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, 2017
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)
12424 Wilshire Blvd, Suite 745
Los Angeles, CA
(Address of principal executive office)
26-4333375
(IRS Employer Identification No.)
90025
(Zip Code)
(512) 329-2643
(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, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
(Check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
Accelerated filer
Smaller reporting company
☐
☒
☐
☐
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
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, 2017, based on the price at
which the common stock was last sold on such date, is $24,577,543. 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 February 27, 2018, there were 29,998,466 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.
Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
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.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
PAGE
3
19
36
36
36
36
37
37
38
43
F-1 – F-34
44
44
45
46
50
54
57
57
59
63
64
Table of Contents
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 biomedical signal processing to extract information from physiologic signals. Our initial
focus is on providing intracardiac signal information to electrophysiologists during electrophysiology (EP) studies and catheter ablation for
complex arrhythmias, 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 developing a proprietary biomedical signal processing technology platform
to extract information from physiologic signals. Our initial emphasis is on providing intracardiac signal information to electrophysiologists
during EP studies and catheter ablation of AF and VT. Our first product is 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 electrocardiograms and electrograms required during electrophysiology studies and catheter ablation procedures.
3
Table of Contents
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 minimize noise and artifacts and acquire high fidelity cardiac signals will potentially increase these signals’ diagnostic
value, and therefore offer improved accuracy and efficiency of the EP 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 who provided us with data for initial technology validation. The physicians had 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 those recordings and successfully removed baseline
wander, noise and artifacts from the data thereby providing better diagnostic quality signals.
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 then by obtaining pre-clinical recordings from the lab at the University of
California at Los Angeles. We believe that our proof of concept unit performed well as compared to the conventional 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 the conventional recording system. Subsequently, we analyzed the results of our proof of concept unit to
determine the final design of the PURE EP System prototype.
After conducting research of peer-reviewed EP publications (see Initial Analysis in Our Products section below), we contacted
Samuel J. Asirvatham. M.D. (who we believed to be an expert in the field of signal-based catheter ablation), at Mayo Clinic in Rochester,
Minnesota. Since the end of 2014, we have collaborated with Dr. Asirvatham and other physicians affiliated with Mayo Clinic in
Rochester, Minnesota and Jacksonville, Florida. We have performed pre-clinical studies at Mayo Clinic since 2015 to validate technology
within the PURE EP System prototype. These studies have been designed to determine clinical effectiveness for features within the PURE
EP System that are in development. Since March 2016, we have published seven manuscripts in collaboration with the physicians from
Mayo Clinic evidencing our pre-clinical findings. The publications cover a variety of subjects pertaining to the PURE EP System as an
enhanced electrophysiology recording system with signal acquisition and differentiation and having specific visualization of different
electrophysiology signals.
Our initial focus is on improving intracardiac signal processing and diagnostic information for catheter ablation procedures for the
complex arrhythmias, 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 catheter ablation is a procedure
that corrects conduction of electrical impulses in the heart that cause arrhythmias and is now a preferred treatment for certain
arrhythmias. During this procedure, a catheter is usually inserted using a venous access into a specific area of the heart. Cryo or
radiofrequency energy is delivered through the catheter to destroy small areas of the heart muscle that cause the abnormal heart
rhythm. According to a 2014 article in Circulation: Arrhythmia and Electrophysiology, catheter ablation should be considered as the first-
line therapy for patients with paroxysmal atrial fibrillation (“Ablation Versus Drugs: What is the Best First-Line Therapy for Paroxysmal
Atrial Fibrillation?” (Circ Arrhythm Electrophysiol. 2014; 7:739-746).
Catheter ablation for many arrhythmias have high success rates; however, more complex or long-standing examples of the disease
often require multiple procedures (each typically lasting from 3-6 hours), evidencing the need for additional research and technology to
diagnose and treat these cases. Consequently, ablating AF and VT has been regarded as being extremely difficult. Therefore, access to
these procedures has traditionally been limited to being performed by only the most well-trained cardiologists; however, advancements in
new technologies and techniques show a strong growth rate for these procedures.
4
Table of Contents
Our overall goal is to establish our proprietary biomedical signal processing technology as a new platform in the electrophysiology
market that will have the following advantages over the electrophysiology recording systems currently available on the market:
● Precise, uninterrupted, real-time evaluations of electrograms (PURE EP™);
● Higher quality cardiac signal acquisition for accurate and more efficient electrophysiology studies and catheter ablation procedures to
help reduce costs and length of procedures;
● Reliable display of information to better determine precise ablation targets, strategy and end point of procedures with the objective of
reducing the need for multiple procedures;
● A 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 achievements to date include:
● Initial system concept validation has been 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.
● 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; Beaumont
Medical Center, Detroit, MI; University Hospitals Case Medical Center, Cleveland, OH; The Heart Rhythm Institute, University of
Oklahoma Health Sciences Center, Oklahoma City, OK; 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.
5
Table of Contents
● 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, Jacksonville, Florida, as a member of our
Scientific Advisory Board. On March 31, 2015 Drs. Asirvatham and Venkatachalam performed our first pre-clinical study at the
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 and are taking steps
toward its 510(k) submission.
● On March 8, 2016, Dr. Ammar Killu from Mayo Clinic presented our preclinical data at the 13th 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 March 28, 2016, we announced an Advanced Research Program with Dr. Asirvatham at the Mayo Clinic beginning June 2016.
● 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 our 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 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.”
● On September 14, 2016, Dr. Asirvatham performed our sixth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
6
Table of Contents
● 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.”
● On February 14, 2017, Dr. Asirvatham performed our seventh pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On March 15, 2017, Dr. Asirvatham performed our eighth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● In April 2017, the PURE EP System was featured in The Journal of Innovations in Cardiac Rhythm Management with the manuscript
entitled, “Initial Experience with the BioSig PURE EP™ Signal Recording System: An Animal Laboratory Experience” co-authored
by physicians from Mayo Clinic and Harvard Brigham & Women’s Hospital.
● On May 2, 2017, Dr. Asirvatham performed our ninth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On May 11, 2017, the PURE EP System was featured in a poster presentation entitled, “Use of Terminal Unipolar Electrogram
Current of Injury as a Novel Marker to Estimate Contact: An Acute Canine Study.”
● On May 31, we announced that we have appointed Natasha Russkina as a Managing Director, Europe with the view of establishing
European operations of BioSig Technologies, Inc. in Geneva, Switzerland.
● On July 10, 2017, the PURE EP System was featured in a poster presentation at the American Heart Association’s 13th Annual Basic
Cardiovascular Sciences (BCVS) 2017 Scientific Sessions: Pathways to Cardiovascular Therapeutics entitled, “Use of a Novel
Electrogram Filtering Algorithm to Visualize Conduction Tissue Signals in the Ventricle in Sinus Rhythm and Arrhythmia: An Acute
Canine Study.”
● On July 11, 2017, we announced that we have engaged Health Research International (HRI) to compile essential market data and help
perform strategic planning for its PURE EP™ platform technology.
● On July 12, 2017, the PURE EP System was featured in a poster presentation at the American Heart Association’s 13th Annual Basic
Cardiovascular Sciences (BCVS) 2017 Scientific Sessions: Pathways to Cardiovascular Therapeutics entitled, “Assessment of
Catheter Position above or below the Aortic Valve by Evaluation of Characteristics of the Local Electro gram: An Acute Canine
Study.”
● On August 9, 2017, Dr. Asirvatham performed our tenth pre-clinical study at Mayo Clinic in Rochester, Minnesota.
● On October 11, 2017, we announced that Mr. Joseph W. Rafferty has joined the Company as Chief Commercialization Officer.
7
Table of Contents
● On October 19, 2017, we announced that we have made significant progress towards commercialization of our PURE EP System and
recently received the first production units of the PURE EP System from our manufacturing partner, Minnetronix.
● On October 24, 2017, we announced that we have engaged Quintain Project Solutions LLC as the manufacturing project management
leader for the PURE EP System.
● On October 26, 2017, we announced that we concluded a key part of the strategic planning project launched earlier this year in
collaboration with Health Research International (HRI). HRI conducted a detailed survey of U.S. electrophysiologists primarily based
in New York, Texas, Massachusetts, Florida, Pennsylvania, and North Carolina to gather opinions on the main features of the PURE
EP System. The inability to record high quality unipolar signals and difficulty detecting small intracardiac signals were consistently
reported among the factors interfering with effective ablations. Survey respondents rated all six features listed of the PURE EP
System as being ‘Very Helpful’ for their ablations, emphasizing overall noise reduction and improved signal clarity/accuracy as key
benefits. Most respondents see signal clarity as paramount to the success of ablations and indicated interest in a technology that
reduces ‘noise’.
● On November 2, 2017, we announced that we have engaged Sherpa Technology Group as our Intellectual Property Advisor.
● On November 10, 2017, we announced that Andrew Filler, Partner and General Counsel of Sherpa Technology Group has joined our
board of directors taking the place of Dr. Jerome B. Zeldis.
● On November 14, 2017, we announced that we have added the role of Chief Regulatory and Compliance Officer in preparation of our
FDA submission.
● On January 3, 2018 we announced that Steve Chaussy had been elevated to our full time Chief Financial Officer to facilitate growth
trajectory of the Company.
● On January 9, 2018, we announced that we have partnered with Charles Austin and JK Advisors in preparation of the commercial
launch of our PURE EP System.
● On January 10, 2018, Dr. Asirvatham performed our eleventh pre-clinical study at Mayo Clinic in Rochester, Minnesota.
We conducted our first three pre-clinical studies in 2015 at Mayo Clinic in Rochester, Minnesota. We have continued additional
pre-clinical studies as part of an advanced research program since 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 VT model.
In the third quarter of 2017, in collaboration with Health Research International, we conducted a detailed survey of U.S.
electrophysiologists to gather opinions on the main features of the PURE EP System.
We intend to continue further pre-clinical studies at Mayo Clinic and we intend to begin a pre-clinical study at the Cardiac
Arrhythmia Center at the University of California at Los Angeles. We intend to conduct further pre-clinical 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 engaged
Quintain Project Solutions LLC as the manufacturing project management leader for the PURE EP System – implementing steps for
obtaining 510(k) clearance from the U.S. Food and Drug Administration for the PURE EP System.
8
Table of Contents
We believe that by the conclusion of 2018, 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 National Standards Authority of Ireland (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 2019.
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 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.
Catheter ablation is 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 dedicated electrophysiology labs in the U.S. and 1,500 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 $750 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, last updated in August 2017 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. 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; in addition, global ablation procedure numbers are predicted to grow from 865,000 to 1,350,000 per year.
Catheter Ablation 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.
9
Table of Contents
Most cardiac arrhythmias are well understood, and ablation simply requires destroying a small area of heart tissue possessing
electrical abnormality. In contrast, complex arrhythmias, 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. Furthermore, the length of these procedures, which typically last from 3-6 hours, 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.
AF is the most common heart rhythm disorder in the world and increases the risk for stroke 5-fold. In 2010, there was a reported
global prevalence of 33.5 million (20.9 million men and 12.6 million women). In 2017, the Centers for Disease Control and Prevention
stated that there are an estimated 2.7-6.1 million Americans suffering with AF, more than 750,000 patients hospitalized annually for the
condition, and AF contributes to an estimated 130,000 deaths 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 AF patient population in the U.S. and
Europe. 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. 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 (“2014 ACCF/AHA/HRS Focused Update on the
Management of Patients With Atrial Fibrillation (Updating the 2011 Guideline)”). However, rates of success and complications may vary,
sometimes considerably.
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 which can often result in sudden cardiac death. 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. Catheter ablation of VT has historically
been used primarily for drug refractory ventricular arrhythmias in patients with ICDs. However, advances in electro-anatomical mapping
systems, techniques to identify ablation sites during sinus rhythm, and the use of hemodynamic support devices has broadened the
applicability of catheter ablation for ventricular arrhythmias. When performed in centers with high procedural volumes, the rates of
complications remain relatively low. However, success rates have historically been quite variable and highly dependent on the specific
ablation approach adopted.
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 considering 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 ablation procedures.
10
Table of Contents
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
with 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.
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
termination of both pulmonary vein potentials and ventricular
tachycardia. Therefore, it is important that the recording system’s noise removal technique does not alt er 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.
to determine ablation strategy during
11
Table of Contents
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 can 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.
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 presents 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 EP 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 GE CardioLab and St. Jude EP-WorkMate.
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.
12
Table of Contents
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 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.
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
13
Table of Contents
Prototype Testing
After conducting research of peer-reviewed EP publications (see Initial Analysis in Our Products section below), we contacted
Samuel J. Asirvatham. M.D. (who we believed to be an expert in the field of signal-based catheter ablation), at Mayo Clinic in Rochester,
Minnesota. Since the end of 2014, we have collaborated with Dr. Asirvatham and other physicians affiliated with Mayo Clinic in
Rochester, Minnesota and Jacksonville, Florida. We have performed pre-clinical studies at Mayo Clinic since 2015 to validate technology
within the PURE EP System prototype. These studies have been designed to determine clinical effectiveness for features within the PURE
EP System that are in development. Since March 2016, we have published seven manuscripts in collaboration with the physicians from
Mayo Clinic evidencing our pre-clinical findings. The publications cover a variety of subjects pertaining to the PURE EP System as an
enhanced electrophysiology recording system with signal acquisition and differentiation and having specific visualization of different
electrophysiology signals.
The current PURE EP System prototype
Technology and Development Plan
Our technology team consists of six engineers and a consulting firm 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.
We conducted our first three pre-clinical studies in 2015 at Mayo Clinic in Rochester, Minnesota. We have continued additional
pre-clinical studies as part of an advanced research program since 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 VT model.
In the third quarter of 2017, in collaboration with Health Research International, we conducted a detailed survey of U.S.
electrophysiologists to gather opinions on the main features of the PURE EP System.
We intend to continue further pre-clinical studies at Mayo Clinic and we intend to begin a pre-clinical study at the Cardiac
Arrhythmia Center at the University of California at Los Angeles. We intend to conduct further pre-clinical studies, and research studies.
The main objective of these studies is to demonstrate the clinical potential of the PURE EP System.
14
Table of Contents
We have initiated technology development with Minnetronix, a medical technology and innovation company, and engaged
Quintain Project Solutions LLC as the manufacturing project management leader for the PURE EP System – implementing steps for
obtaining 510(k) clearance from the U.S. Food and Drug Administration for the PURE EP System.
We believe that by the conclusion of 2018, 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 National Standards Authority of Ireland (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 2019.
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:
● 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.
● 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.
15
Table of Contents
Research and Development Expenses
Research and development expenses for the fiscal years ended December 31, 2017, 2016 were $4,756,468 and $2,654,501,
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 targeted commercial sales of the PURE EP System in the second half of 2018.
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.
In November 2017, we engaged 3LP Advisors LLC dba Sherpa Technology Group as our Intellectual Property Advisor.
16
Table of Contents
Trademarks
Our trademark for “BIOSIG TECHNOLOGIES”; was registered on April 25, 2017. Our trademark for “PURE EP”; was
registered on January 26, 2016.
Government Regulation
Our solutions include software and hardware which will be used for patient diagnosis and, accordingly, are subject to regulation by
the U.S. Food and Drug Administration and other regulatory agencies. U.S. Food and Drug Administration regulations govern, among
other things, the following activities that we perform and will continue to perform in connection with:
● 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.
U.S. Food and Drug Administration’s Pre-market Clearance and Approval Requirements
The U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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.
17
Table of Contents
The U.S. Food and Drug Administration’s 510(k) clearance process usually takes three to six months from the date the application
is submitted and filed with the U.S. Food and Drug Administration, but it can take significantly longer. A device that reaches market
through the 510(k) process is not considered to be “approved” by the U.S. Food and Drug Administration. They are generally referred to as
“cleared” or “510(k) cleared” devices. Nevertheless, it can 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 U.S. Food and Drug Administration
requires each manufacturer to make this determination initially, but the U.S. Food and Drug Administration can review any such decision
and can disagree with a manufacturer’s determination. If the U.S. Food and Drug Administration disagrees with a manufacturer’s
determination, the U.S. Food and Drug Administration 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 U.S. Food and Drug Administration regulation
After a medical device is placed on the market, numerous U.S. Food and Drug Administration regulatory requirements apply,
including, but not limited to the following:
● 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 U.S. Food and Drug Administration;
● Medical Device Listing, which requires manufacturers to list the devices they have in commercial distribution with the U.S. Food and
Drug Administration;
● 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 U.S. Food and Drug Administration 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 U.S. Food and Drug
Administration, which may include one or more of the following sanctions:
● 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.
18
Table of Contents
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 U.S. Food and Drug
Administration 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 February 27, 2018, we had 14 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.
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, 2017 and 2016, we incurred net losses
attributable to common stockholders of $12,815,620 and $11,697,210, respectively and used $7,470,054 in cash for operating activities for
the year ended December 31, 2017. As of February 27, 2018, we had cash on hand of approximately $2,353,000. 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.
19
Table of Contents
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:
● successful completion of the pre-clinical and clinical development of our products;
● obtaining necessary regulatory approvals from the U.S. Food and Drug Administration 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.
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 U.S. Food and Drug Administration, 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.
20
Table of Contents
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 U.S. Food and Drug Administration 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 five 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.
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:
● the U.S. Food and Drug Administration 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;
21
Table of Contents
● 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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.
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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration clearance or approval before they can be commercially
marketed in the U.S., and the U.S. Food and Drug Administration 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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration
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 U.S. Food and Drug Administration 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 U.S. Food and Drug Administration to grant us such additional marketing clearances and even additional trials
requested by the U.S. Food and Drug Administration may not result in our obtaining 510(k) marketing clearance for our product. The
failure to obtain U.S. Food and Drug Administration 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.
22
Table of Contents
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:
● 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;
● 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 U.S. Food and Drug Administration 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.
23
Table of Contents
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 U.S. Food and Drug Administration 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 U.S. Food and Drug
Administration 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 U.S. Food
and Drug Administration. 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.
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 GE, Johnson & Johnson, Boston Scientific, Siemens and St. Jude Medical. 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.
24
Table of Contents
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.
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:
● we may not be able to attract and build an effective marketing or sales force;
25
Table of Contents
● 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 U.S. Food and Drug Administration, 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.
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.
26
Table of Contents
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.
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.
27
Table of Contents
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 U.S. Food and Drug Administration 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.
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.
28
Table of Contents
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 U.S. Patent and Trademark Office, and we have filed this
patent application under the Patent Cooperation Treaty (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:
● 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.
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.
29
Table of Contents
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:
● 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.
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 mean 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.
30
Table of Contents
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:
● 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;
● 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.
31
Table of Contents
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 February 27, 2018, we have granted options to purchase 8,230,319 shares of common stock and have reserved 1,740 shares
of our common stock for further issuances pursuant to our 2012 Equity Incentive Plan (the “2012 Plan”). In addition, as of February 27,
2018, we may be required to issue 3,713,101 shares of our common stock for issuance upon conversion of outstanding convertible
preferred stock which includes accrued dividends, and 12,583,129 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 February 27, 2018, two of our stockholders beneficially owned over 25.52% 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.
32
Table of Contents
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.
33
Table of Contents
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.
34
Table of Contents
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.
Risks Related to our Series D Preferred Stock
The holders of our Series D Preferred Stock are entitled to receive a dividend.
The holders of the Series D Preferred Stock are entitled to a 9% annual dividend on the $1,500 per share stated value of our Series
D Preferred Stock when such holders convert their shares of Series D Preferred Stock into common stock, which is payable in cash or,
subject to the satisfaction of certain conditions, in pay-in-kind shares. As a result of the payment of dividends related to our Series D
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 D 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 D Preferred Stock contains anti-dilution provisions, which provisions require the lowering of the conversion price to
the purchase price of future offerings. If in the future we issue securities for less than the conversion price of our Series D Preferred Stock
and such warrants, respectively, we will be required to further reduce the relevant conversion price. We may find it more difficult to raise
additional equity capital while our Series D Preferred Stock is outstanding.
35
Table of Contents
Risks Related to our Series E Preferred Stock
The holders of our Series E Preferred Stock are entitled to receive a dividend.
The holders of the Series E Preferred Stock are entitled to a 7% annual dividend on the $1,500 per share stated value of our Series
E Preferred Stock when such holders convert their shares of Series E Preferred Stock into common stock, which is payable in cash. As a
result of the payment of dividends related to our Series E Preferred Stock, we may be obligated to pay significant sums of money which
could negatively affect our operations.
Our Series E 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 E Preferred Stock contains anti-dilution provisions, which provisions require the lowering of the conversion price to
the purchase price of future offerings. If in the future we issue securities for less than the conversion price of our Series E Preferred Stock
and such warrants, respectively, we will be required to further reduce the relevant conversion price. We may find it more difficult to raise
additional equity capital while our Series E Preferred Stock is outstanding.
ITEM 1B – UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2 – PROPERTIES
We maintain our principal executive and engineering office at 12424 Wilshire Boulevard, Suite 745, Los Angeles, California
which is approximately 2,200 square feet in size. 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.
In connection with the lease of our office space, we are obligated to lease parking spaces at an aggregate approximate cost of $978 per
month. In addition, the Company entered into a lease for storage space with the Los Angeles, California building commencing on
December 1, 2017 and expiring on August 31, 2019 for approximately $200 per month. In February 2018, we opened an administrative
office located in Austin, Texas. We believe our current facilities are sufficient to meet our needs.
Future minimum lease payments under these three agreements are as follows:
Year Ending December 31,
2018
2019
ITEM 3 – LEGAL PROCEEDINGS
$
$
112,994
76,995
189,989
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.
36
Table of Contents
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
Holders of Record
Fiscal Year 2017
High
Low
2.00 $
1.76 $
1.60 $
1.75 $
Fiscal Year 2016
High
Low
1.59 $
2.15 $
1.60 $
1.59 $
1.20
1.23
1.25
1.29
0.90
1.33
1.05
1.25
$
$
$
$
$
$
$
$
As of February 27, 2018, there were approximately 285 holders of our common stock, as determined by counting our record
holders and the number of participants reflected in a security position listing provided to us by the Depository Trust Company. Because
the “DTC participants” are brokers and other institutions holding shares of our common stock on behalf of their customers, we do not
know the actual number of unique shareholders represented by these record holders.
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, Series D, and Series
E Preferred Stock prohibit us from paying dividends in the future on our common stock. We may not pay dividends on our common stock:
(i) so long as at 25% of the originally issued shares of Series D Preferred Stock remain outstanding; (ii) absent consent from the holders
representing a super-majority of the outstanding shares of our Series C Preferred Stock and a certain investor; and (iii) absent consent from
a majority of the outstanding shares of our Series E Preferred Stock, which majority must include a certain investor
ITEM 6 – SELECTED FINANCIAL DATA
Not applicable
37
Table of Contents
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our
financial statements and the related notes thereto that are included in this Form 10-K. In addition to historical information, the following
discussion and analysis includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those
discussed below and elsewhere in this prospectus, particularly in the section entitled “Risk Factors.” See “Special Note Regarding
Forward-Looking Statements.”
Our Business
We are a development stage medical device company developing a proprietary biomedical signal processing technology platform
to extract information from physiologic signals. Our initial emphasis is on providing intracardiac signal information to electrophysiologists
during EP studies and catheter ablation of AF and VT. Our first product is 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 electrocardiograms and electrograms required during electrophysiology studies and catheter 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.
38
Table of Contents
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, 2017 and 2016, the Company did not have any derivative
instruments that were designated as hedges.
At December 31, 2017 and 2016, 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, 2017 Compared to Twelve Months Ended December 31, 2016
Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the twelve months ended December 31, 2017
and 2016.
39
Table of Contents
Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2017 were
$4,756,468, an increase of $2,101,967 or 79%, from $2,654,501 for the twelve months ended December 31, 2016. 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:
Salaries and equity compensation
Consulting expenses
Clinical studies and design work
Acquired research and development
Travel, supplies, other
Total
2017
1,481,421 $
500,628
2,066,028
543,927
164,464
4,756,468 $
2016
1,744,780
322,520
388,447
-
198,754
2,654,501
$
$
Stock based compensation for research and development personnel was $432,929 and $760,732 for the year ended December 31,
2017 and 2016, respectively.
On March 15, 2017, we entered into a know-how license agreement with Mayo Foundation for Medical Education and Research
whereby we were granted an exclusive license, with the right to sublicense, certain know how and patent applications in the field of signal
processing, physiologic recording, electrophysiology recording, electrophysiology software and autonomics to develop, make and offer for
sale. The agreement expires in ten years from the effective date. As such, we are obligated to pay to Mayo Foundation a 1% or 2%
royalty payment on net sales of licensed products, as defined.
In consideration, we issued 630,000 warrants to acquire the Company’s common stock at an exercise price of $1.50, expiring on
March 15, 2020. The estimated fair value of $543,927 was charged to operations as acquired research and development.
General and Administrative Expenses. General and administrative expenses for the twelve months ended December 31, 2017
were $8,138,117, a decrease of $361,187, or 4%, from $8,499,304 incurred in the twelve months ended December 31, 2016. This decrease
is primarily due to decrease in equity-based compensation, net with increases in professional services, consulting fees and travel, meals
and entertainment costs.
Payroll related expenses (including equity compensation) decreased to $5,579,117 in the twelve months ended December 31, 2017
from $6,381,610 for the twelve months ended December 31, 2016, a decrease of $802,493, or 13%. This decrease is due to the value of the
stock-based compensation decreasing to $4,316,542 in 2017, as a result of the vesting of stock and stock options issued to board members,
officers and employees, as compared to $5,233,818 of stock-based compensation in 2016, net with added additional personnel.
Professional services for the twelve months ended December 31, 2017 totaled $362,663, an increase of $2,968, or 1%, over the
$359,695 recognized for the twelve months ended December 31, 2016. Of professional services, legal fees totaled $273,663 for the twelve
months ended December 31, 2017, a decrease of $12,532, or 4%, from $286,195 incurred for the twelve months ended December 31, 2016.
Accounting fees incurred in the twelve months ended December 31, 2017 amounted to $89,000, an increase of $15,500, or 21%, from
$73,500 incurred for the same period in 2016. The increases in professional fees was primarily related to an increase in legal and audit
requirements in 2017 as compared to 2016 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 $1,453,005 for the twelve months ended December 31, 2017, an increase of $285,585 or 24%, from
$1,167,420 for the twelve months ended December 31, 2016. The increase primarily relates to our fund raising and investor relations to
support our increased efforts in market research and potential investor identification.
40
Table of Contents
Travel, meals and entertainment costs for the twelve months ended December 31, 2017 were $379,970, an increase of $105,008, or
38%, from $274,962 incurred during the twelve months ended December 31, 2016. During 2017, additional travel was required than in
2016 due to our marketing and fund-raising efforts. Rent for the twelve months ended December 31, 2017 totaled $142,975, an increase of
$14,419, or 11%, from $128,556 incurred during the same period in 2016. In 2017, our significant increase was the result of our lease
renewal in California along with final settlement with closing our Minneapolis, Minnesota office in late 2017.
Depreciation Expense. Depreciation expense for the twelve months ended 2017 totaled $11,698 as compared to $10,475 incurred
during the same period in 2016. The increase is due primarily to additional equipment purchased in 2017
Gain (loss) 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, In
addition, in November 2017; we issued a Series D Preferred stock and warrants with also contained reset (anti-dilutive) provisions. During
the year ended December 31, 2017, we incurred a gain on change in fair values of these derivatives of $210,465 as compared to a loss of
$422,908 for the same period in the year ended December 31, 2016.
Interest Income (expense). Interest income for the twelve months ended December 31, 2017 totaled $75 as compared to $1
incurred during the twelve months ended December 31, 2016.
Preferred Stock Dividend. Our preferred stock dividend for the twelve months ended December 31, 2017 totaled $119,877, an
increase of $9,854, or 9% from $110,023 incurred during the twelve months ended December 31, 2016. The increase in dividends is a result
added Series D Preferred Stock issued in 2017, net of conversions of the Series C Preferred Stock to common reducing the number of
Series C Preferred shares outstanding. Preferred stock dividends are related to our Series C and D Preferred Stock issued in 2013, 2015 and
2017.
Net Loss Available to Common Stockholders. Net loss available to common stockholders for the twelve months ended December
31, 2017 was $12,815,620, compared to a net loss of $11,697,210 for the twelve months ended December 31, 2016, an increase of
$1,118,410 or 10%. The primary reasons for the increase, as described above, are the increases in research and development expenses, net
with a reduction in general and administrative expenses from 2016 to 2017.
Liquidity and Capital Resources
Twelve Months Ended December 31, 2017 Compared to Twelve Months Ended December 31, 2016
As of December 31, 2017, we had a working capital deficit (current liabilities in excess of current assets) of $2,300,644, comprised
of cash of $1,547,579 and prepaid expenses of $116,938, which was offset by $473,098 of accounts payable and accrued expenses, accrued
dividends on preferred stock issuances of $447,901, warrant liability of $2,358,240 and derivative liability of $685,922. Excluding the
derivative and warrant liabilities, our working capital would have been $743,518. For the twelve months ended December 31, 2017, cash
provided by financing activities totaled $7,971,174, comprised of proceeds from the sale of our common stock and subscriptions of
$6,041,214 and sale of our Series D Preferred stock of $1,929,960. In the comparable period in 2016, $5,226,368 was raised through the
sale of our common stock. At December 31, 2017, we had cash of $1,547,579 compared to $1,055,895 at December 31, 2016. Our cash is
held in bank deposit accounts. At December 31, 2017 and 2016, we had no convertible debentures outstanding.
Cash used in operations for the twelve months ended December 31, 2017 and 2016 was $7,470,054 and $5,107,452, 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.
41
Table of Contents
Cash used in investing activities for the twelve months ended December 31, 2017 was $9,436, compared to $16,255 for the twelve
months ended December 31, 2016. During both the twelve months ended December 31, 2017 and the twelve months ended December 31,
2016, we purchased office furniture and computer equipment.
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, March 10, 2017 and March 31, 2017 an aggregate of 2,899,974 units, which consisted of, in the aggregate, 2,899,974
shares of our common stock and warrants to purchase 952,204 shares of our common stock at an exercise price of $1.50 per share, in
exchange for aggregate gross proceeds of $3,972,191, after financing costs of $377,770. In addition, we issued an aggregate of warrants to
purchase 186,957 shares of our common stock to our placement agent with an exercise price of $1.50, expiring January 13, 2020.
On April 6, 2017, 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 April 6, 2017, April 17, 2017, May 5, 2017, June 20, 2017, June 30, 2017, July 13, 2017,
August 18, 2017, September 18, 2017, October 11, 2017, November 6, 2017 and December 29, 2017 an aggregate of 2,808,607 units,
which consisted of, in the aggregate, 2,808,607 shares of our common stock and warrants to purchase 1,404,306 shares of our common
stock at an exercise price of $1.50 per share, in exchange for aggregate gross proceeds of $4,211,537, after financing costs of $1,374.
In their report dated February 27, 2018, our independent registered public accounting firm stated at December 31, 2017, 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,
2017, the aggregate stated value of our Series C Preferred Stock was $985,000. 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.
42
Table of Contents
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 $5 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.
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.
43
Table of Contents
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, 2017 and 2016
Statements of Operations for the Years Ended December 31, 2017 and 2016
Statement of Stockholders’ Deficit for the two Years Ended December 31, 2017
Statements of Cash Flows for the Years Ended December 31, 2017 and 2016
Notes to Financial Statements
F-1
F-2
F-3
F-4
F-5
F-7
F-8
Table of Contents
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, 2017 and 2016, 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, 2017 and 2016, 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.
/s/ Liggett & Webb, P.A.
We have served as the Company’s auditor since 2013.
February 27, 2018
New York, New York
F-2
Table of Contents
Current assets:
Cash
Prepaid expenses
Total current assets
Property and equipment, net
Other assets:
Deposits
Total assets
BIOSIG TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
ASSETS
2017
2016
$
1,547,579 $
116,938
1,664,517
1,055,895
134,263
1,190,158
18,716
24,188
17,084
27,612
$
1,700,317 $
1,241,958
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses, including $27,375 and $15,755 to related parties as of
December 31, 2017 and 2016, respectively
Dividends payable
Warrant liability
Derivative liability
Total current liabilities
$
473,098 $
447,901
2,358,240
685,922
3,965,161
373,103
359,891
1,937,234
288,934
2,959,162
Series C Preferred Stock, 985 and 1,070 shares issued and outstanding; liquidation preference of
$985,000 and $1,070,000 as of December 31, 2017 and 2016, respectively
985,000
1,070,000
Stockholders’ deficit
Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A,
600 shares of Series B, 4,200 shares of Series C and 1,400 shares of Series D Preferred Stock
Series D Preferred Stock, $0.001 par value, 1,334 and 0 shares issued and outstanding; liquidation
preference of $2,001,000 and $0 as of December 31, 2017 and 2016, respectively
Common stock, $0.001 par value, authorized 200,000,000 shares, 29,321,204 and 22,588,184
issued and outstanding as of December 31, 2017 and 2016, respectively
Additional paid in capital
Common stock subscription
Accumulated deficit
Total stockholders’ deficit
1
-
29,321
53,215,635
29,985
(56,524,786)
(3,249,844)
22,588
41,019,251
-
(43,829,043)
(2,787,204)
Total liabilities and stockholders’ deficit
$
1,700,317 $
1,241,958
See the accompanying notes to the financial statements
F-3
Table of Contents
BIOSIG TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Operating expenses:
Research and development
General and administrative
Depreciation
Total operating expenses
Loss from operations
Other income (expense):
Gain (loss) on change in fair value of derivatives
Interest income
Loss before income taxes
Income taxes (benefit)
Net loss
Preferred stock dividend
Year ended December 31,
2016
2017
$
4,756,468 $
8,138,117
11,698
12,906,283
2,654,501
8,499,304
10,475
11,164,280
(12,906,283)
(11,164,280)
210,465
75
(422,908)
1
(12,695,743)
(11,587,187)
-
-
(12,695,743)
(11,587,187)
(119,877)
(110,023)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
$
(12,815,620) $
(11,697,210)
Net loss per common share, basic and diluted
$
(0.50) $
(0.60)
Weighted average number of common shares outstanding, basic and diluted
25,550,686
19,490,767
See the accompanying notes to the financial statements
F-4
Table of Contents
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.
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT
TWO YEARS ENDED DECEMBER 31, 2017
Additional
Common
Series D Preferred
stock
Shares Amount
Common stock
Paid in
Shares
Amount Capital
stock
Subscription
Accumulated
Deficit
Total
- $
-
-
- 16,825,703 $ 16,826 $29,314,399 $
- $ (32,241,856) $ (2,910,631)
- 3,798,417
3,798 5,222,570
- 1,335,000
1,335 2,469,715
-
-
-
5,226,368
-
2,471,050
-
-
267,334
267
400,733
-
-
401,000
-
-
58,185
58
90,365
-
-
90,423
-
-
-
-
-
-
-
103,096
-
303,545
304 3,528,396
-
-
-
103,096
-
3,528,700
-
-
-
-
-
-
(110,023)
-
-
(110,023)
- (11,587,187) (11,587,187)
-
- $
- 22,588,184 $ 22,588 $41,019,251 $
- $ (43,829,043) $ (2,787,204)
F-5
Table of Contents
BIOSIG TECHNOLOGIES, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT
TWO YEARS ENDED DECEMBER 31, 2017
Additional Common
Series D Preferred
stock
Shares Amount
Common stock
Paid in
Shares
Amount Capital
stock
Subscription
Accumulated
Deficit
Total
Balance, December
31, 2016
Sale of common stock
Sale of Series D
preferred 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
$1.37 per share
Common stock
received and canceled
in connection with
short term swing
profit reimbursement
Common stock
subscription received
Reclassify initial fair
value of derivative
and warrant liability
of Series D preferred
stock and warrants at
issuance
Reclassify fair value
of derivative liability
to equity upon
conversion of Series C
Preferred Stock to
common shares
Fair value of warrant
issued to acquire
research and
development
Stock based
compensation
Preferred stock
dividend
Net loss
Balance, December
31, 2017
- $
-
- 22,588,184 $ 22,588 $41,019,251 $
4,131 6,007,098
- 4,131,536
- $ (43,829,043) $ (2,787,204)
6,011,229
-
-
1,334
1
-
- 1,929,959
-
- 2,271,788
2,272 3,384,345
-
-
-
1,929,960
-
3,386,617
-
-
56,669
57
84,943
-
-
85,000
-
-
24,021
24
31,844
-
-
31,868
-
-
-
(10,744)
(11)
11
-
-
-
-
-
29,985
-
-
-
29,985
-
-
-
- (1,049,216)
-
-
(1,049,216)
-
-
-
-
20,757
-
-
20,757
-
-
-
-
-
-
-
543,927
-
259,750
260 1,362,593
-
-
-
543,927
-
1,362,853
-
-
-
-
-
-
(119,877)
-
-
(119,877)
- (12,695,743) (12,695,743)
-
1,334 $
1 29,321,204 $ 29,321 $53,215,635 $
29,985 $ (56,524,786) $ (3,249,844)
See the accompanying notes to the financial statements
F-6
Table of Contents
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
Equipment distribution as officer compensation
Change in derivative liabilities
Equity based compensation
Fair value of issued warrant to acquire research and development
Changes in operating assets and liabilities:
Prepaid expenses
Security deposit
Accounts payable
Deferred rent payable
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Net cash used in investing activity
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
Proceeds from sale of Series D preferred stock
Proceeds from common stock subscription
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 initial fair value of derivative and warrant liabilities from equity upon issuance of Series
D preferred stock
Reclassify fair value of derivative liability to equity
See the accompanying notes to the financial statements
F-7
Year ended December 31,
2016
2017
$
(12,695,743) $
(11,587,187)
11,698
3,210
(210,465)
4,749,470
543,927
17,325
10,528
102,338
(2,342)
(7,470,054)
10,475
-
422,908
5,999,750
-
(102,955)
-
149,661
(104)
(5,107,452)
(9,436)
(9,436)
(16,255)
(16,255)
6,011,229
1,929,960
29,985
7,971,174
5,226,368
-
-
5,226,368
491,684
102,661
1,055,895
1,547,579 $
953,234
1,055,895
- $
- $
-
-
116,868 $
491,423
1,049,216 $
20,757 $
-
103,096
$
$
$
$
$
$
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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, 2017 and 2016, deposits in excess of FDIC limits were
$1,297,579 and $805,895, respectively.
Prepaid Expenses
Prepaid expenses are comprised of vendor deposits of $100,000, 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
Table of Contents
Long-Lived Assets
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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, 2017 and 2016, the Company did not have any
derivative instruments that were designated as hedges.
At December 31, 2017 and 2016, 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 $4,756,468 and $2,654,501 for the year ended December 31, 2017 and 2016, respectively.
F-9
Table of Contents
Income Taxes
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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 non-current.
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, 2017 and 2016 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
Series D convertible preferred stock
Options to purchase common stock
Warrants to purchase common stock
Totals
Stock based compensation
2017
656,667
1,334,000
8,510,319
12,789,086
23,290,072
2016
713,333
-
8,245,190
9,128,189
18,086,712
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.
As of December 31, 2017, there were outstanding stock options to purchase 8,510,319 shares of common stock, 7,347,486 shares of which
were vested. As of December 31, 2016, the Company had 8,245,190 options outstanding to purchase shares of common stock, of which
7,028,639 were vested.
F-10
Table of Contents
Registration Rights
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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.
Beginning on October 28, 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 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 the final closing under the Private Placement and to be effective
120 calendar days thereafter. The final closing under the Private Placement occurred on March 31, 2017. On June 8, 2017, the Company
filed the required registration statement and on September 19, 2017 was declared effective. The Company has estimated the liability
under the registration rights agreement at $-0- as of December 31, 2017.
On November 3, 2017, in connection with the Company’s private placement of Series D 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 D Preferred Stock and exercise of the warrants issued to
holders of Series D 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 D Preferred Stock and exercise of the
warrants on or before December 18, 2017 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
March 18, 2018 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and
Exchange Commission issues comments. On December 18, 2017, the Company filed the required registration statement. The Company
has estimated the liability under the registration rights agreement at $-0- as of December 31, 2017.
Beginning on April 6, 2017, 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 the final closing under the Private Placement and to be effective 120 calendar
days thereafter. The final closing under the Private Placement occurred on December 31, 2017. The Company has estimated the liability
under the registration rights agreement at $-0- as of December 31, 2017.
F-11
Table of Contents
Recent Accounting Pronouncements
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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 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 consolidated financial statements, except as disclosed.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of December 31, 2017, the Company had cash of $1,547,579 and working capital deficit (current liabilities in excess of current assets)
of $2,300,644 principally due to the inclusion of non-cash derivative and warrant liabilities recorded in current liabilities. In addition, the
Company raised $6,041,214 through the sale of common stock and warrants (See Note 8) and $1,929,960 through the sale of Series D
preferred stock and warrants (Note 6) in 2017. Subsequent to December 31, 2017, the Company raised $1,500,000 from the sale of Series
E preferred stock and warrants and $270,000 from the sale of common stock (Note 13). As of December 31, 2017, excluding the
derivative and warrant liabilities, the Company’s working capital would have been $743,518. During the year ended December 31, 2017,
the Company used net cash in operating activities of $7,470,054. 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 6 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, 2017 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 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, 2017 and 2016, all advances had been repaid.
Accrued expenses related primarily to travel reimbursements due related parties as of December 31, 2017 and 2016 was $27,375 and
$15,755, respectively.
F-12
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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 22, 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 22, 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.
On April 1, 2017, the Company received and canceled 10,744 shares of its common stock as payment for short-swing profit pursuant to
Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended from Mr. Londoner.
On June 16, 2017 Mr. Cash was granted 100,000 shares of common stock at a cost basis of $1.37 per share in connection with his
severance settlement. The granted shares vested immediately.
On November 8, 2017, Mr. Londoner, Mr. Chaussy and Mr. O’Donnell were granted 450,000, 250,000 and 200,000 shares of common
stock at a cost basis of $1.52 per share for their 2017 performance, respectively. The granted shares vested immediately.
On November 1, 2017, in connection with Mr. Filler joining the Company’s Board of Directors, the Company entered into a Master
Services Agreement (the “Agreement”) with 3LP Advisors LLC (d/b/a Sherpa Technology Group) (“Sherpa”) and an initial statement of
work (the “SOW”), pursuant to which Sherpa will develop, execute and expand the Company’s intellectual property strategy over the
course of the next approximately 18 months by evaluating the business and technology landscape in which the Company operates, and
charting and executing a strategy of patent filing and licensing. In connection with the SOW, the Company will pay Sherpa fee of (i)
$200,000 in cash, of which $25,000 will be paid on January 1, 2018, with the remainder to be paid upon completion of certain objectives,
and (ii) a ten-year option to purchase up to 300,000 of the Company’s common stock at an exercise of $1.50 per share of common stock,
of which 150,000 options vest immediately and 150,000 options are performance conditioned. Mr. Filler is the general counsel and
partner of Sherpa.
On November 9, 2017, Mr. Londoner, Mr. O’Donnell and Mr. Weild, as members of the board of directors, were granted each 50,000
shares of common stock at a cost basis of $1.49 per share for their 2017 board and committee service. The granted shares vested
immediately.
On November 9, 2017, Mr. Tanaka, Mr. Filler and Mr. Foley, as members of the board of directors, were granted each 30,000 shares of
common stock at a cost basis of $1.49 per share for their 2017 board service. The granted shares vested immediately.
On December 22, 2017 Mr. Gallagher and Mr. Fischer were granted options to purchase 39,926 and 65,972 shares of common stock at a
cost basis of $1.37 per share for their 2017 board service. The granted options vested as of December 22, 2017 and are exercisable for a
ten year term.
F-13
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2017 and 2016 is summarized as follows:
Computer equipment
Furniture and fixtures
Subtotal
Less accumulated depreciation
Property and equipment, net
2017
2016
$
$
87,059 $
12,975
100,034
(81,318)
18,716 $
84,704
10,117
94,821
(70,633)
24,188
During the year ended December 31, 2017, the Company distributed equipment with a book value of $3,210 to a prior employee in
connection with a settlement agreement.
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 $11,698 and $10,475 for the years ended December 31, 2017 and 2016, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2017 and 2016 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
2017
2016
$
$
93,595 $
2,600
109,059
246,030
7,912
569
13,333
473,098 $
120,464
43,116
1,192
181,884
10,202
2,912
13,333
373,103
NOTE 6 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
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”).
F-14
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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.
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.
F-15
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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.
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.
Issuances:
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.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000.
2017 and 2016 conversions:
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.
F-16
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
In June 2017, the Company issued an aggregate of 60,846 shares of its common stock in exchange for 65 shares of the Company’s Series
C Preferred Stock and accrued dividends.
In July 2017, the Company issued an aggregate of 19,844 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, 2017, at the time of conversions, the Company reclassified the fair value of the embedded beneficial
conversion feature of the Series C Preferred Stock of $20,757 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
0.74% to 1.06%, a dividend yield of 0%, and volatility of 151% to 166%.
Series C Preferred Stock issued and outstanding totaled 985 and 1,070 as of December 31, 2017 and 2016, respectively. As of December
31, 2017 and 2016, the Company has accrued $419,283 and $359,891 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.
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. At December 31,
2017 and 2016, the Company estimated the liability at $-0-.
F-17
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 7 – WARRANT AND DERIVATIVE LIABILITIES
Series C 9% Convertible Preferred Stock and related warrants
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%.
Series D Convertible Preferred Stock and related warrants
At issuance, the Company determined that certain anti-dilutive provisions embedded in the Series D Preferred Stock and related warrants
(see Note 8) met the defined criteria of a derivative and accordingly, reclassified from equity to liability the determined fair value of the
embedded reset provisions of the Series D Preferred Stock and warrants of $397,162 and $652,054, respectively.
The Company valued the reset provisions of the Series D 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 1.74%, a
dividend yield of 0%, and volatility of 130%.
At December 31, 2017, the Company marked to market the fair value of the reset provisions of the Preferred Stock and warrants and
determined fair values of $685,922 and $2,358,240, respectively. The Company recorded a gain from change in fair value of derivatives
of $210,465 for year ended December 31, 2017. 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 1.39% to
1.89%, a dividend yield of 0%, and volatility of 131%
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, 2017 and 2016, the
Company has authorized 200 shares of Series A preferred stock, 600 shares of Series B preferred stock, 4,200 shares of Series C Preferred
Stock and (in 2017) 1,400 shares of Series D Preferred Stock. As of December 31, 2017 and 2016, there were no outstanding shares of
Series A and Series B preferred stock.
Series C Preferred 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.
F-18
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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.
In June 2017, the Company issued 60,846 shares of its common stock in exchange for 65 shares of the Company’s Series C Preferred
Stock and accrued dividends.
In July 2017, the Company issued an aggregate of 19,844 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, 2017 to December 31, 2017, the Company exchanged 85 shares of the Company’s Series C Preferred Stock
and dividends with a recorded value of $116,868 for 80,690 shares of common stock.
As of December 31, 2017 and 2016, the Company has 985 and 1,070 Series C Preferred Stock issued and outstanding.
Series D Preferred Stock
On November 3, 2017, the Board of Directors authorized the issuance of up to 1,400 shares of Series D Convertible Preferred Stock (the
“Series D Preferred Stock”) and accordingly, the Company filed the Certificate of Designations for the Series D Preferred Stock with the
Secretary of State of the State of Delaware. Pursuant to such Certificate of Designations, in the event of the Company’s liquidation or
winding up of its affairs, the holders of Preferred Shares will be entitled to a liquidation preference of the stated value per Preferred Share
of $1,500 (the “Stated Value”) plus any accrued but unpaid dividends or any other fees due the holder.
A holder of Preferred Shares is entitled at any time to convert any whole or partial number of shares of Preferred Shares into shares of
Common Stock determined by dividing the Stated Value of the Preferred Shares being converted by the conversion price of $1.50 per
share (the “Conversion Price”). The Conversion Price is subject to “full ratchet” anti-dilution price protection upon the issuance of equity
or equity-linked securities at a price lower than the Conversion Price as well as other customary anti-dilution protection.
A holder of the Preferred Shares shall be entitled to receive cumulative dividends at the rate per Preferred Share (as a percentage of the
Stated Value per Preferred Share) of 9% per annum, with respect to the Series D Preferred Stock on each date that such Holder converts
Preferred Shares into Common Stock (with respect only to Preferred Shares being converted). The Company may pay such dividends, at
its option, in cash, Common Stock or a combination thereof. Payment of dividends in shares of Common Stock is subject to the
satisfaction of certain equity conditions set forth in the Certificate of Designations. Upon the conversion of Preferred Shares prior to
November 3, 2020, the Company shall also pay to the Holders of the Preferred Shares so converted cash, or at the Company’s option,
Common Stock or a combination thereof, with respect to the Preferred Shares so converted in an amount equal to $270 per $1,000 of
Stated Value of the Preferred Shares being converted, less the amount of all prior dividends paid on such converted Preferred Shares
before the relevant date of conversion.
F-19
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
On November 3, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional
accredited investors (the “Investors”), pursuant to which the Company sold an aggregate of 1,334 shares (the “Preferred Shares”) of its
Series D Preferred Stock, par value $0.001 per share, and Class A Warrants to purchase an aggregate of 667,000 shares of the Company’s
common stock, par value $0.001 per share at an exercise price of $1.75 per share (the “Class A Warrants”), in exchange for aggregate net
cash proceeds of $1,929,960, net of expenses of $70,040. Contemporaneously with the entry into the Purchase Agreement, the Company
and the Purchasers agreed to exchange outstanding warrants to purchase 780,506 shares of the Common Stock at an exercise price of
$1.50 per share for new Class B Warrants to purchase an equal number of shares of common stock at the same exercise price (the “Class
B Warrants”). Class A Warrants are exercisable immediately and expire on May 3, 2021, and have an exercise price of $1.75 per share.
The Class B Warrants are exercisable immediately and expire on November 3, 2020, and have an exercise price of $1.50. The Class A
Warrants and Class B Warrants otherwise have similar terms, including, a “full ratchet” anti-dilution adjustment in the event that the
Company issues any common stock at a per share price lower than the applicable exercise price then in effect.
On November 6, 2017, the terms of the Class A Warrants automatically adjusted due to the full-ratchet anti-dilution protection provision
contained in such warrants. As a result of the adjustment, the exercise price applicable to the Class A Warrants decreased to $1.50 per
share from $1.75 per share, and the number of shares issuable under each warrant was increased such that the aggregate exercise price
payable under such warrant, after taking into account the decrease in the exercise price, is equal to the aggregate exercise price prior to
such adjustment. An additional 111,167 shares of common stock may be issued upon exercise of the Class A Warrants due to the
adjustment.
In connection with the Company’s private placement of Series D 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 D Preferred Stock and exercise of the warrants issued to holders of Series D 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 D Preferred Stock and exercise of the warrants on or before December 18,
2017 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 March 18, 2018 in the event that the
registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues
comments. On December 18, 2017, the Company filed the required registration statement. The Company has estimated the liability under
the registration rights agreement at $-0- as of December 31, 2017.
As of December 31, 2017, the Company has 1,334 Series D Preferred Stock issued and outstanding and has accrued $28,618 dividends
payable on the Series D Preferred Stock.
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, 2017 and 2016, the Company had 29,321,204 and 22,588,184 shares issued and outstanding, respectively.
F-20
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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 2,040,504 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.
During the year ended December 31, 2017, the Company issued an aggregate of 1,825,000 shares of common stock under the terms of its
2012 Equity Plan for services rendered totaling $2,705,250 ($1.48 average per share).
During the year ended December 31, 2017, the Company issued an aggregate of 446,788 shares of its common stock for services totaling
$681,367 ($1.53 per share).
During the year ended December 31, 2017, the Company issued an aggregate of 135,000 and 124,750 shares of its common stock for
vested restricted stock units and stock based compensation previously accrued in 2016.
During the year ended December 31, 2017, the Company entered into securities purchase agreements with investors pursuant to which the
Company issued 4,131,536 shares of common stock and 2,246,300 warrants for aggregate proceeds of $6,011,229, net of $186,075 in
expenses.
In April 2017, the Company received and canceled 10,744 shares of its common stock as payment for short-swing profit pursuant to
Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended from an officer and member of the Company’s Board of Directors.
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.
F-21
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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 shall be 3%
to 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 registration statements, which was declared effective to satisfy the requirements under the registration rights
agreements with the purchasers of its common stock and warrants prior to April 6, 2017. The final closing under the April 6, 2017 Private
Placement occurred on December 31, 2017. The Company has estimated the liability under the registration rights agreement at $-0- as of
December 31, 2017.
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.
F-22
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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, 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.
During the year ended December 31, 2017, the Company granted an aggregate of 1,680,898 options to officers, directors and key
consultants.
During the year ended December 31, 2017, the Company granted an aggregate of 2,009,750 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, 2017:
Options Outstanding
Options Exercisable
Exercise
Price
$
1.01-2.00
2.01-3.00
3.01-4.00
Number of
Options
3,825,540
4,384,779
300,000
8,510,319
Weighted
Average
Remaining Life
In Years
Exercisable
Number of
Options
$
6.8
3.7
7.3
5.2
2,662,707
4,384,779
300,000
7,347,486
A summary of the stock option activity and related information for the 2012 Plan for the years ended December 31, 2017 and 2016 is as
follows:
Weighted-
Average
Outstanding at January 1, 2016
Grants
Exercised
Canceled
Outstanding at December 31, 2016
Grants
Exercised
Canceled
Outstanding at December 31, 2017
Exercisable at December 31, 2017
Weighted-
Average
Exercise Price
2.30
1.71
Remaining
Contractual
Term
Shares
7,780,190 $
905,000
-
(440,000)
8,245,190 $
1,680,898
-
(1,415,769) $
8,510,319 $
7,347,486 $
2.24
2.24
1.50
2.17
2.11
2.19
Aggregate
6.4 $
10.0 $
-
Intrinsic Value
-
-
-
-
-
-
5.7 $
10.0 $
5.2 $
4.8 $
27,045
25,394
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 $1.44 as of December 31, 2017, which would have been received by the option holders had those
option holders exercised their options as of that date.
F-23
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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, 2017 and 2016 was estimated using the Black-Scholes pricing model.
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.
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
$
On February 8, 2017, the Company granted an aggregate of 130,000 options to purchase the Company stock in connection with the
services rendered at the exercise price of $1.55 per share for a term of ten years with vesting immediately.
On November 8, 2017, the Company granted 200,000 options to purchase the Company stock in connection with the services rendered at
the exercise price of $1.57 per share for a term of ten years with 50,000 vesting immediately and 50,000 vesting each anniversary through
November 8, 2020.
On November 8, 2017, the Company granted 475,000 options to purchase the Company stock in connection with the services rendered at
the exercise price of $1.57 per share for a term of ten years with 237,500 vesting immediately and 237,500 at one year anniversary.
F-24
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
On November 24, 2017, the Company granted 50,000 options to purchase the Company stock in connection with the services rendered at
the exercise price of $1.45 per share for a term of ten years, vesting immediately.
On November 24, 2017, the Company granted 420,000 options to purchase the Company stock in connection with the services rendered
at the exercise price of $1.45 per share for a term of ten years with 120,000 vesting immediately; 50,000 vesting on two year anniversary
and 250,000 performance contingent.
On November 24, 2017, the Company granted 300,000 options to purchase the Company stock in connection with the services rendered
at the exercise price of $1.50 per share for a term of ten years with 150,000 vesting immediately and 150,000 performance contingent.
On December 22, 2017, the Company granted 105,898 options to purchase the Company stock in connection with the services rendered at
the exercise price of $1.37 per share for a term of ten years, 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, 2017:
Risk-free interest rate
Dividend yield
Stock price volatility
Expected life
Weighted average grant date fair value
2.01% - 2.34 %
0 %
95.72% to 107.17 %
5 – 10 years
1.17
$
The fair value of all options vesting during the year ended December 31, 2017 and 2016 of $1,269,591 and $2,801,948, respectively, was
charged to current period operations. Unrecognized compensation expense of $979,812 and $310,817 at December 31, 2017 and 2016,
respectively, will be expensed in future periods.
Restricted Stock
The following table summarizes the restricted stock activity for the two years ended December 31, 2017:
Restricted shares issued as of January 1, 2016
Granted
Vested
Total restricted shares issued as of December 31, 2016
Granted
Vested
Vested restricted shares as of December 31, 2017
Unvested restricted shares as of December 31, 2017
175,000
180,000
(220,000)
135,000
-
(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 $93,261 and $213,174 for the years ended December 31, 2017
and 2016, respectively. As of December 31, 2017, the stock-based compensation relating to restricted stock of $-0- remains
unamortized.
F-25
Table of Contents
Warrants
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at
December 31, 2017:
Exercise
Price
Number
Outstanding
383,320
8,667,440
35,076
1,689,026
100,000
30,755
100,000
228,720
214,193
1,340,556
12,789,086
0.001
1.50
1.84
1.95
2.00
2.02
2.50
2.75
3.67
3.75
$
$
$
$
$
$
$
$
$
$
Expiration
Date
January 2020
February 2018 to May 2021
January 2020
October 2018 to September 2019
August 2018
January 2020
August 2018
August 2019 to September 2019
December 2018 to January 2019
April 2019 to March 2020
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.
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.
F-26
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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
On February 9, 2017, the Company exchanged 38,572 warrants with an exercise price of $2.10 with 45,001 warrants with an exercise
price of $1.50, all other terms and conditions the same, to 2016 investors to adjust offered terms in connection with the Company’s equity
raise with other investors.
On February 10, 2017, the Company issued an aggregate of 300,628 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on February 10, 2020, in connection with the sale of the Company’s common stock.
On March 10, 2017, the Company issued an aggregate of 197,159 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on March 10, 2020, in connection with the sale of the Company’s common stock.
On March 15, 2017, the Company issued 630,000 warrants to purchase the Company’s common stock at $1.50 per share, expiring on
March 15, 2020, to Mayo Foundation in connection with a know-how licensing agreement (See Note 10). The fair value of the of the
issued warrants of $543,927, determined using the Black-Scholes option model with an estimated volatility of 105.22%, risk free rate of
1.599%, dividend yield of -0- and fair value of the Company’s common stock of $1.37, was charged to current period operations as
acquired research and development.
On March 31, 2017, the Company issued an aggregate of 157,250 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on March 31, 2020, in connection with the sale of the Company’s common stock.
On April 6, 2017, the Company issued an aggregate of 288,300 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on April 6, 2020, in connection with the sale of the Company’s common stock.
On May 5, 2017, the Company issued an aggregate of 6,667 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on May 5, 2020, in connection with the sale of the Company’s common stock.
On May 17, 2017, the Company issued an aggregate of 186,957 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on May 17, 2020, for placement agent services in connection with the sale of the Company’s common stock.
On June 20, 2017, the Company issued 10,000 warrants to purchase the Company’s common stock at $1.50 per share, expiring on June
20, 2020, in connection with the sale of the Company’s common stock.
On June 30, 2017, the Company issued an aggregate of 108,334 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on June 30, 2020, in connection with the sale of the Company’s common stock.
On July 13, 2017, the Company issued an aggregate of 133,501 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on July 13, 2020, in connection with the sale of the Company’s common stock.
F-27
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
On August 18, 2017, the Company issued an aggregate of 175,500 warrants to purchase the Company’s common stock at $1.50 per share,
expiring on August 18, 2020, in connection with the sale of the Company’s common stock.
On September 18, 2017, the Company issued an aggregate of 51,668 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on September 18, 2020, in connection with the sale of the Company’s common stock.
On October 11, 2017, the Company issued an aggregate of 193,334 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on October 11, 2020, in connection with the sale of the Company’s common stock.
On November 3, 2017, the Company issued an aggregate of 667,000 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on May 3, 2021, in connection with the sale of the Company’s Series D preferred stock. The warrants contain certain anti-
dilutive provisions (see Note 8).
On November 3, 2017, the Company issued an aggregate of 780,506 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on November 3, 2020 in exchange for the return and cancellation of previous issued 780,505 warrants. The transaction
was in connection with the sale of the Series D preferred stock. Both the issued and canceled warrants contain certain anti-dilutive
provisions (see Note 8).
On November 6, 2017, the Company issued an aggregate of 206,668 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on November 6, 2020, in connection with the sale of the Company’s common stock.
On November 6, 2017, due to certain anti-dilutive provisions embedded in the November 3, 2017 warrants issued in connection with the
sale of Series D preferred stock (see above), exercise price of the previously issued 667,000 warrants were reset to $1.50 and an additional
111,167 warrants were issued with an exercise price of $1.50 per share, expiring May 3, 2021.
On December 29, 2017, the Company issued an aggregate of 230,334 warrants to purchase the Company’s common stock at $1.50 per
share, expiring on December 29, 2020, in connection with the sale of the Company’s common stock.
Stock based compensation related to warrants issued for services was $0 and $56,931 for the years ended December 31, 2017 and 2016,
respectively.
A summary of the warrant activity for the years ended December 31, 2017 and 2016 is as follows:
F-28
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Weighted-
Average
Shares
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Outstanding at January 1, 2016
Grants
Exercised
Canceled
Outstanding at December 31, 2016
Grants
Exercised
Canceled
Outstanding at December 31, 2017
Vested and expected to vest at December 31, 2017
Exercisable at December 31, 2017
7,078,685 $
2,049,504 $
-
-
9,128,189 $
4,479,974
-
(819,077) $
12,789,086 $
12,789,086 $
12,789,086 $
2.02
1.74
$
$
1.96
1.50
1.50
1.82
1.82
1.82
Aggregate
Intrinsic Value
497,933
-
-
-
494,099
-
3.0
2.5
-
-
2.1 $
3.0
1.7 $
551,636
1.7 $
1.7 $
551,636
551,636
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 $1.44 as of December 31, 2017, which would have been received by the warrant holders had those
warrant holders exercised their warrants as of that date.
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.
F-29
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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, 2017 and 2016, 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, 2017 and 2016, the Company did not have any derivative instruments that were designated as hedges.
The derivative and warrant liability as of December 31, 2017, in the amount of $685,922 and $2,358,240, respectively, has a level 3
classification.
The following table provides a summary of changes in fair value of the Company’s level 3 financial liabilities as of December 31, 2017:
Balance, December 31, 2015
Total (gains) losses
Transfers out due to conversion of Series C Preferred Stock
Mark to market to December 31, 2016
Balance, December 31, 2016
Initial fair value of derivative at date of issuance of Series D Preferred Stock
Initial fair value of warrant liability at date of issuance
Transfers out due to conversion of Series C Preferred Stock
Mark to market to December 31, 2017
Balance, December 31, 2017
Gain (loss) on change in warrant and derivative liabilities for the year ended December 31, 2016
Warrant
Liability
Derivative
$
1,621,199 $
285,157
-
316,035
1,937,234
-
652,054
-
(231,048)
2,358,240
231,048 $
(103,096)
106,873
288,934
397,162
-
(20,757)
20,583
685,922
(20,583)
$
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.
F-30
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Operating leases
On February 8, 2017, 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, 2017 and expiring on August 31, 2019. In connection with the lease,
the Company is obligated to lease parking spaces at an aggregate approximate cost of $978 per month. In addition, the Company entered
into a lease for storage space with the Los Angeles, California building commencing on December 1, 2017 and expiring on August 31,
2019.
Future minimum lease payments under these three agreements are as follows:
Year Ending December 31,
2018
2019
Licensing agreements
$
$
112,994
76,995
189,989
On March 15, 2017, the Company entered into a know-how license agreement with Mayo Foundation for Medical Education and
Research whereby the Company was granted an exclusive license, with the right to sublicense, certain know how and patent applications
in the field of signal processing, physiologic recording, electrophysiology recording, electrophysiology software and autonomics to
develop, make and offer for sale. The agreement expires in ten years from the effective date.
The Company is obligated to pay to Mayo Foundation a 1% or 2% royalty payment on net sales of licensed products, as defined.
In consideration, the Company issued 630,000 warrants to acquire the Company’s common stock at an exercise price of $1.50, expiring
on March 15, 2020.
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.
F-31
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
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.
Effective July 15, 2017, the Company elected not to continue under the above described agreement and accordingly terminated
employment with Mr. Cash.
As of December 31, 2017, there are no outstanding employment agreements.
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,
2017.
NOTE 12 – INCOME TAXES
At December 31, 2017, the Company has available for federal income tax purposes a net operating loss carry forward of approximately
$24,000,000, 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, 2017, the Company has increased the valuation allowance from $5,500,000 to $8,200,000.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, 2013.
The effective rate differs from the statutory rate of 34% for due to the following:
F-32
Table of Contents
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Statutory rate on pre-tax book loss
(Gain) loss on change in fair value of derivatives
Stock based compensation
Fair value of warrant to acquire research and development
Other
Valuation allowance
2017
2016
(34.00)%
(0.56)%
12.72%
1.46%
0.09%
20.29%
0.00%
(34.00)%
1.24%
17.6%
0.00%
0.09%
15.07%
0.00%
The Company’s deferred taxes as of December 31, 2017 and 2016 consist of the following:
Non-Current deferred tax asset:
Net operating loss carry-forwards
Valuation allowance
Net non-current deferred tax asset
NOTE 13 – SUBSEQUENT EVENTS
Adoption of Accounting Standards
2017
2016
$
$
8,200,000 $
(8,200,000)
- $
5,500,000
(5,500,000)
-
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings
Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part
I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round
features.
When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no
longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also
clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or
embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down
round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share
(EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a
dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded
conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion
features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The
amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as
pending content in the Codification, to a scope exception.
Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all
entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be
reflected as of the beginning of the fiscal year that includes that interim period. The Company anticipates early adoption of this
pronouncement effective January 1, 2018. As such, the impact would the reclassification of the December 31, 2017 fair values of our
warrant and derivative liabilities to equity.
On January 1, 2018, the Company adopted ASU 2017-11 and according reclassified the fair value of the reset provisions embedded in
previously issued Series C Preferred stock, Series D Preferred stock and certain warrants with embedded anti-dilutive provisions from
liability to equity in aggregate of $3,044,162.
F-33
Table of Contents
Series E Preferred Stock Issuance
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
On February 16, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional
accredited investors (the “Investors”), pursuant to which the Company sold to the Investors an aggregate of 1,000 shares (the “Preferred
Shares”) of its Series E Preferred Stock, par value $0.001 per share, and warrants to purchase an aggregate of 500,000 shares of the
Company’s common stock, par value $0.001 per share (the “Common Stock”), at an exercise price of $1.75 per share (the “Warrants”), in
exchange for aggregate consideration of $1,500,000 (the “Transaction”). The sale of the Preferred Shares and Warrants were offered and
sold in reliance on the exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) provided by
Section 4(a)(2) and Regulation D (Rule 506) under the Securities Act.
The Purchase Agreement contains representations and warranties of the Company and the Investors that are typical for transactions of this
type. The Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type. For a
period of twelve months after the closing date of Transaction, the Investors are entitled to a right of first refusal (the “ROFR”) with
respect to subsequent sales of securities by the Company (other than with respect to issuances of Excluded Securities (as defined in the
Purchase Agreement)) Pursuant to the ROFR, each Investor will have the opportunity to elect to purchase its pro rata portion of thirty
percent (30%) of any securities being offered by the Company in the subsequent offering.
In connection with the entry into the Purchase Agreement, the Investors and the Company also entered into a registration rights agreement
(the “Registration Rights Agreement”) whereby the Company agreed to file a registration statement with the Securities and Exchange
Commission (the “SEC”) within 90 days of the closing of the transactions contemplated by the Purchase Agreement (the “Filing Date”)
covering the resale of (a) all shares of Common Stock Issuable upon conversion of the Preferred Shares, (b) all shares of Common Stock
issuable upon exercise of the Warrants, (c) all other shares of Common Stock issued pursuant to any transaction documents which have
been, or which may, from time to time be issued or become issuable to the Investors under the Transaction Documents (without regard to
any limitation or restriction on purchases), and (d) any securities issued or then issuable upon any stock split, dividend or other
distribution, recapitalization or similar event (“Registrable Securities”), not then registered. The Company will use its reasonable best
efforts to keep the registrations statement effective pursuant to Rule 415 under the Securities Act until the earlier of (i) the date on which
the Investors shall have sold all the Registrable Securities covered therby and (ii) that date that all Registrable Securities may be sold
pursuant to Rule 144 without any public information requirement or volume or manner of sale limitations.
The Warrants are exercisable immediately and expire on August 16, 2021, and have an exercise price of $1.75 per share. The Warrants
include a “full ratchet” anti-dilution adjustment in the event that the Company issues any common stock or common stock equivalent at a
per share price lower than the applicable exercise price then in effect.
In connection with its entry into the Purchase Agreement, on February 14, 2018, the Company entered into a consent agreement (the
“Consent”) with the holders of the Company’s Series D Convertible Preferred Stock (the “Series D Holders”). Pursuant to the Consent,
the Series D Holders consented to the Transaction and are entitled at any time on or before April 17, 2018, to elect to receive the more
favorable terms of the Transaction. In consideration for their entry into the Consent, the Company issued to the Series D Holders
warrants to purchase up to an aggregate of 100,000 shares of Common Stock (the “Consent Warrants”). The Consent Warrants are
exercisable immediately and expire on February 14, 2021, and have an exercise price of $1.50 per share. The Consent Warrants include a
“full ratchet” anti-dilution adjustment in the event that the Company issues any common stock or common stock equivalent at a per share
price lower than the applicable exercise price then in effect. The issuance of the Consent Warrants to the Series D Holders was in reliance
on the exemption from registration under the Securities Act provided by Section 4(a)(2) and Regulation D (Rule 506) under the Securities
Act.
F-34
Table of Contents
Common Stock Issuance
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
On January 5, 2018, the Company entered into a unit purchase agreements with certain accredited investors pursuant to which the
Company issued 200,000 shares of our common stock and 100,000 warrants to purchase one share of our common stock, exercisable at a
price of $1.50 per share and expiring January 5, 2021, in exchange for aggregate consideration of $299,985, net of expenses of $15 (of
which $29,985 were received as common stock subscriptions as of December 31, 2017).
In January and February 2018, the Company issued an aggregate of 367,343 shares of common stock in exchange for 280 shares of our
Series D 9% Convertible Preferred Stock and accrued dividends.
On February 14, 2018, the Company issued an aggregate of 9,919 shares of common stock in exchange for 10 shares of our Series C 9%
Convertible Preferred Stock and accrued dividends.
On February 1, 2018, the Company granted 200,000 restricted stock units to consultants for services rendered, of which 100,000 vest
upon date of grant and 100,000 shares vest at the one-year anniversary of the date of grant provided the consultants are providing services
through the vesting date.
Options
On February 15, 2018, the Company granted our board member, Andrew L. Filler 50,000 options to purchase common stock in
connection with his appointment as chairman of our Nominating and Corporate Governance Committee at the exercise price of $1.42 per
share for a term of ten years, vesting immediately.
F-35
Table of Contents
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.
44
Table of Contents
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of December
31, 2017, 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, 2017, 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.
45
Table of Contents
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The following table sets forth information regarding our executive officers and the members of our board of directors.
Name
Kenneth L. Londoner
Steve Chaussy
Donald E. Foley
Roy T. Tanaka
Andrew L. Filler
Patrick J. Gallagher
Seth H. Z. Fischer
Jeffrey F. O’Donnell, Sr.
David Weild IV
Age
50
63
66
69
51
53
61
58
61
Position with the Company
Chief Executive Officer, Executive Chairman and 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, as our executive chairman since November
2013 and our chief executive officer since July 2017. 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.
Steve Chaussy. Mr. Chaussy has served as our chief financial officer on a full -time basis since January 2018. Mr. Chaussy served
as our chief financial officer on a part time basis from May 2011 to January 2018. 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.
46
Table of Contents
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. Mr. Foley also 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. In addition, Mr. Foley serves as chairman of the board of trustees of the
Burke Rehabilitation Hospital and Burke Medical Research Institute, as well as the W. Burke Foundation since 2009 during which time the
Hospital merged with the MonteFiore Hospital System. Mr. Foley holds an M.B.A. from New York University, and a B.A. from Union
College where he had served as a trustee, and as a chairman of the President’s Council. He also served as a trustee of the Covent of the
Sacred Heart; and currently serves as a trustee at the Sacred Heart Network of schools and a trustee and head finance chair at New
Beginning Family Academy, a charter school in Bridgeport, CT. 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 Epix Therapeutics Inc., a company
developing technology to measure the temperature in a lesion during cardiac ablation procedures, and VytronUS Inc., a company
developing ultrasound technology in the diagnosis and treatment of complex cardiac arrhythmias. In addition, Mr. Tanaka served as a
director of Volcano Corporation until May 2014 and TomoTherapy 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.
Andrew L. Filler. Mr. Filler has served as our director since November 2017. Mr. Filler brings to BioSig over 20 years of
experience in intellectual property for technology and medical device companies. He currently serves as Partner and General Counsel for
Sherpa Technology Group since February 2014. In addition, Mr. Filler had served as General Counsel and Vice President of IP for
Nanosys, Inc. from July 2004 until February 2014 and currently consults with Nanosys, Inc. on business and legal matters. Mr. Filler also
served as chief intellectual property counsel at Caliper Technologies from January 2002 until June 2004, senior associate attorney at Weil,
Gotshal & Manges from January 2000 until January 2002, and director of intellectual property at Corvascular from 1997 until 2000. We
believe that Mr. Filler’s extensive experience as an intellectual property lawyer and managing extensive intellectual property portfolios
make him a valuable member of our board.
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 over
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 Senior Managing Director and head of healthcare sales at Laidlaw & Co. (UK) Ltd. Mr. Gallagher serves
as a strategic consultant for Athenex, Inc., a biopharmaceutical 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. He also sits on the board of
directors of Cingulate Therapeutics since July 2013, a clinical stage biopharmaceutical company focused on innovative new products for
ADHD, as well as Evermore Global Advisors, a global money manager since May 2015. 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.
47
Table of Contents
Seth H. Z. Fischer . Mr. Fischer has served as our director since May 2013. He most recently served as the Chief Executive Officer
and as a director of Vivus, Inc., a publicly traded biopharmaceutical company commercializing and developing innovative, next-generation
therapies to address unmet needs, with currently marketed products in metabolic disease and sexual health from September 2013 -
December 2017. Prior to Vivus, Mr. Fischer served in positions of increasing responsibility with Johnson & Johnson, a public healthcare
company, from 1983 until his retirement in 2012. Mr. Fischer served as Company Group Chairman, Johnson & Johnson, and Worldwide
Franchise Chairman, Cardiovascular Devices, 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, McNeil Pediatrics, and Scios. Prior to this position, He served as President of Ortho-McNeil
Pharmaceuticals from 2000 to 2004, with his operating responsibilities encompassing the commercialization of products in multiple
therapeutic categories including epilepsy, migraine, analgesic, anti-infective, cardiovascular, neurologic, psychiatric and women’s health
areas. Mr. Fischer currently serves as a member of the board of directors Agile Therapeutics, Inc., a public pharmaceutical company
focused on women’s health. He also serves on the board of directors of Marinus Pharmaceuticals, Inc., a public biopharmaceutical company
focused on epilepsy and neuropsychiatric disorders. 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. Mr. Fischer holds a Bachelor of General Studies from Ohio University and served as a captain in the U.S.
Air Force. Mr. Fischer brings extensive executive level strategic and operational experience to our Board needed for strategic planning,
product development, commercialization and operations.
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). 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 chairman of the board of Strata Skin Sciences (NASDAQ: SSKN) (2 years) and prior
director for Cardiac Science (7 yrs.) and Endologix (12 yrs.). 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. And in 2017 Jeff assumed the role of Chairman
of the Board for SpectraWave, a cardiology device startup. 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 PrudentialFinancial.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 was a director and then chairman of the board of the 9-11 charity Tuesday’s Children. He became
chairman emeritus in late 2016 and still serves on the board. Mr. Weild brings extensive financial, economic, stock exchange, capital
markets, and small company expertise to the Company gained throughout his career on Wall Street. He is a recognized expert in capital
markets and has spoken at the White House, Congress, the SEC, OECD and the G-20 on how market structure can be bettered to improve
capital formation and economic growth.
48
Table of Contents
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,
2017, we believe that all filing requirements applicable to our officers, directors and greater than ten percent stockholders were complied
with for the fiscal year ended December 31, 2017, except that Jeffrey O’Donnell filed one late report with respect to one transaction.
Independent Directors
Our board of directors has determined that each of Roy T. Tanaka, David Weild IV, Patrick J. Gallagher, Donald E. Foley, Seth H.
Z. Fischer, Andrew L. Filler 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 Securities and Exchange Commission.
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 Messrs. Filler, Foley and Tanaka, each of whom
qualifies as an independent director under Section 5605(a)(2) of the rules of the NASDAQ Stock Market. Mr. Filler is the chairman of our
nominating and corporate governance committee.
Compensation Committee
Our compensation committee is currently comprised of Messrs. O’Donnell and Gallagher, 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.
49
Table of Contents
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 chief executive officer, executive chairman and member of
our board, (ii) Gregory D. Cash, our former chief executive officer and former member of our board and (iii) Steven Chaussy, our chief
financial officer.
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
($)
2017 435,000
2016 315,000
- 758,500
- 538,940
(1)
(2)
2017 179,252
2016 325,000
137,000
259,221
2017 180,833
2016 110,000
380,000
386,000
(3)
(4)
(5)
(6)
-
-
-
-
-
-
-
-
-
-
-
-
- 1,193,500
- 853,940
- 316,252
- 584,221
- 560,833
- 496,000
Name and principal
position
Kenneth L. Londoner,
Chief Executive
Officer,
Executive Chairman
and Director (7)
Gregory D. Cash,
President, Former
Chief Executive
Officer and Director
Steven Chaussy, Chief
Financial Officer
(1)
(2)
(3)
(4)
Represents (i) common stock award or 450,000 shares granted November 8, 2017 and (ii) a common stock award of 50,000
shares granted on November 9, 2017
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 100,000 shares granted June 6, 2017
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 250,000 shares granted November 8, 2017
Represents a common stock award of 200,000 shares granted May 4, 2016.
(5)
(6)
(7) Mr. Londoner served as our Executive Chairman and Director through the entirety of our last two fiscal years. Mr.
Londoner has served as our Chief Executive Officer since July 31, 2017.
50
Table of Contents
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.
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.
51
Table of Contents
In connection with the termination of Mr. Cash’s employment with the Company, we entered into a General Release and
Severance Agreement (the “Severance Agreement”) with Mr. Cash, pursuant to which Mr. Cash’s employment with the Company was
terminated effective as of June 1, 2017. Pursuant to the Severance Agreement, the Company agreed, among other things, to: (i) make
severance payments in an amount equal to Mr. Cash’s base salary, less applicable taxes and other withholdings, through July 14, 2017,
payable in equal installments in accordance with the normal payroll policies of the Company, with the first installment being paid on the
Company’s first regular pay date on or after the fortieth (40th) day following the Separation Date, which initial payment shall include all
installment amounts that would have been paid during the first forty (40) days following the Separation Date had installments commenced
immediately following the Separation Date; (ii) provide through December 31, 2017, or until Mr. Cash becomes eligible for comparable
employer sponsored health plan benefits, whichever is sooner, all health plan benefits to which Mr. Cash was entitled prior to the
Separation Date, pursuant to Mr. Cash’s election of COBRA with the Company and Mr. Cash paying the relative costs therefor in the same
proportion as existed while Mr. Cash was an active employee of the Company; (iii) issue 100,000 shares of restricted stock to Mr. Cash,
subject to the terms and conditions of the BioSig Technologies, Inc. 2012 Equity Incentive Plan and the Award Agreement (as described
below); and (iv) transfer to Mr. Cash title to certain equipment previously issued to him.
In connection with the termination of Mr. Cash’s employment with the Company, on May 31, 2017, the Company also entered
into a Restricted Stock Award Agreement (the “Award Agreement”) with Mr. Cash, pursuant to which the Company issued 100,000 shares
of restricted stock (the “Severance Shares”) to Mr. Cash, subject to the terms of the Award Agreement.
Pursuant to the Award Agreement, the Severance Shares will: (i) vest 100% as of the date of grant; (ii) be subject to forfeiture
immediately upon any revocation by Mr. Cash of his release of claims against the Company under the Severance Agreement; and (iii) be
subject to a one-year lock-up period, during which Mr. Cash will not be permitted to sell, transfer, pledge, hypothecate, margin, assign or
otherwise encumber any of the Severance Shares.
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, 2017.
Name
Kenneth
Londoner
Steven
Chaussy
Number of
Securities
underlying
Unexercised
Options (#)
Exercisable
250,000
Number of
Securities
underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($/Sh)
Option
Expiration
Date
Number of
Shares or
Units of
Stock that
have not
Vested (#)
- $
2.09 1/16/2020
- $
Market
Value of
Shares of
Units That
Have Not
Vested ($)
-
30,000
30,000
- $
- $
2.09 1/16/2020
2.09 6/11/2023
- $
- $
-
-
52
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 ($)
- $
- $
- $
-
-
-
Table of Contents
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 February 27, 2018, the number of options and restricted stock awards granted under the 2012 Plan are 15,184,383.
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, 2017 for services to our company.
Name
Donald E. Foley
Roy T. Tanaka
Andrew L. Filler
Patrick J Gallagher
Seth H. Z. Fischer
Jeffrey F O’Donnell, Sr
David Weild, IV
Jerome B. Zeldis (former member) (6)
Total:
Fees Earned
or Paid in
Cash ($)
Equity
Awards ($)
Total ($)
$
$
$
$
$
$
$
$
$
- $
- $
- $
- $
$
- $
- $
- $
- $
44,700 (1) $
44,700 (1) $
44,700 (1) $
42,084 (2) $
69,537 (3) $
378,500 (4) $
74,500 (5) $
$
-
$
698,721
44,700
44,700
44,700
42,084
69,537
378,500
74,500
-
698,721
(1)
(2)
(3)
(4)
Represents (i) a common stock award of 30,000 shares granted November 9, 2017
Represents (i) a stock option granted December 22, 2017 for the purchase of 39,926 shares of common stock, vesting
immediately, at an exercise price of $1.37 per share and termination date of December 22, 2027.
Represents (i) 2 stock options granted December 22, 2017 for the purchase of an aggregate of 65,972 shares of common stock,
vesting immediately, at an exercise price of $1.37 per share and termination date of December 22, 2027.
Represents (i) a common stock award of 200,000 shares granted on November 8, 2017 and (ii) a common stock award of 50,000
shares granted November 9, 2017.
Represents (i) a common stock award of 50,000 shares granted November 9, 2017
(5)
(6) Dr. Zeldis retired as our director on November 9, 2017.
53
Table of Contents
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, 2017, with respect to our equity compensation plans under
which our equity securities are authorized for issuance:
Number of
securities to
be issued
upon
exercise of
outstanding
options
(a)
Weighted-
average
exercise
price of
outstanding
options
(b)
Securities
remaining
available for future
issuance under
equity
compensation
plans
(excluding
securities
reflected in column
(a))
(c)
8,510,319 $
-
8,510,319 $
2.10
-
2.10
1,907,509
-
1,907,509
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
The following table sets forth information with respect to the beneficial ownership of our common stock as of February 27, 2018:
● by each person who is known by us to beneficially own more than 5.0% 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.
The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange
Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power
to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the
security. With respect to the Series C and Series D 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., 12424 Wilshire Blvd., Suite 745, Los Angeles, California 90025.
54
Table of Contents
Name of Beneficial Owner
5% Owners
Lora Mikolaitis
David Cherry
Ramachandra Malya
Alpha Capital Anstalt
Officers and Directors
Kenneth L. Londoner
Roy T. Tanaka
Seth H. Z. Fischer
Patrick J. Gallagher
Jeffrey F. O’Donnell, Sr.
Steve Chaussy
Andrew L. Filler
David Weild IV
Donald E. Foley
Number of
Shares
Beneficially
Owned (1)
Percentage of
Common
Stock Owned
(1)(2)
3,408,724 (3)
11.26%
2,358,639 (4)
1,820,000 (5)
7.73%
6.12%
3,377,356 (6)
10.62%
4,361,853 (7)
14.26%
974,802 (8)
616,916 (9)
296,150(10)
779,800(11)
946,687(12)
80,000(13)
400,000(14)
609,166(15)
3.16%
2.02%
*
2.57%
3.15%
*
1.32%
2.01%
All directors and executive officers as a group (9 persons)
9,065,374
29.72%
* Less than 1%
(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 February 27, 2018, 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 29,998,466 shares of common stock outstanding as of February 27, 2018.
55
Table of Contents
(3)
(4)
Comprised of (i) 43,750 shares of common stock, (ii) options to purchase 287,500 shares of common stock that are currently
exercisable or exercisable within 60 days of February 27, 2018, and (iii) 3,077,474 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.
Comprised of (i) 10,000 shares of common stock and warrants to purchase 5,000 shares of common stock, (ii) 316,642 shares
of common stock and warrants to purchase 158,321 shares of common stock held by Thomas David Cherry as Trustee of
Cherry Family Trust, a trust for which David Cherry is deemed the beneficial owner, and (iii) 1,245,784 shares of common
stock and warrants to purchase 622,892 shares of common stock held by Cherry Pipes Ltd., David Cherry has sole voting and
dispositive power over the securities held for the account of Cherry Pipes Ltd.
(5)
Comprised of (i) 1,280,000 shares of common stock and (ii) warrants to purchase 540,000 shares of common stock.
(6)
(7)
(8)
(9)
Konrad Ackermann has sole voting and dispositive power over the securities held for the account of this selling
stockholder. Includes (i) 288,536 shares of common stock issued upon conversion of 220 Series D shares as of February 27,
2018 (ii) 947,000 shares of common stock issuable upon conversion of Series D Preferred Stock, (iii) 349,725 shares of
common stock as a make-whole dividend issuable upon the conversion of Series D Preferred Stock, and (iv) 1,792,095 of
common stock issuable upon the exercise of warrants.
Comprised of (i) 762,250 shares of common stock directly held by Mr. Londoner, (ii) 3,019,974 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.
Comprised of (i) 80,875 shares of common stock and (ii) options to purchase 893,927 shares of common stock that are
currently exercisable.
Comprised of (i) 25,000 shares of common stock and (ii) options to purchase 591,916 shares of common stock that are
currently exercisable or exercisable within 60 days of February 27, 2018.
(10) Comprised of (i) 45,000 shares of common stock, (ii) options to purchase 239,926 shares of common stock that are currently
exercisable or exercisable within 60 days of February 27, 2018, and (iii) warrants to purchase 11,224 shares of common stock.
(11) Comprised of (i) 409,000 shares of common stock and (ii) options to purchase 370,800 shares of common stock that are
currently exercisable.
(12) Comprised of (i) 886,687 shares of common stock and (ii) options to purchase 60,000 shares of common stock that are
currently exercisable.
(13) Comprised of (i) 30,000 shares of common stock and (ii) options to purchase 50,000 shares of common stock that are currently
exercisable.
(14) Comprised of (i) 50,000 shares of common stock and (ii) options to purchase 350,000 shares of common stock that is currently
exercisable.
(15) Comprised of (i) 230,000 shares of common stock, (ii) options to purchase 279,166 shares of common stock that are currently
exercisable or exercisable within 60 days of February 27, 2018 and (iii) warrants to purchase 100,000 shares of common stock.
56
Table of Contents
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
Accrued expenses related primarily to travel reimbursements due related parties as of December 31, 2017 and 2016 was $27,375
and $15,755, respectively.
On April 1, 2017, the Company received and canceled 10,744 shares of its common stock as payment for short-swing profit
pursuant to Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended from Mr. Londoner.
On June 16, 2017 Mr. Cash was granted 100,000 shares of common stock at a cost basis of $1.37 per share in connection with his
severance settlement. The granted shares vested immediately.
On November 1, 2017, in connection with Mr. Filler joining the Company’s Board of Directors, the Company entered into a
Master Services Agreement (the “Agreement”) with 3LP Advisors LLC (d/b/a Sherpa Technology Group) (“Sherpa”) and an initial
statement of work (the “SOW”), pursuant to which Sherpa will develop, execute and expand the Company’s intellectual property strategy
over the course of the next approximately 18 months by evaluating the business and technology landscape in which the Company operates,
and charting and executing a strategy of patent filing and licensing. In connection with the SOW, the Company will pay Sherpa fee of (i)
$200,000 in cash, of which $25,000 was paid on January 1, 2018, with the remainder to be paid upon completion of certain objectives, and
(ii) a ten-year option to purchase up to 300,000 of the Company’s common stock at an exercise of $1.37 per share of common stock, of
which 150,000 options vest immediately and 150,000 options are condition on the achievement of certain performance objectives. Mr.
Filler is the general counsel and partner of Sherpa.
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, Andrew L. Filler 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.
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, 2017 and 2016, including review of our interim financial
statements were $59,500 and $58,000, respectively.
Audit Related Fees. We incurred fees to our independent registered public accounting firm of $26,000 and $12,000 for audit
related fees during the fiscal years ended December 31, 2017 and 2016, 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 $3,500 for tax compliance, tax
advice and tax planning during the fiscal years ended December 31, 2017 and 2016.
57
Table of Contents
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, 2017 and 2016, respectively.
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.
58
Table of Contents
ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
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, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017 and 2016
Consolidated Statement of Stockholders’ Deficit for the two years ended December 31, 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
None.
(3) Exhibits
Exhibit
No.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Description
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)
Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (incorporated by
reference to Exhibit 3.1 to the Form 8-K filed on November 9, 2017)
Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (incorporated by
reference to Exhibit 3.1 to the Form 8-K filed on February 16, 2018)
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)
59
Table of Contents
10.8
10.9
10.10
10.11
10.12
10.13
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)
Amendment Agreement No. 2 to Securities Purchase Agreement, dated April 12, 2013, by and between BioSig
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)
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)
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)
10.14
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)
10.15
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).
10.16
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)
10.17
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)
10.18
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)
10.19
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)
10.20
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)
10.21
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)
10.22
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)
10.23
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)
10.24
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)
10.25
10.26
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 10.1 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)
10.27
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)
10.28
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)
10.29
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)
10.30
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)
10.31
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)
10.32
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)
10.33
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)
10.34
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)
60
Table of Contents
10.35
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)
10.36
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)
10.37
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)
10.38
10.39
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)
10.40
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)
10.41
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)
10.42
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)
10.43
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)
10.44
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)
10.45
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)
10.46
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)
10.47
General Release and Severance Agreement, dated May 31, 2017, by and between BioSig Technologies, Inc. and Greg Cash
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 2, 2017)
10.48
Restricted Stock Award Agreement, dated May 31, 2017, by and between BioSig Technologies, Inc. and Greg Cash
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed on June 2, 2017)
10.49
Form of Unit Purchase Agreement, dated April 6, 2016, by and between BioSig Technologies, Inc. and certain purchasers
set forth therein (incorporated by reference to Exhibit 10.61 to the Form S-1/A filed on August 3, 2017)
10.50
Form of Warrant used in connection with April 6, 2017 private placement (incorporated by reference to Exhibit 10.62 to the
Form S-1/A filed on August 3, 2017)
10.51
10.52
Form of Registration Rights Agreement, dated April 6, 2017, by and between BioSig Technologies, Inc. and certain
purchasers set forth therein (incorporated by reference to Exhibit 10.63 to the Form S-1/A filed on August 3, 2017)
Certificate of Designation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Form 8-K
filed on November 9, 2017)
10.53
Form of Securities Purchase Agreement dated November 3, 2017, by and between BioSig Technologies, Inc. and certain
accredited investors (incorporated by reference to Exhibit 10.1 to Form 8-K filed on November 9, 2017)
10.54
Form of Warrant A used in connection with November 3, 2017 sale of Series D Convertible Preferred Stock (incorporated
by reference to Exhibit 10.2 to Form 8-K filed on November 9, 2017
10.55
Form of Warrant B used in connection with November 3, 2017 sale of Series D Convertible Preferred Stock (incorporated
by reference to Exhibit 10.3 to Form 8-K filed on November 9, 2017
10.56
10.57
10.58
10.59
Form of Registration Rights Agreement dated November 3, 2017, by and between BioSig Technologies, Inc. and certain
purchasers of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 10.4 to Form 8-K filed on
November 9, 2017
Form of Securities Purchase Agreement dated February 16, 2018, by and between BioSig Technologies, Inc. and certain
accredited investors (incorporated by reference to Exhibit 10.1 to Form 8-K filed on February 16, 2018)
Form of Warrant used in connection with February 16, 2018 sale of Series E Convertible Preferred Stock (incorporated by
reference to Exhibit 10.2 to Form 8-K filed on February 16, 2018)
Form of Registration Rights Agreement dated February 16, 2018, by and between BioSig Technologies, Inc. and certain
purchasers of Series E Convertible Preferred Stock (incorporated by reference to Exhibit 10.3 to Form 8-K filed on February
16, 2018)
61
Table of Contents
31.01
31.02
32.01
101
INS
101
SCH
101
CAL
101
LAB
101
PRE
101
DEF
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.
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Calculation Linkbase Document
XBRL Taxonomy Labels Linkbase Document
XBRL Taxonomy Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
62
Table of Contents
ITEM 16 – FORM 10-K SUMMARY
None.
63
Table of Contents
SIGNATURES
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.
Date: February 27, 2018
Date: February 27, 2018
BIOSIG TECHNOLOGIES, INC.
By:
By:
/s/ KENNETH L. LONDONER
Kenneth L. Londoner
Chief Executive Officer and Executive Chairman
(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
/s/ DONALD E. FOLEY
Donald E. Foley
/s/ ANDREW L. FILLER
Andrew L. Filler
/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
Position
Director
Director
Director
Director
Director
Director
Director
64
Date
February 27, 2018
February 27, 2018
February 27, 2018
February 27, 2018
February 27, 2018
February 27, 2018
February 27, 2018
EXHIBIT 31.01
I, Kenneth L. Londoner, 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: February 27, 2018
/s/ KENNETH L. LONDONER
Kenneth L. Londoner
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: February 27, 2018
/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, Kenneth L. Londoner, 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, 2017 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: February 27, 2018
/s/ KENNETH L. LONDONER
By:
Name: Kenneth L. Londoner
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, 2017 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: February 27, 2018
/s/ STEVEN CHAUSSY
By:
Name: Steven Chaussy
Title:
Chief Financial Officer