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, 2015 and 2014, 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 audit.
We conducted our audit 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 audit 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, 2015 and 2014, 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.
|
|
Liggett & Webb, P.A
.
|
March 14, 2016
New York, New York
BI
OSIG TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 2015 AND 2014
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
953,234
|
|
|
$
|
239,781
|
|
Prepaid expenses
|
|
|
31,308
|
|
|
|
75,537
|
|
Total current assets
|
|
|
984,542
|
|
|
|
315,318
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
18,408
|
|
|
|
13,020
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
27,612
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,030,562
|
|
|
$
|
353,338
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses, including $12,716 and $40,293 to related parties as of December 31, 2015 and 2014 respectively
|
|
$
|
223,546
|
|
|
$
|
554,026
|
|
Stock based payable
|
|
|
-
|
|
|
|
226,305
|
|
Dividends payable
|
|
|
340,291
|
|
|
|
445,069
|
|
Warrant liability
|
|
|
1,621,199
|
|
|
|
-
|
|
Derivative liability
|
|
|
285,157
|
|
|
|
-
|
|
Total current liabilities
|
|
|
2,470,193
|
|
|
|
1,225,400
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred Stock, 1,471 and 2,711 shares issued and outstanding as of December 31, 2015 and 2014, respectively, liquidation preference of $1,471,000 and $2,711,000 as of December 31, 2015 and 2014, respectively
|
|
|
1,471,000
|
|
|
|
2,711,000
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B and 4,200 shares of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized 50,000,000 shares, 16,825,703 and 11,179,266 issued and outstanding as of December 31, 2015 and 2014, respectively
|
|
|
16,826
|
|
|
|
11,179
|
|
Additional paid in capital
|
|
|
29,314,399
|
|
|
|
19,186,163
|
|
Accumulated deficit
|
|
|
(32,241,856
|
)
|
|
|
(22,780,404
|
)
|
Total stockholders' deficit
|
|
|
(2,910,631
|
)
|
|
|
(3,583,062
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
1,030,562
|
|
|
$
|
353,338
|
|
See the accompanying notes to the financial statements.
B
IOSIG TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$
|
1,238,548
|
|
|
$
|
547,996
|
|
General and administrative
|
|
|
10,795,007
|
|
|
|
7,304,440
|
|
Depreciation
|
|
|
10,475
|
|
|
|
15,809
|
|
Total operating expenses
|
|
|
12,044,030
|
|
|
|
7,868,245
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(12,044,030
|
)
|
|
|
(7,868,245
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Gain on change in fair value of derivatives
|
|
|
3,113,580
|
|
|
|
-
|
|
Interest income (expense)
|
|
|
(1,298
|
)
|
|
|
(11,025
|
)
|
Financing costs
|
|
|
(529,704
|
)
|
|
|
(593,770
|
)
|
Total other income (expense)
|
|
|
2,582,578
|
|
|
|
(604,795
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(9,461,452
|
)
|
|
|
(8,473,040
|
)
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,461,452
|
)
|
|
|
(8,473,040
|
)
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend
|
|
|
(351,522
|
)
|
|
|
(300,359
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
(9,812,974
|
)
|
|
$
|
(8,773,399
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$
|
(0.70
|
)
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted
|
|
|
14,103,055
|
|
|
|
9,650,275
|
|
See the accompanying notes to the financial statements.
B
IOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2013
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,412,101
|
|
|
$
|
8,412
|
|
|
$
|
9,036,038
|
|
|
$
|
(14,007,005
|
)
|
|
$
|
(4,962,555
|
)
|
Sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
956,179
|
|
|
|
956
|
|
|
|
1,968,454
|
|
|
|
-
|
|
|
|
1,969,410
|
|
Common stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
654,000
|
|
|
|
654
|
|
|
|
1,634,346
|
|
|
|
-
|
|
|
|
1,635,000
|
|
Common stock issued in settlement of related party debt
|
|
|
-
|
|
|
|
-
|
|
|
|
26,000
|
|
|
|
26
|
|
|
|
64,974
|
|
|
|
-
|
|
|
|
65,000
|
|
Common stock issued upon conversion of Series A Preferred Stock and accrued dividends at $1.84 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
577,901
|
|
|
|
578
|
|
|
|
1,062,753
|
|
|
|
-
|
|
|
|
1,063,331
|
|
Common stock issued upon conversion of Series B Preferred Stock and accrued dividends at $2.02 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
493,818
|
|
|
|
494
|
|
|
|
997,032
|
|
|
|
-
|
|
|
|
997,526
|
|
Common stock issued upon conversion of Series C Preferred Stock and accrued dividends at $1.50 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
59,267
|
|
|
|
59
|
|
|
|
88,841
|
|
|
|
-
|
|
|
|
88,900
|
|
Donated capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
87,500
|
|
|
|
-
|
|
|
|
87,500
|
|
Equity warrants issued to placement agent for sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,800
|
|
|
|
-
|
|
|
|
52,800
|
|
Fair value of vested options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,193,425
|
|
|
|
-
|
|
|
|
4,193,425
|
|
Preferred stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(300,359
|
)
|
|
|
(300,359
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,473,040
|
)
|
|
|
(8,473,040
|
)
|
Balance, December 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
11,179,266
|
|
|
$
|
11,179
|
|
|
$
|
19,186,163
|
|
|
$
|
(22,780,404
|
)
|
|
$
|
(3,583,062
|
)
|
BIOSIG TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, January 1, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
11,179,266
|
|
|
$
|
11,179
|
|
|
$
|
19,186,163
|
|
|
$
|
(22,780,404
|
)
|
|
$
|
(3,583,062
|
)
|
Sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
2,645,432
|
|
|
|
2,645
|
|
|
|
4,757,153
|
|
|
|
-
|
|
|
|
4,759,798
|
|
Common stock issued upon conversion of Series C Preferred Stock and accrued dividends at $1.50 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
1,430,871
|
|
|
|
1,431
|
|
|
|
2,144,870
|
|
|
|
-
|
|
|
|
2,146,302
|
|
Common stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
1,452,500
|
|
|
|
1,453
|
|
|
|
3,340,299
|
|
|
|
-
|
|
|
|
3,341,752
|
|
Common stock issued in exchange for 156,102 warrants exercised on a cashless basis
|
|
|
-
|
|
|
|
-
|
|
|
|
99,552
|
|
|
|
100
|
|
|
|
(100
|
)
|
|
|
-
|
|
|
|
-
|
|
Common stock issued in exchange for exercise of options at $2.09 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
10
|
|
|
|
20,890
|
|
|
|
-
|
|
|
|
20,900
|
|
Common stock issued in exchange for exercise of warrants at $3.67 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
4,082
|
|
|
|
4
|
|
|
|
14,977
|
|
|
|
-
|
|
|
|
14,981
|
|
Common stock issued in exchange for exercise of warrants at $2.50 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
4
|
|
|
|
9,996
|
|
|
|
-
|
|
|
|
10,000
|
|
Reclassify fair value of warrant liability from equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,097,444
|
)
|
|
|
-
|
|
|
|
(4,097,444
|
)
|
Reclassify fair value of derivative liability from equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,242,590
|
)
|
|
|
-
|
|
|
|
(1,242,590
|
)
|
Reclassify fair value of warrant liability to equity upon warrant exercise
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
265,955
|
|
|
|
-
|
|
|
|
265,955
|
|
Reclassify fair value of derivative liability to equity upon conversion of Series C Preferred Stock to common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
639,467
|
|
|
|
-
|
|
|
|
639,467
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,626,284
|
|
|
|
-
|
|
|
|
4,626,284
|
|
Preferred Stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(351,522
|
)
|
|
|
-
|
|
|
|
(351,522
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,461,452
|
)
|
|
|
(9,461,452
|
)
|
Balance, December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
16,825,703
|
|
|
$
|
16,826
|
|
|
$
|
29,314,399
|
|
|
$
|
(32,241,856
|
)
|
|
$
|
(2,910,631
|
)
|
See the accompanying notes to the financial statements.
BI
OSIG TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,461,452
|
)
|
|
$
|
(8,473,040
|
)
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
10,475
|
|
|
|
15,809
|
|
Amortization of debt discount
|
|
|
585,324
|
|
|
|
593,770
|
|
Change in derivative liabilities
|
|
|
(3,113,580
|
)
|
|
|
-
|
|
Equity based compensation
|
|
|
7,968,036
|
|
|
|
5,743,425
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
44,229
|
|
|
|
8,715
|
|
Accounts payable
|
|
|
(333,494
|
)
|
|
|
(110,844
|
)
|
Stock based payable
|
|
|
(226,305
|
)
|
|
|
226,305
|
|
Deferred rent payable
|
|
|
3,016
|
|
|
|
(1,212
|
)
|
Net cash used in operating activities
|
|
|
(4,523,751
|
)
|
|
|
(1,997,072
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(15,863
|
)
|
|
|
(3,963
|
)
|
Payment of long term deposit
|
|
|
(2,612
|
)
|
|
|
-
|
|
Net cash used in investing activity
|
|
|
(18,475
|
)
|
|
|
(3,963
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
4,759,798
|
|
|
|
1,969,410
|
|
Proceeds from sale of Series C Preferred Stock
|
|
|
450,000
|
|
|
|
-
|
|
Proceeds from exercise of options
|
|
|
20,900
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
24,981
|
|
|
|
-
|
|
Net repayments of related party advances
|
|
|
-
|
|
|
|
(30,781
|
)
|
Net cash provided by financing activities
|
|
|
5,255,679
|
|
|
|
1,938,629
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
713,453
|
|
|
|
(62,406
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
|
239,781
|
|
|
|
302,187
|
|
Cash and cash equivalents, end of the period
|
|
$
|
953,234
|
|
|
$
|
239,781
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
1,298
|
|
|
$
|
11,025
|
|
Cash paid during the period for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of Series A preferred stock and accrued dividends
|
|
$
|
-
|
|
|
$
|
1,063,331
|
|
Common stock issued upon conversion of Series B preferred stock and accrued dividends
|
|
$
|
-
|
|
|
$
|
997,526
|
|
Common stock issued upon conversion of Series C Preferred Stock and accrued dividends
|
|
$
|
2,146,302
|
|
|
$
|
88,900
|
|
Common stock issued for future services, related party
|
|
$
|
-
|
|
|
$
|
85,000
|
|
Common stock issued in settlement of accounts payable, related party
|
|
$
|
-
|
|
|
$
|
65,000
|
|
Related party donated capital
|
|
$
|
-
|
|
|
$
|
87,500
|
|
See the accompanying notes to the financial statements.
BI
OSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
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, 2015 and 2014, deposits in excess of FDIC limits were $703,234 and $-0-, respectively.
Prepaid Expenses
From time to time, the Company issues shares of its common stock for services to be performed. The fair value of the common stock is determined at the date of the contract for services and is amortized ratably over the term of the contract. As of December 31, 2015 and 2014, prepaid expenses relating to stock based payments were $-0- and $56,667, respectively.
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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Long-Lived Assets
The Company follows Accounting Standards Codification 360-10-15-3, “Impairment or Disposal of Long-lived Assets,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Fair Value of Financial Instruments
Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At December 31, 2015 and 2014, the Company did not have any derivative instruments that were designated as hedges.
At December 31, 2015 and 2014, the Company had outstanding preferred stock and warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions. (See Note 7 and Note 8).
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 $1,238,548 and $547,996 for the year ended December 31, 2015 and 2014, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.
Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
Net Income (loss) Per Common Share
The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The computation of basic and diluted loss per share as of December 31, 2015 and 2014 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:
|
|
2015
|
|
|
2014
|
|
Series C convertible preferred stock
|
|
|
980,667
|
|
|
|
1,807,333
|
|
Options to purchase common stock
|
|
|
7,780,190
|
|
|
|
5,990,190
|
|
Warrants to purchase common stock
|
|
|
7,078,685
|
|
|
|
5,113,990
|
|
Totals
|
|
|
15,839,542
|
|
|
|
12,911,513
|
|
Stock based compensation
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, 2015, there were outstanding stock options to purchase 7,780,190 shares of common stock, 5,613,501 shares of which were vested.
As of December 31, 2014, the Company had 5,990,190 options outstanding to purchase shares of common stock, of which 3,799,559 were vested.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20, Registration Payment Arraignments (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the arraignment, the maximum potential amount and to assess each reporting period the probable liability under these arraignments and, if exists, to record or adjust the liability to current period operations. On June 23, 2014, the Company filed Form S-1/A became effective with the Securities and Exchange Commission. As such, the Company determined that payments were due under its registration rights agreement and therefore accrued $55,620 as interest expense during the year ended December 31, 2014 for the liability under the registration rights agreements. During the year ended December 31, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
Beginning on October 23, 2015, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investors units , which each unit consisting of one share of the Company’s common stock and a warrant to purchase one half of one share of common stock (the “
Private Placement
”). In connection with the Private Placement, the Company also entered into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days upon close of the private placement and to be effective 120 calendar days thereafter. As of the date of filing, the Private Placement has not closed. The Company has estimated the liability at $-0- as of December 31, 2015.
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 financial position, results of operations or cash flows.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements during the years ended December 31, 2015 and 2014, the Company incurred net losses attributable to common stockholders of $9,812,974 and $8,773,399, respectively and used $4,523,751 in cash for operating activities for the year ended December 31, 2015. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
The Company's existence is dependent upon management's ability to develop profitable operations. The Company completed financing subsequent to the date of these financial statements (See Note 14). However additional capital will be needed to continue developing its products and services and there can be no assurance that the Company's efforts will be successful. There is no assurance that can be given that management's actions will result in profitable operations or the resolution of its liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
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, 2015 and 2014, all advances had been repaid.
Accrued expenses due related parties as of December 31, 2015 and 2014 was $12,716 and $40,293, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
On August 1, 2012, we entered into a consulting agreement with Asher Holzer, Ph.D., then a member of our board of directors. Pursuant to the consulting agreement, Dr. Holzer was to serve as our chief scientific officer and assist in the development of our technology and our PURE EP System, in exchange for monthly payments of $10,000. We paid Dr. Holzer an initial payment of $7,500 pursuant to the consulting agreement. In the first quarter of 2014, we agreed to an oral amendment to our consulting agreement with Dr. Holzer, which resulted in Dr. Holzer agreeing to receive (i) a payment of $65,000, to be paid by us upon our closing of a capital raising transaction that results in proceeds to us of at least $5 million, and (ii) a future option grant to purchase 125,000 shares of our common stock, in exchange for acknowledging that no other payments are due by us to Dr. Holzer pursuant to the consulting agreement.
On September 1, 2014, we entered into a letter agreement and release with Dr. Holzer, pursuant to which Dr. Holzer agreed to cancel, extinguish and terminate all amounts due or owed by us for services performed by Dr. Holzer pursuant to that certain consulting agreement, dated as of August 1, 2012, as amended. In connection with the cancellation of all payment obligations and in exchange for Dr. Holzer waiving and releasing us from all possible claims related to such obligations under the consulting agreement, Dr. Holzer received 26,000 shares of our common stock. Dr. Holzer also agreed to provide us with one additional year of consulting services in exchange for 34,000 shares of common stock.
On January 31, 2014, as part of a private placement transaction of our common stock and warrants,
Jonathan Steinhouse, then a member of our board of directors, purchased an aggregate of 24,490 shares of common stock and a warrant to purchase 12,246 shares of common stock for an aggregate purchase price of $60,000.
On March 5, 2014, Mr. Steinhouse made an advance of funds to us in the aggregate amount of $10,000, which was repaid in full on April 3, 2014. The advance was interest-free and not made on condition of any specific terms.
On September 12, 2014, Sterne Agee & Leach Inc. C/F Jonathan Steinhouse R/O IRA, as part of a private placement transaction of our common stock and warrants, purchased an aggregate of 4,000 shares of common stock and a warrant to purchase 2,000 shares of common stock for an aggregate purchase price of $10,000.
During 2014, one of the Company’s board of directors forgave an outstanding obligation of $87,500 for services. Accordingly, the Company reclassified the liability to equity as donated capital.
During 2014, the Company issued 34,000 shares of its common stock for future services to a board member totaling $85,000 ($2.50 per share), unrelated to his services as a board member. The fair value of the services is amortized over the service period. As of December 31, 2014, the unamortized portion of $56,667 is included in prepaid expenses in the accompanying balance sheet.
During 2014, the Company issued 26,000 shares of its common stock in settlement of $65,000 debt to a board of directors’ member ($2.50 per share).
On January 31, 2014, as part of a private placement transaction of our common stock and warrants, a related party purchased an aggregate of 24,490 shares of common stock and a warrant to purchase 12,246 shares of common stock for an aggregate purchase price of $60,000.
On March 23, 2015, we issued Mr. Londoner an aggregate of 169,334 shares of common stock in exchange for 200 shares of our Series C 9% Convertible Preferred Stock and accrued dividends.
On April 30, 2015, Mr. Chaussy was granted 150,000 shares of common stock at a cost basis of $2.90 per share for his 2013-2015 performance. One half of the shares vested immediately; the second half vests on January 1, 2016.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
On October 19, 2015, we entered into a consulting agreement with Dr. Holzer. Pursuant to the consulting agreement, Dr. Holzer is to provide certain consulting services in connection with the development and commercialization of our products, in exchange for a stock option for the purchase of 100,000 shares of common stock, vesting 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date, at an exercise price of $1.56 per share and termination date of October 19, 2025.
On October 23, 2015, as part of a private placement transaction of our common stock and warrants, a related party purchased an aggregate of 66,667 shares of common stock and a warrant to purchase 33,334 shares of common stock for an aggregate purchase price of $100,000.
On November 18, 2015, as part of a private placement transaction of our common stock and warrants, Donald E. Foley purchased an aggregate of 200,000 shares of common stock and a warrant to purchase 100,000 shares of common stock for an aggregate purchase price of $300,000.
The Company has informal compensation and consulting agreements with employees and outside contractors, certain of whom are also Company stockholders. The Agreements are generally month to month. As of December 31, 2015 and 2014, total due under these agreements and related expenses were $-0- and $11,250, respectively.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2015 and 2014 is summarized as follows:
|
|
2015
|
|
|
2014
|
|
Computer equipment
|
|
$
|
68,449
|
|
|
$
|
54,900
|
|
Furniture and fixtures
|
|
|
10,117
|
|
|
|
7,803
|
|
Subtotal
|
|
|
78,566
|
|
|
|
62,703
|
|
Less accumulated depreciation
|
|
|
(60,158
|
)
|
|
|
(49,683
|
)
|
Property and equipment, net
|
|
$
|
18,408
|
|
|
$
|
13,020
|
|
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $10,475 and $15,809 at December 31, 2015 and 2014, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2015 and 2014 consist of the following:
|
|
2015
|
|
|
2014
|
|
Accrued accounting and legal
|
|
$
|
112,723
|
|
|
$
|
190,767
|
|
Accrued reimbursements
|
|
|
13,613
|
|
|
|
26,792
|
|
Accrued consulting
|
|
|
15,200
|
|
|
|
16,334
|
|
Accrued research and development expenses
|
|
|
34,179
|
|
|
|
93,407
|
|
Accrued credit card obligations
|
|
|
-
|
|
|
|
13,278
|
|
Accrued payroll
|
|
|
-
|
|
|
|
62,068
|
|
Accrued liquidated damages
|
|
|
-
|
|
|
|
55,620
|
|
Accrued office and other
|
|
|
31,482
|
|
|
|
29,093
|
|
Deferred rent
|
|
|
3,016
|
|
|
|
-
|
|
Accrued settlement related to arbitration
|
|
|
13,333
|
|
|
|
66,667
|
|
|
|
$
|
223,546
|
|
|
$
|
554,026
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 6 – REDEEMABLE PREFERRED STOCK
Series A Preferred Stock
In May 2011, the Board of Directors authorized the issuance of up to 200 shares of Series A Preferred Stock (the “Series A preferred stock”).
The Series A preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $5,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 5% per annum of the Stated Value of $5,000 per share, payable quarterly beginning on August 31, 2011 and are cumulative. The holders of Series A preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series A preferred stock, the Company cannot, (a) alter or change adversely the powers, preferences or rights given to the Series A preferred stock or alter or amend the Certificate of Designation.
The Series A preferred stock is mandatorily redeemable on December 31, 2014 (as modified) at a price equal to the Stated Value ($5,000) plus an amount equal to all accumulated and unpaid dividends. If the Company fails to redeem at redemption, the unpaid redemption price will accrue at 14% per annum until paid.
The Series A preferred stock is convertible (as amended), automatically, inclusive of any accrued and unpaid dividends, immediately into the Company’s common stock upon the Company becoming subject to the reporting requirements under Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended at conversion price of $1.84 per share.
On June 23, 2014, upon the effectiveness of the Company’s registration statement, the Company issued an aggregate of 577,901 shares of its common stock in exchange for all the outstanding Series A preferred stock and accrued dividends of $141,331.
Series B Preferred Stock
On November 28, 2011, the Board of Directors authorized the issuance of up to 600 shares of Series B Preferred Stock (the “Series B preferred stock”).
The Series B preferred stock is entitled to preference over holders of junior stock upon liquidation in the amount of $5,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 5% per annum of the Stated Value of $5,000 per share, payable quarterly beginning on December 31, 2011 and are cumulative. The holders of Series B preferred stock have no voting rights, however without the affirmative vote of all the holders of then outstanding shares of the Series B preferred stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series A preferred stock or alter or amend the Certificate of Designation.
The Series B preferred stock is mandatorily redeemable on December 31, 2014 at a price equal to the Stated Value ($5,000) plus an amount equal to all accumulated and unpaid dividends. If the Company fails to redeem at redemption, the unpaid redemption price will accrue at 14% per annum until paid.
The Series B preferred stock is convertible (as amended), automatically, inclusive of any accrued and unpaid dividends, immediately into the Company’s common stock upon the Company becoming subject to the reporting requirements under Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended at conversion price of $2.02 per share.
On June 23, 2014, upon the effectiveness of the Company’s registration statement, the Company issued an aggregate of 493,818 shares of its common stock in exchange for all the outstanding Series B preferred stock and accrued dividends of $110,026.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 7 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of 9% Series C Convertible Preferred Stock (the “Series C Preferred Stock”).
The Series C Preferred Stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the stated value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative. The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis, but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock. The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder. The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder. In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, which holders must include Alpha Capital Anstalt, so long as Alpha Capital Anstalt holds not less than $100,000 of 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,
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
The holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%. The Company determined that certain of the defined triggering events were outside the Company’s control and therefore classified the Series C Preferred Stock outside of equity.
In connection with the sale of the Series C preferred stock, the Company issued an aggregate of 1,330,627 warrants to purchase the Company’s common stock at $2.61 per share expiring five years from the initial exercise date. The warrants contain full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $2.61 per share as well as other customary anti-dilution protection. The warrants are exercisable for cash; or if at any time after six months from the issuance date, there is no effective registration statement registering the resale, or no current prospectus available for the resale, of the shares of common stock underlying the warrants, the warrants may be exercised by means of a “cashless exercise”. As a result of an amendment to the conversion price of our Series C Preferred Stock, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $2.61 per share to $1.50 per share and increased the aggregate number of shares issuable under the warrants to 2,315,301.
In accordance with ASC 470-20, at issuance, the Company recognized an embedded beneficial conversion feature present in the Series C Preferred Stock when it was issued. The Company allocated the net proceeds between the intrinsic value of the conversion option ($1,303,671) and the warrants ($1,064,739) to additional paid-in capital. The aggregate debt discount, comprised of the relative intrinsic value of the conversion option ($1,303,671), the relative fair value of the warrants ($1,064,739), and the issuance costs ($412,590), for a total of $2,781,000, is amortized over an estimated one year as interest expense.
During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s Series C Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C Preferred Stock for net proceeds of $1,814,910.
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required. There was no established market for the Company’s common stock. As described in Note 8, as of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively, from equity to liabilities.
At March 31, 2015, the Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: contractual terms of 2.78 to 3.50 years, a risk free interest rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141.00%.
During December 2014, the Company issued an aggregate of 59,267 shares of its commons stock in exchange for 70 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
During January 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.
During March 2015, the Company issued an aggregate of 169,334 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s Series C Preferred Stock and accrued dividends.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000. In connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at an exercise price of $1.50 per share for five years with certain reset provisions as described above. The Company determined the initial fair values of the embedded beneficial conversion feature of the Series C Preferred Stock and the reset provisions of the related issued warrants $506,348 and $334,784, respectively, using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of 0.25%, a dividend yield of 0%, and volatility of 140.00%. The determined fair values were recorded as liabilities and a charge to current period operations.
In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s Series C Preferred Stock and accrued dividends.
In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s Series C Preferred Stock and accrued dividends.
In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
In October 2015, the Company issued an aggregate of 143,935 shares of its common stock in exchange for 170 shares of the Company’s Series C Preferred Stock and accrued dividends.
In November 2015, the Company issued an aggregate of 99,061 shares of its common stock in exchange for 117 shares of the Company’s Series C Preferred Stock and accrued dividends.
In December 2015, the Company issued an aggregate of 84,667 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.
For the year ended December 31, 2015, at the time of conversions, the Company reclassified the fair value of the embedded beneficial conversion feature of the Series C Preferred Stock of $639,467 from liability to equity. The fair values were determined using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of 0.23% to 0.27%, a dividend yield of 0%, and volatility from 139% to 147.00%.
Series C Preferred Stock issued and outstanding totaled 1,471 and 2,711 as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, the Company has accrued $340,291 and $445,069 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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
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. As a result, the Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement as of December 31, 2014. At December 31, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
NOTE 8 – WARRANT AND DERIVATIVE LIABILITIES
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related warrants (see Note 7) did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation was not required. There was no established market for the Company’s common stock. As of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively.
The Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89, a dividend yield of 0%, and volatility of 141.00%.
At December 31, 2015, the Company marked to market the fair value of the reset provisions of the Series C Preferred Stock and warrants and determined fair values of $285,157 and $1,621,199, respectively. The Company recorded a gain from change in fair value of derivatives of $3,113,580 for the year ended December 31, 2015, respectively. The fair values of the embedded derivatives were determined using the Multinomial Lattice pricing model and the following assumptions: estimated contractual term of 2.00 years, a risk free interest rate of 1.01%, a dividend yield of 0%, and volatility of 147.00%.
NOTE 9 – STOCKHOLDER EQUITY
There was not a viable market for the Company’s common stock to determine its fair value until October 29, 2014; therefore, prior to October 29, 2014, management was required to estimate the fair value to be utilized in the determining stock based compensation costs. In estimating the fair value, management considered recent sales of its common stock to independent qualified investors, placement agents’ assessments of the underlying common shares relating to our sale of preferred stock and validation by independent fair value experts. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of December 31, 2015 and 2014, the Company has designated and issued 200 and 184.4 shares of Series A preferred stock, respectively, designated and issued 600 and 177.5 shares of Series B preferred stock, respectively. See Note 6.
As of December 31, 2015 and 2014, the Company designated and issued 4,200 and 2,781 shares of Series C 9% convertible preferred stock, respectively. See Note 7.
On June 23, 2014, the Company issued an aggregate of 577,901 and 493,818 shares of its common stock in exchange of all the issued and outstanding Series A and Series B preferred stock.
During December 2014, the Company issued an aggregate of 59,267 shares of its commons stock in exchange for 70 shares of the Company’s Series C 9% Convertible Preferred Stock and accrued dividends.
During January 2015, the Company issued an aggregate of 42,334 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.
During March 2015, the Company issued an aggregate of 169,334 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
In April 2015, the Company issued an aggregate of 152,401 shares of its common stock in exchange for 180 shares of the Company’s Series C Preferred Stock and accrued dividends.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000. In connection with the sale, the Company issued 374,641 warrants to purchase the Company’s common stock at an exercise price of $1.50 per share for five years.
In May 2015, the Company issued an aggregate of 273,473 shares of its common stock in exchange for 323 shares of the Company’s Series C Preferred Stock and accrued dividends.
In June 2015, the Company issued an aggregate of 296,333 shares of its common stock in exchange for 350 shares of the Company’s Series C Preferred Stock and accrued dividends.
In July 2015, the Company issued an aggregate of 169,333 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
In October 2015, the Company issued an aggregate of 143,935 shares of its common stock in exchange for 170 shares of the Company’s Series C Preferred Stock and accrued dividends.
In November 2015, the Company issued an aggregate of 99,061 shares of its common stock in exchange for 117 shares of the Company’s Series C Preferred Stock and accrued dividends.
In December 2015, the Company issued an aggregate of 84,667 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.
Cumulatively from January 1, 2015 to December 31, 2015, the Company exchanged 1,690 shares of the Company’s Series C Preferred Stock and dividends with a recorded value of $2,146,302 for 1,430,871 shares of common stock.
As of December 31, 2015 and 2014, the Company has 1,471 and 2,711 Series C Preferred Stock issued and outstanding.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Common stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. As of December 31, 2015 and 2014, the Company had 16,825,703 and 11,179,266 shares issued and outstanding, respectively.
During the year ended December 31, 2014, the Company issued 654,000 shares of its common stock (net of shares exchanged) under the terms of its 2012 Equity Plan for services rendered totaling $1,635,000 ($2.50 per share).
During the year ended December 31, 2014, the Company issued 26,000 shares of its common stock in settlement of $65,000 related party debt ($2.50 per share).
During the year ended December 31, 2014, the Company entered into a securities purchase agreement with investors pursuant to which the Company issued 956,179 shares of common stock and five-year warrants for aggregate net proceeds of $1,969,410.
During the year ended December 31, 2015, the Company issued an aggregate of 1,452,500 shares of common stock under the terms of its 2012 Equity Plan for services rendered totaling $3,341,752 ($2.30 average per share).
During the year ended December 31, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.
During the year ended December 31, 2015, the Company issued an aggregate of 8,082 shares of common stock in exchange for warrants exercised at an average price of $3.09 per share.
During the year ended December 31, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.
During the year ended December 31, 2015, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 2,645,432 shares of common stock and warrants for aggregate proceeds of $4,759,798, net of $608,356 in expenses.
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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 30 calendar days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that the Company will not be required to make any payments any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that the Company will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that the Company is unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements dated December 31, 2013, April 4, 2014 and August 15, 2014 shall be 3% of the aggregate purchase price paid by the purchasers, (ii) the maximum aggregate liquidated damages due under the registration rights agreement dated December 19, 2014 shall be 6% of the aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreements, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration statement in certain events.
The Company filed a registration statement on May 20, 2015, which was declared effective on June 12, 2015 to satisfy the requirements under the registration rights agreements with the purchasers of its common stock and warrants prior to September 30, 2015.
Beginning on October 23, 2015, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investors units, which each unit consisting of one share of the Company’s common stock and a warrant to purchase one half of one share of common stock (the “
Private Placement
”). In connection with the Private Placement, the Company also entered into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days upon close of the private placement and to be effective 120 calendar days thereafter. As of the date of filing, the Private Placement has not closed. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2015.
Stock based payable
The Company is obligated to issue shares of its common stock to board members and consultants for past and future services. The estimated liability as of December 31, 2015 and 2014 of $-0- and $226,305 was determined based on services rendered for past services as of December 31, 2015 and 2014, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 10 – OPTIONS AND WARRANTS
There was not a viable market for the Company’s common stock to determine its fair value until October 29, 2014; therefore, prior to October 29, 2014, management was required to estimate the fair value to be utilized in the determining stock based compensation costs. In estimating the fair value, management considered recent sales of its common stock to independent qualified investors, placement agents’ assessments of the underlying common shares relating to our sale of preferred stock and validation by independent fair value experts. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.
Options
On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “2012 Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 11,686,123, (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 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 quoted market price or in absence of such quoted market price, by the Board of Directors in good faith.
Additionally, the vesting period of the grants under the Plan will be determined by the Committee, in its sole discretion, and expiration period not more than ten years. The Company reserved 1,250,000 shares of its common stock for future issuance under the terms of the Plan.
During the year ended December 31, 2014, the Company granted an aggregate of 3,478,498 options and 654,000 stock grants (net of shares exchanged) to officers, directors and key consultants.
During the year ended December 31, 2015, the Company granted an aggregate of 1,800,000 options and 1,452,500 stock grants (net of shares exchanged) to officers, directors and key consultants.
The following table presents information related to stock options at December 31, 2015:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$
|
1.01-2.00
|
|
|
|
1,544,642
|
|
|
|
6.3
|
|
|
|
910,142
|
|
|
2.01-3.00
|
|
|
|
5,935,548
|
|
|
|
6.3
|
|
|
|
4,403,359
|
|
|
3.01-4.00
|
|
|
|
300,000
|
|
|
|
9.3
|
|
|
|
300,000
|
|
|
|
|
|
|
7,780,190
|
|
|
|
6.4
|
|
|
|
5,613,501
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
A summary of the stock option activity and related information for the 2012 Plan for the years ended December 31, 2015 and 2014 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2014
|
|
|
2,990,977
|
|
|
$
|
2.05
|
|
|
|
6.02
|
|
|
$
|
-
|
|
Grants
|
|
|
3,478,498
|
|
|
|
2.39
|
|
|
|
8.10
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
(479,285
|
)
|
|
$
|
(2.00
|
)
|
|
|
|
|
|
|
-
|
|
Outstanding at December 31, 2014
|
|
|
5,990,190
|
|
|
$
|
2.25
|
|
|
|
6.7
|
|
|
$
|
3,267,692
|
|
Grants
|
|
|
1,800,000
|
|
|
|
2.70
|
|
|
|
8.9
|
|
|
$
|
-
|
|
Exercised
|
|
|
(10,000
|
)
|
|
|
2.09
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
7,780,190
|
|
|
$
|
2.30
|
|
|
|
6.4
|
|
|
$
|
-
|
|
Exercisable at December 31, 2015
|
|
|
5,613,501
|
|
|
$
|
2.35
|
|
|
|
5.8
|
|
|
$
|
-
|
|
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 $1.30 as of December 31, 2015, which would have been received by the option holders had those option holders exercised their options as of that date.
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees.
For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The fair value of stock-based payment awards during the years ended December 31, 2015 and 2014 was estimated using the Black-Scholes pricing model.
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding.
During the year ended December 31, 2014, the Company granted an aggregate of 3,478,498 options to purchase the Company’s common stock in connection with the services rendered at exercise prices from $2.21 to $2.50 per share for a term of seven years. Vesting is as follows:
|
1,491,983
|
|
Exercisable immediately
|
|
125,000
|
|
Per quarter, over one year
|
|
1,126,552
|
|
Per quarter, over two years
|
|
734,963
|
|
Performance contingent
|
|
3,478,498
|
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
The fair value of the granted options for the year ended December 31, 2014 was determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
|
-0-
|
%
|
Volatility
|
|
119.43% to 129.88
|
%
|
Risk free rate:
|
|
0.48% to 2.53
|
%
|
Expected life:
|
|
7 to 10 years
|
|
Estimated fair value of the Company’s common stock
|
|
$
|
$2.21 to $2.50
|
|
Estimated forfeiture rate
|
|
|
0
|
%
|
During the year ended December 31, 2015, the Company granted an aggregate of 1,800,000 options to purchase the Company’s common stock in connection with the services rendered at exercise prices from $1.56 to $3.99 per share for a term of seven years. Vesting is as follows:
|
737,500
|
|
Exercisable immediately
|
|
155,000
|
|
Per quarter, over one year
|
|
250,000
|
|
Per quarter, over three years
|
|
225,000
|
|
One year anniversary
|
|
300,000
|
|
1/12 per month beginning first month anniversary
|
|
100,000
|
|
50% one year anniversary, 50% two year anniversary
|
|
32,500
|
|
Performance contingent
|
|
1,800,000
|
|
|
The fair value of the granted options for the year ended December 31, 2015 was determined using the Black Scholes option pricing model with the following assumptions:
Dividend yield:
|
|
|
-0-
|
%
|
Volatility
|
|
118.56% to 130.30
|
%
|
Risk free rate:
|
|
1.19% to 2.37
|
%
|
Expected life:
|
|
7 to 10 years
|
|
Estimated fair value of the Company’s common stock
|
|
$
|
1.42 to $3.99
|
|
Estimated forfeiture rate
|
|
|
0
|
%
|
On April 22, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.
The fair value of all options vesting during the year ended December 31, 2015 and 2014 of $4,471,603 and $4,193,425, respectively, was charged to current period operations. Unrecognized compensation expense of $1,782,575 and $3,778,589 at December 31, 2015 and 2014, respectively, will be expensed in future periods.
Restricted Stock
The following table summarizes the restricted stock activity for the year ended December 31, 2015:
Restricted shares issued as of January 1, 2015
|
|
|
-
|
|
Granted
|
|
|
175,000
|
|
Total restricted shares issued as of December 31, 2015
|
|
|
175,000
|
|
Vested restricted shares as of December 31, 2015
|
|
|
(75,000
|
)
|
Unvested restricted shares as of December 31, 2015
|
|
|
100,000
|
|
Stock based compensation expense related to restricted stock grants was $338,614 and $-0- for the year ended December 31, 2015 and 2014, respectively. As of December 31, 2015, the stock-based compensation relating to restricted stock of $53,386 remains unamortized.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at December 31, 2015:
Exercise
|
|
|
Number
|
|
Expiration
|
Price
|
|
|
Outstanding
|
|
Date
|
$
|
0.001
|
|
|
|
383,320
|
|
January 2020
|
$
|
1.50
|
|
|
|
3,991,391
|
|
February 2018 to December 2018
|
$
|
1.84
|
|
|
|
35,076
|
|
January 2020
|
$
|
1.95
|
|
|
|
654,674
|
|
October 2018 to December 2018
|
$
|
2.00
|
|
|
|
100,000
|
|
August 2018
|
$
|
2.02
|
|
|
|
30,755
|
|
January 2020
|
$
|
2.50
|
|
|
|
100,000
|
|
August 2018
|
$
|
2.75
|
|
|
|
228,720
|
|
August 2019 to September 2019
|
$
|
3.67
|
|
|
|
214,193
|
|
December 2018 to January 2019
|
$
|
3.75
|
|
|
|
1,340,556
|
|
April 2019 to March 2020
|
|
|
|
|
|
7,078,685
|
|
|
On January 31, 2014, the Company issued an aggregate of 64,626 warrants to purchase the Company’s common stock at $3.67 per share for five years in connection with the sale of the Company’s common stock.
In February 2014, as described in the terms of the warrants issued in connection with the sale of the Series C preferred stock, the Company reset 2,138,800 previously issued warrants from an exercise price of $2.61 per share to $1.50. In addition, the Company was required to increase the number of issued warrants to an aggregate total of 3,721,518 warrants.
In April 2014, the Company issued an aggregate of 137,856 warrants to purchase the Company’s common stock at $3.75 per share for five years in connection with the sale of the Company’s common stock.
In August 2014, the Company issued an aggregate of 135,120 warrants to purchase the Company’s common stock at $2.75 per share for five years in connection with the sale of the Company’s common stock.
In September 2014, the Company issued an aggregate of 93,600 warrants to purchase the Company’s common stock at $2.75 per share for five years in connection with the sale of the Company’s common stock.
In December 2014, the Company issued an aggregate of 358,470 warrants to purchase the Company’s common stock in connection with the sale of the Company’s common stock. Of the aggregate issued, 204,840 warrants are exercisable at $2.50 expiring six months from the date of issuance and 153,630 warrants exercisable at $3.75 per share expiring March 31, 2020.
On January 23, 2015, the Company issued an aggregate of 428,400 and 321,300 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
On February 10, 2015, the Company issued an aggregate of 337,000 and 252,750 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
On February 27, 2015, the Company issued an aggregate of 223,000 and 167,250 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
On March 31, 2015, the Company issued an aggregate of 410,360 and 307,770 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.
On April 15, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.
On May 5, 2015, the Company issued 4,082 shares of common stock in exchange for 4,082 warrants exercised at $3.67 per share.
On May 8, 2015, the Company issued 4,000 shares of common stock in exchange for 4,000 warrants exercised at $2.50 per share.
On May 11, 2015, the Company issued an aggregate of 374,641 warrants to purchase the Company’s common stock at $1.50 per share expiring on May 11, 2020 in connection with the sale of the Company’s Series C Preferred stock.
On August 17, 2015, the Company issued 100,000 and 100,000 warrants to purchase the Company’s common stock at $2.00 and 2.50 per share, respectively, expiring on August 17, 2018 in connection with services provided. Both warrants vest at 1/12 per month over one year. The fair value of the vested portion of the issued warrants of $104,505 was charged to current period operations and was determined using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities of 118.80% to 118.88%, risk free rate of 0.92% to 1.31%, dividend yield of -0- and fair value of the Company’s common stock of $1,30 to $1.40. As of December 31, 2015, unrecognized compensation expense was $46,993.
On October 23, 2015, the Company issued an aggregate of 108,336 warrants to purchase the Company’s common stock at $1.95, expiring on October 23, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 11,334 warrants to purchase the Company’s common stock at $1.50, expiring October 23, 2018 for placement agent services.
On October 29, 2015, the Company issued an aggregate of 43,334 warrants to purchase the Company’s common stock at $1.95, expiring on October 29, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 6,134 warrants to purchase the Company’s common stock at $1.50, expiring October 29, 2018 for placement agent services.
On November 18, 2015, the Company issued an aggregate of 188,335 warrants to purchase the Company’s common stock at $1.95, expiring on November 18, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 25,200 warrants to purchase the Company’s common stock at $1.50, expiring November 18, 2018 for placement agent services.
On December 18, 2015, the Company issued an aggregate of 116,668 warrants to purchase the Company’s common stock at $1.95, expiring on December 18, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 20,000 warrants to purchase the Company’s common stock at $1.50, expiring December 18, 2018 for placement agent services.
On December 22, 2015, the Company issued an aggregate of 166,667 warrants to purchase the Company’s common stock at $1.95, expiring on December 22, 2018, in connection with the sale of the Company’s common stock. In addition, the Company issued 20,000 warrants to purchase the Company’s common stock at $1.50, expiring December 22, 2018 for placement agent services.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
A summary of the warrant activity for the years ended December 31, 2015 and 2014 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2014
|
|
|
2,717,258
|
|
|
$
|
2.28
|
|
|
|
6.02
|
|
|
|
-
|
|
Grants
|
|
|
2,396,732
|
|
|
$
|
4.64
|
|
|
|
2.05
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2014
|
|
|
5,113,990
|
|
|
$
|
1.71
|
|
|
|
3.6
|
|
|
$
|
6,041,436
|
|
Grants
|
|
|
3,728,479
|
|
|
|
2.62
|
|
|
|
2.3
|
|
|
|
-
|
|
Exercised
|
|
|
(164,184
|
)
|
|
|
1.58
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(1,599,600
|
)
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
7,078,685
|
|
|
$
|
2.02
|
|
|
|
3.0
|
|
|
$
|
497,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2015
|
|
|
7,078,685
|
|
|
$
|
2.02
|
|
|
|
3.0
|
|
|
$
|
497,933
|
|
Exercisable at December 31, 2015
|
|
|
6,945,353
|
|
|
$
|
2.01
|
|
|
|
3.0
|
|
|
$
|
497,933
|
|
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 $1.30 as of December 31, 2015, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.
NOTE 11 – 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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
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, 2015 and 2014, 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 8. 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, 2015 and 2014, the Company did not have any derivative instruments that were designated as hedges.
The derivative and warrant liability as of December 31, 2015, in the amount of $285,157 and $1,621,199, 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, 2015:
|
|
Warrant
Liability
|
|
|
Derivative
|
|
Balance, December 31, 2014 (and prior)
|
|
$
|
-
|
|
|
$
|
-
|
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Initial fair value of derivative at March 31, 2015, reclassified from equity
|
|
|
-
|
|
|
|
1,242,590
|
|
Initial fair value of warrant liability at March 31, 2015, reclassified from equity
|
|
|
4,097,444
|
|
|
|
-
|
|
Initial fair value of derivative at date of issuance of Series C Preferred Stock
|
|
|
-
|
|
|
|
250,540
|
|
Initial fair value of warrant liability at the date of issuance
|
|
|
334,784
|
|
|
|
-
|
|
Transfers out due to conversion of Series C Preferred Stock
|
|
|
-
|
|
|
|
(639,467
|
)
|
Transfers out due to exercise of warrants
|
|
|
(265,955
|
)
|
|
|
-
|
|
Mark to market to December 31, 2015
|
|
|
(2,545,074
|
)
|
|
|
(568,506
|
)
|
Balance, December 31, 2015
|
|
$
|
1,621,199
|
|
|
$
|
285,157
|
|
Gain on change in warrant and derivative liabilities for the year ended December 31, 2015
|
|
$
|
2,545,074
|
|
|
$
|
568,506
|
|
Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases, therefore decreasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Operating leases
On April 15, 2015, the Company entered into a lease amendment agreement, whereby the Company agreed to extend the lease for office space in Los Angeles, California, commencing September 1, 2015 and expiring on August 31, 2017. In connection with the lease, the Company is obligated to lease parking spaces at an aggregate approximate cost of $978 per month.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
In April 2015, the Company entered into a lease for approximately 1,741 square feet of office space in Golden Valley Minnesota, whereby the Company agreed to lease premises, commencing May 1, 2015 and expiring on May 31, 2018. In connection therewith, the Company paid a security deposit of $2,712.
Future minimum lease payments under these three agreements are as follows:
Year Ending December 31,
|
|
|
|
|
2016
|
|
$
|
125,192
|
|
2017
|
|
|
96,024
|
|
2018
|
|
|
13,783
|
|
|
|
$
|
234,999
|
|
Rent expense charged to operations, which differs from rent paid due to rent credits and to increasing amounts of base rent, is calculated by allocating total rental payments on a straight-line basis over the term of the lease. During the years ended December 31, 2015 and 2014, rent expense was $165,514 and $77,063, respectively and as of December 31, 2015 and 2014, net deferred rent payable was $3,016 and $-0-, respectively. Included in rent expense for the year ended December 31, 2015, was temporary monthly rental expenses incurred.
Employment agreements
On July 14, 2014, the Company’s Board Of Directors (the “Board”) increased the size of the Board to eight members and appointed Gregory D. Cash and Patrick J. Gallagher as members of the Board, effective as of July 15, 2014, to serve for a term expiring at the Company’s 2015 annual meeting of stockholders. In addition, the Board appointed Mr. Cash to serve as the Company’s president and chief executive officer.
In connection with the appointment of Mr. Cash, on July 15, 2014 (the “Effective Date”), the Company entered into an employment agreement with Mr. Cash (the “Employment Agreement”). The Employment Agreement has an initial term of three years that expires on July 15, 2017. Under the Employment Agreement, Mr. Cash is entitled to an annual base salary of $275,000. Upon the Company closing an equity or equity-linked financing with proceeds to the Company of at least $3.5 million (a “Qualified Financing”), Mr. Cash’s annual base salary will automatically increase to $325,000 and he will receive (i) a one-time payment equal to the difference between the amount he would have earned if his base salary was $325,000 and the amount he actually earned at his base salary of $275,000 for the time period from the Effective Date until the closing of such Qualified Financing and (ii) a one-time cash bonus of $30,000. If the Company does not complete a Qualified Financing within six months after the Effective Date, Mr. Cash’s annual base salary will nonetheless increase to $325,000 and he will receive the same one-time payment unless the Company reasonably determines that the failure to complete such Qualified Financing was within the reasonable control of Mr. Cash. Mr. Cash is also eligible to receive an annual bonus equal to at least 50% of the sum of his base salary and one-time payment, based on the achievement of reasonable performance criteria to be determined by the Board in consultation with Mr. Cash within 90 days of the Effective Date.
In accordance with the Employment Agreement, on July 15, 2014, the Company granted Mr. Cash an incentive stock option to purchase 1,265,769 shares of the Company’s common stock, made pursuant to an Incentive Stock Option Agreement. The option has an exercise price of $2.21, which was the fair market value of the Company’s common stock on the date of grant, and a term that expires ten years from the date of grant. The option will vest as follows (i) 542,473 shares of common stock will vest in eleven equal installments of 45,206 shares of common stock and one final installment of 45,207 shares of common stock on a quarterly basis with the first installment vesting on the Effective Date and subsequent installments vesting every three months thereafter; (ii) 180,824 shares of common stock will vest immediately upon completion of a Qualified Financing; (iii) 180,824 shares of common stock will vest upon the listing of the Company’s common stock on a recognized U.S. national securities exchange (i.e., NYSE, MKT LLC, The Nasdaq Stock Market LLC or the New York Stock Exchange); (iv) 180,824 shares of common stock will vest upon the 510(k) clearance or any other type of clearance deemed necessary by the U.S. Food and Drug Administration of the Company’s PURE (Precise Uninterrupted Real-time evaluations of Electrograms) EP technology platform; and (v) 180,824 shares of common stock will vest upon the Company achieving a market capitalization of $150,000,000 and maintaining such market capitalization for at least 90 consecutive calendar days.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
Litigation
On January 7, 2014, David Drachman, the Company’s former chief executive officer and president, filed a statement of claim against the Company with the American Arbitration Association with respect to his resignation from his positions with us in November 2013. Mr. Drachman alleges, among other things, that (i) the Company misled him with respect to the status of our technology and required him to perform capital raising duties that had not been previously agreed upon, (ii) he resigned from his positions with us for good reason, as such term was defined in his employment agreement with the Company, and (iii) he, in his individual capacity, has full rights to the ownership and control of a patent application describing a combined ablation and recording unit directed at the use of electrocardiography sensing for control of radiofrequency renal denervation that we filed with the U.S. Patent and Trademark Office during the time Mr. Drachman served in his positions with the Company.
During the year ended December 31, 2014, the Company settled the above claim for $100,000 with payments over six months. As of December 31, 2015 and 2014, $13,333 and $66,667 was outstanding, respectively.
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, 2015.
NOTE 13 – INCOME TAXES
At December 31, 2015, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $11,200,000, expiring in the year 2035, 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, 2015, the Company has increased the valuation allowance from $2,300,000 to $3,700,000.
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 jurisdiction and in California. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2011.
The effective rate differs from the statutory rate of 34% for due to the following:
|
|
2015
|
|
|
2014
|
|
Statutory rate on pre-tax book loss
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
Gain on change in fair value of derivatives
|
|
|
(11.5
|
)%
|
|
|
-
|
%
|
Stock based compensation
|
|
|
28.6
|
%
|
|
|
23.0
|
%
|
Financing costs
|
|
|
2.1
|
%
|
|
|
2.4
|
%
|
Valuation allowance
|
|
|
14.8
|
%
|
|
|
8.6
|
%
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
The Company’s deferred taxes as of December 31, 2015 and 2014 consist of the following:
|
|
2015
|
|
|
2014
|
|
Non-Current deferred tax asset:
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
3,700,000
|
|
|
$
|
2,300,000
|
|
Valuation allowance
|
|
|
(3,700,000
|
)
|
|
|
(2,300,000
|
)
|
Net non-current deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 14 – SUBSEQUENT EVENTS
Common stock:
On January 6, 2016, the Company issued 75,000 shares of common stock to Mr. Chaussy, the Company’s Chief Financial Officer, for the second half of his grant dated April 30, 2015 at a cost basis of $2.90 per share.
On January 20, 2016, the Company issued 75,000 shares of common stock to a consultant for services pursuant to a grant dated December 7, 2015 at a cost basis of $1.31.
On February 9, 2016, the Company issued Alpha Capital an aggregate of 54,859 shares of common stock in exchange for 75 shares of our Series C 9% Convertible Preferred Stock and accrued dividends.
On March 11, 2016, the Company issued 25,000 shares of common stock to a consultant for services pursuant to a General Release and Non-Disparagement agreement dated March 1, 2015 at a cost basis of $1.26.
October 2015 Private Placement
On February 9, 2016, as part of a private placement transaction of our common stock and warrants, certain accredited investors purchased an aggregate of 50,000 shares of common stock and warrants to purchase 25,000 shares of common stock at $1.95, expiring February 9, 2019, for an aggregate purchase price of $75,000. In addition, the Company issued 6,000 warrants to purchase the Company’s common stock at $1.50, expiring February 9, 2019 for placement agent services.
On March 9, 2016, as part of a private placement transaction of our common stock and warrants, certain accredited investors purchased an aggregate of 200,000 shares of common stock and warrants to purchase 100,000 shares of common stock at $1.95, expiring March 9, 2019, for an aggregate purchase price of $300,000. In addition, the Company issued 12,000 warrants to purchase the Company’s common stock at $1.50, expiring March 9, 2019 for placement agent services.
BIOSIG TECHNOLOGIES, INC.
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
137,613
|
|
|
$
|
953,234
|
|
Prepaid expenses
|
|
|
11,291
|
|
|
|
31,308
|
|
Total current assets
|
|
|
148,904
|
|
|
|
984,542
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
15,500
|
|
|
|
18,408
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
27,612
|
|
|
|
27,612
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
192,016
|
|
|
$
|
1,030,562
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses, including $11,912 and $12,716 to related parties as of March 31, 2016 and December 31, 2015, respectively
|
|
$
|
228,163
|
|
|
$
|
223,546
|
|
Dividends payable
|
|
|
367,287
|
|
|
|
340,291
|
|
Warrant liability
|
|
|
1,878,986
|
|
|
|
1,621,199
|
|
Derivative liability
|
|
|
283,857
|
|
|
|
285,157
|
|
Total current liabilities
|
|
|
2,758,293
|
|
|
|
2,470,193
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred Stock, 1,396 and 1,471 shares issued and outstanding; liquidation preference of $1,396,000 and $1,471,000 as of March 31, 2016 and December 31, 2015, respectively
|
|
|
1,396,000
|
|
|
|
1,471,000
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 1,000,000 shares, designated 200 shares of Series A, 600 shares of Series B and 4,200 shares of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized 50,000,000 shares, 17,355,562 and 16,825,703 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively
|
|
|
17,356
|
|
|
|
16,826
|
|
Additional paid in capital
|
|
|
30,845,130
|
|
|
|
29,314,399
|
|
Accumulated deficit
|
|
|
(34,824,763
|
)
|
|
|
(32,241,856
|
)
|
Total stockholders' deficit
|
|
|
(3,962,277
|
)
|
|
|
(2,910,631
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
192,016
|
|
|
$
|
1,030,562
|
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED
STATEMENTS OF OPERATIONS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$
|
372,426
|
|
|
$
|
302,079
|
|
General and administrative
|
|
|
1,939,148
|
|
|
|
2,746,853
|
|
Depreciation
|
|
|
2,908
|
|
|
|
2,860
|
|
Total operating expenses
|
|
|
2,314,482
|
|
|
|
3,051,792
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(2,314,482
|
)
|
|
|
(3,051,792
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Loss on change in fair value of derivatives
|
|
|
(268,425
|
)
|
|
|
-
|
|
Interest income (expense)
|
|
|
-
|
|
|
|
(1,114
|
)
|
Total other income (expense)
|
|
|
(268,425
|
)
|
|
|
(1,114
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,582,907
|
)
|
|
|
(3,052,906
|
)
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,582,907
|
)
|
|
|
(3,052,906
|
)
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend
|
|
|
(32,244
|
)
|
|
|
(79,395
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
(2,615,151
|
)
|
|
$
|
(3,132,301
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted
|
|
|
17,074,329
|
|
|
|
12,256,418
|
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED STATEMENT OF
STOCKHOLDERS' DEFICIT
|
|
THREE MONTHS ENDED MARCH 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, January 1, 2016
|
|
|
16,825,703
|
|
|
$
|
16,826
|
|
|
$
|
29,314,399
|
|
|
$
|
(32,241,856
|
)
|
|
$
|
(2,910,631
|
)
|
Sale of common stock
|
|
|
250,000
|
|
|
|
250
|
|
|
|
351,750
|
|
|
|
-
|
|
|
|
352,000
|
|
Common stock issued for services
|
|
|
150,000
|
|
|
|
150
|
|
|
|
183,850
|
|
|
|
-
|
|
|
|
184,000
|
|
Common stock issued upon conversion of Series C Preferred Stock at $1.50 per share
|
|
|
50,000
|
|
|
|
50
|
|
|
|
74,950
|
|
|
|
-
|
|
|
|
75,000
|
|
Common stock issued settlement of Series C Preferred Stock accrued dividends at $1.08 per share
|
|
|
4,859
|
|
|
|
5
|
|
|
|
5,243
|
|
|
|
-
|
|
|
|
5,248
|
|
Reclassify fair value of derivative liability to equity upon conversion of Series C Preferred Stock to common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
11,938
|
|
|
|
-
|
|
|
|
11,938
|
|
Stock based compensation
|
|
|
75,000
|
|
|
|
75
|
|
|
|
935,244
|
|
|
|
-
|
|
|
|
935,319
|
|
Preferred Stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
(32,244
|
)
|
|
|
-
|
|
|
|
(32,244
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,582,907
|
)
|
|
|
(2,582,907
|
)
|
Balance, March 31, 2016
(unaudited)
|
|
|
17,355,562
|
|
|
$
|
17,356
|
|
|
$
|
30,845,130
|
|
|
$
|
(34,824,763
|
)
|
|
$
|
(3,962,277
|
)
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
|
|
CONDENSED
STATEMENTS OF CASH FLOWS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,582,907
|
)
|
|
$
|
(3,052,906
|
)
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,908
|
|
|
|
2,860
|
|
Change in derivative liabilities
|
|
|
268,425
|
|
|
|
-
|
|
Equity based compensation
|
|
|
1,119,319
|
|
|
|
1,634,714
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
20,017
|
|
|
|
8,744
|
|
Accounts payable
|
|
|
4,314
|
|
|
|
(233,155
|
)
|
Stock based payable
|
|
|
-
|
|
|
|
419,761
|
|
Deferred rent payable
|
|
|
303
|
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(1,167,621
|
)
|
|
|
(1,219,982
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
-
|
|
|
|
(2,684
|
)
|
Net cash used in investing activity
|
|
|
-
|
|
|
|
(2,684
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
352,000
|
|
|
|
3,042,213
|
|
Net cash provided by financing activities
|
|
|
352,000
|
|
|
|
3,042,213
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(815,621
|
)
|
|
|
1,819,547
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
|
953,234
|
|
|
|
239,781
|
|
Cash and cash equivalents, end of the period
|
|
$
|
137,613
|
|
|
$
|
2,059,328
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
-
|
|
|
$
|
1,115
|
|
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
|
|
$
|
80,248
|
|
|
$
|
317,500
|
|
Reclassify fair value of derivative and warrant liability from equity
|
|
$
|
11,938
|
|
|
$
|
5,440,034
|
|
See the accompanying notes to the unaudited condensed financial statements
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
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 is principally devoted to improving the quality of cardiac recordings obtained during EP studies and catheter ablation procedures. 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.
The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The condensed balance sheet as of December 31, 2015 has been derived from audited financial statements.
Operating results for the three months ended March 31, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2015 filed with the Company’s Form 10-K with the Securities and Exchange Commission on March 14, 2016.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of March 31, 2016, the Company had cash of $137,613 and working capital deficit (current liabilities in excess of current assets) of $2,609,389. During the three months ended March 31, 2016, the Company used net cash in operating activities of $1,167,621. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
In April 2016, the Company raised approximately $2 million
as part of private placement transactions of the Company’s common stock and warrants
(see Note 11). 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 March 31, 2016 and requires additional financing to fund future operations. Further, the Company does not have any commercial products available for sale and there is no assurance that if approval of their products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable.
Accordingly, the accompanying condensed financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed financial statements do not include any adjustment that might result from the outcome of this uncertainty.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
NOTE 3
–
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 March 31, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.
At March 31, 2016 and December 31, 2015, the Company had outstanding preferred stock and warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions. (See Note 6 and Note 7).
Research and development costs
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $372,426 and $302,079 for the three months ended March 31, 2016 and 2015, respectively.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
Net 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 March 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Series C convertible preferred stock
|
|
|
930,667
|
|
|
|
1,640,667
|
|
Options to purchase common stock
|
|
|
7,780,190
|
|
|
|
6,205,190
|
|
Warrants to purchase common stock
|
|
|
7,221,685
|
|
|
|
7,561,820
|
|
Totals
|
|
|
15,932,542
|
|
|
|
15,407,677
|
|
Stock Based Compensation
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.
As of March 31, 2016, the Company had 7,780,190 options outstanding to purchase shares of common stock, of which 5,971,951 were vested.
As of December 31, 2015, the Company had 7,780,190 options outstanding to purchase shares of common stock, of which 5,613,501 were vested.
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.
Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20, Registration Payment Arraignments (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the arraignment, the maximum potential amount and to assess each reporting period the probable liability under these arraignments and, if exists, to record or adjust the liability to current period operations. On June 23, 2014, the Company filed Form S-1/A became effective with the Securities and Exchange Commission. As such, the Company determined that payments were due under its registration rights agreement and therefore accrued $55,620 as interest expense during the year ended December 31, 2014 for the liability under the registration rights agreements. During the year ended December 31, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
Beginning on October 23, 2015, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investors units, which each unit consisting of one share of the Company’s common stock and a warrant to purchase one half of one share of common stock (the “
Private Placement
”). In connection with the Private Placement, the Company also entered into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days upon the final closing under the Private Placement and to be effective 120 calendar days thereafter. The final closing under the Private Placement occurred on April 29, 2016. The Company has estimated the liability under the registration rights agreement at $-0- as of March 31, 2016.
Recent Accounting Pronouncements
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2016 and December 31, 2015 is summarized as follows:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Computer equipment
|
|
$
|
68,449
|
|
|
$
|
68,449
|
|
Furniture and fixtures
|
|
|
10,117
|
|
|
|
10,117
|
|
Subtotal
|
|
|
78,566
|
|
|
|
78,566
|
|
Less accumulated depreciation
|
|
|
(63,066
|
)
|
|
|
(60,158
|
)
|
Property and equipment, net
|
|
$
|
15,500
|
|
|
$
|
18,408
|
|
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $2,908 and $2,860 for the three months ended March 31, 2016 and 2015, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at March 31, 2016 and December 31, 2015 consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Accrued accounting and legal
|
|
$
|
134,197
|
|
|
$
|
112,723
|
|
Accrued reimbursements
|
|
|
25,008
|
|
|
|
13,613
|
|
Accrued consulting
|
|
|
5,948
|
|
|
|
15,200
|
|
Accrued research and development expenses
|
|
|
35,920
|
|
|
|
34,179
|
|
Accrued office and other
|
|
|
10,438
|
|
|
|
31,482
|
|
Deferred rent
|
|
|
3,319
|
|
|
|
3,016
|
|
Accrued settlement related to arbitration
|
|
|
13,333
|
|
|
|
13,333
|
|
|
|
$
|
228,163
|
|
|
$
|
223,546
|
|
NOTE 6 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of 9% Series C Convertible Preferred Stock (the “Series C Preferred Stock”).
The Series C Preferred Stock is entitled to preference over holders of junior stock upon liquidation in the amount of $1,000 plus any accrued and unpaid dividends; entitled to dividends as a preference to holders of junior stock at a rate of 9% per annum of the stated value of $1,000 per share, payable quarterly beginning on September 30, 2013 and are cumulative. The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis, but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock. The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder. The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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.
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.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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.
During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s Series C Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C Preferred Stock for net proceeds of $1,814,910.
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related issued warrants did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation is not required. There was no established market for the Company’s common stock. As described in Note 8, as of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively, from equity to liabilities.
At March 31, 2015, the Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: contractual terms of 2.78 to 3.50 years, a risk free interest rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141.00%.
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.
For the three months ended March 31, 2016, at the time of conversions, the Company reclassified the fair value of the embedded beneficial conversion feature of the Series C Preferred Stock of $11,938 from liability to equity. The fair values were determined using a Multinomial Lattice pricing model and the following assumptions: estimated contractual terms of 2.00 years, a risk free interest rate of 0.23%, a dividend yield of 0%, and volatility of 144%.
Series C Preferred Stock issued and outstanding totaled 1,396 and 1,471 as of March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016 and December 31, 2015, the Company has accrued $367,287 and $340,291 dividends payable on the Series C Preferred Stock.
Registration Rights Agreement
In connection with the Company’s private placement of Series C Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series C Preferred Stock and exercise of the warrants issued to holders of Series C Preferred Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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. As a result, the Company accrued $55,620 as interest expense for liquidating damages due under the registration rights agreement as of December 31, 2014. At December 31, 2015, the Company estimated the liability at $-0- and therefore recorded the change to current period operations.
NOTE 7 – WARRANT AND DERIVATIVE LIABILITIES
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related warrants (see Note 6) did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation was not required. There was no established market for the Company’s common stock. As of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively.
The Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89, a dividend yield of 0%, and volatility of 141.00%.
At March 31, 2016, the Company marked to market the fair value of the reset provisions of the Series C Preferred Stock and warrants and determined fair values of $283,857 and $1,878,986, respectively. The Company recorded a loss from change in fair value of derivatives of $268,425 for the three months ended March 31, 2016. The fair values of the embedded derivatives were determined using the Multinomial Lattice pricing model and the following assumptions: estimated contractual term of 1.00 to 2.00 years, a risk free interest rate of 0.39% to 1.01%, a dividend yield of 0%, and volatility of 143.00%.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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 March 31, 2016 and December 31, 2015, the Company has authorized 200 shares of Series A preferred stock, 600 shares of Series B preferred stock and 4,200 shares of Series C Preferred Stock. As of March 31, 2016 and December 31, 2015, there were no outstanding shares of Series A and Series B 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.
As of March 31, 2016 and December 31, 2015, the Company has 1,396 and 1,471 Series C Preferred Stock issued and outstanding.
Common stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value common stock. As of March 31, 2016 and December 31, 2015, the Company had 17,355,562 and 16,825,703 shares issued and outstanding, respectively.
During the three months ended March 31, 2016, the Company issued an aggregate of 150,000 shares of common stock under the terms of its 2012 Equity Plan for services rendered totaling $184,000 ($1.23 average per share).
During the three months ended March 31, 2016, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 250,000 shares of common stock and 143,000 warrants for aggregate proceeds of $352,000, net of $23,000 in expenses.
During the three months ended March 31, 2016, the Company issued 75,000 shares of common stock as vested previously issued restricted stock units
Beginning on October 23, 2015, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investors units, which each unit consisting of one share of the Company’s common stock and a warrant to purchase one half of one share of common stock (the “
Private Placement
”). In connection with the Private Placement, the Company also entered into a registration rights agreements with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days of the final closing under the Private Placement and to be effective 120 calendar days thereafter. The final closing under the Private Placement occurred on April 29, 2016. The Company has estimated the liability under the registration rights agreement at $-0- as of March 31, 2016.
NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
Options
On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 11,686,123 (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.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.
Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 1,440,933 shares of its common stock for future issuance under the terms of the Plan.
During the three months ended March 31, 2016, the Company granted an aggregate of 150,000 stock grants to key consultants under the plan. See Note 8.
The following table presents information related to stock options at March 31, 2016:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
Exercisable
|
|
Exercise
|
|
Number of
|
|
Remaining Life
|
|
Number of
|
|
Price
|
|
Options
|
|
In Years
|
|
Options
|
|
|
$
|
1.01-2.00
|
|
|
|
1,544,642
|
|
|
|
6.0
|
|
|
|
969,726
|
|
|
|
2.01-3.00
|
|
|
|
5,935,548
|
|
|
|
6.1
|
|
|
|
4,702,225
|
|
|
|
3.01-4.00
|
|
|
|
300,000
|
|
|
|
9.0
|
|
|
|
300,000
|
|
|
|
|
|
|
|
7,780,190
|
|
|
|
6.2
|
|
|
|
5,971,951
|
|
A summary of the stock option activity and related information for the Plan for the three months ended March 31, 2016 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2016
|
|
|
7,780,190
|
|
|
$
|
2.30
|
|
|
|
6.4
|
|
|
$
|
-
|
|
Grants
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
7,780,190
|
|
|
$
|
2.30
|
|
|
|
6.2
|
|
|
$
|
-
|
|
Exercisable at March 31, 2016
|
|
|
5,971,951
|
|
|
$
|
2.35
|
|
|
|
5.7
|
|
|
$
|
-
|
|
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 $1.40 as of March 31, 2016, which would have been received by the option holders had those option holders exercised their options as of that date.
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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 any stock-based payment awards during the three months ended March 31, 2016 and 2015 was estimated using the Black-Scholes pricing model.
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding.
The fair value of all options vesting during the three months ended March 31, 2016 and 2015 of $697,649 and $798,789, respectively, was charged to current period operations. Unrecognized compensation expense of $1,084,926 and $1,782,575 at March 31, 2016 and December 31, 2015, respectively, will be expensed in future periods.
Restricted Stock
The following table summarizes the restricted stock activity for the three months ended March 31, 2016:
Restricted shares issued as of January 1, 2016
|
|
|
175,000
|
|
Granted
|
|
|
-
|
|
|
|
|
(75,000
|
)
|
Total restricted shares issued as of March 31, 2016
|
|
|
100,000
|
|
Vested restricted shares as of March 31, 2016
|
|
|
-
|
|
Unvested restricted shares as of March 31, 2016
|
|
|
100,000
|
|
Stock based compensation expense related to restricted stock grants was $50,084 and $-0- for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the stock-based compensation relating to restricted stock of $3,302 remains unamortized.
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at March 31, 2016:
Exercise
|
|
|
Number
|
|
Expiration
|
Price
|
|
|
Outstanding
|
|
Date
|
$
|
0.001
|
|
|
|
383,320
|
|
January 2020
|
$
|
1.50
|
|
|
|
4,009,391
|
|
February 2018 to March 2019
|
$
|
1.84
|
|
|
|
35,076
|
|
January 2020
|
$
|
1.95
|
|
|
|
779,674
|
|
October 2018 to March 2019
|
$
|
2.00
|
|
|
|
100,000
|
|
August 2018
|
$
|
2.02
|
|
|
|
30,755
|
|
January 2020
|
$
|
2.50
|
|
|
|
100,000
|
|
August 2018
|
$
|
2.75
|
|
|
|
228,720
|
|
August 2019 to September 2019
|
$
|
3.67
|
|
|
|
214,193
|
|
December 2018 to January 2019
|
$
|
3.75
|
|
|
|
1,340,556
|
|
April 2019 to March 2020
|
|
|
|
|
|
7,221,685
|
|
|
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.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
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.
Stock based compensation related to warrants issued for services was $36,405 and $-0- for the three months ended March 31, 2016 and 2015, respectively.
A summary of the warrant activity for the three months ended March 31, 2016 is as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2016
|
|
|
7,078,685
|
|
|
$
|
2.02
|
|
|
|
3.0
|
|
|
|
497,933
|
|
Grants
|
|
|
143,000
|
|
|
|
1.89
|
|
|
|
2.9
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
7,221,685
|
|
|
$
|
2.01
|
|
|
|
2.8
|
|
|
$
|
536,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at March 31, 2016
|
|
|
7,221,685
|
|
|
$
|
2.03
|
|
|
|
2.8
|
|
|
$
|
536,265
|
|
Exercisable at March 31, 2016
|
|
|
7,138,353
|
|
|
$
|
2.01
|
|
|
|
2.8
|
|
|
$
|
536,265
|
|
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 $1.40 as of March 31, 2016, 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.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts payable and other current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2016 and December 31, 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative and warrant liabilities as level 3 and values its derivatives using the methods discussed in Note 7. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 5 are that of volatility and market price of the underlying common stock of the Company.
As of March 31, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.
The derivative and warrant liability as of March 31, 2016, in the amount of $283,857 and $1,878,986, 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 March 31, 2016:
|
|
Warrant
Liability
|
|
|
Derivative
|
|
Balance, December 31, 2015
|
|
$
|
1,621,199
|
|
|
$
|
285,157
|
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Transfers out due to conversion of Series C Preferred Stock
|
|
|
-
|
|
|
|
(11,938
|
)
|
Mark to market to March 31, 2016
|
|
|
257,787
|
|
|
|
10,638
|
|
Balance, March 31, 2016
|
|
$
|
1,878,986
|
|
|
$
|
283,857
|
|
Loss on change in warrant and derivative liabilities for the three months ended March 31, 2016
|
|
$
|
(257,787
|
)
|
|
$
|
(10,638
|
)
|
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.
BIOSIG TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2016
(unaudited)
NOTE 11 – SUBSEQUENT EVENTS
On April 1, 2016, as part of a private placement transaction of the Company’s common stock and warrants, certain accredited investors purchased an aggregate of 200,654 shares of common stock and warrants to purchase 100,327 shares of common stock at $1.95 per share, expiring April 1, 2019, for an aggregate purchase price of $256,768, net of issuance costs. 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 6, 2016, the Company issued 100,000 shares of its common stock upon vesting of previously issued restricted stock units.
On April 19, 2016, as part of a private placement transaction of the Company’s common stock and warrants, certain accredited investors purchased an aggregate of 169,959 shares of common stock and warrants to purchase 84,980 shares of common stock at $1.95 per share, expiring April 19, 2019, for an aggregate purchase price of $227,427, net of issuance costs. 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, as part of a private placement transaction of the Company’s common stock and warrants, certain accredited investors purchased an aggregate of 1,135,731 shares of common stock and warrants to purchase 567,866 shares of common stock at $1.95 per share, expiring April 29, 2019, for an aggregate purchase price of $1,508,137, net of issuance costs. In addition, the Company issued 79,524 warrants to purchase the Company’s common stock at $1.50 per share, expiring April 29, 2019 for placement agent services.