patent applications that we intend to file in the U.S. in the future are
expected to represent portions of the hardware and software technology associated with our PURE EP System, which technology includes
a cardiac signal system that reads cardiac signals and filters such cardiac signals from noise such as non-cardiac signals or other body-
generated artifacts. Upon filing of such patent applications, we believe that the novel aspects of our PURE EP System should be subject
to pending patent application; however, we cannot be assured that all of the patents related to our patent applications, if any, will be
granted.
On December 9, 2016, we filed two provisional patent applications: “Assessment of Catheter Position by Local Electrogram” and
“Visualization of Conduction Tissue Signals”.
Trademarks
In December 2015, our trademark for “PURE EP” went live in the U.S. On February 7, 2017, the USPTO published the trademark for
“BioSig Technologies”.
Government Regulation
Our solutions include software and hardware which will be used for patient diagnosis and, accordingly, are subject to regulation
by the FDA and other regulatory agencies. FDA regulations govern, among other things, the following activities that we perform and will
continue to perform in connection with:
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Product design and development;
Product testing;
Product manufacturing;
Product labeling and packaging;
Product handling, storage, and installation;
Pre-market clearance or approval;
Advertising and promotion; and
Product sales, distribution, and servicing.
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FDA’s Pre-market Clearance and Approval Requirements
The FDA classifies all medical devices into one of three classes. Devices deemed to pose lower risks are placed in either Class I
or II, which requires the manufacturer to submit to the FDA a pre-market notification, known as a PMN, and a 510(k) approval, requesting
clearance of the device for commercial distribution in the U.S. Class III devices are devices which must be approved by the pre-market
approval process. These tend to be devices that are permanently implanted into a human body or that may be necessary to sustain life. For
example, an artificial heart meets both these criteria. Based on analysis of predicate devices, we believe that our products will be
classified as Class II. Pursuant to FDA guidelines, Class II devices include a programmable diagnostic computer, which is a device that
can be programmed to compute various physiologic or blood flow parameters based on the output from one or more electrodes,
transducers, or measuring devices; this device includes any associated commercially supplied programs. Because the PURE EP System is
a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays
electrocardiogram and electrograms, we believe it will be classified as a Class II device. We must, therefore, first receive a 510(k)
clearance from the FDA for our PURE EP System before we can commercially distribute it in the U.S. In the event that our PURE EP
System is classified as a Class III device, which we believe is unlikely to occur, the FDA regulatory approval process and the subsequent
commercialization of our product will require significantly greater time and resources than if it is classified as a Class II device, which
would require us to reassess our strategic business plan of operations.
510(k) Clearance Process
For our PURE EP System, we must submit a pre-market notification to the FDA demonstrating that the proposed device is
substantially equivalent to a previously cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for
which the FDA has not yet called for the submission of pre-market approval applications, or is a device that has been reclassified from
Class III to either Class II or I.
The FDA’s 510(k) clearance process usually takes three to six months from the date the application is submitted and filed with
the FDA, but it can take significantly longer. A device that reaches market through the 510(k) process is not considered to be “approved”
by the FDA. Such a device is generally referred to as a “cleared” or “510(k) cleared” device, but can nevertheless be marketed and sold in
the U.S.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a major change in its intended use, will require a new 510(k) clearance or could require a pre-market approval, which requires
more data and is generally a significantly longer process than the 510(k) clearance process. The FDA requires each manufacturer to make
this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA
disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or recall the modified
device until 510(k) clearance or a pre-market approval is obtained.
Pervasive and continuing FDA regulation
After a medical device is placed on the market, numerous FDA regulatory requirements apply, including, but not limited to the
following:
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Quality System regulation, which requires manufacturers to follow design, testing, control, documentation
and other quality assurance procedures during the manufacturing process;
Establishment Registration, which requires establishments involved in the production and distribution of
medical devices intended for commercial distribution in the U.S. to register with the FDA;
Medical Device Listing, which requires manufacturers to list the devices they have in commercial
distribution with the FDA;
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Labeling regulations, which prohibit “misbranded” devices from entering the market, as well as prohibit
the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;
and
Medical Device Reporting regulations, which require that manufacturers report to the FDA if their device
may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely
cause or contribute to a death or serious injury if it were to recur.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include one
or more of the following sanctions:
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Fines, injunctions, and civil penalties;
Mandatory recall or seizure of our products;
Administrative detention or banning of our products;
Operating restrictions, partial suspension or total shutdown of production;
Refusing our request for 510(k) clearance or pre-market approval of new product versions;
Revocation of 510(k) clearance or pre-market approvals previously granted; and
Criminal penalties.
International Regulation
International sales of medical devices are subject to foreign government regulations, which vary substantially from country to
country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval, and the
requirements may differ significantly.
The European Union has adopted legislation, in the form of directives to be implemented in each member state, concerning the
regulation of medical devices within the European Union. The directives include, among others, the European Union Medical Devices
Directive (Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, as amended) (the “Medical Device Directive”) that
establishes standards for regulating the design, manufacture, clinical trials, labeling, and vigilance reporting for medical devices. Our
PURE EP system may be affected by this legislation. Under the Medical Device Directive, medical devices are classified into four
classes, I, IIa, IIb, and III, with class I being the lowest risk and class III being the highest risk. Under the Medical Device Directive, a
competent authority is nominated by the government of each member state to monitor and ensure compliance with the Medical Device
Directive. The competent authority of each member state then designates a notified body to oversee the conformity assessment procedures
set forth in the Medical Device Directive, whereby manufacturers demonstrate that their devices comply with the requirements of the
Medical Device Directive and are entitled to bear the CE mark. CE is an abbreviation for Conformité Européenne (or European
Conformity) and the CE mark, when placed on a product, indicates compliance with the requirements of the applicable directive. Medical
devices properly bearing the CE mark may be commercially distributed throughout the European Union. Failure to obtain the CE mark
will preclude us from selling the PURE EP System and related products in the European Union.
Employees
As of March 30, 2017, we had 11 full-time employees. Additionally, we use consultants as needed to perform various specialized
services. None of our employees are represented under a collective bargaining agreement.
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ITEM 1A – RISK FACTORS
RISK FACTORS
There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. You should carefully
consider the risks described below and the other information included in this Annual Report on Form 10-K, including the consolidated
financial statements and related notes. If any of the following risks, or any other risks not described below, actually occur, it is likely that
our business, financial condition, and/or operating results could be materially adversely affected. The risks and uncertainties described
below include forward-looking statements and our actual results may differ from those discussed in these forward-looking statements.
Risks Related to Our Business and Industry
Because our condition as a going concern is in doubt, we will be forced to cease our business operations unless we can raise sufficient
funds to satisfy our working capital needs.
As shown in the accompanying financial statements during years ended December 31, 2016 and 2015, we incurred net losses
attributable to common stockholders of $11,697,210 and $9,812,974, respectively and used $5,107,452 in cash for operating activities for
the year ended December 31, 2016. As of March 30, 2017, we had cash on hand of approximately $0.8 million. These factors, among
others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.
Our existence is dependent upon management’s ability to develop profitable operations. We are devoting substantially all of our
efforts to developing product candidates and there can be no assurance that our efforts will be successful. There is no assurance that can
be given that our actions will result in profitable operations or the resolution of our liquidity problems.
Because we are an early development stage company with no products near commercialization, we expect to incur significant
additional operating losses.
We are an early development stage company and we expect to incur substantial additional operating expenses over the next
several years as our research, development, pre-clinical testing, regulatory approval and clinical trial activities increase. The amount of our
future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial
revenue and do not expect to generate revenues from the commercial sale of our products in the near future, if ever. Our ability to
generate revenue and achieve profitability will depend on, among other things, the following:
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successful completion of the pre-clinical and clinical development of our products;
obtaining necessary regulatory approvals from the FDA or other regulatory authorities;
establishing manufacturing, sales, and marketing arrangements, either alone or with third parties; and
raising sufficient funds to finance our activities.
We might not succeed at all, or at any, of these undertakings. If we are unsuccessful at some or all of these undertakings, our
business, prospects, and results of operations may be materially adversely affected.
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Our product candidates are at an early stage of development and may not be successfully developed or commercialized.
Our main product candidate, the PURE EP System, is in the early stage of development and will require substantial further
capital expenditures, development, testing, and regulatory clearances prior to commercialization, especially given that we have not yet
completed pre-clinical testing on this product. The development and regulatory approval process takes several years and it is not likely
that the PURE EP System, even if successfully developed and approved by the FDA, may not be commercially available for a number of
years. In addition, due to budgetary constraints, we have not been able to devote the level of resources that we desired to our research and
development efforts. The continued development of our product candidates is dependent upon our ability to obtain sufficient
financing. However, even if we are able to obtain the requisite financing to fund our development program, we cannot assure you that our
product candidates will be successfully developed or commercialized. Our failure to develop, manufacture or receive regulatory approval
for or successfully commercialize any of our product candidates could result in the failure of our business and a loss of all of your
investment in our company.
We expect to derive our revenue from sales of our PURE EP System and other products we may develop. If we fail to generate revenue
from these sources, our results of operations and the value of our business will be materially and adversely affected.
We expect our revenue to be generated from sales of our PURE EP System and other products we may develop. Future sales of
these products, if any, will be subject to, among other things, the receipt of regulatory approvals and commercial and market uncertainties
that may be outside our control. If we fail to generate our intended revenues from these products, our results of operations and the value of
our business and securities would be materially and adversely affected.
We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration
and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may
require us to relinquish valuable rights.
Until and unless we receive approval from the FDA and other regulatory authorities for our products, we will not generate
revenues from our products. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from
cash on hand, public or private equity offerings, debt financings, bank credit facilities or corporate collaboration and licensing
arrangements. We believe that our existing cash on hand will be sufficient to enable us to fund our projected operating requirements for
approximately the next two and half months. However, we may need to raise additional funds more quickly if one or more of our
assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently
anticipate. We also may decide to raise additional funds before we require them if we are presented with favorable terms for raising
capital.
If we seek to sell additional equity or debt securities, obtain a bank credit facility or enter into a corporate collaboration or
licensing arrangement, we may not obtain favorable terms for us and/or our stockholders or be able to raise any capital at all, all of which
could result in a material adverse effect on our business and results of operations. The sale of additional equity or debt securities, if
convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and
could also result in covenants that would restrict our operations. Raising additional funds through collaboration or licensing arrangements
with third parties may require us to relinquish valuable rights to our technologies, future revenue streams, research programs or product
candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. In addition, we could be forced to
discontinue product development, reduce or forego sales and marketing efforts and forego attractive business opportunities, all of which
could have an adverse impact on our business and results of operations.
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We may be unable to develop our existing or future technology.
Our product, the PURE EP System, may not deliver the levels of accuracy and reliability needed to make it a successful product
in the marketplace and the development of such accuracy and reliability may be indefinitely delayed or may never be achieved. In
addition, we may experience delays in the development of our technology for other reasons, including failure to obtain necessary
funding and failure to obtain regulatory approvals. Failure to develop this or other technology could have an adverse material effect on our
business, financial condition, results of operations and future prospects.
The results of clinical studies may not support the usefulness of our technology.
Conducting clinical trials is a long, expensive and uncertain process that is subject to delays and failure at any stage. Clinical
trials can take months or years. The commencement or completion of any of our clinical trials may be delayed or halted for numerous
reasons, including:
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the FDA may not approve a clinical trial protocol or a clinical trial, or may place a clinical trial on hold;
subjects may not enroll in clinical trials at the rate we expect or we may not follow up on subjects at the
rate we expect;
subjects may experience events unrelated to our products;
third-party clinical investigators may not perform our clinical trials consistent with our anticipated
schedule or the clinical trial protocol and good clinical practices, or other third-party organizations may
not perform data collection and analysis in a timely or accurate manner;
interim results of any of our clinical trials may be inconclusive or negative;
regulatory inspections of our clinical trials may require us to undertake corrective action or suspend or
terminate the clinical trials if investigators find us not to be in compliance with regulatory requirements; or
governmental regulations or administrative actions may change and impose new requirements,
particularly with respect to reimbursement.
Results of pre-clinical studies do not necessarily predict future clinical trial results and previous clinical trial results may not be
repeated in subsequent medical trials. We may experience delays, cost overruns and project terminations despite achieving promising
results in pre-clinical testing or early clinical testing. In addition, the data obtained from clinical trials may be inadequate to support
approval or clearance of a submission. The FDA may disagree with our interpretation of the data from our clinical trials, or may find the
clinical trial design, conduct or results inadequate to demonstrate the safety and effectiveness of the product candidate. The FDA may also
require us to conduct additional pre-clinical studies or clinical trials that could further delay approval of our products. If we are
unsuccessful in receiving FDA approval of a product, we would not be able to commercialize the product in the U.S., which could
seriously harm our business. Moreover, we face similar risks in other jurisdictions in which we may sell or propose to sell our products.
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The medical device industry is subject to stringent regulation and failure to obtain regulatory approval will prevent commercialization
of our products.
Medical devices are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic
Act, by comparable agencies in foreign countries and by other regulatory agencies and governing bodies. Under the Federal Food, Drug,
and Cosmetic Act and associated regulations, manufacturers of medical devices must comply with certain regulations that cover the
composition, labeling, testing, clinical study, manufacturing, packaging and distribution of medical devices. In addition, medical devices
must receive FDA clearance or approval before they can be commercially marketed in the U.S., and the FDA may require testing and
surveillance programs to monitor the effects of approved products that have been commercialized and can prevent or limit further
marketing of a product based on the results of these post-market evaluation programs. The process of obtaining marketing clearance from
the FDA for new products could take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-
clinical and clinical testing, require changes to the products and result in limitations on the indicated uses of the product. In addition, if we
seek regulatory approval in non-U.S. markets, we will be subject to further regulatory approvals that may require additional costs and
resources. There is no assurance that we will obtain necessary regulatory approvals in a timely manner, or at all.
Our product, the PURE EP System, will need to receive 510(k) marketing clearance from the FDA in order permit us to market
this product in the U.S. In addition, if we intend to market our product for additional medical uses or indications, we will need to submit
additional 510(k) applications to the FDA that are supported by satisfactory clinical trial results specifically for the additional indication.
The results of our initial clinical trials may not provide sufficient evidence to allow the FDA to grant us such additional marketing
clearances and even additional trials requested by the FDA may not result in our obtaining 510(k) marketing clearance for our product.
The failure to obtain FDA marketing clearance for the PURE EP System, any additional indications for the PURE EP System or any other
of our future products would have a material adverse effect on our business.
Even if regulatory approval is obtained, our products will be subject to extensive post-approval regulation.
Once a product is approved by the relevant regulatory body for our targeted commercialization market, numerous post-approval
requirements apply, including but not limited to requirements relating to manufacturing, labeling, packaging, advertising and record
keeping. Even if regulatory approval of a product is obtained, the approval may be subject to limitations on the uses for which the product
may be marketed, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the
product. Any such post-approval requirement could reduce our revenues, increase our expenses and render the approved product
candidate not commercially viable. If we fail to comply with the regulatory requirements of the applicable regulatory authorities, or if
previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we
could be subject to administrative or judicially imposed sanctions or other negative consequences, including:
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restrictions on our products, manufacturers or manufacturing processes;
warning letters and untitled letters;
civil penalties and criminal prosecutions and penalties;
fines;
injunctions;
product seizures or detentions;
import or export bans or restrictions;
voluntary or mandatory product recalls and related publicity requirements;
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suspension or withdrawal of regulatory approvals;
total or partial suspension of production; and
refusal to approve pending applications for marketing approval of new products or of supplements to
approved applications.
Regulations are constantly changing, and in the future our business may be subject to additional regulations that increase our
compliance costs.
We believe we understand the current laws and regulations to which our products will be subject in the future. However, federal,
state and foreign laws and regulations relating to the sale of our products are subject to future changes, as are administrative
interpretations of regulatory agencies. If we fail to comply with such federal, state or foreign laws or regulations, we may fail to obtain
regulatory approval for our products and, if we have already obtained regulatory approval, we could be subject to enforcement actions,
including injunctions preventing us from conducting our business, withdrawal of clearances or approvals and civil and criminal penalties.
In the event that federal, state, and foreign laws and regulations change, we may incur additional costs to seek government approvals, in
addition to the clearance we intend to seek from the FDA in order to sell or market our products. If we are slow or unable to adapt to
changes in existing regulatory requirements or the promulgation of new regulatory requirements or policies, we or our licensees may,
following approval, lose marketing approval for our products which will impact our ability to conduct business in the future.
The market for our technology and revenue generation avenues for our products may be slow to develop, if at all.
The market for our products may be slower to develop or smaller than estimated or it may be more difficult to build the market
than anticipated. The medical community may resist our products or be slower to accept them than we anticipate. Revenues from our
products may be delayed or costs may be higher than anticipated which may result in our need for additional funding. We anticipate that
our principal route to market will be through commercial distribution partners. These arrangements are generally non-exclusive and have
no guaranteed sales volumes or commitments. The partners may be slower to sell our products than anticipated. Any financial,
operational or regulatory risks that affect our partners could also affect the sales of our products. In the current economic environment,
hospitals and clinical purchasing budgets may exercise greater restraint with respect to purchases, which may result in purchasing
decisions being delayed or denied. If any of these situations were to occur this could have a material adverse effect on our business,
financial condition, results of operations and future prospects.
If we seek to market our products in foreign jurisdictions, we may need to obtain regulatory approval in these jurisdictions.
In order to market our products in the European Union and many other foreign jurisdictions, we may need to obtain separate
regulatory approvals and comply with numerous and varying regulatory requirements. Approval procedures vary among countries (except
with respect to the countries that are part of the European Economic Area) and can involve additional clinical testing. The time required to
obtain approval may differ from that required to obtain FDA approval. Should we decide to market our products abroad, we may fail to
obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in
other countries, and approval by one foreign regulatory authority, including obtaining CE Mark approval, does not ensure approval by
regulatory authorities in other foreign countries or by the FDA. We may be unable to file for, and may not receive, necessary regulatory
approvals to commercialize our products in any foreign market, which could adversely affect our business prospects.
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The electrophysiology market is highly competitive.
There are a number of groups and organizations, such as healthcare, medical device and software companies in the
electrophysiology market that may develop a competitive offering to our products. The largest companies in the electrophysiology market
are General Electric Company, Johnson & Johnson, Boston Scientific Corporation, Siemens S.A and St. Jude Medical, Inc. (which was
acquired by Abbott Laboratories in January 2017). All of these companies have significantly greater resources, experience and name
recognition than we possess. There is no assurance that they will not attempt to develop similar or superior products, that they will not be
successful in developing such products or that any products they may develop will not have a competitive advantage over our products. If
we experience delayed regulatory approvals or disputed clinical claims, we may not have a commercial or clinical advantage over
competitors’ products that we believe we currently possess. Should a superior offering come to market, this could have a material adverse
effect on our business, financial condition, results of operations and future prospects.
We rely on key officers, consultants and scientific and medical advisors, and their knowledge of our business and technical expertise
would be difficult to replace.
We are highly dependent on our officers, consultants and scientific and medical advisors because of their expertise and
experience in medical device development. We do not have “key person” life insurance policies for any of our officers. Moreover, if we
are unable to obtain additional funding, we will be unable to meet our current and future compensation obligations to such employees and
consultants. In light of the foregoing, we are at risk that one or more of our consultants or employees may leave our company for other
opportunities where there is no concern about such employers fulfilling their compensation obligations, or for other reasons. The loss of
the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product
development, loss of customers and sales and diversion of management resources, which could adversely affect our results of operations.
We may fail to attract and retain qualified personnel.
We expect to rapidly expand our operations and grow our sales, research and development and administrative operations. This
expansion is expected to place a significant strain on our management and will require hiring a significant number of qualified personnel.
Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other
companies, research and academic institutions, government entities and other organizations for qualified personnel in the areas of our
activities. Many of these companies, institutions and organizations have greater resources than we do, along with more prestige associated
with their names. If we fail to identify, attract, retain and motivate these highly skilled personnel, we may be unable to continue our
marketing and development activities, and this could have a material adverse effect on our business, financial condition, results of
operations and future prospects.
If we do not effectively manage changes in our business, these changes could place a significant strain on our management and
operations.
Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our
business could place a significant strain on our management systems, infrastructure and other resources. To manage our growth
successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls,
systems, procedures and resources may not be adequate to support a changing and growing company. If our management fails to respond
effectively to changes and growth in our business, including acquisitions, there could be a material adverse effect on our business,
financial condition, results of operations and future prospects.
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Our strategic business plan may not produce the intended growth in revenue and operating income.
Our strategies ultimately include making significant investments in sales and marketing programs to achieve revenue growth and
margin improvement targets. If we do not achieve the expected benefits from these investments or otherwise fail to execute on our
strategic initiatives, we may not achieve the growth improvement we are targeting and our results of operations may be adversely
affected. We may also fail to secure the capital necessary to make these investments, which will hinder our growth.
In addition, as part of our strategy for growth, we may make acquisitions and enter into strategic alliances such as joint ventures
and joint development agreements. However, we may not be able to identify suitable acquisition candidates, complete acquisitions or
integrate acquisitions successfully, and our strategic alliances may not prove to be successful. In this regard, acquisitions involve
numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies
and the diversion of management’s attention from other business concerns. Although we will endeavor to evaluate the risks inherent in
any particular transaction, there can be no assurance that we will properly ascertain all such risks. In addition, acquisitions could result in
the incurrence of substantial additional indebtedness and other expenses or in potentially dilutive issuances of equity securities. There can
be no assurance that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial condition
and results of operations.
We currently have no sales, marketing or distribution operations and will need to expand our expertise in these areas.
We currently have no sales, marketing or distribution operations and, in connection with the expected commercialization of our
planned products, will need to expand our expertise in these areas. To increase internal sales, distribution and marketing expertise and be
able to conduct these operations, we would have to invest significant amounts of financial and management resources. In developing these
functions ourselves, we could face a number of risks, including:
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we may not be able to attract and build an effective marketing or sales force;
the cost of establishing, training and providing regulatory oversight for a marketing or sales force may be
substantial; and
there are significant legal and regulatory risks in medical device marketing and sales that we have never
faced, and any failure to comply with applicable legal and regulatory requirements for sales, marketing and
distribution could result in an enforcement action by the FDA, European regulators or other authorities
that could jeopardize our ability to market our planned products or could subject us to substantial liability.
The liability of our directors and officers is limited.
The applicable provisions of the Delaware General Corporation Law and our Amended and Restated Certificate of Incorporation
and By-laws limit the liability of our directors to us and our stockholders for monetary damages for breaches of their fiduciary duties, with
certain exceptions, and for other specified acts or omissions of such persons. In addition, the applicable provisions of the Delaware
General Corporation Law and of our Amended and Restated Certificate of Incorporation and By-laws provide for indemnification of such
persons under certain circumstances. In the event we are required to indemnify any of our directors or any other person, our financial
strength may be harmed.
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Our product development program depends upon third-party researchers who are outside our control and whose negative performance
could materially hinder or delay our pre-clinical testing or clinical trials.
We do not have the ability to conduct all aspects of pre-clinical testing or clinical trials ourselves. We depend upon independent
investigators and collaborators, such as commercial third-parties, government, universities and medical institutions, to conduct our pre-
clinical and clinical trials under agreements with us. These collaborators are not our employees and we cannot control the amount or
timing of resources that they devote to our programs. These investigators may not assign as great a priority to our programs or pursue
them as diligently as we would if we were undertaking such programs ourselves. The failure of any of these outside collaborators to
perform in an acceptable and timely manner in the future, including in accordance with any applicable regulatory requirements, such as
good clinical and laboratory practices, or pre-clinical testing or clinical trial protocols, could cause a delay or otherwise adversely affect
our pre-clinical testing or clinical trials, our success in obtaining regulatory approvals and, ultimately, the timely advancement of our
development programs. In addition, these collaborators may also have relationships with other commercial entities, some of whom may
compete with us. If our collaborators assist our competitors at our expense, our competitive position would be harmed.
Negative publicity or unfavorable media coverage could damage our reputation and harm our operations.
In the event that the marketplace perceives our products as not offering the benefits which we believe they offer, we may receive
negative publicity. This publicity may result in litigation and increased regulation and governmental review. If we were to receive such
negative publicity or unfavorable media attention, whether warranted or unwarranted, our ability to market our products would be
adversely affected. We may be required to change our products and services and become subject to increased regulatory burdens, and we
may be required to pay large judgments or fines and incur significant legal expenses. Any combination of these factors could further
increase our cost of doing business and adversely affect our financial position, results of operations and cash flows.
We may face risks associated with future litigation and claims.
We may, in the future, be involved in one or more lawsuits, claims or other proceedings. These suits could concern issues
including contract disputes, employment actions, employee benefits, taxes, environmental, health and safety, personal injury and product
liability matters. Due to the uncertainties of litigation, we can give no assurance that we will prevail on any claims made against us in any
such lawsuit. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have an adverse effect on our
financial condition, liquidity or operating results.
Specifically, we believe we will be subject to product liability claims or product recalls, particularly in the event of false positive
or false negative reports, because we plan to develop and manufacture medical diagnostic products. We intend to obtain appropriate
insurance coverage once we reach a manufacturing stage. A product recall or a successful product liability claim or claims that exceed our
planned insurance coverage could have a material adverse effect on us. In addition, product liability insurance is expensive. In the future
we may not be able to obtain coverage on acceptable terms, if at all. Moreover, our insurance coverage may not adequately protect us
from liability that we incur in connection with clinical trials or sales of our products. In the event of an award against us during a time
when we have no available insurance or insufficient insurance, we may sustain significant losses of our operating capital. In addition, any
products liability litigation, regardless of outcome or strength of claims, may divert time and resources away from the day-to-day operation
of our business and product development efforts. Any of these outcomes could adversely impact our business and results of operations, as
well as impair our reputation in the medical and investment communities.
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We may be subject, directly or indirectly, to U.S. federal and state health care fraud and abuse and false claims laws and regulations.
Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to, or
have not fully complied with such laws, we could face substantial penalties.
If we are successful in achieving regulatory approval to market our PURE EP System, our operations will be directly, or
indirectly through our customers and health care professionals, subject to various U.S. federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statute, federal False Claims Act, and federal Foreign Corrupt Practices Act. These laws
may impact, among other things, our proposed sales, and marketing and education programs.
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing
remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a
good or service, for which payment may be made under a federal health care program such as the Medicare and Medicaid programs.
Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration
is to induce referrals of federal health care covered business, the statute has been violated. The federal Anti-Kickback Statute is broad and,
despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care
industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions
such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation
of the federal Anti-Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations
such as the federal False Claims Act. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which
apply to the referral of patients for health care items or services reimbursed by any source, not only the Medicare and Medicaid programs.
The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use
of false statements to obtain payment from, the federal government. Suits filed under the federal False Claims Act, known as “qui tam”
actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or
“whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam
actions has increased significantly in recent years, causing greater numbers of medical device and health care companies to have to defend
a federal False Claim Act action. The federal Patient Protection and Affordable Care Act includes provisions expanding the ability of
certain relators to bring actions that would have been previously dismissed under prior law. When an entity is determined to have violated
the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil
penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims act
to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through
Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws including qui tam
provisions.
The federal Patient Protection and Affordable Care Act includes provisions known as the Physician Payments Sunshine Act,
which requires manufacturers of drugs, biologics, devices and medical supplies covered under Medicare and Medicaid starting in 2012 to
record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to the Centers for Medicare and
Medicaid Services for subsequent public disclosure. Manufacturers must also disclose investment interests held by physicians and their
family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for
knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been
enacted on the state level in the U.S., and an increasing number of countries worldwide either have adopted or are considering similar
laws requiring transparency of interactions with health care professionals. In addition, some states such as Massachusetts and Vermont
impose an outright ban on certain gifts to physicians. If we receive FDA clearance to market our system in the U.S., these laws could
affect our promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential
purchasers or users of our system. Both the disclosure laws and gift bans will impose administrative, cost and compliance burdens on us.
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We are unable to predict whether we could be subject to actions under any of these laws, or the impact of such actions. If we are
found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject
to penalties, including civil and criminal penalties, damages, fines, or an administrative action of suspension or exclusion from
government health care reimbursement programs and the curtailment or restructuring of our operations.
In addition, to the extent we commence commercial operations overseas, we will be subject to the federal Foreign Corrupt
Practices Act and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The federal Foreign Corrupt
Practices Act prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or
retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales
agents or distributors may be ineffective, and violations of the federal Foreign Corrupt Practices Act and similar laws may result in severe
criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business,
financial condition and results of operations.
We have identified a material weakness in our internal control over financial reporting which, if not remediated, could adversely affect
our reputation, business or stock price.
As disclosed in “Item 9A – Controls and Procedures,” we have identified a material weakness in our internal control over
financial reporting related to the segregation of duties in the initiating and recording of transactions.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is
a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or
detected on a timely basis. Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls
weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and
prohibitively costly, due to the size of our organization. While management expects to continue to use reasonable care in following and
seeking improvements to effective internal control processes that have been and continue to be in use by us, we cannot assure you that our
remedial measures will be sufficient to address the material weakness. Moreover, we cannot assure you that we will not identify
additional material weaknesses in our internal control over financial reporting in the future. If we are unable to remediate the material
weakness, our ability to record, process and report financial information accurately, and to prepare financial statements within the time
periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected. The occurrence of or
failure to remediate the material weakness may adversely affect our reputation and business and the market price of our common stock
and any other securities we may issue.
Risks Related to Our Intellectual Property
If we do not obtain protection for our intellectual property rights, our competitors may be able to take advantage of our research and
development efforts to develop competing products.
We intend to rely on a combination of patents, trade secrets, and nondisclosure and non-competition agreements to protect our
proprietary intellectual property. We have filed a patent application with the USPTO, and we have filed this patent application under the
PCT with the U.S. Receiving Office. We plan to file additional patent applications in the U.S. and in other countries as we deem
appropriate for our products. Our applications have and will include claims intended to provide market exclusivity for certain commercial
aspects of the products, including the methods of production, the methods of usage and the commercial packaging of the products.
However, we cannot predict:
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the degree and range of protection any patents will afford us against competitors, including whether third
parties will find ways to invalidate or otherwise circumvent our patents;
if and when such patents will be issued, and, if granted, whether patents will be challenged and held
invalid or unenforceable;
whether or not others will obtain patents claiming aspects similar to those covered by our patents and
patent applications; or
whether we will need to initiate litigation or administrative proceedings which may be costly regardless of
outcome.
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Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants
and advisors as well as our licensors and contractors. To help protect our proprietary know-how and our inventions for which patents may
be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, it is our policy to
require all of our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential
information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions
important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our
trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary
rights would be significantly impaired and our business and competitive position would suffer.
Given the fact that we may pose a competitive threat, competitors, especially large and well-capitalized companies that own or
control patents relating to electrophysiology recording systems, may successfully challenge our current and planned patent applications,
produce similar products or products that do not infringe our future patents, or produce products in countries where we have not applied
for patent protection or that do not respect our patents.
If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of our
intellectual property may be greatly reduced. Patent protection and other intellectual property protection are important to the success of
our business and prospects, and there is a substantial risk that such protections will prove inadequate.
If we infringe upon the rights of third parties, we could be prevented from selling products and forced to pay damages and defend
against litigation.
If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur
substantial costs and we may be required to:
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obtain licenses, which may not be available on commercially reasonable terms, if at all;
abandon an infringing product candidate;
redesign our product candidates or processes to avoid infringement;
cease usage of the subject matter claimed in the patents held by others;
pay damages; and/or
defend litigation or administrative proceedings which may be costly regardless of outcome, and which
could result in a substantial diversion of our financial and management resources.
Any of these events could substantially harm our earnings, financial condition and operations.
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Risks Related to our Common Stock
The public trading market for our common stock is volatile and may result in higher spreads in stock prices, which may limit the
ability of our investors to sell their shares of our common stock at a profit, if at all.
Our common stock trades in the over-the-counter market and is quoted on the OTCQB tier of the OTC Markets Group, Inc. The
over-the-counter market for securities has historically experienced extreme price and volume fluctuations during certain periods. These
broad market fluctuations may adversely affect the market price of our common stock and result in substantial losses to our investors. In
addition, the spreads on stock traded through the over-the-counter market are generally unregulated and higher than on national stock
exchanges, which means that the difference between the price at which shares could be purchased by investors in the over-the-counter
market compared to the price at which they could be subsequently sold would be greater than on these exchanges. Significant spreads
between the bid and asked prices of the stock could continue during any period in which a sufficient volume of trading is unavailable or if
the stock is quoted by an insignificant number of market makers. Historically, our trading volume has been insufficient to significantly
reduce this spread and we have had a limited number of market makers insufficient to affect this spread. These higher spreads could
adversely affect investors who purchase the shares at the higher price at which the shares are sold, but subsequently sell the shares at the
lower bid prices quoted by the brokers. Unless the bid price for the stock exceeds the price paid for the shares by the investor, plus
brokerage commissions or charges, the investor could lose money on the sale. For higher spreads such as those on over-the-counter
stocks, this is likely a much greater percentage of the price of the stock than for exchange listed stocks. There is no assurance that at the
time an investor in our common stock wishes to sell the shares, the bid price will have sufficiently increased to create a profit on the sale.
We do not know whether a market for our common stock will be sustained or what the market price of our common stock will be and
as a result it may be difficult for you to sell your shares of our common stock.
Although our common stock now trades on the OTCQB, an active trading market for our shares may not be sustained. It may be
difficult for our stockholders to sell their shares without depressing the market price for our shares or at all. As a result of these and other
factors, our stockholders may not be able to sell their shares. Further, an inactive market may also impair our ability to raise capital by
selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by
using our shares of common stock as consideration. If an active market for our common stock does not develop or is not sustained, it may
be difficult for our stockholders to sell shares of our common stock.
The market price for our common stock may fluctuate significantly, which could result in substantial losses by our investors.
The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond
our control, such as:
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the outcomes of potential future patent litigation;
our ability to monetize our future patents;
changes in our industry;
announcements of technological innovations, new products or product enhancements by us or others;
announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures,
acquisitions or capital commitments;
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changes in earnings estimates or recommendations by security analysts, if our common stock is covered
by analysts;
investors’ general perception of us;
future issuances of common stock;
the addition or departure of key personnel;
general market conditions, including the volatility of market prices for shares of technology companies,
generally, and other factors, including factors unrelated to our operating performance; and
the other factors described in this “Risk Factors” section.
These factors and any corresponding price fluctuations may materially and adversely affect the market price of our common
stock and result in substantial losses by our investors.
Further, the stock market in general, and the market for technology companies in particular, has experienced extreme price and
volume fluctuations in the past. Continued market fluctuations could result in extreme volatility in the price of our common stock, which
could cause a decline in the value of our common stock.
Price volatility of our common stock might be worse if the trading volume of our common stock is low. In the past, following
periods of market volatility, stockholders have often instituted securities class action litigation. If we were involved in securities litigation,
it could have a substantial cost and divert resources and attention of management from our business, even if we are successful. Future
sales of our common stock could also reduce the market price of such stock.
Moreover, the liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at
a given price, but by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if any. These
factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between
the bid and ask prices for our common stock. In addition, without a large float, our common stock is less liquid than the stock of
companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of
an active public trading market, an investor may be unable to liquidate its investment in our common stock. Trading of a relatively small
volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were
larger. We cannot predict the prices at which our common stock will trade in the future.
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Our common stock is a “penny stock,” which makes it more difficult for our investors to sell their shares.
Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934, as
amended. The penny stock rules generally apply to companies whose common stock is not listed on The NASDAQ Stock Market or other
national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue of at least
$6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating
for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established
customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information
concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers
have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers
willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it
could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will
find it more difficult to dispose of our securities.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to
decline.
If our stockholders sell substantial amounts of our common stock in the public market, it could create a circumstance commonly
referred to as an “overhang,” in anticipation of which the market price of our common stock could fall. The existence of an overhang,
whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the
sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Our stockholders may experience substantial dilution as a result of the conversion of outstanding convertible preferred stock or the
exercise of options and warrants to purchase shares of our common stock.
As of March 30, 2017, we have granted options to purchase 8,375,190 shares of common stock, and have reserved 3,377,638
shares of our common stock for further issuances pursuant to our 2012 Equity Incentive Plan (the “2012 Plan”). In addition, as of March
30, 2017, we may be required to issue 1,021,895 shares of our common stock for issuance upon conversion of outstanding convertible
preferred stock plus accrued dividends as of December 31, 2016 and 9,632,404 shares of our common stock for issuance upon exercise of
outstanding warrants. Should all of these shares be issued, you would experience dilution in ownership of our common stock and the price
of our common stock will decrease unless the value of our company increases by a corresponding amount.
The interests of our controlling stockholders may not coincide with yours and such controlling stockholders may make decisions with
which you may disagree.
As of March 30, 2017, two of our stockholders beneficially owned over 32.73% of our common stock. As a result, these
stockholders may be able to influence the outcome of matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our
company and make some future transactions more difficult or impossible without the support of our controlling stockholders. The
interests of our controlling stockholders may not coincide with our interests or the interests of other stockholders.
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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock
price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts
publish about us or our business. We currently have new research coverage by securities and industry analysts. If one or more of the
analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would
likely decline. If one or more of these analysts cease coverage of us or fails to publish reports on us regularly, demand for our stock could
decrease, which could cause our stock price and trading volume to decline.
We are subject to financial reporting and other requirements that place significant demands on our resources.
We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of
the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our
management, administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could
have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary for us to
provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to
manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors
may be harmed.
We are an “emerging growth company” and we cannot be certain that the reduced disclosure requirements applicable to emerging
growth companies will not make our common stock less attractive to investors.
The JOBS Act permits “emerging growth companies” like us to rely on some of the reduced disclosure requirements that are
already available to smaller reporting companies. As long as we qualify as an emerging growth company or a smaller reporting company,
we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the
Sarbanes-Oxley Act, as described above, and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and
“say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already
available to smaller reporting companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption
from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, as
long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this until we
are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements
may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year during which we
had total annual gross revenues of $1 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of
the date of the first sale of common stock under our registration statement on Form S-1 that became effective on June 23, 2014; (iii) the
date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which
we are deemed to be a “large accelerated filer,” as defined by the Securities and Exchange Commission, which would generally occur
upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and
demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements,
particularly if we would also not qualify as a smaller reporting company. In addition, until such time, we cannot predict if investors will
find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and could cause our
stock price to decline.
32
Delaware law and our Amended and Restated Certificate of Incorporation and By-laws contain anti-takeover provisions that could
delay or discourage takeover attempts that stockholders may consider favorable.
Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers,
preferences and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference
over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the
voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and
designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of
control might benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation Law. Section 203
generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period
of three years after the date of the transaction in which the person became an interested stockholder, unless (i) prior to the date of the
transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; (ii) the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares
owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder.
Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly,
may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a
price above the prevailing market price.
The terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock. As a result, any
return on investment may be limited to the value of our common stock.
The terms of our Series C Preferred Stock prohibit us from paying dividends in the future on our common stock, absent consent
from the holders representing a super-majority of the outstanding shares of our Series C Preferred Stock and a certain investor. Because
we will likely not pay dividends, our common stock may be less valuable because a return on an investment in our common stock will
only occur if our stock price appreciates.
Risks Related to our Series C Preferred Stock
Our Series C Preferred Stock contains covenants that could limit our financing options and liquidity position, which would limit our
ability to grow our business.
Covenants in the certificate of designation for our Series C Preferred Stock impose operating and financial restrictions on us.
These restrictions prohibit or limit our ability to, among other things:
●
●
●
●
●
incur additional indebtedness;
permit liens on assets;
repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;
pay cash dividends to our stockholders; and
engage in transactions with affiliates.
33
These restrictions may limit our ability to obtain financing, withstand downturns in our business or take advantage of business
opportunities. Moreover, debt financing we may seek may contain terms that include more restrictive covenants, may require repayment
on an accelerated schedule or may impose other obligations that limit our ability to grow our business, acquire needed assets, or take
other actions we might otherwise consider appropriate or desirable.
In addition, the certificate of designation for our Series C Preferred Stock requires us to redeem shares of our Series C Preferred
Stock, at each holder’s option and for an amount greater than their stated value, upon the occurrence of certain events, including our being
subject to a judgment of greater than $100,000 or our initiation of bankruptcy proceedings.
The holders of our Series C Preferred Stock are entitled to receive a dividend, which may be increased if we do not comply with certain
covenants.
The holders of the Series C Preferred Stock are entitled to a 9% annual dividend on the $1,000 per share stated value of our
Series C Preferred Stock, which is payable in cash or, subject to the satisfaction of certain conditions, in pay-in-kind shares. The dividend
may be increased to a 18% annual dividend if we fail to comply with certain covenants, including our being subject to a judgment of
greater than $100,000 or our initiation of bankruptcy proceedings. As a result of the payment of dividends related to our Series C
Preferred Stock, we may be obligated to pay significant sums of money or issue a significant number of shares of our common stock,
which could negatively affect our operations or result in the dilution of the holders of our common stock, respectively.
Our Series C Preferred Stock and certain of our warrants contain anti-dilution provisions that may result in the reduction of their
conversion prices or exercise prices in the future.
Our Series C Preferred Stock and certain of our warrants contain anti-dilution provisions, which provisions require the lowering
of the conversion price or exercise price, as applicable, to the purchase price of future offerings. Furthermore, with respect to such
warrants, if we complete an offering below the exercise price of such warrants, the number of shares issuable under such warrants will be
proportionately increased such that the aggregate exercise price payable after taking into account the decrease in the exercise price, shall
be equal to the aggregate exercise price prior to such adjustment. If in the future we issue securities for less than the conversion or
exercise price of our Series C Preferred Stock and such warrants, respectively, we will be required to further reduce the relevant
conversion or exercise prices, and the number of shares underlying such warrants will be increased. We may find it more difficult to raise
additional equity capital while our Series C Preferred Stock and such warrants are outstanding.
ITEM 1B – UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2 – PROPERTIES
We maintain our principal executive office at 8441 Wayzata Blvd., Suite 240, Minneapolis, Minnesota. In April 2015, we
entered into a lease for approximately 1,741 square feet of office space commencing May 1, 2015 and expiring May 31, 2018 with initial
monthly payments of $2,712.
We also maintain our engineering office at 12424 Wilshire Boulevard, Suite 745, Los Angeles, California. On April 15, 2015,
we extended our lease for office space in Los Angeles, California to August 31, 2017, with monthly payments of $6,733 beginning on
September 1, 2015. In connection with the lease of our office space in Los Angeles, California, we are obligated to lease parking spaces
at an aggregate approximate cost of $760 per month. On February 8, 2017, we extended our lease for office space in Los Angeles,
California to August 31, 2019, with monthly payments of $8,139 beginning September 1, 2017 until August 31, 2018 and $8,423 until
August 31, 2019.
34
Future minimum lease payments under all lease agreements are as follows:
Year Ending December 31,
2017
2018
2019
Total
$
$
120,754
112,585
67,387
300,726
ITEM 3 – LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of
business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to
time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have,
individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder
of more than 5% of our common stock is an adverse party or has a material interest adverse to our interest.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
35
PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market for Common Stock
On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.” Prior to October 29, 2014,
there was no established trading price for our common stock. The following table sets forth, for the periods indicated, the high and low bid
prices per share of our common stock as reported by the OTCQB. The quotations reflect inter-dealer prices, without retail markup,
markdown or commissions, and may not represent actual transactions.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year 2015
High
Low
2.85 $
4.80 $
2.30 $
1.90 $
Fiscal Year 2016
High
Low
1.59 $
2.15 $
1.60 $
1.59 $
1.31
2.00
1.13
1.08
0.90
1.33
1.05
1.25
$
$
$
$
$
$
$
$
36
Holders of Record
As of March 30, 2017, there were approximately 217 holders of record of our common stock.
Dividends
We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable
future, but intend to retain our capital resources for reinvestment in our business. In addition, the terms of our Series C Preferred Stock
prohibit us from paying dividends in the future on our common stock, absent consent from the holders representing a super-majority of
the outstanding shares of our Series C Preferred Stock and a certain investor.
ITEM 6 – SELECTED FINANCIAL DATA
Not applicable
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Our Business
We are a development stage medical device company that is developing a proprietary technology platform to minimize noise and
artifacts from cardiac recordings during electrophysiology studies and ablation. Our product under development, the PURE EP System, is
a surface electrocardiogram and intracardiac multichannel recording and analysis system that acquires, processes and displays
electrocardiogram and electrograms required during electrophysiology studies and ablation procedures.
We have not generated any revenue to date and consequently our operations are subject to all risks inherent in the establishment
of a new business enterprise.
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of
financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and
assumptions that affect the amounts reported in our financial statements. The financial statements include estimates based on currently
available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial
statements include allowance for doubtful accounts and accruals for inventory claims. Changes in the status of certain facts or
circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could
differ from the estimates and assumptions.
Among the significant judgments made by management in the preparation of our financial statements are the following:
Research and Development
We account for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10,
Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs
are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research
and development costs related to both present and future products are expensed in the period incurred.
37
Stock Based Compensation
All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of
restricted stock and stock options, which are measured at fair value on the grant date and recognized in the statements of operations as
compensation expense over the relevant vesting period. Restricted stock payments and stock-based payments to nonemployees are
recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a
performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-
forfeitable, the measurement date is the date the award is issued.
On October 29, 2014, our common stock commenced trading on OTCQB under the symbol “BSGM.” Fair value is typically
determined by the closing price of our common stock on the date of the award.
Derivative Instrument Liability
We account for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for
derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or
contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation.
Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and
the types of relationships designated are based on the exposures hedged. At December 31, 2015 and 2014, the Company did not have any
derivative instruments that were designated as hedges.
At December 31, 2016 and 2015, we had outstanding preferred stock and warrants that contained embedded derivatives. These
embedded derivatives include certain conversion features and reset provisions.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit
carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts
measured at the current enacted tax rates. We record an estimated valuation allowance on our deferred income tax assets if it is not more
likely than not that these deferred income tax assets will be realized. We recognize 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 financial statements from such a position are measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate settlement.
Results of Operations
We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of
our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate
predictions of future operations are difficult or impossible to make.
Twelve Months Ended December 31, 2016 Compared to Twelve Months Ended December 31, 2015
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the twelve months ended December 31, 2016
and 2015.
Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2016
were $2,654,501, an increase of $1,147,512, or 76%, from $1,506,989 for the twelve months ended December 31, 2015. This increase is
primarily due additional personnel and outside design costs as we develop our proprietary technology platform. Research and
development expenses were comprised of the following:
38
Salaries and equity compensation
Consulting expenses
Clinical studies and design work
Travel, supplies, other
Total
2016
1,744,780 $
322,520
388,447
198,754
2,654,501 $
2015
977,297
359,842
40,731
129,119
1,506,989
$
$
General and Administrative Expenses. General and administrative expenses for the twelve months ended December 31, 2016
were $8,499,304, a decrease of $2,027,262, or 19%, from $10,526,566 incurred in the twelve months ended December 31, 2015. This
decrease is primarily due to decrease in equity compensation increases in payroll related expenses, equity based compensation and
professional services and, to a lesser extent, due to increases in consulting fees and travel, meals and entertainment costs.
Payroll related expenses (including equity compensation) decreased to $6,381,610 in the twelve months ended December 31,
2016 from $8,592,539 for the twelve months ended December 31, 2015, a decrease of $2,210,929, or 26%. This decrease is due to the
value of the stock based compensation decreasing to $5,233,818 in 2016, as a result of the vesting of stock and stock options issued to
board members, officers and employees, as compared to $7,478,491 of stock based compensation in 2015, net with added additional
personnel.
Professional services for the twelve months ended December 31, 2016 totaled $359,695, a decrease of $19,771, or 5%, over the
$379,466 recognized for the twelve months ended December 31, 2015. Of professional services, legal fees totaled $286,195 for the
twelve months ended December 31, 2016, a decrease of $17,271, or 6%, from $303,466 incurred for the twelve months ended December
31, 2015. Accounting fees incurred in the twelve months ended December 31, 2016 amounted to $73,500, a decrease of $2,500, or 3%,
from $76,000 incurred for the same period in 2015. The decreases in professional fees was primarily related to a decrease in legal and
audit requirements in 2016 as compared to 2015 as we continue to develop our operations, including legal fees associated with our capital
raising transactions and the filing of our registration statements.
Consulting fees totaled $1,167,420 for the twelve months ended December 31, 2016, an increase of $352,856 or 43%, from
$814,564 for the twelve months ended December 31, 2015. The increase primarily relates to our fund raising and investor relations to
support our increased efforts in market research and potential investor identification.
Travel, meals and entertainment costs for the twelve months ended December 31, 2016 were $274,962, a decrease of $11,203, or
4%, from $286,165 incurred during the twelve months ended December 31, 2016. During 2016, less travel was required than in 2015 due
to our marketing and fund raising efforts. Rent for the twelve months ended December 31, 2016 totaled $128,556, a decrease of $36,958,
or 22%, from $165,514 incurred during the same period in 2015. In 2015, we relocated our corporate headquarters to Minneapolis,
Minnesota while continuing to maintain our engineering/research office in Los Angeles, California. In addition, we provided temporary
housing for interns in the summer of 2015, not incurred in 2016.
Depreciation Expense. Depreciation expense for the twelve months ended 2016 totaled $10,475, no change from the expense of
$10,475 incurred during the same period in 2015.
(Loss) gain on change in fair values of derivatives. Beginning in March 2015, we are required to estimate the fair value of the
embedded beneficial conversion features of our issued Series C Preferred stock and certain warrants with reset (anti-dilution)
provisions. During the year ended December 31, 2016, we incurred a loss on change in fair values of these derivatives of $(422,908) as
compared to a gain of $3,113,580 or the same period in the year.
Interest Income (expense). Interest income for the twelve months ended December 31, 2016 totaled $1 as compared to income
expense of $(1,298) incurred during the twelve months ended December 31, 2015. For 2015, interest costs were comprised of vendor
finance costs.
39
Financing Costs. Financing costs for the year ended December 31, 2015 totaled $529,704 as compared to $-0- for the year
ended December 31, 2016. Financing costs are primarily related to the beneficial conversion feature in and the fees paid related to the
issuance of our Series C Preferred Stock issued in 2015. The beneficial conversion feature associated with the Series C Preferred Stock is
comprised of the allocated fair value of the conversion feature and the allocated fair value of warrants issued in connection with the sale
of the Series C Preferred Stock.
Preferred Stock Dividend. Our preferred stock dividend for the twelve months ended December 31, 2016 totaled $110,023, a
decrease of $241,499, or 69% from $351,522 incurred during the twelve months ended December 31, 2015. The reduction in dividends is
a result of conversions of the Series C Preferred Stock to common reducing the number of preferred shares outstanding. Preferred stock
dividends are related to our Series C Preferred Stock issued in 2013 and 2015.
Net Loss Available to Common Stockholders. Net loss available to common stockholders for the twelve months ended December
31, 2016 was $11,697,210, compared to a net loss of $9,812,974 for the twelve months ended December 31, 2015, an increase of
$1,884,236 or 19%. The primary reasons for the increase, as described above, are the increases in research and development expenses
and changes in in fair values of derivatives from 2015 to 2016.
Liquidity and Capital Resources
Twelve Months Ended December 31, 2016 Compared to Twelve Months Ended December 31, 2015
As of December 31, 2016, we had a working capital deficit (current liabilities in excess of current assets) of $1,769,004,
comprised of cash of $1,055,895 and prepaid expenses of $134,263, which was offset by $373,103 of accounts payable and accrued
expenses, accrued dividends on preferred stock issuances of $359,891, warrant liability of $1,937,234 and derivative liability of
$288,934. Excluding the derivative and warrant liabilities, our working capital would have been $457,164. For the twelve months ended
December 31, 2016, cash provided by financing activities totaled $5,226,368, comprised of proceeds from the sale of our common
stock. In the comparable period in 2015, $4,759,798 was raised through the sale of our common stock, $450,000 from the sale of our
Series C Preferred Stock and $45,881 from the exercise of options and warrants. At December 31, 2016, we had cash of $1,055,895
compared to $953,234 at December 31, 2015. Our cash is held in bank deposit accounts. At December 31, 2016 and 2015, we had no
convertible debentures outstanding.
Cash used in operations for the twelve months ended December 31, 2016 and 2015 was $5,107,452 and $4,523,751, respectively,
which represent cash outlays for research and development and general and administrative expenses in such periods. Increase in cash
outlays principally resulted from increased research and development and general and administrative expenses due to the continued
development of our operations.
Cash used in investing activities for the twelve months ended December 31, 2016 was $16,255, compared to $18,475 for the
twelve months ended December 31, 2015. During both the twelve months ended December 31, 2016 and the twelve months ended
December 31, 2015, we purchased office furniture and computer equipment. In addition, we paid a long term lease deposit for our
corporate location of $2,612 in 2015.
On October 28, 2016, we entered into a unit purchase agreement with certain accredited investors, pursuant to which we issued
and sold, in multiple closings occurring on each of October 28, 2016, November 23, 2016, December 16, 2016, December 22, 2016,
February 10, 2017 and March 10, 2017 an aggregate of 2,585,474 units, which consisted of, in the aggregate, 2,585,474 shares of our
common stock and warrants to purchase 794,954 shares of our common stock at an exercise price of $1.50 per share, in exchange for
aggregate gross proceeds of $3,531,262, after financing costs of $346,949.
40
In their report dated March 30, 2017, our independent registered public accounting firm stated at December 31, 2016, there is
substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our
net losses and negative cash flows from operations since inception and our expectation that these conditions will continue for the
foreseeable future. In addition, we will require additional financing to fund future operations. Further, we do not have any commercial
products available for sale and have not generated revenues to date, and there is no assurance that, if approval of our products is received,
we will be able to generate cash flow to fund operations. In addition, there can be no assurance that our research and development will be
successfully completed or that any product will be approved or commercially viable. Our ability to continue as a going concern is subject
to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities,
obtaining loans from various financial institutions or being awarded grants from government agencies, where possible. Our continued net
operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.
Our Series C Preferred Stock contains triggering events which would, among other things, require redemption (i) in cash, at the
greater of (a) 120% of the stated value of $1,000 or (b) the product of (I) the variable weighted average price of our common stock on the
trading day immediately preceding the date of the triggering event and (II) the stated value divided by the then conversion price or (ii) in
shares of our common stock, equal to a number of shares equal to the amount set forth in (i) above divided by 75%. As of December 31,
2016, the aggregate stated value of our Series C Preferred Stock was $1,070,000. The triggering events include our being subject to a
judgment of greater than $100,000 or our initiation of bankruptcy proceedings. If any of the triggering events contained in our Series C
Preferred Stock occur, the holders of our Series C Preferred Stock may demand redemption, an obligation we may not have the ability to
meet at the time of such demand. We will be required to pay interest on any amounts remaining unpaid after the required redemption of
our Series C Preferred Stock, at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
We expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses,
including expenses related to clinical trials. We expect that our general and administrative expenses will increase in the future as we
expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental
audit fees, investor relations programs and increased professional services.
Our future capital requirements will depend on a number of factors, including the progress of our research and development of
product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of
financing and our success in developing markets for our product candidates. We believe our existing cash will not be sufficient to fund our
operating expenses and capital equipment requirements. We anticipate we will need approximately $4 million in addition to our current
cash on hand to fund our operating expenses and capital equipment requirements for the next 12 months. We will have to raise additional
funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance that we will be able
to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary additional funds to continue
operations and the attainment of profitable operations.
Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected
cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing
holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior
to those of existing holders of our securities.
If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of
or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to
develop or commercialize independently.
41
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or
application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position,
results of operations or cash flows.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
42
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BIOSIG TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2016 and 2015
Statements of Operations for the Years Ended December 31, 2016 and 2015
Statement of Stockholders’ Deficit for the two Years Ended December 31, 2016
Statements of Cash Flows for the Years Ended December 31, 2016 and 2015
Notes to Financial Statements
F-1
F-2
F-3
F-4
F-5
F-7
F-8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
BioSig Technologies, Inc.
We have audited the accompanying balance sheet of BioSig Technologies. Inc. (“the Company”) as of December 31, 2016 and 2015,
and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BioSig
Technologies, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company has incurred losses from operations since its inception and has a net stockholders’
deficiency. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
March 30, 2017
New York, New York
/s/ Liggett & Webb, P.A.
F-2
BIOSIG TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 2016 AND 2015
ASSETS
Current assets:
Cash
Prepaid expenses
Total current assets
Property and equipment, net
Other assets:
Deposits
Total assets
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses, including $15,755 and $12,716 to related parties as of
December 31, 2016 and 2015, respectively
Dividends payable
Warrant liability
Derivative liability
Total current liabilities
Series C Preferred Stock, 1,070 and 1,471 shares issued and outstanding; liquidation preference of
$1,070,000 and $1,471,000 as of December 31, 2016 and 2015, respectively
Commitments and contingencies
Stockholders’ deficit
Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A,
600 shares of Series B and 4,200 shares of Series C Preferred Stock
Common stock, $0.001 par value, authorized 200,000,000 and 50,000,000 shares, 22,588,184 and
16,825,703 issued and outstanding as of December 31, 2016 and 2015, respectively
Additional paid in capital
Accumulated deficit
Total stockholders’ deficit
2016
2015
$
1,055,895 $
134,263
1,190,158
953,234
31,308
984,542
24,188
18,408
27,612
27,612
$
1,241,958 $
1,030,562
$
373,103 $
359,891
1,937,234
288,934
2,959,162
223,546
340,291
1,621,199
285,157
2,470,193
1,070,000
1,471,000
-
-
22,588
41,019,251
(43,829,043)
(2,787,204)
16,826
29,314,399
(32,241,856)
(2,910,631)
Total liabilities and stockholders’ deficit
$
1,241,958 $
1,030,562
See the accompanying notes to the financial statements.
F-3
BIOSIG TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Operating expenses:
Research and development
General and administrative
Depreciation
Total operating expenses
Loss from operations
Other income (expense):
(Loss) gain on change in fair value of derivatives
Interest income (expense)
Financing costs
Total other income (expense)
Loss before income taxes
Income taxes (benefit)
Net loss
Preferred stock dividend
Year ended December 31,
2015
2016
$
2,654,501 $
8,499,304
10,475
11,164,280
1,506,989
10,526,566
10,475
12,044,030
(11,164,280)
(12,044,030)
(422,908)
1
-
3,113,580
(1,298)
(529,704)
(422,907)
2,582,578
(11,587,187)
(9,461,452)
-
-
(11,587,187)
(9,461,452)
(110,023)
(351,522)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
$
(11,697,210) $
(9,812,974)
Net loss per common share, basic and diluted
$
(0.60) $
(0.70)
Weighted average number of common shares outstanding, basic and diluted
19,490,767
14,103,055
See the accompanying notes to the financial statements.
F-4
Balance, January 1, 2015
Sale of common stock
Common stock issued upon conversion
of Series C Preferred Stock and accrued
dividends at $1.50 per share
Common stock issued for services
Common stock issued in exchange for
156,102 warrants exercised on a cashless
basis
Common stock issued in exchange for
exercise of options at $2.09 per share
Common stock issued in exchange for
exercise of warrants at $3.67 per share
Common stock issued in exchange for
exercise of warrants at $2.50 per share
Reclassify fair value of warrant liability
from equity
Reclassify fair value of derivative
liability from equity
Reclassify fair value of warrant liability
to equity upon warrant exercise
Reclassify fair value of derivative
liability to equity upon conversion of
Series C Preferred Stock to common
shares
Stock based compensation
Preferred Stock dividend
Net loss
Balance, December 31, 2015
BIOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIT
TWO YEARS ENDED DECEMBER 31, 2016
Additional
Common stock
Shares
11,179,266 $
2,645,432
Amount
11,179 $
2,645
Paid in
Capital
19,186,163 $
4,757,153
Accumulated
Deficit
(22,780,404) $
-
Total
(3,583,062)
4,759,798
2,146,301
3,341,752
-
20,900
14,981
10,000
-
-
-
-
-
-
1,430,871
1,452,500
1,431
1,453
2,144,870
3,340,299
99,552
100
(100)
10,000
10
20,890
4
4
14,977
9,996
4,082
4,000
-
-
-
(4,097,444)
-
(4,097,444)
-
(1,242,590)
-
(1,242,590)
-
265,955
-
265,955
-
-
-
-
16,825,703 $
-
-
-
-
16,826 $
639,467
4,626,285
(351,522)
-
29,314,399 $
-
-
-
(9,461,452)
(32,241,856) $
639,467
4,626,285
(351,522)
(9,461,452)
(2,910,631)
See the accompanying notes to the financial statements.
F-5
Balance, January 1, 2016
Sale of common stock
Common stock issued for services
Common stock issued upon conversion
of Series C Preferred Stock at $1.50 per
share
Common stock issued settlement of
Series C Preferred Stock accrued
dividends at $1.55 per share
Reclassify fair value of derivative
liability to equity upon conversion of
Series C Preferred Stock to common
shares
Stock based compensation
Preferred Stock dividend
Net loss
Balance, December 31, 2016
BIOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIT
TWO YEARS ENDED DECEMBER 31, 2016
Additional
Common stock
Shares
16,825,703 $
3,798,417
1,335,000
Amount
16,826 $
3,798
1,335
Paid in
Capital
29,314,399 $
5,222,570
2,469,715
Accumulated
Deficit
(32,241,856) $
-
-
Total
(2,910,631)
5,226,368
2,471,050
267,334
267
400,733
-
401,000
58,185
58
90,365
-
90,423
-
303,545
-
-
22,588,184 $
-
304
-
-
22,588 $
103,096
3,528,396
(110,023)
-
41,019,251 $
-
-
-
(11,587,187)
(43,829,043) $
103,096
3,528,700
(110,023)
(11,587,187)
(2,787,204)
See the accompanying notes to the financial statements.
F-6
BIOSIG TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation
Amortization of debt discount
Change in derivative liabilities
Equity based compensation
Changes in operating assets and liabilities:
Prepaid expenses
Accounts payable
Stock based payable
Deferred rent payable
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Payment of long term deposit
Net cash used in investing activity
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
Proceeds from sale of Series C preferred stock
Proceeds from exercise of options
Proceeds from exercise of warrants
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
Supplemental disclosures of cash flow information:
Cash paid during the period for interest
Cash paid during the period for income taxes
Non cash investing and financing activities:
Common stock issued upon conversion of Series C Preferred Stock and accrued dividends
Reclassify derivative liability to equity upon conversion of Series C preferred stock
Reclassify warrant liability to equity upon exercise of liability warrants
See the accompanying notes to the financial statements.
F-7
Year ended December 31,
2015
2016
$
(11,587,187) $
(9,461,452)
10,475
-
422,908
5,999,750
(102,955)
149,661
-
(104)
(5,107,452)
10,475
585,324
(3,113,580)
7,968,036
44,229
(333,494)
(226,305)
3,016
(4,523,751)
(16,255)
-
(16,255)
(15,863)
(2,612)
(18,475)
5,226,368
-
-
-
5,226,368
4,759,798
450,000
20,900
24,981
5,255,679
102,661
713,453
953,234
1,055,895 $
239,781
953,234
- $
- $
1,298
-
491,423 $
103,096 $
- $
2,146,302
639,467
265,955
$
$
$
$
$
$
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Business and organization
BioSig Technologies Inc. (the “Company”) was initially incorporated on February 24, 2009 under the laws of the State of Nevada and
subsequently re-incorporated in the state of Delaware in 2011. The Company and its efforts are principally devoted to improving the
quality of cardiac recordings obtained during ablation of atrial fibrillation (AF) and ventricular tachycardia (VT). The Company has not
generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business
enterprise.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC
605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination
of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives
of long-lived assets, the fair value of the Company’s stock, stock-based compensation, fair values relating to warrant and other derivative
liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash
and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such
amounts may be in excess of the FDIC insurance limit. At December 31, 2016 and 2015, deposits in excess of FDIC limits were $805,895
and $703,234, respectively.
Prepaid Expenses
Prepaid expenses are comprised of vendor deposits of $100,000 (2016), prepaid insurance and operating expense prepayments.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings.
F-8
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Long-Lived Assets
The Company follows Accounting Standards Codification 360-10-15-3, “Impairment or Disposal of Long-lived Assets,” which
established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the
unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-
lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Fair Value of Financial Instruments
Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of
certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the
balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets,
financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”)
and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to
measure many financial instruments and certain other items at fair value.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for
derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or
contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation.
Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and
the types of relationships designated are based on the exposures hedged. At December 31, 2015 and 2014, the Company did not have any
derivative instruments that were designated as hedges.
At December 31, 2016 and 2015, the Company had outstanding preferred stock and warrants that contained embedded derivatives. These
embedded derivatives include certain conversion features and reset provisions. (See Note 6 and Note 7).
Research and development costs
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10,
Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs
are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research
and development costs related to both present and future products are expensed in the period incurred. The Company incurred research
and development expenses of $2,654,501 and $1,506,989 for the year ended December 31, 2016 and 2015, respectively.
F-9
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income
tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized
or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available
evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise
from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different
periods.
Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
Net Income (loss) Per Common Share
The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC
260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or
conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The computation of basic and diluted loss per share as of December 31, 2016 and 2015 excludes potentially dilutive securities when their
inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the
period.
Potentially dilutive securities excluded from the computation of basic and diluted net income (loss) per share are as follows:
Series C convertible preferred stock
Options to purchase common stock
Warrants to purchase common stock
Totals
Stock based compensation
2016
713,333
8,245,190
9,128,189
18,086,712
2015
980,667
7,780,190
7,078,685
15,839,542
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.
For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award
is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount
is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting
period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of
operations, as if such amounts were paid in cash.
F-10
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
As of December 31, 2016, there were outstanding stock options to purchase 8,245,190 shares of common stock, 7,028,639 shares of which
were vested. As of December 31, 2015, the Company had 7,780,190 options outstanding to purchase shares of common stock, of which
5,613,501 were vested.
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20,
Registration Payment Arraignments (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the
arraignment, the maximum potential amount and to assess each reporting period the probable liability under these arraignments and, if
exists, to record or adjust the liability to current period operations. On June 23, 2014, the Company filed Form S-1/A became effective
with the Securities and Exchange Commission. As such, the Company determined that payments were due under its registration rights
agreement and therefore accrued $55,620 as interest expense during the year ended December 31, 2014 for the liability under the
registration rights agreements. During the year ended December 31, 2015, the Company estimated the liability at $-0- and therefore
recorded the change to current period operations.
Beginning on May 16, 2016, the Company entered into subscription agreements with certain accredited investors pursuant to which the
Company sold to the investors units, which each unit consisting of one share of the Company’s common stock and a warrant to purchase
one half of one share of common stock (the “Private Placement”). In connection with the Private Placements, the Company also entered
into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration rights with
respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to
file a registration statement within 45 calendar days upon the final closing under the Private Placement and to be effective 120 calendar
days thereafter. As of December 31, 2016, the Private Placement has not closed. The Company has estimated the liability under the
registration rights agreement at $-0- as of December 31, 2016.
Reclassification
Certain reclassifications have been made to prior periods’ data to conform with the current year’s presentation. These reclassifications had
no effect on reported income or losses.
Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure
of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC)
205, Presentation of Financial Statements. This update provides an explicit requirement for management to assess an entity’s ability to
continue as a going concern, and to provide related footnote disclosure in certain circumstances. The amendments are effective for annual
periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application
is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of
this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
F-11
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
The FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise
from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease
liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or
less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease
liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented
using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early
application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is
not expected to have a material impact on the Company’s consolidated financial position and results of operations.
The FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The amendment is part of the
FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The
amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged
directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing
companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective
for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment requires different
transition methods for various components of the standard. Early adoption is permitted. The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial position and results of operations.
In November 2016, the FASB issued ASU No. 2016-18, S tatement of Cash Flows (Topic 230): Restricted Cash (a consensus of the
FASB Emerging Issues Task Force). This ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts
shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard is not
expected to have a material impact on the Company’s consolidated financial position and results of operations
In April 2015, the FASB issued ASU No. 2015-03(ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs . This standard amends the existing guidance to require that debt issuance costs be presented in the
balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU 2015-03 is
effective on a retrospective basis for annual and interim reporting periods beginning after December 15, 2015, but early adoption is
permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and
results of operations.
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash
flows.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon
the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or
disclosure in the condensed consolidated financial statements, except as disclosed.
F-12
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of December 31, 2016, the Company had cash of $1,055,895 and working capital deficit (current liabilities in excess of current assets)
of $1,769,004 principally due to the inclusion of non-cash derivative and warrant liabilities recorded in current liabilities. In addition, the
Company raised approximately $1,358,763 in 2017 through the sale of common stock and warrants (See Note 13). As of December 31,
2016, excluding the derivative and warrant liabilities, the Company’s working capital would have been $457,164. During the year ended
December 31, 2016, the Company used net cash in operating activities of $5,107,452. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. Management believes that the Company has sufficient funds to meet its research and
development and other funding requirements for at least the next 4 months.
The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common and
preferred stock. The Company has experienced net losses and negative cash flows from operations since inception and expects these
conditions to continue for the foreseeable future. The Company has stockholders’ deficiencies at December 31, 2016 and requires
additional financing to fund future operations. Further, the Company does not have any commercial products available for sale and there
is no assurance that if approval of their products is received that the Company will be able to generate cash flow to fund operations. In
addition, there can be no assurance that the Company’s research and development will be successfully completed or that any product will
be approved or commercially viable.
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates
continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of
business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent
realizable or settlement values. The condensed financial statements do not include any adjustment that might result from the outcome of
this uncertainty.
NOTE 3 – RELATED PARTY TRANSACTIONS
The Company’s President and shareholders have advanced funds to the Company for working capital purposes since the Company’s
inception in February 2009. No formal repayment terms or arrangements exist and the Company is not accruing interest on these
advances. As of December 31, 2016 and 2015, all advances had been repaid.
Accrued expenses related primarily to travel reimbursements due related parties as of December 31, 2016 and 2015 was $15,755 and
$12,716, respectively.
On March 23, 2015, we issued Mr. Londoner an aggregate of 169,334 shares of common stock in exchange for 200 shares of our Series C
9% Convertible Preferred Stock and accrued dividends.
On April 30, 2015, Mr. Chaussy was granted 150,000 shares of common stock at a cost basis of $2.90 per share for his 2013-2015
performance. One half of the shares vested immediately; the second half vests on January 1, 2016 and were subsequently issued on
January 6, 2016.
On October 19, 2015, we entered into a consulting agreement with Dr. Holzer. Pursuant to the consulting agreement, Dr. Holzer is to
provide certain consulting services in connection with the development and commercialization of our products, in exchange for a stock
option for the purchase of 100,000 shares of common stock, vesting 50% on the first anniversary of the grant date and the remaining 50%
on the second anniversary of the grant date, at an exercise price of $1.56 per share and termination date of October 19, 2025.
On October 23, 2015, as part of a private placement transaction of our common stock and warrants, a related party purchased an aggregate
of 66,667 shares of common stock and a warrant to purchase 33,334 shares of common stock for an aggregate purchase price of $100,000.
F-13
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
On November 18, 2015, as part of a private placement transaction of our common stock and warrants, Donald E. Foley purchased an
aggregate of 200,000 shares of common stock and a warrant to purchase 100,000 shares of common stock for an aggregate purchase price
of $300,000.
On May 4, 2016, Mr. Londoner and Mr. Chaussy were granted 250,000 and 200,000 shares of common stock at a cost basis of $1.93 per
share for their 2016 performance, respectively. The granted shares vested immediately.
On December 8, 2016, Mr. Londoner and Mr. O’Donnell each were granted 41,500 shares of common stock at a cost basis of $1.36 per
share for their 2016 performance. The granted shares vested immediately and were subsequently issued in 2017.
On December 8, 2016 Mr. Cash and Mr. Tanaka each were granted 20,875 shares of common stock at a cost basis of $1.36 per share for
their 2016 performance. The granted shares vested immediately and were subsequently issued in 2017.
On December 8, 2016 Mr. Zeldis and Mr. Weild each were granted options to purchase 50,000 shares of common stock at a cost basis of
$1.36 per share for their 2016 performance. The granted options vested as of December 22, 2016 and are exercisable for a ten year term.
On December 8, 2016 Mr. Gallagher and Mr. Foley each were granted options to purchase 25,000 shares of common stock at a cost basis
of $1.36 per share for their 2016 performance. The granted options vested as of December 22, 2016 and are exercisable for a ten year
term.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2016 and 2015 is summarized as follows:
Computer equipment
Furniture and fixtures
Subtotal
Less accumulated depreciation
Property and equipment, net
2016
2015
$
$
84,704 $
10,117
94,821
(70,633)
24,188 $
68,449
10,117
78,566
(60,158)
18,408
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $10,475 and $10,475 for the years ended December 31, 2016 and 2015, respectively.
F-14
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2016 and 2015 consist of the following:
Accrued accounting and legal
Accrued reimbursements
Accrued consulting
Accrued research and development expenses
Accrued office and other
Deferred rent
Accrued settlement related to arbitration
2016
2015
$
$
120,464 $
43,116
1,192
181,884
10,202
2,912
13,333
373,103 $
112,723
13,613
15,200
34,179
31,482
3,016
13,333
223,546
NOTE 6 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of 9% Series C Convertible Preferred Stock (the
“Series C Preferred Stock”).
The Series C Preferred Stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any
accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the stated value
of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative. The holders of the Series C Preferred Stock
vote together with the holders of our common stock on an as-converted basis, but may not vote the Series C Preferred Stock in excess of
the beneficial ownership limitation of the Series C Preferred Stock. The beneficial ownership limitation is 4.99% of our then outstanding
shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of
common stock following such conversion or exercise upon the request of an individual holder. The beneficial ownership limitation is
determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares
outstanding when calculating the limitation for a different holder.
In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, we may not
(i) increase the number of authorized shares of preferred stock, (ii) amend our charter documents, including the terms of the Series C
Preferred Stock, in any manner adverse to the holders of the Series C Preferred Stock, including authorizing or creating any class of stock
ranking senior to, or otherwise pari passu with, the shares of Series C Preferred Stock as to dividends, redemption or distribution of assets
upon a liquidation, or (iii) perform certain covenants, including:
● incur additional indebtedness;
● permit liens on assets;
● repay, repurchase or otherwise acquire more than a de minimis number of shares of capital stock;
● pay cash dividends to our stockholders; and
● engage in transactions with affiliates.
F-15
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Any holder of Series C Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series C Preferred Stock
into shares of our common stock at a price of $1.50 per share. The Series C Preferred Stock is subject to full ratchet anti-dilution price
protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $1.50 per share
as well as other customary anti-dilution protection.
In the event that:
(i) we fail to, or announce our intention not to, deliver common stock share certificates upon conversion of our Series C Preferred
Stock prior to the seventh trading day after such shares are required to be delivered,
(ii) we fail for any reason to pay in full the amount of cash due pursuant to our failure to deliver common stock share certificates upon
conversion of our Series C Preferred Stock within five calendar days after notice therefor is delivered,
(iii) we fail to have available a sufficient number of authorized and unreserved shares of common stock to issue upon a conversion of
our Series C Preferred Stock,
(iv) we fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of our
obligations under, the securities purchase agreement, the registration rights agreement, the certificate of designation or the warrants
entered into pursuant to the private placement transaction for our Series C Preferred Stock, which failure or breach could have a
material adverse effect, and such failure or breach is not cured within 30 calendar days after written notice was delivered,
(v) we are party to a change of control transaction,
(vi) we file for bankruptcy or a similar arrangement or are adjudicated insolvent,
(vii) we are subject to a judgment, including an arbitration award against us, of greater than $100,000, and such judgment remains
unvacated, unbonded or unstayed for a period of 45 calendar days,
The holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time
for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%. The Company
determined that certain of the defined triggering events were outside the Company’s control and therefore classified the Series C Preferred
Stock outside of equity.
In connection with the sale of the Series C preferred stock, the Company issued an aggregate of 1,330,627 warrants to purchase the
Company’s common stock at $2.61 per share expiring five years from the initial exercise date. The warrants contain full ratchet anti-
dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than
$2.61 per share as well as other customary anti-dilution protection. The warrants are exercisable for cash; or if at any time after six
months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the
resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”.
As a result of an amendment to the conversion price of our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of
the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of
shares issuable under the warrants to 2,315,301.
In accordance with ASC 470-20, at issuance, the Company recognized an embedded beneficial conversion feature present in the Series C
Preferred Stock when it was issued. The Company allocated the net proceeds between the intrinsic value of the conversion option
($1,303,671) and the warrants ($1,064,739) to additional paid-in capital. The aggregate debt discount, comprised of the relative intrinsic
value of the conversion option ($1,303,671), the relative fair value of the warrants ($1,064,739), and the issuance costs ($412,590), for a
total of $2,781,000, is amortized over an estimated one year as interest expense.
F-16
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s
Series C Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C
Preferred Stock for net proceeds of $1,814,910.
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C
Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of
delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and
therefore bifurcation is not required. There was no established market for the Company’s common stock. As described in Note 7, as of
March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified
the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively,
from equity to liabilities.
At March 31, 2015, the Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-
20 using the Multinomial Lattice pricing model and the following assumptions: contractual terms of 2.78 to 3.50 years, a risk free interest
rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141.00%.
During January 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s
Series C Preferred Stock and accrued dividends.
During March 2015, the Company issued an aggregate of 169,334 shares of its common stock in exchange for 200 shares of the
Company’s Series C Preferred Stock and accrued dividends.
In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s
Series C Preferred Stock and accrued dividends.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000. In
connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at an exercise price of $1.50
per share for five years with certain reset provisions as described above. The Company determined the initial fair values of the embedded
beneficial conversion feature of the Series C Preferred Stock and the reset provisions of the related issued warrants $506,348 and
$334,784, respectively, using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00
years, a risk free interest rate of 0.25%, a dividend yield of 0%, and volatility of 140.00%. The determined fair values were recorded as
liabilities and a charge to current period operations.
In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In October 2015, the Company issued an aggregate of 143,935 shares of its common stock in exchange for 170 shares of the Company’s
Series C Preferred Stock and accrued dividends.
F-17
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
In November 2015, the Company issued an aggregate of 99,061 shares of its common stock in exchange for 117 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In December 2015, the Company issued an aggregate of 84,667 shares of its common stock in exchange for 100 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In February 2016, the Company issued an aggregate of 54,859 shares of its common stock in exchange for 75 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In May 2016, the Company issued an aggregate of 197,713 shares of its common stock in exchange for 236 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In June 2016, the Company issued an aggregate of 54,759 shares of its common stock in exchange for 70 shares of the Company’s Series
C Preferred Stock and accrued dividends.
In December 2016, the Company issued an aggregate of 18,188 shares of its common stock in exchange for 20 shares of the Company’s
Series C Preferred Stock and accrued dividends.
For the year ended December 31, 2016, at the time of conversions, the Company reclassified the fair value of the embedded beneficial
conversion feature of the Series C Preferred Stock of $103,096 from liability to equity. The fair values were determined using a
Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of
0.23% to 0.59%, a dividend yield of 0%, and volatility of 141% to 160%.
Series C Preferred Stock issued and outstanding totaled 1,070 and 1,471 as of December 31, 2016 and 2015, respectively. As of
December 31, 2016 and 2015, the Company has accrued $359,891 and $340,291 dividends payable on the Series C Preferred Stock.
Registration Rights Agreement
In connection with the Company’s private placement of Series C Preferred Stock and warrants, the Company entered into a registration
rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the
common stock issuable upon conversion of Series C Preferred Stock and exercise of the warrants issued to holders of Series C Preferred
Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale
of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and
to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration
statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that
registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the
registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues
comments.
If (i) the registration statement is not filed by July 22, 2013, (ii) the registration statement is not declared effective by the Securities and
Exchange Commission within five trading days after the Company is notified that the registration statement is not being reviewed by the
Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities
and Exchange Commission by November 22, 2013 in the case of a review by the Securities and Exchange Commission pursuant to which
the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for
more than 20 consecutive calendar days or more than an aggregate of 45 calendar days during any 12-month period after its first effective
date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount
equal to 0.25% of the aggregate purchase price paid by such purchasers per month of delinquency.
F-18
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement shall be 3% of
the aggregate purchase price paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than
seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreement, the Company must maintain the effectiveness of the registration statement from the
effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be
sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration
statement in certain events.
The Company filed a registration statement on July 22, 2013, which was originally declared effective on June 23, 2014. As a result, the
Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement as of December 31,
2014. At December 31, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
NOTE 7 – WARRANT AND DERIVATIVE LIABILITIES
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C
Preferred Stock and related warrants (see Note 6) did not meet the defined criteria of a derivative in such that the net settlement
requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards
Codification 815 and therefore bifurcation was not required. There was no established market for the Company’s common stock. As of
March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified
from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of
$1,242,590 and $4,097,444, respectively.
The Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the
Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89, a
dividend yield of 0%, and volatility of 141.00%.
At December 31, 2016, the Company marked to market the fair value of the reset provisions of the Series C Preferred Stock and warrants
and determined fair values of $288,934 and $1,937,234, respectively. The Company recorded a loss from change in fair value of
derivatives of $422,908 for year ended December 31, 2016. The fair values of the embedded derivatives were determined using the
Multinomial Lattice pricing model and the following assumptions: estimated contractual term of 1.43 to 3.36 years, a risk free interest rate
of 0.59% to 1.47%, a dividend yield of 0%, and volatility of 161%
NOTE 8 – STOCKHOLDER EQUITY
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of December 31, 2016 and 2015, the
Company has authorized 200 shares of Series A preferred stock, 600 shares of Series B preferred stock and 4,200 shares of Series C
Preferred Stock. As of December 31, 2016 and 2015, there were no outstanding shares of Series A and Series B preferred stock.
During January 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s
Series C Preferred Stock and accrued dividends.
During March 2015, the Company issued an aggregate of 169,334 shares of its common stock in exchange for 200 shares of the
Company’s Series C Preferred Stock and accrued dividends.
F-19
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s
Series C Preferred Stock and accrued dividends.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000. In
connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at an exercise price of $1.50
per share for five years.
In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In October 2015, the Company issued an aggregate of 143,935 shares of its common stock in exchange for 170 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In November 2015, the Company issued an aggregate of 99,061 shares of its common stock in exchange for 117 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In December 2015, the Company issued an aggregate of 84,667 shares of its common stock in exchange for 100 shares of the Company’s
Series C Preferred Stock and accrued dividends.
Cumulatively from January 1, 2015 to December 31, 2015, the Company exchanged 1,690 shares of the Company’s Series C Preferred
Stock and dividends with a recorded value of $2,146,302 for 1,430,871 shares of common stock.
In February 2016, the Company issued 54,859 shares of its common stock in exchange for 75 shares of the Company’s Series C Preferred
Stock and accrued dividends.
In May 2016, the Company issued an aggregate of 197,713 shares of its common stock in exchange for 236 shares of the Company’s
Series C Preferred Stock and accrued dividends.
In June 2016, the Company issued an aggregate of 54,759 shares of its common stock in exchange for 70 shares of the Company’s Series
C Preferred Stock and accrued dividends.
In December 2016, the Company issued an aggregate of 18,188 shares of its common stock in exchange for 20 shares of the Company’s
Series C Preferred Stock and accrued dividends.
Cumulatively from January 1, 2016 to December 31, 2016, the Company exchanged 401 shares of the Company’s Series C Preferred
Stock and dividends with a recorded value of $491,423 for 325,519 shares of common stock.
As of December 31, 2016 and 2015, the Company has 1,070 and 1,471 Series C Preferred Stock issued and outstanding.
F-20
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Common stock
On November 18, 2016 at the Special Meeting, the stockholders approved an amendment to the Company’s Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of common stock from 50,000,000 to 200,000,000 shares (the
“Certificate Amendment”). The Certificate Amendment had been previously approved by the Company’s Board on September 7, 2016,
subject to stockholder approval. Immediately following the Special Meeting on November 18, 2016, the Company filed the Certificate
Amendment with the Secretary of State of the State of Delaware.
As of December 31, 2016 and 2015, the Company had 22,588,184 and 16,825,703 shares issued and outstanding, respectively.
During the year ended December 31, 2015, the Company issued an aggregate of 1,452,500 shares of common stock under the terms of its
2012 Equity Plan for services rendered totaling $3,341,752 ($2.30 average per share).
During the year ended December 31, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at
$2.09 per share.
During the year ended December 31, 2015, the Company issued an aggregate of 8,082 shares of common stock in exchange for warrants
exercised at an average price of $3.09 per share.
During the year ended December 31, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants
exercised on a cashless basis.
During the year ended December 31, 2015, the Company entered into securities purchase agreements with investors pursuant to which the
Company issued 2,645,432 shares of common stock and warrants for aggregate proceeds of $4,759,798, net of $608,356 in expenses.
During the year ended December 31, 2016, the Company issued an aggregate of 790,000 shares of common stock under the terms of its
2012 Equity Plan for services rendered totaling $1,419,200 ($1.80 average per share).
During the year ended December 31, 2016, the Company issued an aggregate of 545,000 shares of common stock for services rendered
totaling $1,051,850 ($1.93 average per share).
During the year ended December 31, 2016, the Company entered into securities purchase agreements with investors pursuant to which
the Company issued 3,798,417 shares of common stock and 2,049,504 warrants for aggregate proceeds of $5,226,368, net of $490,543
in expenses.
During the year ended December 31, 2016, the Company issued 220,000 shares of common stock as vested previously issued restricted
stock units
During the year ended December 31, 2016, the Company issued 83,545 shares of its common stock in exchange for 100,000 common
stock options previously issued in May 2016 under the terms of its 2012 Equity Plan. The equality of the fair value was determined using
the Black Scholes option pricing model with the following assumptions: dividend yield: 0%; volatility: 122.82%; risk free rate: 1.08%,
term: 5 years and fair value of the Company’s common stock: $1.84.
At December 31, 2016, the Company was obligated, but had not issued, 124,750 shares of common stock for Board of Director
compensation approved in December 2016. The Company accrued $168,288 compensation relating to the obligation as stock based
compensation (at $1.36 average per share).
F-21
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
In connection with the securities purchase agreements described above, the Company entered into registration rights agreements with the
purchasers in such private placements pursuant to which the Company agreed to provide certain registration rights with respect to the
common stock issued to the investors participating in such private placements and the common stock issuable upon exercise of the related
warrants issued such investors. Specifically, the Company agreed to file a registration statement with the Securities and Exchange
Commission covering the resale of the shares of common stock issued pursuant to the private placement and issuable upon the exercise of
the warrants within 45 days of the termination date of such private placement and to cause such registration statement to be declared
effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and
Exchange Commission, within 30 calendar days after the Company is notified that registration statement is not being reviewed by the
Securities and Exchange Commission, and within 180 calendar days of the initial filing date of the registration statement in the event that
the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues
comments.
If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared
effective by the Securities and Exchange Commission within 30 calendar days after the Company is notified that registration statement is
not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared
effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the
case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues
comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more
than an aggregate of 15 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated
damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price
paid by such purchasers per month of delinquency, provided, however, that the Company will not be required to make any payments any
of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for
resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that the Company will not be required to
make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that the
Company is unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the
Securities Act of 1933, as amended.
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements dated
December 31, 2013, April 4, 2014 and August 15, 2014 shall be 3% of the aggregate purchase price paid by the purchasers, (ii) the
maximum aggregate liquidated damages due under the registration rights agreement dated December 19, 2014 shall be 6% of the
aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven
days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreements, the Company must maintain the effectiveness of the registration statement from the
effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be
sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration
statement in certain events.
The Company filed a registration statement on August 2, 2016, which was declared effective on August 8, 2016 to satisfy the
requirements under the registration rights agreements with the purchasers of its common stock and warrants prior to June 30, 2016.
F-22
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Beginning on October 23, 2015, the Company entered into subscription agreements with certain accredited investors pursuant to which
the Company sold to the investors units, which each unit consisting of one share of the Company’s common stock and a warrant to
purchase one half of one share of common stock (the “Private Placement”). In connection with the Private Placement, the Company also
entered into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration
rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the
Company to file a registration statement within 45 calendar days upon close of the private placement and to be effective 120 calendar
days thereafter. As of the date of filing, the Private Placement has not closed. The Company has estimated the liability under the
registration rights agreement at $-0- as of December 31, 2016.
NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
Options
On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “Plan) and terminated the Long-
Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 15,186,123 (as amended) shares of
the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the
Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and
nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise
price, vesting and expiration period of the grants under the Plan.
However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of
the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common
stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.
Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an
expiration period of not more than ten years. The Company reserved 227,388 shares of its common stock for future issuance under the
terms of the Plan.
During the year ended December 31, 2015, the Company granted an aggregate of 1,800,000 options and 1,452,500 stock grants (net of
shares exchanged) to officers, directors and key consultants.
During the year ended December 31, 2016, the Company granted an aggregate of 750,000, net of 100,000 canceled, options to
officers, directors and key consultants.
During the year ended December 31, 2016, the Company granted an aggregate of 723,545 stock grants to officers, employees and key
consultants under the plan. See Note 8.
The following table presents information related to stock options at December 31, 2016:
F-23
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Options Outstanding
Options Exercisable
Exercise
Price
Number of
Options
$
1.01-2.00
2.01-3.00
3.01-4.00
2,294,642
5,650,548
300,000
8,245,190
Weighted
Average
Remaining Life
In Years
Exercisable
Number of
Options
1,810,976
4,917,663
300,000
7,028,639
6.8
5.3
8.3
5.8
A summary of the stock option activity and related information for the 2012 Plan for the years ended December 31, 2016 and 2015 is as
follows:
Weighted-
Average
Weighted-
Average
Remaining
Contractual
Term
Shares
Exercise Price
Outstanding at January 1, 2015
Grants
Exercised
Canceled
Outstanding at December 31, 2015
Grants
Exercised
Canceled
Outstanding at December 31, 2016
Exercisable at December 31, 2016
5,990,190 $
1,800,000
(10,000)
-
7,780,190 $
905,000
-
(440,000) $
8,245,190 $
7,028,639 $
2.25
2.70
2.09
2.30
1.71
2.24
2.24
2.28
Aggregate
6.7 $
8.9 $
-
Intrinsic Value
3,267,692
-
-
-
-
-
6.4 $
10.0 $
5.8 $
5.5 $
-
-
The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less
than the Company’s stock price of $1.29 as of December 31, 2016, which would have been received by the option holders had those
option holders exercised their options as of that date.
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated
using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until
sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption
to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options
for non-employees.
For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for
“plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied
yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The fair value of stock-
based payment awards during the years ended December 31, 2016 and 2015 was estimated using the Black-Scholes pricing model.
F-24
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest.
In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options,
and the number of vested options as a percentage of total options outstanding.
During the year ended December 31, 2015, the Company granted an aggregate of 1,800,000 options to purchase the Company’s common
stock in connection with the services rendered at exercise prices from $1.56 to $3.99 per share for a term of seven years. Vesting is as
follows:
737,500
155,000
250,000
225,000
300,000
100,000
32,500
1,800,000
Exercisable immediately
Per quarter, over one year
Per quarter, over three years
One year anniversary
1/12 per month beginning first month anniversary
50% one year anniversary, 50% two year anniversary
Performance contingent
The fair value of the granted options for the year ended December 31, 2015 was determined using the Black Scholes option pricing model
with the following assumptions:
Dividend yield:
Volatility
Risk free rate:
Expected life:
Estimated fair value of the Company’s common stock
Estimated forfeiture rate
-0-%
118.56% to
130.30%
1.19% to 2.37%
7 to 10 years
$ 1.42 to $3.99
0%
On April 22, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.
On May 18, 2016, the Company granted an aggregate of 685,000 options to purchase the Company stock in connection with the services
rendered at the exercise price of $1.84 per share for a term of ten years, vesting immediately. In September 2016, the Company issued
83,545 shares of its common stock in exchange for 100,000 common stock options previously issued in May 2016 under the terms of its
2012 Equity Plan. The equality of the fair value was determined using the Black Scholes option pricing model with the following
assumptions: dividend yield: 0%; volatility: 122.82%; risk free rate: 1.08%, term: 5 years and fair value of the Company’s common
stock: $1.84.
On August 24, 2016, the Company granted 65,000 options to purchase the Company stock in connection with the services rendered at the
exercise price of $1.33 per share for a term of ten years with 12,500 vesting immediately; 37,500 vesting quarterly beginning September
14, 2016 through December 14, 2017 and 15,000 performance contingent.
On December 22, 2016, the Company granted an aggregate of 150,000 options to purchase the Company stock in connection with the
services rendered at the exercise price of $1.36 per share for a term of ten years with vesting immediately.
F-25
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
On December 29, 2016, the Company granted 5,000 options to purchase the Company stock in connection with the services rendered at
the exercise price of $1.35 per share for a term of ten years with vesting immediately.
The following assumptions were used in determining the fair value of employee and vesting non-employee options during the year ended
December 31, 2016:
Risk-free interest rate
Dividend yield
Stock price volatility
Expected life
Weighted average grant date fair value
1.08% - 2.04%
0%
109.3% to
122.82%
5 – 10 years
1.47
$
The fair value of all options vesting during the year ended December 31, 2016 and 2015 of $2,801,948 and $4,471,603, respectively, was
charged to current period operations. Unrecognized compensation expense of $310,817 and $1,782,575 at December 31, 2016 and 2015,
respectively, will be expensed in future periods.
Restricted Stock
The following table summarizes the restricted stock activity for the two years ended December 31, 2016:
Restricted shares issued as of January 1, 2015
Granted
Total restricted shares issued as of December 31, 2015
Granted
Vested
Vested restricted shares as of December 31, 2016
Unvested restricted shares as of December 31, 2016
-
175,000
175,000
180,000
(220,000)
-
135,000
On September 7, 2016, the Company granted 180,000 restricted stock units (“RSU”) to a consultant vesting monthly over one year
beginning October 7, 2016.
Stock based compensation expense related to restricted stock grants was $213,174 and $338,614 for the years ended December 31, 2016
and 2015, respectively. As of December 31, 2016, the stock-based compensation relating to restricted stock of $75,861 remain
unamortized and is expected to be amortized over the remaining period of approximately 9 months.
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at
December 31, 2016:
F-26
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Exercise
Price
Number
Outstanding
383,320
4,967,971
35,076
1,689,026
100,000
30,755
38,572
100,000
228,720
214,193
1,340,556
9,128,189
0.001
1.50
1.84
1.95
2.00
2.02
2.10
2.50
2.75
3.67
3.75
$
$
$
$
$
$
$
$
$
$
$
Expiration
Date
January 2020
February 2018 to May 2020
January 2020
October 2018 to September 2019
August 2018
January 2020
June 2019
August 2018
August 2019 to September 2019
December 2018 to January 2019
April 2019 to March 2020
On January 23, 2015, the Company issued an aggregate of 428,400 and 321,300 warrants to purchase the Company’s common stock at
$2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the
Company’s common stock.
On February 10, 2015, the Company issued an aggregate of 337,000 and 252,750 warrants to purchase the Company’s common stock at
$2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the
Company’s common stock.
On February 27, 2015, the Company issued an aggregate of 223,000 and 167,250 warrants to purchase the Company’s common stock at
$2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the
Company’s common stock.
On March 31, 2015, the Company issued an aggregate of 410,360 and 307,770 warrants to purchase the Company’s common stock at
$2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the
Company’s common stock.
On April 15, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.
On May 5, 2015, the Company issued 4,082 shares of common stock in exchange for 4,082 warrants exercised at $3.67 per share.
On May 8, 2015, the Company issued 4,000 shares of common stock in exchange for 4,000 warrants exercised at $2.50 per share.
On May 11, 2015, the Company issued an aggregate of 374,641 warrants to purchase the Company’s common stock at $1.50 per share
expiring on May 11, 2020 in connection with the sale of the Company’s Series C Preferred stock.
On August 17, 2015, the Company issued 100,000 and 100,000 warrants to purchase the Company’s common stock at $2.00 and 2.50 per
share, respectively, expiring on August 17, 2018 in connection with services provided. Both warrants vest at 1/12 per month over one
year. The fair value of the vested portion of the issued warrants of $104,505 was charged to current period operations and was
determined using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable
entities of 118.80% to 118.88%, risk free rate of 0.92% to 1.31%, dividend yield of -0- and fair value of the Company’s common stock of
$1.30 to $1.40. As of December 31, 2015, unrecognized compensation expense was $46,993.
F-27
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
On October 23, 2015, the Company issued an aggregate of 108,336 warrants to purchase the Company’s common stock at $1.95, expiring
on October 23, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 11,334 warrants to
purchase the Company’s common stock at $1.50, expiring October 23, 2018 for placement agent services.
On October 29, 2015, the Company issued an aggregate of 43,334 warrants to purchase the Company’s common stock at $1.95, expiring
on October 29, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 6,134 warrants to
purchase the Company’s common stock at $1.50, expiring October 29, 2018 for placement agent services.
On November 18, 2015, the Company issued an aggregate of 188,335 warrants to purchase the Company’s common stock at $1.95,
expiring on November 18, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 25,200
warrants to purchase the Company’s common stock at $1.50, expiring November 18, 2018 for placement agent services.
On December 18, 2015, the Company issued an aggregate of 116,668 warrants to purchase the Company’s common stock at $1.95,
expiring on December 18, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 20,000
warrants to purchase the Company’s common stock at $1.50, expiring December 18, 2018 for placement agent services.
On December 22, 2015, the Company issued an aggregate of 166,667 warrants to purchase the Company’s common stock at $1.95,
expiring on December 22, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 20,000
warrants to purchase the Company’s common stock at $1.50, expiring December 22, 2018 for placement agent services.
On February 9, 2016, the Company issued 25,000 warrants to purchase the Company’s common stock at $1.95 per share, expiring on
February 9, 2019, in connection with the sale of the Company’s common stock. In addition, the Company issued 6,000 warrants to
purchase the Company’s common stock at $1.50 per share, expiring February 9, 2019 for placement agent services.
On March 9, 2016, the Company issued an aggregate of 100,000 warrants to purchase the Company’s common stock at $1.95 per share,
expiring on March 9, 2019, in connection with the sale of the Company’s common stock. In addition, the Company issued 12,000
warrants to purchase the Company’s common stock at $1.50 per share, expiring March 9, 2019 for placement agent services.
On April 1, 2016, the Company issued an aggregate of 100,327 warrants to purchase the Company’s common stock at $1.95 per share,
expiring on April 1, 2019, in connection with the sale of the Company’s common stock. In addition, the Company issued 18,040 warrants
to purchase the Company’s common stock at $1.50 per share, expiring April 1, 2019 for placement agent services.
On April 19, 2016, the Company issued an aggregate of 84,980 warrants to purchase the Company’s common stock at $1.95 per share,
expiring on April 19, 2019, in connection with the sale of the Company’s common stock. In addition, the Company issued 17,996
warrants to purchase the Company’s common stock at $1.50 per share, expiring April 19, 2019 for placement agent services.
On April 29, 2016, the Company issued an aggregate of 567,866 warrants to purchase the Company’s common stock at $1.95 per share,
expiring on April 29, 2019, in connection with the sale of the Company’s common stock. In addition, the Company issued an aggregate of
96,256 warrants to purchase the Company’s common stock at $1.50 per share, expiring between October 23, 2018 through April 29, 2019
for placement agent services.
On June 1, 2016, the Company issued an aggregate of 38,572 warrants to purchase the Company’s common stock at $2.10 per share,
expiring on June 1, 2019, in connection with the sale of the Company’s common stock.
F-28
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
On August 30, 2016, the Company issued an aggregate of 152,513 warrants to purchase the Company’s common stock at $1.95 per share,
expiring on August 30, 2019, in connection with the sale of the Company’s common stock.
On September 19, 2016, the Company issued an aggregate of 35,000 warrants to purchase the Company’s common stock at $1.95 per
share, expiring on September 19, 2019, in connection with the sale of the Company’s common stock.
On October 28, 2016, the Company issued an aggregate of 173,284 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on October 28, 2019, in connection with the sale of the Company’s common stock.
On November 23, 2016, the Company issued an aggregate of 50,002 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on November 23, 2019, in connection with the sale of the Company’s common stock
On December 16, 2016, the Company issued an aggregate of 456,668 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on December 16, 2019, in connection with the sale of the Company’s common stock
On December 22, 2016, the Company issued an aggregate of 115,000 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on December 22, 2019, in connection with the sale of the Company’s common stock
Stock based compensation related to warrants issued for services was $56,931 and $104,505 for the years ended December 31, 2016 and
2015, respectively.
A summary of the warrant activity for the years ended December 31, 2016 and 2015 is as follows:
Weighted-
Average
Outstanding at January 1, 2015
Grants
Exercised
Canceled
Outstanding at December 31, 2015
Grants
Exercised
Canceled
Outstanding at December 31, 2016
Weighted-
Average
Remaining
Contractual
Term
Exercise Price
1.71
2.62
1.58
2.50
2.02
1.74
Shares
5,113,990 $
3,728,479 $
(164,184) $
(1,599,600) $
7,078,685 $
2,049,504
-
-
9,128,189 $
Aggregate
Intrinsic Value
6,041,436
-
-
-
497,933
-
3.6
2.3
-
-
3.0 $
2.5
1.96
1.96
1.96
2.1 $
494,099
2.1 $
2.1 $
494,099
494,099
Vested and expected to vest at December 31, 2016
Exercisable at December 31, 2016
9,128,189 $
9,128,189 $
The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price
less than the Company’s stock price of $1.29 as of December 31, 2016, which would have been received by the warrant holders had those
warrant holders exercised their warrants as of that date.
F-29
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
NOTE 10 – FAIR VALUE MEASUREMENT
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”).
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would
transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs
that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with
insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are
observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or
liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair
value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed
and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial
statements.
The carrying value of the Company’s cash and cash equivalents, accounts payable and other current assets and liabilities approximate fair
value because of their short-term maturity.
As of December 31, 2016 and 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative and warrant liabilities as level 3 and values its derivatives using the methods discussed in Note 7.
While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that
the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different
estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods
discussed in Note 5 are that of volatility and market price of the underlying common stock of the Company.
As of December 31, 2016 and 2015, the Company did not have any derivative instruments that were designated as hedges.
The derivative and warrant liability as of December 31, 2016, in the amount of $288,934 and $1,937,234, respectively, has a level 3
classification.
F-30
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
The following table provides a summary of changes in fair value of the Company’s level 3 financial liabilities as of December 31, 2016:
Balance, December 31, 2014 (and prior)
Total (gains) losses
Initial fair value of derivative at March 31, 2015, reclassified
from equity
Initial fair value of warrant liability at March 31, 2015,
reclassified from equity
Initial fair value of derivative at date of issuance of Series C
Preferred Stock
Initial fair value of warrant liability at the date of issuance
Transfers out due to conversion of Series C Preferred Stock
Transfers out due to exercise of warrants
Mark to market to December 31, 2015
Balance, December 31, 2015
Transfers out due to conversion of Series C Preferred Stock
Mark to market to December 31, 2016
Balance, December 31, 2016
Loss on change in warrant and derivative liabilities for the year
ended December 31, 2016
Warrant
Liability
Derivative
$
- $
-
-
1,242,590
4,097,444
-
-
334,784
-
(265,955)
(2,545,074)
1,621,199
-
316,035
1,937,234 $
250,540
-
(639,467)
-
(568,506)
285,157
(103,096)
106,873
288,934
(316,035) $
(106,873)
$
$
Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.
As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases,
therefore decreasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant
unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Operating leases
On April 15, 2015, the Company entered into a lease amendment agreement, whereby the Company agreed to extend the lease for office
space in Los Angeles, California, commencing September 1, 2015 and expiring on August 31, 2017. In connection with the lease, the
Company is obligated to lease parking spaces at an aggregate approximate cost of $978 per month.
In April 2015, the Company entered into a lease for approximately 1,741 square feet of office space in Golden Valley Minnesota, whereby
the Company agreed to lease premises, commencing May 1, 2015 and expiring on May 31, 2018. In connection therewith, the Company
paid a security deposit of $2,712.
Future minimum lease payments under these three agreements are as follows:
Year Ending December 31,
2017
2018
96,024
13,783
109,807
$
F-31
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
Rent expense charged to operations, which differs from rent paid due to rent credits and to increasing amounts of base rent, is calculated
by allocating total rental payments on a straight-line basis over the term of the lease. During the years ended December 31, 2016 and
2015, rent expense was $128,556 and $165,514, respectively and as of December 31, 2016 and 2015, net deferred rent payable was
$2,912 and $3,016, respectively. Included in rent expense for the year ended December 31, 2015, was incurred temporary monthly rental
expenses.
Employment agreements
On July 14, 2014, the Company’s Board Of Directors (the “Board”) increased the size of the Board to eight members and
appointed Gregory D. Cash and Patrick J. Gallagher as members of the Board, effective as of July 15, 2014, to serve for a term expiring at
the Company’s 2015 annual meeting of stockholders. In addition, the Board appointed Mr. Cash to serve as the Company’s president and
chief executive officer.
In connection with the appointment of Mr. Cash, on July 15, 2014 (the “Effective Date”), the Company entered into an employment
agreement with Mr. Cash (the “Employment Agreement”). The Employment Agreement has an initial term of three years that expires on
July 15, 2017. Under the Employment Agreement, Mr. Cash is entitled to an annual base salary of $275,000. Upon the Company closing
an equity or equity-linked financing with proceeds to the Company of at least $3.5 million (a “Qualified Financing”), Mr. Cash’s annual
base salary will automatically increase to $325,000 and he will receive (i) a one-time payment equal to the difference between the amount
he would have earned if his base salary was $325,000 and the amount he actually earned at his base salary of $275,000 for the time period
from the Effective Date until the closing of such Qualified Financing and (ii) a one-time cash bonus of $30,000. If the Company does not
complete a Qualified Financing within six months after the Effective Date, Mr. Cash’s annual base salary will nonetheless increase to
$325,000 and he will receive the same one-time payment unless the Company reasonably determines that the failure to complete such
Qualified Financing was within the reasonable control of Mr. Cash. Mr. Cash is also eligible to receive an annual bonus equal to at least
50% of the sum of his base salary and one-time payment, based on the achievement of reasonable performance criteria to be determined
by the Board in consultation with Mr. Cash within 90 days of the Effective Date.
In accordance with the Employment Agreement, on July 15, 2014, the Company granted Mr. Cash an incentive stock option to purchase
1,265,769 shares of the Company’s common stock, made pursuant to an Incentive Stock Option Agreement. The option has an exercise
price of $2.21, which was the fair market value of the Company’s common stock on the date of grant, and a term that expires ten years
from the date of grant. The option will vest as follows (i) 542,473 shares of common stock will vest in eleven equal installments of 45,206
shares of common stock and one final installment of 45,207 shares of common stock on a quarterly basis with the first installment vesting
on the Effective Date and subsequent installments vesting every three months thereafter; (ii) 180,824 shares of common stock will vest
immediately upon completion of a Qualified Financing; (iii) 180,824 shares of common stock will vest upon the listing of the Company’s
common stock on a recognized U.S. national securities exchange (i.e., NYSE, MKT LLC, The Nasdaq Stock Market LLC or the New
York Stock Exchange); (iv) 180,824 shares of common stock will vest upon the 510(k) clearance or any other type of clearance deemed
necessary by the U.S. Food and Drug Administration of the Company’s PURE (Precise Uninterrupted Real-time evaluations of
Electrograms) EP technology platform; and (v) 180,824 shares of common stock will vest upon the Company achieving a market
capitalization of $150,000,000 and maintaining such market capitalization for at least 90 consecutive calendar days.
Litigation
The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business. Although
occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a
material adverse effect on its financial position, results of operations or liquidity. There was no outstanding litigation as of December 31,
2016.
F-32
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
NOTE 12 – INCOME TAXES
At December 31, 2016, the Company has available for federal income tax purposes a net operating loss carry forward of approximately
$16,400,000, expiring in the year 2036, that may be used to offset future taxable income. The Company has provided a valuation reserve
against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the
Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company’s
ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be
reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits. During the year ended
December 31, 2016, the Company has increased the valuation allowance from $3,700,000 to $5,500,000.We have adopted the
provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or
expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be
recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax
authorities.
Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the
largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax
positions relating to open income tax returns that were considered to be uncertain.
The Company is required to file income tax returns in the U.S. Federal various State jurisdictions. The Company is no longer subject to
income tax examinations by tax authorities for tax years ending before December 31, 2012.
The effective rate differs from the statutory rate of 34% for due to the following:
Statutory rate on pre-tax book loss
Gain on change in fair value of derivatives
Stock based compensation
Other
Valuation allowance
2016
2015
(34.00)%
1.24%
17.6%
0.09%
15.07%
0.00%
(34.00)%
(11.5)%
28.6%
2.1%
14.8%
0.00%
The Company’s deferred taxes as of December 31, 2016 and 2015 consist of the following:
Non-Current deferred tax asset:
Net operating loss carry-forwards
Valuation allowance
Net non-current deferred tax asset
2016
2015
$
$
5,500,000 $
(5,500,000)
- $
3,700,000
(3,700,000)
-
NOTE 13 – SUBSEQUENT EVENTS
On February 10, 2017 and March 10, 2017, the Company entered into a unit purchase agreement with certain accredited investors,
pursuant to which the Company issued and sold in two closings an aggregate of 995,571 units, which consisted of, in the
aggregate, 995,571 shares of our common stock and warrants to purchase 497,787 shares of our common stock at an exercise price of
$1.50 per share, in exchange for aggregate net proceeds of $1,358,763, after financing costs.
F-33
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2016
On January 25, 2017, the Company approved an Amendment Agreement to the certain Unit Purchase Agreement dated May 26, 2016
whereas under the Original Agreement the Company issued each of the purchasers Units at a price of $1.75 per unit, with each original
Unit consisting of (i) one share of Common Stock, and (ii) an Investor Warrant to purchase one-half of one share of Common Stock at an
exercise price of $2.10 per share of Common; the Amendment Agreement reduced the Original Price Per Unit to $1.50 and the exercise
price of the Original Warrants to $1.50 per share. On February 10, 2017, the Company issued an additional 12,858 shares of common
stock and 6,429 warrants to purchase common stock pursuant to the Amendment Agreement.
On January 25, 2017, the Company granted 75,000 shares of common stock and an aggregate of 130,000 options for compensation to key
consultants outside the 2012 Equity Plan at a cost (or exercise price) of $1.55 per share.
F-34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision of and
with the participation of our management, including our principal executive and our principal financial officer of the effectiveness of the
design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange
Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and our principal
financial officer have concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to
be disclosed by the Company in reports that it files or submits to the SEC under the Exchange Act is recorded, processed, summarized,
and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the
Company’s internal control of financial reporting as discussed below.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the
Company (including its consolidated subsidiaries) and all related information appearing in our Annual Report on Form 10-K. Our
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States
of America. Internal control over financial reporting includes those policies and procedures that:
1.
2.
3.
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with the authorization of management and/or of our Board of Directors; and
provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of
our assets that could have a material effect on our financial statements, including controls related to Section 16 (a) of the
Securities Exchange Act of 1934. As disclosed in Section 16 (a), the Company's Executive Chairman and Director failed to file
125 Form 4 filings for approximately 292 transactions in shares of our common stock executed on various dates between January
1, 2016 and February 28, 2017.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
43
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of December
31, 2016, based on the criteria in a framework developed by the Company’s management pursuant to and in compliance with the criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”) of the
Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of
controls, walkthroughs of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation,
management has concluded that our internal control over financial reporting was not effective as of December 31, 2016, because
management identified a material weakness in the Company’s internal control over financial reporting related to the segregation of duties
as described below.
The Company concluded it is difficult with a very limited staff to maintain appropriate segregation of duties in the initiating and
recording of transactions, thereby creating a segregation of duties weakness. Due to: (i) the significance of segregation of duties to the
preparation of reliable financial statements; (ii) the significance of potential misstatement that could have resulted due to the deficient
controls; and (iii) the absence of sufficient other mitigating controls, we determined that this control deficiency resulted in more than a
remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements may not be
prevented or detected.
Management’s Remediation Initiatives
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm
pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating
controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of
our organization at the current time. Management expects to continue to use reasonable care in following and seeking improvements to
effective internal control processes that have been and continue to be in use at the Company. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all
control issues within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple errors or mistakes. The design of any system of controls is based in part
on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to
risks.
ITEM 9B – OTHER INFORMATION
None.
44
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information regarding our executive officers and the members of our board of directors.
Name
Kenneth L. Londoner
Gregory D. Cash
Steve Chaussy
Donald E. Foley
Roy T. Tanaka
Jerome Zeldis, M.D, Ph.D.
Patrick J. Gallagher
Seth H. Z. Fischer
Jeffrey F. O’Donnell, Sr.
David Weild IV
Age
49
59
63
65
69
66
52
60
57
60
Position with the Company
Executive Chairman and Director
President and Chief Executive Officer, Director
Chief Financial Officer
Director
Director
Director
Director
Director
Director
Director
Directors are elected at each annual meeting of our stockholders and hold office until their successors are elected and qualified
or until their earlier resignation or removal. Officers are appointed by our board of directors and serve at the discretion of the board of
directors.
Biographical Information
Kenneth L. Londoner. Mr. Londoner has served as our director since February 2009 and as our executive chairman since
November 2013. He previously served as our chairman and chief executive officer from February 2009 to September 2013. Mr. Londoner
has served as the managing partner of Endicott Management Partners, LLC, a firm dedicated to assisting emerging growth companies in
their corporate development, since February 2010. From April 2007 to October 2009, he served as executive vice president – corporate
business development and senior director of business development and, from November 2009 to December 2010, he served as a consultant
to NewCardio, Inc., a medical device designer and developer. Mr. Londoner also served as a director of chatAND Inc. from January 2012
to April 2015. Mr. Londoner is a co-founder and board member of Safe Ports Holdings, Charleston, South Carolina. Mr. Londoner also
served as a director of MedClean Technologies, Inc. from November 2008 to September 2010. Mr. Londoner was an investment officer
and co-manager of the Seligman Growth Fund, Seligman Capital Fund, and approximately $2 billion of pension assets at J & W Seligman
& Co, Inc. in New York from 1991 to 1997. Mr. Londoner graduated from Lafayette College in 1989 with a degree in economics and
finance and received his MBA from New York University’s Leonard N. Stern School of Business in 1994.We believe that Mr.
Londoner’s extensive experience in financial and venture capital matters, as well as his intimate knowledge of our company as its co-
founder make him an asset to our board of directors.
Gregory D. Cash. Mr. Cash has served as our president and chief executive officer and as a director since July 2014. Mr. Cash
served as the president, chief executive officer and founder of Argent International LLC, a life sciences consulting firm, from July 2011
until July 2014. Mr. Cash served as a member of the board of directors for Acuity Medical International, Inc. from January 2015 to April
2015. From September 2012 until February 2013, he was also president and chief executive officer of NeuroTherm, Inc., a multinational
company in the interventional pain field. Until June 2011, Mr. Cash served as president, chief executive officer and director of HeartSine
Technologies, Inc., a start-up company in the automated external defibrillator market. Prior to joining HeartSine Technologies in
December 2006, he was President, Vascular Therapy and New Business for Sorin Group based in Milan, Italy and also Senior Vice
President, Strategic Alliances based in Denver, Colorado. From 2002 to 2004, Mr. Cash was the president, chief executive officer and a
director of Vasomedical, Inc., a NASDAQ traded public company.
45
Prior to 2002, he was corporate vice president at Datascope Corporation and president of its wholly owned subsidiary,
InterVascular, Inc., president and chief operating officer of Eminent Technology Partners, Inc. and chief executive officer of its subsidiary,
Eminent Research Systems, vice president and general manager of vascular therapies for the U.S. Surgical Corporation and spent five
years at Boston Scientific Corporation in numerous roles, including vice president of cardiology sales and marketing in Europe. Mr. Cash
began his career at Medtronic, Inc., where he served fourteen years in increasingly senior sales and marketing positions. He currently
serves on a number of advisory boards, including the Concordia Language Villages National Board, the University of Minnesota Office
for Technology Commercialization as well as the French American Chamber of Commerce of Minneapolis/St. Paul. Mr. Cash holds a
B.A. in International Marketing and Business Administration from the College of St. Thomas in St. Paul, Minnesota. We believe that Mr.
Cash’s medical business experience, proven leadership skills and cardiac industry technology expertise make him a valuable member of
our board.
Steve Chaussy. Mr. Chaussy has served as our chief financial officer on a part time basis since May 2011. Since 2005, Mr.
Chaussy has been the sole proprietor of Anna & Co., Inc., a consulting company that offers services to small publicly traded companies.
Anna & Co., Inc. provides general financial and accounting services, with a special emphasis towards SEC reporting and compliance, to
companies that lack sufficient resources to hire full-time employees to provide such services. From 2001 to 2005, Mr. Chaussy provided
services as both a chief financial officer and as a consultant to small publicly traded companies. Prior to 2001, Mr. Chaussy served as chief
financial officer for a large private distribution and wholesaling company, where he gained international experience. Mr. Chaussy is a
graduate of Virginia Polytechnic Institute and State University and is a licensed certified public accountant in Virginia, California and
Florida.
Donald E. Foley. Mr. Foley has served as our director since October 2015. Mr. Foley was chairman of the board and chief
executive officer of Wilmington Trust Corporation from 2010-2011. Prior to Wilmington Trust Corporation, Mr. Foley was senior vice
president, treasurer and director of tax for ITT Corporation, a supplier of advanced technology products and services. Mr. Foley currently
serves on the board of directors of AXA Equitable EQAT Mutual Funds and is an advisory board member of M&T Corporation Trust and
Investment Committee. In addition, Mr. Foley served on the boards of directors of M&T Corporation from 2011-2012 and of Wilmington
Trust Company and Wilmington Trust Corporation from 2007-2011. Mr. Foley holds an M.B.A. from New York University and a B.A.
from Union College. He is also a member of the board of trustees of Burke Rehabilitation Hospital and Burke Medical Research Institute,
as well as the W. Burke Foundation. Mr. Foley brings extensive financial, economic, capital markets and executive leadership expertise to
our board gained through his successful career on Wall Street and the Fortune 500.
Roy T. Tanaka . Mr. Tanaka has served as our director since July 2012. From 2004 until his retirement in September 2008, Mr.
Tanaka served as the worldwide president of Biosense Webster, Inc., a Johnson & Johnson company, a market and technology leader in
the field of electrophysiology. He joined Biosense Webster, Inc. as its U.S. president in 1997. Previously he held a variety of senior
management positions at Sorin Biomedical, Inc., including president and chief executive officer, and leadership roles at CooperVision
Surgical and Shiley, a division of Pfizer, Inc. He currently serves on the boards of directors of Coherex Medical, Inc. and Advanced
Cardiac Therapeutics Inc., a company using electrophysiology to develop technology to measure the temperature in a lesion during cardiac
ablation procedures, and VytronUS Inc. In addition, Mr. Tanaka served as a director of Volcano Corporation until May 2014 and Tomo
Therapy until its acquisition in June 2011. Mr. Tanaka brings broad experience in executive leadership in the medical device field. His
operational expertise and knowledge of the regulatory environment, both in the U.S. and globally, also bring a valuable perspective.
Jerome B. Zeldis, M.D., Ph.D. Dr. Zeldis has served as a director since April 2015. Dr. Zeldis is the chief executive officer of
Celgene Global Health and the chief medical officer of Celgene Corporation. Dr. Zeldis has been with Celgene since 1997; prior to his
current role, he served as senior vice president of clinical research and medical affairs. Prior to Celgene, Dr. Zeldis worked at Sandoz
Research Institute and Janssen Research Institute in both clinical research and medical development. He is currently on the board of the
Semorex Corporation, Bionor Pharma, Inc., Mali Health and PTC Corporation and serves as the chairman of the board of directors of
Alliqua BioMedical, Inc. Dr. Zeldis attended Brown University for a B.A., M.S., followed by Yale University for a M.Phil., M.D., and
Ph.D. in molecular biophysics and biochemistry (immunochemistry).
46
He trained in internal medicine at the UCLA Center for the Health Sciences and Gastroenterology at the Massachusetts General
Hospital and Harvard Medical School. He was assistant professor of medicine at the Harvard Medical School, associate professor of
medicine at University of California, Davis, clinical associate professor of Medicine at Cornell Medical School and professor of clinical
medicine at the Robert Wood Johnson Medical School in New Brunswick, New Jersey. Dr. Zeldis has published 122 peer reviewed
articles and 24 reviews, book chapters, and editorials. Dr. Zeldis brings his extensive background in the healthcare industry, as well as his
experience in emerging growth companies, which will make him a valuable resource on our board of directors.
Patrick J. Gallagher. Mr. Gallagher has served as our director since July 2014. Mr. Gallagher, MBA, CFA, is an accomplished
capital markets executive, advisor, and investor with a distinguished record of success in both the public and private markets. He has
nearly 20 years of experience on Wall Street and extensive expertise in alternative investments, capital markets, and marketing. Since
September 2014, Mr. Gallagher has served as managing director and head of healthcare sales at Laidlaw & Co. (UK) Ltd. Mr. Gallagher
serves as a strategic consultant for Kinex Pharmaceuticals, LLC, a biotechnology firm focused on next-generation therapies in oncology
and immunology and was the vice president of business development and investor relations from September 2012 to October 2013. In
November 2010, he was appointed by broker Concept Capital, a division of Sanders Morris Harris, as a Managing Director and the head
of institutional sales. In 2001, Mr. Gallagher co-founded BDR Research Group, LLC, an independent sell-side research firm specializing
in healthcare investing, financing and operations, and served as its chief executive officer until November 2010. Prior to 2001, he held
various sales positions at investment and research firms Kidder Peabody, PaineWebber and New Vernon Associates. Mr. Gallagher is a
CFA charter holder, received his MBA from Pennsylvania State University and holds a B.S. degree in finance from the University of
Vermont. We believe that Mr. Gallagher’s experience in capital markets and marketing, with extensive expertise concentrated in the life
sciences space, make him a valuable resource on our board.
Seth H. Z. Fischer . Mr. Fischer has served as our director since May 2013. Since September 2013, Mr. Fischer has served as the
chief executive officer and director of Vivus, Inc., a biopharmaceutical company focusing on the treatment of obesity, sleep apnea,
diabetes and sexual health. Prior to that, Mr. Fischer served in positions of increasing responsibility with Johnson & Johnson from 1983
until his retirement in 2012. Most recently Mr. Fischer served as Company Group Chairman Johnson & Johnson and Worldwide
Franchise Chairman Cordis Corporation from 2008 to 2012, which included responsibility for Cordis and Biosense Webster, and as
Company Group Chairman North America Pharmaceuticals from 2004 to 2007, which included responsibility for Ortho-McNeil
Pharmaceuticals, Janssen and Scios. Since 2013, Mr. Fischer has served as an advisor of MedHab, LLC, a medical device limited liability
company. From April 2013 to September 2013, Mr. Fischer served on the board of directors of Trius Therapeutics, Inc., a public
pharmaceutical company, until it was acquired by Cubist Pharmaceuticals, now a wholly owned subsidiary of Merck & Co., Inc. We
believe that Mr. Fischer’s extensive executive experience in a major health care company and his specific experience in launching and
growing new pharmaceutical products make him an ideal member of our board.
Jeffrey F. O’Donnell, Sr . Mr. O’Donnell has served as our director since February 2015; he had previously served as a director
from October 2011 until February 2014. Mr. O’Donnell has extensive experience in the Healthcare industry, merging a solid, traditional
corporate background with emerging growth experience. Jeff brings more than 20 years of Board and Chief Executive experience running
emerging medical device firms. Businesses under his direct leadership have achieved over $1.5 Billion in value creation from initial public
offering of stock or mergers and acquisitions. Currently, Jeff is the President and CEO of Trice Medical. Trice is an emerging growth
medical device company developing optical needles used by orthopedic surgeons to diagnose soft tissue damage of joints. In 2008, Jeff
started and ran Embrella Cardiovascular, a medical device startup company, which was sold in 2011 to Edwards Lifesciences (NYSE:
EW). Prior to Embrella Cardiovascular, Jeff served as President and CEO of PhotoMedex (NASDAQ: PHMD) from 1999 to 2009. Prior
to PhotoMedex, Jeff was the President and CEO of Cardiovascular Dynamics. His team took CCVD public on NASDAQ in June of 1996
and purchased Radiance Medical Systems and Endologix (NASDAQ: ELGX). From 1994 to 1995 Jeff held the position of President and
CEO of Kensey Nash Corporation (NASDAQ: KNSY).
47
Additionally, he has held several senior sales and marketing management positions at Boston Scientific Corporation, Guidant
Corporation and with Johnson & Johnson’s Orthopedic Division. In 2005, Jeff was named LifeSciences CEO of the Year by Price
Waterhouse Coopers. In 2011, Jeff was named the Greater Philadelphia Emerging Entrepreneur Of The Year by Ernst & Young. Jeff is a
previous director for Cardiac Science (7 yrs.) and Endologix (12 yrs.); he also serves as Chairman of the Board of Strata Skin Sciences
(NASDAQ: SSKN). In 2016 he joined the Accel Board of AdvaMed; he is an observer on the Membership, Ethics, and Technology and
Regulatory committees of the AdvaMed Board. Jeff is a graduate of LaSalle University in Philadelphia earning a B.S. in Business
Administration. Mr. O’Donnell brings his experience in the healthcare industry and cardiovascular space, along with his experience with
emerging growth companies, which will make him a valuable member of our board of directors.
David Weild IV. Mr. Weild has served as a director since May 2015. Mr. Weild is founder, chairman and CEO of Weild & Co.,
Inc., parent company of the investment banking firm Weild Capital, LLC. Prior to Weild & Co., Mr. Weild was vice chairman of
NASDAQ, president of PrudentialSecurities.com and head of corporate finance and equity capital markets at Prudential Securities, Inc.
Mr. Weild holds an M.B.A. from the Stern School of Business and a B.A. from Wesleyan University. Mr. Weild is currently on the board
of PAVmed. From September 2010 to June 2011, Mr. Weild served on the board of Helium.com, until it was acquired by R.R. Donnelly
& Sons Co. Since 2003, Mr. Weild has been chairman of the board of the 9-11 charity Tuesday’s Children. Mr. Weild brings extensive
financial, economic, stock exchange, capital markets, and small company expertise to the Company gained throughout his career on Wall
Street.
Family Relationships
There are no family relationships among any of our officers or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers, and persons who own
more than ten percent of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our
common stock. To our knowledge, based solely on a review of the copies of such reports furnished to us, during the fiscal year ended
December 31, 2016, there were a number of transactions that were not timely reported.
The following is the number of late reports since the beginning of the fiscal year ended December 31, 2016, under Section 16(a)
and the number of transactions reflected therein as not reported on a timely basis during such fiscal year by such executive officers,
directors and persons who own more than ten percent of our common stock:
·
·
·
·
·
·
·
·
Mr. Londoner failed to file 93 Form 4 filings for approximately 292 transactions in shares of our common stock
executed on various dates between January 1, 2016 and February 28, 2017.
Mr. Zeldis filed one late report with respect to one transaction.
Mr. Weild filed one late report with respect to one transaction.
Mr. Tanaka filed one late report with respect to one transaction.
Mr. Cash filed two late reports, each with respect to one transaction.
Mr. Foley filed one late report with respect to one transaction.
Ms. Mikolaitis filed one late report with respect to one transaction.
Mr. Chaussy filed two late reports, one with respect to one transaction and one with respect to three transactions.
48
Committees of the Board of Directors
Our board of directors has established an audit committee, a nominating and corporate governance committee and a
compensation committee, each of which has the composition and responsibilities described below.
Audit Committee
Our audit committee is currently comprised of Messrs. Weild, Gallagher and O’Donnell, each of whom our board has determined
to be financially literate and qualifies as an independent director under Section 5605(a)(2) and Section 5605(c)(2) of the rules of the
NASDAQ Stock Market. Mr. Weild is the chairman of our audit committee. In addition, Mr. Weild qualifies as a financial expert, as
defined in Item 407(d)(5)(ii) of Regulation S-K.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee is currently comprised of Dr. Zeldis and Messrs. Foley and Tanaka, each of
whom qualifies as an independent director under Section 5605(a)(2) of the rules of the NASDAQ Stock Market. Dr. Zeldis is the
chairman of our nominating and corporate governance committee.
Compensation Committee
Our compensation committee is currently comprised of Messrs. O’Donnell, Tanaka and Fischer, each of whom qualifies as an
independent director under Section 5605(a)(2) of the rules of the NASDAQ Stock Market, an “outside director” for purposes of Section
162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Section 16b-3 under the Securities Exchange Act of
1934, as amended, and does not have a relationship to us which is material to his ability to be independent from management in
connection with the duties of a compensation committee member, as described in Section 5605(d)(2) of the rules of the NASDAQ Stock
Market. Mr. O’Donnell is the chairman of our compensation committee.
Code of Ethics
We have adopted a code of business conduct and ethics that applies to our officers, directors and employees, including our
principal executive officer, principal financial officer and principal accounting officer. The full text of our Code of Business Conduct and
Ethics is published on the Investors section of our website at www.biosigtech.com. We intend to disclose any future amendments to
certain provisions of the Code of Business Conduct and Ethics, or waivers of such provisions granted to executive officers and directors,
on this website within four business days following the date of any such amendment or waiver.
ITEM 11 – EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning compensation, for our last two fiscal years awarded to,
earned by or paid to our named executive officers: (i) Kenneth L. Londoner, our executive chairman and member of our board, (ii)
Gregory D. Cash, our chief executive officer and member of our board and (iii) Steven Chaussy, our chief financial officer.
49
Year
Salary
($)
Bonus
($)
Stock
Awards
($) (1)
Option
Awards
($)
Nonequity
Incentive Plan
Compensation
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total
($)
2016 315,000
2015 368,052
- 538,940
56,000
-
(1)
(2)
2016 325,000
2015 385,834
259,221
56,000
(3)
(2)
2016 110,000
2015 102,500
386,000
336,000
(4)
(5)
-
-
-
-
-
-
-
-
-
-
-
-
- 853,940
- 424,052
- 555,413
- 441,834
- 496,000
- 438,500
Name and
principal
position
Kenneth L.
Londoner,
Executive
Chairman and
Director
Gregory D.
Cash,
President,
Chief
Executive
Officer and
Director
Steven
Chaussy,
Chief
Financial
Officer
(1)
(2)
(3)
(4)
(5)
Represents (i) a common stock award of 250,000 shares granted May 4, 2016 and (ii) a common stock award of 41,500 shares
granted December 8, 2016.
Represents a common stock award of 25,000 shares granted on February 24, 2015.
Represents (i) a stock option granted May 18, 2016 for the purchase of 150,000 shares of common stock at $1.84 for ten years,
exercisable immediately and (ii) a common stock award of 20,875 shares granted December 8, 2016.
Represents a common stock award of 200,000 shares granted May 4, 2016.
Represents a restricted stock award of 150,000 shares granted on February 24, 2015.
Agreements with Executive Officers and Change-In-Control Arrangements
Kenneth L. Londoner
We entered into an employment agreement with Kenneth Londoner on March 1, 2013. The employment agreement terminated
on March 1, 2015, after which Mr. Londoner’s employment became on an at-will basis. Prior to its termination, Mr. Londoner’s
employment agreement required that Mr. Londoner receive an annual base salary of $225,000 and be eligible for annual discretionary
bonuses and equity-based incentives, as our board may determine. Mr. Londoner was also subject to non-competition and non-solicitation
obligations, whereby, for a period lasting until one year after the termination of his employment with us, Mr. Londoner was not permitted
to, directly or indirectly, (i) in any state in the U.S. or country that we conduct business and for which Mr. Londoner had responsibility,
work for, invest in, provide financing to or establish a business that competes with our business, other than an exception that permits
limited investment in publicly-traded competitors, (ii) solicit business from or do business with any customer, client, manufacturer or
vendor with whom we did business or who we solicited within the preceding two years, and (iii) solicit, engage or hire any person
employed by or who served as a consultant to us within the preceding twelve months. In September 2013, Mr. Londoner resigned as our
chief executive officer, but remained with us in an executive role. In November 2013, Mr. Londoner became our executive
chairman. While Mr. Londoner’s employment agreement expired on March 1, 2015, we intend to continue to compensate Mr. Londoner
pursuant to the terms of his former employment agreement for his contributions with respect to corporate finance, investor relations, and
business development.
Prior to entering into his employment agreement, Mr. Londoner was an at-will employee.
50
Gregory D. Cash
On July 15, 2014, we entered into an employment agreement with Gregory Cash. The employment agreement has an initial term
of three years that expires on July 15, 2017. Under the employment agreement, Mr. Cash is entitled to an annual base salary of $275,000.
On March 31, 2015, upon our closing an equity or equity-linked financing with proceeds of at least $3.5 million (a “Qualified
Financing”), Mr. Cash’s annual base salary automatically increased to $325,000 and he received (i) a one-time payment equal to the
difference between the amount he would have earned if his base salary was $325,000 and the amount he actually earned at his base salary
of $275,000 for the time period from the effective date of the agreement until the closing of such Qualified Financing and (ii) a one-time
cash bonus of $30,000. Mr. Cash is also eligible to receive an annual bonus equal to at least 50% of the sum of his base salary and one-
time payment, based on the achievement of reasonable performance criteria to be determined by the board in consultation with Mr. Cash
within 90 days of the effective date.
In accordance with Mr. Cash’s employment agreement, on July 15, 2014, we granted Mr. Cash an incentive stock option to
purchase 1,265,769 shares of common stock, made pursuant to an Incentive Stock Option Agreement. The option has an exercise price of
$2.21, which was the fair market value of our common stock on the date of grant, and a term that expires ten years from the date of grant.
The option will vest as follows (i) 542,473 shares of common stock will vest in eleven equal installments of 45,206 shares of common
stock and one final installment of 45,207 shares of common stock on a quarterly basis with the first installment vesting on the effective
date of his employment agreement and subsequent installments vesting every three months thereafter; (ii) 180,824 shares of common
stock will vest immediately upon completion of a Qualified Financing; (iii) 180,824 shares of common stock will vest upon the listing of
our common stock on a recognized U.S. national securities exchange (i.e., NYSE, MKT LLC, The Nasdaq Stock Market LLC or the New
York Stock Exchange); (iv) 180,824 shares of common stock will vest upon the 510(k) clearance or any other type of clearance deemed
necessary by the FDA of our PURE EP technology platform; and (v) 180,824 shares of common stock will vest upon our achieving a
market capitalization of $150,000,000 and maintaining such market capitalization for at least 90 consecutive calendar days.
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding equity awards that have been previously awarded to each of the named
executive officers and which remained outstanding as of December 31, 2016.
Option
Exercise
Price
($/Sh)
Option
Expiration
Date
Number of
Shares or
Units of
Stock that
have not
Vested (#)
Market
Value of
Shares of
Units That
Have Not
Vested ($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights that
Have Not
Vested (#)
Equity
Incentive Plan
Awards:
Market of
Payout Value
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested ($)
- $
- $
- $
- $
- $
-
-
-
-
-
- $
- $
- $
- $
- $
-
-
-
-
-
Number of
Securities
underlying
Unexercised
Options (#)
Unexercisable
Number of
Securities
underlying
Unexercised
Options (#)
Exercisable
632,884
150,000
632,885 $
- $
2.21 7/24/2024
1.84 5/18/2016
250,000
- $
2.09 1/16/2020
30,000
30,000
- $
- $
2.09 1/16/2020
2.09 6/11/2023
51
Name
Gregory D
Cash
Kenneth
Londoner
Steven
Chaussy
BioSig Technologies, Inc. 2012 Equity Incentive Plan
On October 19, 2012, our board of directors adopted the 2012 Plan, which provides for the grant of stock options, stock
appreciation rights, restricted stock and restricted stock units to employees, directors and consultants, to be granted from time to time as
determined by our board of directors or its designees. An aggregate of 15,186,123 shares of common stock are reserved for issuance
under the 2012 Plan. As of March 30, 2017, the number of options and restricted stock awards granted under the 2012 Plan are
11,808,485.
Director Compensation
The following table sets forth summary information concerning the total compensation paid to our non-employee directors
during the fiscal year ended December 31, 2016 for services to our company.
Name
Donald E. Foley
Roy T. Tanaka
Jerome Zeldis, M.D. Ph.D.
Patrick J Gallagher
Jeffrey F O’Donnell, Sr
David Weild, IV
Total:
Fees Earned
or Paid in
Cash ($)
$
$
$
$
$
$
$
Equity
Awards ($)
Total ($)
-
-
-
-
-
-
-
$
$
$
$
$
$
$
27,556 (1)
28,390 (2)
56,112 (3)
27,556 (1)
56,440 (4)
56,112 (3)
252,166
$
$
$
$
$
$
$
27,556
28,390
56,112
27,556
56,440
56,112
252,166
(1)
(2)
(3)
(4)
Represents (i) a stock option granted December 22, 2016 for the purchase of 25,000 shares of common stock, vesting
immediately, at an exercise price of $1.36 per share and termination date of December 22, 2026
Represents (i) a common stock award of 20,875 shares granted on December 8, 2016.
Represents (i) a stock option granted December 22, 2016 for the purchase of 50,000 shares of common stock, vesting
immediately, at an exercise price of $1.36 per share and termination date of December 22, 2026
Represents (i) a common stock award of 41,500 shares granted on December 8, 2016.
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table provides certain information as of December 31, 2016, with respect to our equity compensation plans under
which our equity securities are authorized for issuance:
Securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
3,318,513
-
3,318,513
Number of
securities to
be issued
upon
exercise of
outstanding
options
(a)
8,245,190 $
-
8,245,190
Weighted-
average
exercise
price of
outstanding
options
(b)
2.24
-
2.24
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Plan category
Total
52
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the beneficial ownership of our common stock as of March 30, 2017:
· by each person who is known by us to beneficially own more than 5% of our common stock;
· by each of our named executive officers and directors; and
· by all of our named executive officers and directors as a group.
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership
of a security if he, she or it possesses sole or shared voting or investment power of that security, or has the right to acquire beneficial
ownership of that security within 60 days. The information does not necessarily indicate beneficial ownership for any other purpose,
including for purposes of Sections 13(d) and 13(g) of the Securities Act. . With respect to the Series C Preferred Stock and warrants held
by the beneficial owners listed below, there exist contractual provisions limiting conversion and exercise to the extent such conversion or
exercise would cause such beneficial owner, together with its affiliates or members of a “group,” to beneficially own a number of shares
of common stock which would exceed from 4.99% to 9.99% of our then outstanding shares of common stock following such conversion
or exercise. The shares and percentage ownership of our outstanding shares indicated in the table below do not give effect to these
limitations. Except as indicated in the footnotes to this table, to our knowledge and subject to community property laws where applicable,
each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned
and each person’s address is c/o BioSig Technologies, Inc., 8441 Wayzata Blvd., Suite 240, Minneapolis, Minnesota 55426.
Name of Beneficial Owner
5% Owners
Lora Mikolaitis
Officers and Directors
Kenneth L. Londoner
Gregory D. Cash
Roy T. Tanaka
Seth H. Z. Fischer
Patrick J. Gallagher
Jeffrey F. O’Donnell, Sr.
Steve Chaussy
Jerome B. Zeldis, M.D., Ph.D.
David Weild IV
Donald E. Foley
Number of
Shares
Beneficially
Owned (1)
Percentage of
Common
Stock Owned
(1)(2)
3,686,224 (3)
15.14%
4,339,220 (4)
17.59%
929,171 (5)
944,802 (6)
550,944 (7)
255,000 (8)
529,800 (9)
683,762 (10)
654,148 (11)
350,000 (12)
475,000 (13)
3.72%
3.78%
2.24%
1.05%
2.17%
2.83%
2.66%
1.43%
1.95%
All directors and executive officers as a group (10 persons)
* Less than 1%
10,098,641
40.98%
53
(1) Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the
exercise of all options and other securities convertible into common stock beneficially owned by such person or entity currently
exercisable or exercisable within 60 days of March 30, 2017, except as otherwise noted. Shares issuable pursuant to the exercise of
stock options and other securities convertible into common stock exercisable within 60 days are deemed outstanding and held by the
holder of such options or other securities for computing the percentage of outstanding common stock beneficially owned by such
person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other
person.
(2) These percentages have been calculated based on 24,091,363 shares of common stock outstanding as of March 30, 2017.
(3) Comprised of (i) 43,750 shares of common stock, (ii) options to purchase 250,000 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017, and (iii) 3,392,474 shares of common stock held by Miko Consulting
Group, Inc. Lora Mikolaitis has sole voting and dispositive power over the securities held for the account of Miko Consulting Group,
Inc.
(4) Comprised of (i) 424,617 shares of common stock directly held by Mr. Londoner, (ii) 3,334,974 shares of common stock held by
Endicott Management Partners, LLC, an entity for which Mr. Londoner is deemed the beneficial owner, (iii) warrants to purchase
329,629 shares of common stock, and (v) options to purchase 250,000 shares of common stock that are currently exercisable.
(5) Comprised of (i) 55,875 shares of common stock and (ii) options to purchase 873,296 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017.
(6) Comprised of (i) 50,875 shares of common stock and (ii) options to purchase 893,927 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017.
(7) Comprised of (i) 25,000 shares of common stock and (ii) options to purchase 525,944 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017.
(8) Comprised of (i) 45,000 shares of common stock, (ii) options to purchase 200,000 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017, and (iii) warrants to purchase 10,000 shares of common stock.
(9) Comprised of (i) 159,000 shares of common stock and (ii) options to purchase 370,800 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017.
(10) Comprised of (i) 623,762 shares of common stock and (ii) options to purchase 60,000 shares of common stock that are currently
exercisable.
(11) Comprised of (i) 137,245 shares of common stock, (ii) options to purchase 400,000 shares of common stock that are currently
exercisable, (iii) shares of Series C Preferred Stock that are convertible into approximately 48,334 shares of common stock including
dividend shares, and (iv) warrants to purchase 68,569 shares of common stock.
(12) Comprised of options to purchase 350,000 shares of common stock that is currently exercisable or exercisable within 60 days of
March 30, 2017.
(13) Comprised of (i) 200,000 shares of common stock, (ii) options to purchase 175,000 shares of common stock that are currently
exercisable or exercisable within 60 days of March 30, 2017 and (iii) warrants to purchase 100,000 shares of common stock.
54
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
On October 19, 2015, we entered into a consulting agreement with Dr. Holzer. Pursuant to the consulting agreement, Dr. Holzer
is to provide certain consulting services in connection with the development and commercialization of our products, in exchange for a
stock option for the purchase of 100,000 shares of common stock, vesting 50% on the first anniversary of the grant date and the
remaining 50% on the second anniversary of the grant date, at an exercise price of $1.56 per share and termination date of October 19,
2025.
On March 23, 2015, we issued Mr. Londoner an aggregate of 169,334 shares of common stock in exchange for 200 shares of our
Series C 9% Convertible Preferred Stock and accrued dividends.
On October 23, 2015, as part of a private placement transaction of our common stock and warrants, Mr. Londoner purchased an
aggregate of 66,667 shares of common stock and a warrant to purchase 33,334 shares of common stock for an aggregate purchase price of
$100,000.
On April 30, 2015, Mr. Chaussy was granted 150,000 shares of common stock at a cost basis of $2.90 per share for his 2013-
2015 performance. One half of the shares vested immediately; the second half vests on January 1, 2016.
On November 18, 2015, as part of a private placement transaction of our common stock and warrants, Donald E. Foley purchased
an aggregate of 200,000 shares of common stock and a warrant to purchase 100,000 shares of common stock for an aggregate purchase
price of $300,000.
On April 29, 2016, Patrick Gallagher, as part of a private placement transaction of our common stock and warrants, purchased an
aggregate of 20,000 shares of common stock and a warrant to purchase 10,000 shares of common stock for an aggregate purchase price of
$30,000.
On May 4, 2016, Mr. Chaussy was granted 200,000 shares of common stock at a cost basis of $1.93 per share for his 2015
performance.
On May 4, 2016, Mr. Londoner was granted 250,000 shares of common stock at a cost basis of $1.93 per share for his 2015
performance.
On December 8, 2016, the Company granted an aggregate of 150,000 options to purchase shares of common stock at $1.36 per
share to directors for 2016 performance.
On December 8, 2016, the Company granted an aggregate of 124,750 shares of common stock at a cost basis of $1.36 to
directors for 2016 performance.
Independent Directors
Our board of directors has determined that each of Roy T. Tanaka, David Weild IV, Patrick J. Gallagher, David E. Foley, Seth H.
Z. Fischer, Jerome Zeldis and Jeffrey F. O’Donnell, Sr. is independent within the meaning of Rule 5605(a)(2) of the NASDAQ Listing
Rules and the rules and regulations promulgated by the SEC. In making its independence determinations, the board of directors sought to
identify and analyze all of the facts and circumstances related to any relationship between a director, his immediate family and our
company and our affiliates and did not rely on categorical standards other than those contained in the NASDAQ rule referenced above.
55
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees. The aggregate fees billed by our independent registered public accounting firm, for professional services rendered
for the audit of our annual financial statements for the years ended December 31, 2016 and 2015, including review of our interim
financial statements were $58,000 and $56,500, respectively.
Audit Related Fees. We incurred fees to our independent registered public accounting firm of $12,000 and $14,500 for audit
related fees during the fiscal years ended December 31, 2016 and 2015, respectively, which related to consent for and review of
registration statements filed by the Company with the SEC.
Tax Fees. We incurred fees to our independent registered public accounting firm of $3,500 and $5,000 for tax compliance, tax
advice and tax planning during the fiscal years ended December 31, 2016 and 2015.
All Other Fees. We incurred fees to our independent registered public accounting firm of $-0- and $-0- for all other fees during
the fiscal years ended December 31, 2016 and 2015, respectively.
For the fiscal year ended December 31, 2014 and the portion of the fiscal year ended December 31, 2015 prior to our formation
of the audit committee, the board of directors considered the audit fees, audit-related fees, tax fees and other fees paid to our accountants,
as disclosed above, and determined that the payment of such fees was compatible with maintaining the independence of the
accountants. Our audit committee pre-approves all auditing services and all permitted non-auditing services (including the fees and terms
thereof) to be performed by our independent registered public accounting firm, except for de minimis non-audit services that are approved
by the audit committee prior to the completion of the audit. The audit committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-auditing
services, provided that decisions of such subcommittee to grant pre-approval is presented to the full audit committee at its next scheduled
hearing.
ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
(1) Financial Statements
The following financial statements are included herein:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Operations for the years ended December 31, 2016 and 2015
Consolidated Statement of Stockholders’ Deficit for the two years ended December 31, 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
None.
(3) Exhibits
See Index to Exhibits.
56
31.01
31.02
32.01
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS
XBRL Instance Document
101 SCH
XBRL Taxonomy Extension Schema Document
101 CAL
XBRL Taxonomy Calculation Linkbase Document
101 LAB
XBRL Taxonomy Labels Linkbase Document
101 PRE
XBRL Taxonomy Presentation Linkbase Document
101 DEF
XBRL Taxonomy Extension Definition Linkbase Document
57
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SIGNATURES
Date: March 30, 2017
Date: March 30, 2017
BIOSIG TECHNOLOGIES, INC.
By:
By:
/s/ GREGORY D. CASH
Gregory D. Cash
Chief Executive Officer (Principal Executive Officer)
/s/ STEVEN CHAUSSY
Steven Chaussy
Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Name
Position
Date
/s/ KENNETH L. LONDONER
Kenneth L. Londoner
/s/ DONALD E. FOLEY
Donald E. Foley
/s/ JEROME ZELDIS
Jerome Zeldis
/s/ PATRICK J. GALLAGHER
Patrick J. Gallagher
/s/ ROY T. TANAKA
Roy T. Tanaka
/s/ SETH H. Z. FISCHER
Seth H. Z. Fischer
/s/ JEFFREY F. O’DONNELL, SR.
Jeffrey F. O’Donnell, Sr.
/s/ DAVID WEILD IV
David Weild IV
Executive Chairman, Director
March 30, 2017
Director
Director
Director
Director
Director
Director
Director
58
March 30, 2017
March 30, 2017
March 30, 2017
March 30, 2017
March 30, 2017
March 30, 2017
March 30, 2017
Exhibit No.
Description
Index to Exhibits
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.1
to the Form S-1 filed on July 22, 2013)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.2 to the Form S-1 filed on July 22, 2013)
Certificate of Second Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.3 to the Form S-1 filed on July 22, 2013)
Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.5 to the Form S-1/A filed on January 21, 2014)
Certificate of Fourth Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.6 to the Form S-1/A filed on March 28, 2014)
Certificate of Fifth Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.1 to the Form 8-K filed on August 21, 2014)
Certificate of Sixth Amendment to the Amended and Restated Certificate of Incorporation of BioSig Technologies, Inc.
(incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 25, 2016)
Bylaws of BioSig Technologies, Inc. (incorporated by reference to Exhibit 3.4 to the Form S-1 filed on July 22, 2013)
BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form S-1 filed on
July 22, 2013)
Form of Stock Option Agreement under the 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the
Form S-1 filed on July 22, 2013)
Securities Purchase Agreement, dated September 19, 2011, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.3 to the Form S-1 filed on July 22, 2013)
Securities Purchase Agreement, dated December 27, 2011, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.4 to the Form S-1 filed on July 22, 2013)
Securities Purchase Agreement, dated February 6, 2013, by and between BioSig Technologies, Inc. and certain purchasers
set forth therein (incorporated by reference to Exhibit 10.5 to the Form S-1 filed on July 22, 2013)
Registration Rights Agreement, dated February 6, 2013, by and between BioSig Technologies, Inc. and certain purchasers
set forth therein (incorporated by reference to Exhibit 10.6 to the Form S-1 filed on July 22, 2013)
Form of Warrant used in connection with February 6, 2013 private placement (incorporated by reference to Exhibit 10.7 to
the Form S-1 filed on July 22, 2013)
Amendment Agreement No. 1 to Securities Purchase Agreement and Registration Rights Agreement, dated February 25,
2013, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to
Exhibit 10.8 to the Form S-1 filed on July 22, 2013)
10.9
Amendment Agreement No. 2 to Securities Purchase Agreement, dated April 12, 2013, by and between BioSig
10.10
Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.9 to the Form S-1 filed
on July 22, 2013)
Amendment Agreement No. 3 to Securities Purchase Agreement and Registration Rights Agreement, dated June 25, 2013,
by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit
10.10 to the Form S-1 filed on July 22, 2013)
10.11
Office Lease Agreement, dated August 9, 2011, by and between BioSig Technologies, Inc. and Douglas Emmett 1993,
LLC (incorporated by reference to Exhibit 10.11 to the Form S-1 filed on July 22, 2013)
59
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
Employment Agreement, dated March 1, 2013, by and between BioSig Technologies, Inc. and Kenneth Londoner
(incorporated by reference to Exhibit 10.12 to the Form S-1 filed on July 22, 2013)
Indemnity Agreement, dated May 2, 2013 by and between BioSig Technologies, Inc. and Seth H. Z. Fischer (incorporated
by reference to Exhibit 10.14 to the Form S-1 filed on July 22, 2013)
Consulting Agreement, dated August 1, 2012, by and between BioSig Technologies, Inc. and Asher Holzer (incorporated
by reference to Exhibit 10.15 to the Form S-1 filed on July 22, 2013)
Unsecured Promissory Note made by BioSig Technologies, Inc. in favor of Kenneth Londoner, dated November 21, 2012
(incorporated by reference to Exhibit 10.19 to the Form S-1/A filed on September 11, 2013)
Form of 8% Senior Convertible Promissory Note issued pursuant to Bridge Loan Agreement, dated July 20, 2012
(incorporated by reference to Exhibit 10.20 to the Form S-1/A filed on September 11, 2013)
Promissory Note made by BioSig Technologies, Inc. in favor of Kenneth Londoner, dated December 6, 2012
(incorporated by reference to Exhibit 10.21 to the Form S-1/A filed on September 11, 2013)
Amendment Agreement No. 4 to Securities Purchase Agreement, dated October 14, 2013, by and between BioSig
Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.23 to the Form S-1/A
filed on January 21, 2014)
Securities Purchase Agreement, dated December 31, 2013, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.24 to the Form S-1/A filed on January 21, 2014)
Registration Rights Agreement, dated December 31, 2013, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.25 to the Form S-1/A filed on January 21, 2014)
Form of Warrant used in connection with December 31, 2013 private placement (incorporated by reference to Exhibit
10.26 to the Form S-1/A filed on January 21, 2014)
Amendment No. 1 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit
10.27 to the Form S-1/A filed on March 28, 2014)
Amendment Agreement No. 5 to Securities Purchase Agreement, dated March 24, 2014, by and between BioSig
Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.28 to the Form S-1/A
filed on March 28, 2014)
Patent Assignment, dated March 17, 2014, by and among Budimir Drakulic, Thomas Foxall, Sina Fakhar and Branislav
Vlajinic and BioSig Technologies, Inc. (incorporated by reference to Exhibit 10.29 to the Form S-1/A filed on May 1,
2014)
Securities Purchase Agreement, dated April 4, 2014, by and between BioSig Technologies, Inc. and certain purchasers set
forth therein (incorporated by reference to Exhibit 10.30 to the Form S-1/A filed on May 1, 2014)
Registration Rights Agreement, dated April 4, 2014, by and between BioSig Technologies, Inc. and certain purchasers set
forth therein (incorporated by reference to Exhibit 10.31 to the Form S-1/A filed on May 1, 2014)
Form of Warrant used in connection with April 4, 2014 private placement (incorporated by reference to Exhibit 10.32 to
the Form S-1/A filed on May 1, 2014)
Consulting Agreement, dated December 10, 2010, by and between BioSig Technologies, Inc. and Jonathan Steinhouse
(incorporated by reference to Exhibit 10.33 to the Form S-1/A filed on May 22, 2014)
Executive Employment Agreement, dated July 15, 2014, by and between BioSig Technologies, Inc. and Gregory Cash
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 21, 2014)
Incentive Stock Option Agreement, dated July 15, 2014, by and between BioSig Technologies, Inc. and Gregory Cash
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 21, 2014)
Securities Purchase Agreement, dated as of August 15, 2014, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 21, 2014)
Registration Rights Agreement, dated as of August 15, 2014, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on August 21, 2014)
60
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.54
10.55
Form of Warrant used in connection with August 15, 2014 private placement (incorporated by reference to Exhibit 10.2 to
the Form 8-K filed on August 21, 2014)
Letter Agreement and Release, dated as of September 1, 2014, by and between BioSig Technologies, Inc. and Asher
Holzer, Ph.D (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on September 5, 2014)
Form of Restricted Stock Award Agreement under the 2012 Equity Incentive Plan (incorporated by reference to Exhibit
10.2 to the Form 8-K filed on September 5, 2014)
Settlement and Mutual Release Agreement, dated November 3, 2014, by and between BioSig Technologies, Inc. and
David Drachman (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 5, 2014)
Composite of Unit Purchase Agreement, dated December 19, 2014, as amended by Supplement No. 1, dated December
17, 2014, by and between BioSig Technologies, Inc. and certain purchasers set forth therein (incorporated by reference to
Exhibit 10.37 to the Form 10-K filed on February 20, 2015)
Registration Rights Agreement, dated December 19, 2014, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.38 to the Form 10-K filed on February 20, 2015)
Form of “A” Warrant used in connection with December 19, 2014 private placement (incorporated by reference to Exhibit
10.39 to the Form 10-K filed on February 20, 2015)
Form of “B” Warrant used in connection with December 19, 2014 private placement (incorporated by reference to Exhibit
10.40 to the Form 10-K filed on February 20, 2015)
Amendment No. 2 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 99.3
to the Form S-8 filed on April 17, 2015)
Amendment No. 3 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit
10.41 to the Form S-1 filed on May 20, 2015)
Securities Purchase Agreement, dated as of May 11, 2015, by and between BioSig Technologies, Inc. and Alpha Capital
Anstalt (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 15, 2015)
Securities Purchase Agreement, dated as of May 11, 2015, by and between BioSig Technologies, Inc. and Brio Capital
Master Fund Ltd. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 15, 2015)
Amendment Agreement No. 6 to Securities Purchase Agreement, dated July 30, 2014, by and between BioSig
Technologies, Inc. and certain purchasers (incorporated by reference to Exhibit 10.44 to the Form S-1/A filed on June 10,
2015
Amendment No. 4 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 99.1
to the Form 8-K filed on May 29, 2015)
Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 29, 2015)
Unit Purchase Agreement, dated October 23, 2015, by and between BioSig Technologies, Inc. and certain purchasers set
forth therein (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 29, 2015)
Form of Warrant used in connection with October 23, 2015 private placement (incorporated by reference to Exhibit 10.3
to the Form 8-K filed on Form 8-K on October 29, 2015)
Registration Rights Agreement, dated October 23, 2015, by and between BioSig Technologies, Inc. and certain purchasers
set forth therein (incorporated by reference to Exhibit 10.04 to the Form 8-K filed on October 29, 2015)
Form of Subscription Agreement (incorporated by reference to the Item 1.01 – Entry Into a Material Definitive
Agreement to the Form 8-K filed on November 3, 2016)
Unit Purchase Agreement, dated October 28, 2016, by and between BioSig Technologies, Inc. and certain purchasers set
forth therein (incorporated by reference to the Item 1.01 – Entry Into a Material Definitive Agreement to the Form 8-K
filed on November 3, 2016)
61
10.56
10.57
Form of Warrant used in connection with October 28, 2016 private placement (incorporated by reference to the Item 1.01
– Entry Into a Material Definitive Agreement to the Form 8-K filed on November 3, 2016)
Registration Rights Agreement, dated October 28, 2016, by and between BioSig Technologies, Inc. and certain purchasers
set forth therein (incorporated by reference to the Item 1.01 – Entry Into a Material Definitive Agreement to the Form 8-K
filed on November 3, 2016)
10.58
Amendment No. 5 to the BioSig Technologies, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1
to the Form 8-K filed on November 25, 2016)
23.1
Consent of Liggett & Webb P.A., independent registered public accounting firm.
31.01
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.02
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.01
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS
XBRL Instance Document
101 SCH
XBRL Taxonomy Extension Schema Document
101 CAL
XBRL Taxonomy Calculation Linkbase Document
101 LAB
XBRL Taxonomy Labels Linkbase Document
101 PRE
XBRL Taxonomy Presentation Linkbase Document
101 DEF
XBRL Taxonomy Extension Definition Linkbase Document
62
EXHIBIT 31.01
I, Gregory D. Cash, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of BioSig Technologies, Inc..;
Based on my knowledge, this 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 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 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
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and 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 reasonable 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: March 30, 2017
/s/ GREGORY D. CASH
Gregory D. Cash
Chief Executive Officer
EXHIBIT 31.02
I, Steven Chaussy, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of BioSig Technologies, Inc.;
Based on my knowledge, this 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 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 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
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and 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 reasonable 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: March 30, 2017
/s/ STEVEN CHAUSSY
Steven Chaussy
Chief Financial Officer
Exhibit 32.01
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory Cash, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that the Annual Report of BioSig Technologies, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Annual
Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of BioSig Technologies, Inc.
Date: March 30, 2017
/s/ GREGORY D. CASH
By:
Name: Gregory D. Cash
Title:
Chief Executive Officer
I, Steven Chaussy, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that the Annual Report of BioSig Technologies, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Annual
Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of BioSig Technologies, Inc.
Date: March 30, 2017
/s/ STEVEN CHAUSSY
By:
Name: Steven Chaussy
Title:
Chief Financial Officer