NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated 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.
On November 7, 2018, the Company formed NeuroClear Technologies, Inc. (“NeuroClear”), a Delaware Corporation, for the purpose to pursue additional applications of the PURE EP™ signal processing technology outside of electrophysiology. In 2019, NeuroClear sold 896,690 shares of its common stock for net proceeds of $5,011,309 to fund initial operations. As of December 31, 2019, the Company had a majority interest in NeuroClear of 87.8% (See Notes 9 and 11).
The consolidated financial statements include the accounts of BioSig Technologies, Inc. and its majority owned subsidiary, NeuroClear Technologies, Inc. to as the “Company” or “BioSig”.
Effective September 10, 2018, the Company amended its Articles of Incorporation to implement a reverse stock split in the ratio of 1 share for every 2.5 shares of common stock. As a result, 40,333,758 shares of the Company’s common stock were exchanged for 16,133,544 shares of the Company's common stock. These consolidated financial statements have been retroactively restated to reflect the reverse stock split (See Note 9).
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 606. A five-step analysis a must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. 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. There were no changes to our revenue recognition policy from the adoption of ASC 606.
Use of estimates
The preparation of consolidated 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 consolidated 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 long term operating leases, patent capitalization, 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, 2019 and 2018, deposits in excess of FDIC limits were $11,608,582 and $4,200,160, respectively.
Inventory
The inventory is comprised of finished goods available for sale and are stated at the lower of cost or net realizable value using the first-in, first-out method of valuation. The inventory at December 31, 2019 and 2018 were $577,690 and $0, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Prepaid Expenses
Prepaid expenses are comprised of vendor deposits of $100,000 (2018), prepaid insurance and operating expense prepayments.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
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 consolidated 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, 2019 and 2018, the Company did not have any derivative instruments that were designated as hedges.
At December 31, 2019 and 2018, the Company had outstanding preferred stock and at December 31, 2018, warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions (See Note 7 and Note 8). On January 1, 2018, the Company adopted ASU 2017-11 and according reclassified the fair value of the reset provisions embedded in previously issued preferred stock and certain warrants with embedded anti-dilutive provisions from liability to equity.
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 $9,738,819 and $4,368,784 for the year ended December 31, 2019 and 2018, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
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, 2019 and 2018 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:
|
|
2019
|
|
|
2018
|
|
Series C convertible preferred stock
|
|
|
82,251
|
|
|
|
190,572
|
|
Options to purchase common stock
|
|
|
3,980,804
|
|
|
|
3,135,828
|
|
Warrants to purchase common stock
|
|
|
2,744,718
|
|
|
|
4,579,511
|
|
Vested restricted stock awards
|
|
|
25,000
|
|
|
|
-
|
|
Totals
|
|
|
6,832,773
|
|
|
|
7,905,911
|
|
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 as measured on the grant date. 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 December 31, 2019, the Company had options to purchase 3,980,804 shares of common stock outstanding, of which options to purchase 2,874,017 shares of common stock were vested.
As of December 31, 2018, there were options to purchase 3,135,828 shares of common stock outstanding, of which options to purchase 3,007,946 shares of common stock 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.
On December 27, 2017, the Tax and Jobs Act (TCJA) was signed into law by the President of the United States, TCJA is a tax reform act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. Accordingly, the Company adjusted its deferred tax assets and liabilities at December 31, 2018, using the new corporate rate of 21 percent. See Note 14.
Patents, net
The Company capitalizes certain initial asset costs in connection with patent applications including registration, documentation and other professional fees associated with the application. Patent costs incurred prior to the Company’s U.S. Food and Drug Administration (“FDA”) 510 (k) application on March 28, 2018 were charged to research and development expense as incurred. Commencing upon first in-man trials on February 18 and 19, 2019, capitalized costs are amortized to expense using the straight-line method over the lesser of the legal patent term or the estimated life of the product of 20 years. During the year ended December 31, 2019, the Company recorded amortization of $15,576 to current period operations.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Segment Information
Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all the financial information related to the Company's only material principal operating segment.
Registration Rights
The Company accounts for registration rights agreements in accordance with the Accounting Standards Codification subtopic 825-20, Registration Payment Arrangements (“ASC 825-20”). Under ASC 825-20, the Company is required to disclose the nature and terms of the arrangement, the maximum potential amount and to assess each reporting period the probable liability under these arrangements and, if exists, to record or adjust the liability to current period operations.
Beginning on October 28, 2016, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investor 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 agreement with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days upon the final closing under the Private Placement and to be effective 120 calendar days thereafter. The final closing under the Private Placement occurred on March 31, 2017. On June 8, 2017, the Company filed the required registration statement and on September 19, 2017 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
Beginning on April 6, 2017, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold to the investor 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. In connection with the Private Placement, the Company also entered into a registration rights agreement with the investors, pursuant to which the Company agreed to provide certain registration rights with respect to the common stock and warrants issued under the Private Placement. The registration rights agreements require the Company to file a registration statement within 45 calendar days upon the final closing under the Private Placement and to be effective 120 calendar days thereafter. The final closing under the Private Placement occurred on December 31, 2017.
On February 28, 2018, the Company filed the required registration statement and on March 26, 2018 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
On November 3, 2017, in connection with the Company’s private placement of Series D Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series D Preferred Stock and exercise of the warrants issued to holders of Series D Preferred Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series D Preferred Stock and exercise of the warrants on or before December 18, 2017 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by March 18, 2018 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments. On December 18, 2017, the Company filed the required registration statement and on December 29, 2017 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
On February 16, 2018, in connection with the Company’s private placement of Series E Preferred Stock and warrants, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) whereby the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) within 90 days of the closing of the transactions contemplated by the Purchase Agreement (the “Filing Date”) covering the resale of (a) all shares of Common Stock Issuable upon conversion of the Preferred Shares, (b) all shares of Common Stock issuable upon exercise of the Warrants, (c) all other shares of Common Stock issued pursuant to any transaction documents which have been, or which may, from time to time be issued or become issuable to the Investors under the Transaction Documents (without regard to any limitation or restriction on purchases), and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event (“Registrable Securities”), not then registered. The Company will use its reasonable best efforts to keep the registrations statement effective pursuant to Rule 415 under the Securities Act until the earlier of (i) the date on which the Investors shall have sold all the Registrable Securities covered thereby and (ii) that date that all Registrable Securities may be sold pursuant to Rule 144 without any public information requirement or volume or manner of sale limitations. On May 16, 2018, the Company filed the required registration statement. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
On March 12, 2019, in connection with the Company’s private placement of common stock, the Company agreed that the Company would use commercially reasonable efforts to prepare and file a registration statement on Form S-3 or Form S-1 with the Securities and Exchange Commission covering the resale of the shares of common stock on or prior the date that is 45 calendar days after the closing date of the private placement, and to cause such registration statement to be declared effective by the Securities and Exchange Commission as soon as practicable thereafter.
On May 31, 2019, the Company filed the required registration statement, and on June 24, 2019, such registration statement was declared effective. The Company has estimated the liability under the registration rights agreement to be $0 as of December 31, 2019. All expenses related to the filing of such registration statement, including legal fees, was borne by the Company. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019.
Adoption of Accounting Standards
ASC 842, Leases (Topic 842)
In February 2016, the Financial Accounting Standards Board established ASC Topic 842, Leases (Topic 842), by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted the new standard on January 1, 2019.
The new standard provides a number of optional practical expedients in transition. The Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company.
The new standard had a material effect on the Company’s financial statements. The most significant effects of adoption relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for real estate operating leases; and (2) providing significant new disclosures about its leasing activities.
Upon adoption, the Company recognized additional operating lease liabilities, net of deferred rent, of approximately $422,000 based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The Company also recognized corresponding ROU assets of approximately $419,000.
The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. Beginning in 2019, the Company changed to its disclosed lease recognition policies and practices, as well as to other related financial statement disclosures due to the adoption of this standard. See Note 5.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260)
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features.
When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.
Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.
Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
On January 1, 2018, the Company adopted ASU 2017-11 and accordingly reclassified the fair value of the reset provisions embedded in previously issued Series C Preferred stock, Series D Preferred stock and certain warrants with embedded anti-dilutive provisions from liability to equity in aggregate of $3,044,162.
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.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the consolidated 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 unaudited condensed consolidated financial statements, except as disclosed.
Reclassification
Certain amounts in the balance sheet at December 31, 2018 have been reclassified to conform to the presentation at December 31, 2019.
NOTE 2 – MANAGEMENT LIQUIDITY PLANS
The Company's primary 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 experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company has not generated revenues and there is no assurance that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's ongoing research and development will be successfully completed or that any product will be approved or commercially viable.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
At December 31, 2019, the Company had working capital of approximately $10.8 million. During the year ended December 31, 2019, the Company raised approximately $10 million, net of expenses, through the sale of common stock, net $5 million from sale of subsidiary stock and $8.4 million from the exercise of warrants and options.
On February 21, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Laidlaw & Company (UK) Ltd. (the “Underwriter”), relating to an underwritten public offering of 2,500,000 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share. All of the Shares were sold by the Company. The public offering price of the Shares was $4.00 per share, and the Underwriter purchased the Shares from the Company pursuant to the Underwriting Agreement at a price of $3.68 per share. At closing on February 25, 2020, the Company received net proceeds of approximately $9,100,000, after deducting the underwriting discount and other offering expenses of approximately $100,000.
In addition, subsequent to December 31, 2019, the Company has received approximately $133,241 from the exercise of previously issued warrants.
At December 31, 2019, the Company had cash of approximately $12.1 million, which together with approximately $9.2 million of net proceeds from the sales of common stock and warrant exercises subsequent to December 31, 2019 (see above and Note 15), constitutes sufficient funds for the Company to meet its research and development and other funding requirements for at least the next 12 months.
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. The net amount of outstanding advances at December 31, 2019 and 2018 was $-0-.
Accrued expenses related primarily to travel reimbursements due related parties as of December 31, 2019 and 2018 was $12,051 and $32,366, respectively.
On November 1, 2017, in connection with Mr. Filler joining the Company’s Board of Directors, the Company entered into a Master Services Agreement (the “Agreement”) with 3LP Advisors LLC (d/b/a Sherpa Technology Group) (“Sherpa”) and an initial statement of work (the “SOW”), pursuant to which Sherpa will develop, execute and expand the Company’s intellectual property strategy over the course of the next approximately 18 months by evaluating the business and technology landscape in which the Company operates, and charting and executing a strategy of patent filing and licensing.
In connection with the SOW, the Company paid Sherpa fee of (i) $200,000 in cash, of which $25,000 will be paid on January 1, 2018, with the remainder to be paid upon completion of certain objectives, and (ii) a ten-year option to purchase up to 120,000 shares of the Company’s common stock at an exercise of $3.75 per share of common stock, of which 60,000 options vest immediately and 60,000 options are performance conditioned (subsequently, condition met). Mr. Filler is the general counsel and partner of Sherpa.
During the years ended December 31, 2019 and 2018, the Company paid $279,030 and $427,219 as patent costs, consulting fees and expense reimbursements. As of December 31, 2019, and 2018, there was an unpaid balance of $27,623 and $0, respectively.
On February 15, 2018 Mr. Filler was granted options to purchase 20,000 shares of common stock at an exercise price of $3.55 per share for their 2017 board service. The granted options vested as of February 15, 2018 and are exercisable for a ten-year term.
On May 4, 2018, Mr. Londoner, Mr. Chaussy and Dr. Drakulic were granted 240,000, 100,000 and 60,000 shares of common stock at a cost basis of $4.425 per share for their 2017 performance, respectively. The granted shares vested immediately.
On August 16, 2018, Mr. Filler acquired 4,800 shares of the Company’s common stock, 1,200 warrants to acquire the Company’s common stock at an exercise price of $6.85 and exercisable for three years and 1,200 warrants to acquire the Company’s common stock at an exercise price of $3.75 expiring on May 16, 2019 in participation in the Company’s private placement of its common stock. The issued warrants vested as of August 16, 2018.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
On October 16, 2018, Mr. Tanaka and Mr. Weild were granted options to purchase 34,566 and 69,132 shares of common stock at an exercise price of $5.09 per share for their 2018 board service. Mr. Tanaka’s options vest with 17,283 vesting on October 16, 2018 and 17,283 vesting January 1, 2019 and are exercisable for a ten-year term. Mr. Weild’s options vest with 17,283 on October 16, 2018; 17,283 on January 1, 2019, 2020 and 2021 each and are exercisable for a ten-year term.
On October 26, 2018, Mr. Gallagher was issued 94 shares of the Company’s common stock in a cashless exercise 490 warrants to purchase the Company common stock.
On November 6, 2018, Mr. Londoner, as Chairman of the board of directors, was granted 60,000 shares of common stock at a cost basis of $5.33 per share for his 2018 board service. The granted shares vested immediately.
On November 6, 2018, Mr. O’Donnell, Mr. Filler, Mr. Fischer each were granted 50,000 shares of common stock for their 2018 board of directors of committee chairmanships services at a cost basis of $5.33 per share. The granted shares vested immediately.
On November 6, 2018, Mr. Fischer and Mr. Foley each were granted 25,000 shares of common stock for their 2018 board of directors’ services at a cost basis of $5.33 per share. The granted shares vested immediately.
On January 2, 2019, Mr. O’Donnell was granted 30,000 shares of common stock at a cost basis of $4.33 per share for his appointment as Lead Director. The granted shares vested immediately.
On January 7, 2019, Mr. Londoner, Mr. Chaussy and Dr. Drakulic were granted 240,000, 100,000 and 70,000 shares of common stock at a cost basis of $4.48 per share, respectively. The granted shares vested immediately.
On April 24, 2019, Mr. Gallagher was issued 4,000 shares of the Company’s common stock in an exercise of warrants to purchase the Company common stock at $4.875 per share.
On May 1, 2019, Dr. Zeldis was issued 1,097 shares of the Company’s common stock in an exercise of warrants to purchase the Company common stock at $3.75 per share.
On May 17, 2019, Mr. Filler was issued 1,200 shares of the Company’s common stock in an exercise of warrants to purchase the Company common stock at $3.75 per share.
On May 17, 2019, in connection with the resignation of Mr. Fischer and Mr. Tanaka, the Company extended for up to two years 236,768 and 392,137 previously granted options that would normally expire 90 days after leaving service.
On May 22, 2019, Dr. Zeldis was issued an aggregate of 17,138 shares of the Company’s common stock upon conversion of 50 shares of the Company’s Series C preferred stock and accrued dividends.
On May 22, 2019, Dr. Zeldis was issued 1,097 shares of the Company’s common stock in an exercise of warrants to purchase the Company common stock at $6.85 per share.
On May 22, 2019, Dr. Zeldis was issued 20,000 shares of the Company’s common stock in an exercise of options to purchase the Company common stock at $3.40 per share.
On May 24, 2019, Mr. Tanaka (former board of director member) was issued 28,077 shares of the Company’s common stock in a cashless exercise 95,857 options to purchase the Company common stock.
On June 20, 2019, Mr. Tanaka (former board of director member) was issued 10,610 shares of the Company’s common stock in a cashless exercise 34,566 options to purchase the Company common stock.
On June 21, 2019, Mr. Navarro was granted restricted stock units representing 50,000 shares of common stock at a cost basis of $9.25 for joining the Company’s board of directors. The granted restricted stock units vest 50% on June 21, 2020 and 50% on June 21, 2021.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
On July 8, 2019, Mr. Londoner, Mr. Chaussy and Mr. Drakulic were granted 60,000, 25,000 and 10,000 shares of common stock at a cost basis of $8.71 per share for their first half 2019 performance, respectively. The granted shares vested immediately.
On September 24, 2019, Ms. Pease was granted restricted stock units representing 40,000 shares of common stock at a cost basis of $8.07 for joining the Company’s board of directors. The granted restricted stock units vest 50% on September 24, 2020 and 50% on September 24, 2021.
On October 2, 2019, Mr. Tanaka (former board of director member) was issued 46,847 shares of the Company’s common stock in a cashless exercise 191,714 options to purchase the Company common stock.
On October 16, 2019, Mr. Londoner, Mr. O’Donnell and Mr. Chaussy were granted options to purchase 250,000, 25,000 and 150,000 shares of common stock in NeuroClear Technologies, Inc. at an exercise price of $5.00 per share for their service in establishing NeuroClear. The granted options vested as of October 16, 2019 and are exercisable for a ten-year term.
On October 16, 2019, Mr. Londoner and Mr. Filler were granted 30,000 and 25,000 shares of common stock at a cost basis of $7.06 per share for 2018 performance, respectively. The granted shares vested immediately. The granted shares vested immediately
On October 30, 2019, Mr. Navarro, Mr. Foley and Dr. Zeldis were each granted options to purchase 29,000 shares of common stock at an exercise price of $7.15 per share for their 2019 board service. The granted options vested as of October 30, 2019 and are exercisable for a ten-year term.
On October 30, 2019, Mr. Gallagher, Mr. O’Donnell and Mr. Weild were each granted options to purchase 36,240 shares of common stock at an exercise price of $7.15 per share for their 2019 board service. The granted options vested as of October 30, 2019 and are exercisable for a ten-year term.
On December 12, 2019, Mr. Londoner, Mr. Chaussy, Dr. Drakulic were granted 225,000, 75,000 and 30,000 shares of common stock at a cost basis of $6.57 per share for their second half 2018 performance, respectively. The granted shares vested immediately.
On December 20, 2019, Mr. O’Donnell was issued 7,254 shares of the Company’s common stock in a cashless exercise 38,320 options to purchase the Company common stock.
During the years ended December 31, 2019 and 2018, Mr. Chaussy guaranteed issued corporate credit cards.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2019 and 2018 is summarized as follows:
|
|
2019
|
|
|
2018
|
|
Computer equipment
|
|
$
|
155,126
|
|
|
$
|
105,447
|
|
Furniture and fixtures
|
|
|
71,463
|
|
|
|
32,619
|
|
Manufacturing equipment
|
|
|
29,098
|
|
|
|
-
|
|
Less accumulated depreciation
|
|
|
(75,319
|
)
|
|
|
(93,720
|
)
|
Property and equipment, net
|
|
$
|
180,368
|
|
|
$
|
44,346
|
|
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.
During the year ended December 31, 2019, the Company recognized a gain of $452 on disposal of equipment.
Depreciation expense was $38,773 and $12,403 for year ended December 31, 2019 and 2018, respectively.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY
On October 1, 2019, the Company entered into a lease agreement whereby the Company leased approximately 1,400 square feet of office space in Rochester Minnesota commencing November 1, 2019 and expiring on October 31, 2021 at an initial rate of $3,411 per month with escalating payments. The lease agreement includes an option to extend the lease for two additional periods of two years each past its initial term.
In determining the length of the lease term to its Rochester, Minnesota lease primarily due to i) the renewal rate is at future market rate to be determined and ii) Company does not have significant leasehold improvements that would restrict its ability to consider relocation. At the lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $77,012.
On August 14, 2019, the Company entered into a lease agreement whereby the Company leased storage space in the same building as our Los Angeles, California facilities, commencing September 1, 2019, and expiring on June 30, 2021, at an initial rate of $235 per month with escalating payments. In connection with the lease, the Company paid a security deposit of $250. There is no option to extend the lease past its initial term. At the lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $4,960.
On April 12, 2019, the Company entered into a sublease agreement whereby the Company leased approximately 4,343 square feet of office space in Westport, Connecticut commencing May 1, 2019 and expiring on October 31, 2021 at an initial rate of $18,277 per month, inclusive of a fixed utility charge, with escalating payments. In connection with the lease the Company paid a security deposit of $68,764, of which $34,382 represents the last two months of the term. There is no option to extend the lease past its initial term. At the lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $506,276.
On October 1, 2018, the Company entered into a lease agreement whereby the Company leased office space in Norwalk, Connecticut commencing on October 1, 2018, for $2,000 per month, which expired on September 30, 2019.
On May 22, 2018, the Company entered into a fifth lease amendment agreement, whereby the Company agreed to extend the lease for the original office space and expand with additional space in Los Angeles, California, commencing June 14, 2018 and expiring on June 30, 2021 at an initial rate of $14,731 per month with escalating payments. In connection with the lease, the Company is obligated to lease parking spaces at an aggregate approximate cost of $1,070 per month. The Company has an option to extend the lease for an additional 3-year (option) term.
On April 11, 2018, the Company extended a short-term lease agreement whereby the Company leased office space in Austin, Texas commencing on August 1, 2018, for $979 per month, which expired on July 31, 2019.
In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. In determining the length of the lease term to its long-term lease, the Company determined not to consider an embedded 3-year option in the Los Angeles lease primarily due to i) the renewal rate is at future market rate to be determined and ii) Company does not have significant leasehold improvements that would restrict its ability to consider relocation.
At lease commencement dates, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $1,007,703.
On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right to use assets of $418,838, lease liability of $422,215 and eliminated deferred rent of $3,377.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Right to use assets is summarized below:
|
|
December 31,
2019
|
|
Los Angeles, CA, Suite 740
|
|
$
|
218,875
|
|
Los Angeles, CA, Suite 745
|
|
|
277,592
|
|
Los Angeles, CA, Storage
|
|
|
4,960
|
|
Westport, CT, 54 Wilton Rd
|
|
|
506,276
|
|
Rochester, MN, 14 4th Street
|
|
|
77,012
|
|
Subtotal
|
|
|
1,084,715
|
|
Less accumulated depreciation
|
|
|
(370,373
|
)
|
Right to use assets, net
|
|
$
|
714,342
|
|
During the year ended December 31, 2019, the Company recorded $413,763 as lease expense to current period operations.
Lease liability is summarized below:
|
|
December 31,
2019
|
|
Los Angeles, CA, Suite 740
|
|
$
|
118,009
|
|
Los Angeles, CA, Suite 745
|
|
|
149,910
|
|
Los Angeles, CA, Storage
|
|
|
4,111
|
|
Westport, CT, 54 Wilton Rd
|
|
|
380,708
|
|
Rochester, MN, 14 4th Street
|
|
|
70,681
|
|
Total lease liability
|
|
|
723,419
|
|
Less: short term portion
|
|
|
(412,288
|
)
|
Long term portion
|
|
$
|
311,131
|
|
Maturity analysis under these lease agreements are as follows:
Year ended December 31, 2020
|
|
$
|
455,124
|
|
Year ended December 31, 2021
|
|
|
321,386
|
|
Total
|
|
|
776,510
|
|
Less: Present value discount
|
|
|
(53,091
|
)
|
Lease liability
|
|
$
|
723,419
|
|
Lease expense for the year ended December 31, 2019 was comprised of the following:
Operating lease expense
|
|
$
|
345,667
|
|
Short-term lease expense
|
|
|
66,422
|
|
Variable lease expense
|
|
|
1,674
|
|
|
|
$
|
413,763
|
|
NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2019 and 2018 consist of the following:
|
|
2019
|
|
|
2018
|
|
Accrued accounting and legal
|
|
$
|
118,783
|
|
|
$
|
59,439
|
|
Accrued reimbursements and travel
|
|
|
58,566
|
|
|
|
27,853
|
|
Accrued consulting
|
|
|
170,284
|
|
|
|
89,718
|
|
Accrued research and development expenses
|
|
|
230,035
|
|
|
|
351,631
|
|
Accrued product purchases
|
|
|
346,206
|
|
|
|
-
|
|
Accrued marketing
|
|
|
11,181
|
|
|
|
-
|
|
Accrued office and other
|
|
|
17,885
|
|
|
|
14,304
|
|
Accrued payroll
|
|
|
522,503
|
|
|
|
395,000
|
|
Deferred rent
|
|
|
-
|
|
|
|
3,377
|
|
Accrued settlement related to arbitration
|
|
|
13,333
|
|
|
|
13,333
|
|
|
|
$
|
1,488,776
|
|
|
$
|
954,655
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 7 – SERIES C 9% CONVERTIBLE PREFERRED STOCK
Series C 9% Convertible Preferred Stock
On January 9, 2013, the Board of Directors authorized the issuance of up to 4,200 shares of 9% Series C Convertible Preferred Stock (the “Series C Preferred Stock”).
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 connection with the sale of the Series C preferred stock, the Company issued an aggregate of 532,251 warrants to purchase the Company’s common stock at $6.53 per share expiring five years from the initial exercise date. The warrants contained 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 $6.53 per share as well as other customary anti-dilution protection. The warrants were exercisable for cash; or if at any time after six months from the issuance date, there was 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 could be exercised by means of a “cashless exercise”.
As a result of an amendment to the conversion price of our Series C Preferred Stock, pursuant to the full-ratchet anti-dilution protection provision of the warrants, the exercise price of the warrants was decreased from $6.53 per share to $3.75 per share and the aggregate number of shares issuable under the warrants was increased to 926,121. As of December 31, 2019, all issued warrants in connection with the Series C preferred stock have expired or have been exercised.
Issuances:
During the month of February 2013, the holders of previously issued convertible bridge notes converted into 600 shares of the Company’s Series C Preferred Stock.
During the months of February, March, May, and July 2013, the Company sold an aggregate of 2,181 shares of the Company’s Series C Preferred Stock for net proceeds of $1,814,910.
On May 11, 2015, the Company sold an aggregate of 450 shares of its Series C Preferred Stock for net proceeds of $450,000.
2019 and 2018 conversions:
In February 2018, the Company issued 3,968 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In March 2018, the Company issued 4,004 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In April 2018, the Company issued 140,408 shares of its common stock in exchange for 370 shares of the Company’s Series C Preferred Stock and accrued dividends.
In May 2018, the Company issued 7,587 shares of its common stock in exchange for 20 shares of the Company’s Series C Preferred Stock and accrued dividends.
In July 2018, the Company issued 36,035 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
In April 2019, the Company issued 3,507 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In May 2019, the Company issued 17,138 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.
In June 2019, the Company issued 70,069 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
In summary, the Company issued an aggregate of 90,714 shares of its common stock in exchange for 260 shares of the Company’s Series C Preferred stock (stated value of $260,000) and $139,592 accrued dividends for the year ended December 31, 2019 and an aggregate of 192,002 shares of its common stock in exchange for 510 shares of the Company’s Series C Preferred stock (stated value of $510,000) and $234,459 accrued dividends for the year ended December 31, 2018.
Series C Preferred Stock issued and outstanding totaled 215 and 475 as of December 31, 2019 and 2018, respectively. As of December 31, 2019, and 2018, the Company has accrued $128,478 and $242,908 dividends payable on the Series C Preferred Stock.
Registration Rights Agreement
In connection with the Company’s private placement of Series C Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series C Preferred Stock and exercise of the warrants issued to holders of Series C Preferred Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series C Preferred Stock and exercise of the warrants on or before July 22, 2013 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by November 22, 2013 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments.
If (i) the registration statement is not filed by July 22, 2013, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within five trading days after the Company is notified that the registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission by November 22, 2013 in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 20 consecutive calendar days or more than an aggregate of 45 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 0.25% of the aggregate purchase price paid by such purchasers per month of delinquency.
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreement shall be 3% of the aggregate purchase price paid by the purchasers, and (ii) if any partial amount of liquidated damages remains unpaid for more than seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreement, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration statement in certain events.
The Company filed a registration statement on July 22, 2013, which was originally declared effective on June 23, 2014. At December 31, 2019 and 2018, the Company estimated the liability at $-0-.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 8 – WARRANT AND DERIVATIVE LIABILITIES
Series C 9% Convertible Preferred Stock and related warrants
At the time of issuance and until March 31, 2015, the Company determined that the anti-dilutive provisions embedded in the Series C Preferred Stock and related warrants (see Note 6) did not meet the defined criteria of a derivative in such that the net settlement requirement of delivery of common shares does not meet the “readily convertible to cash” as described in Accounting Standards Codification 815 and therefore bifurcation was not required. There was no established market for the Company’s common stock. As of March 31, 2015, the Company determined a market had been established for the Company’s common stock and accordingly, reclassified from equity to liability treatment the fair value of the embedded reset provisions of the Series C Preferred Stock and warrants of $1,242,590 and $4,097,444, respectively.
The Company valued the reset provisions of the Series C Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 0.56% to 0.89%, a dividend yield of 0%, and volatility of 141%.
Series D Convertible Preferred Stock and related warrants
At issuance, the Company determined that certain anti-dilutive provisions embedded in the Series D Preferred Stock and related warrants (see Note 9) met the defined criteria of a derivative and accordingly, reclassified from equity to liability the determined fair value of the embedded reset provisions of the Series D Preferred Stock and warrants of $397,162 and $652,054, respectively.
The Company valued the reset provisions of the Series D Preferred Stock and warrants in accordance with ASC 470-20 using the Multinomial Lattice pricing model and the following assumptions: estimated contractual terms, a risk free interest rate of 1.74%, a dividend yield of 0%, and volatility of 130%.
At December 31, 2017, the Company marked to market the fair value of the reset provisions of the Preferred Stock and warrants and determined fair values of $685,922 and $2,358,240, respectively. The fair values of the embedded derivatives were determined using the Multinomial Lattice pricing model and the following assumptions: estimated contractual term of 1.43 to 3.36 years, a risk-free interest rate of 1.39% to 1.89%, a dividend yield of 0%, and volatility of 131%.
On January 1, 2018, the Company adopted ASU 2017-11 and accordingly reclassified the fair value of the reset provisions embedded in previously issued Series C Preferred stock, Series D Preferred stock and certain warrants with embedded anti-dilutive provisions from liability to equity in aggregate of $3,044,162.
NOTE 9 – STOCKHOLDER EQUITY
Preferred stock
The Company is authorized to issue 1,000,000 shares of $0.001 par value preferred stock. As of December 31, 2019, and 2018, the Company has authorized 200 shares of Series A preferred stock, 600 shares of Series B preferred stock, 4,200 shares of Series C Preferred Stock, 1,400 shares of Series D Preferred Stock and 1,000 shares of Series E Preferred Stock. As of December 31, 2019, and December 31, 2018, there were no outstanding shares of Series A, Series B, Series D and Series E preferred stock.
Series C Preferred Stock
In February 2018, the Company issued 3,968 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In March 2018, the Company issued 4,004 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In April 2018, the Company issued 140,408 shares of its common stock in exchange for 370 shares of the Company’s Series C Preferred Stock and accrued dividends.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
In May 2018, the Company issued 7,587 shares of its common stock in exchange for 20 shares of the Company’s Series C Preferred Stock and accrued dividends.
In July 2018, the Company issued 36,035 shares of its common stock in exchange for 100 shares of the Company’s Series C Preferred Stock and accrued dividends.
In April 2019, the Company issued 3,507 shares of its common stock in exchange for 10 shares of the Company’s Series C Preferred Stock and accrued dividends.
In May 2019, the Company issued 17,138 shares of its common stock in exchange for 50 shares of the Company’s Series C Preferred Stock and accrued dividends.
In June 2019, the Company issued 70,069 shares of its common stock in exchange for 200 shares of the Company’s Series C Preferred Stock and accrued dividends.
Cumulatively from January 1, 2019 to December 31, 2019, the Company exchanged 260 shares of the Company’s Series C Preferred Stock and dividends with a recorded value of $399,592 for 90,714 shares of common stock.
Series D Preferred Stock
On November 3, 2017, the Board of Directors authorized the issuance of up to 1,400 shares of Series D Convertible Preferred Stock (the “Series D Preferred Stock”) and accordingly, the Company filed the Certificate of Designations for the Series D Preferred Stock with the Secretary of State of the State of Delaware. Pursuant to such Certificate of Designations, in the event of the Company’s liquidation or winding up of its affairs, the holders of Preferred Shares will be entitled to a liquidation preference of the stated value per Preferred Share of $1,500 (the “Stated Value”) plus any accrued but unpaid dividends or any other fees due the holder.
A holder of Preferred Shares was entitled at any time to convert any whole or partial number of shares of Preferred Shares into shares of Common Stock determined by dividing the Stated Value of the Preferred Shares being converted by the conversion price of $3.75 per share (the “Conversion Price”). The Conversion Price was subject to “full ratchet” anti-dilution price protection upon the issuance of equity or equity-linked securities at a price lower than the Conversion Price as well as other customary anti-dilution protection.
A holder of the Preferred Shares was entitled to receive cumulative dividends at the rate per Preferred Share (as a percentage of the Stated Value per Preferred Share) of 9% per annum, with respect to the Series D Preferred Stock on each date that such Holder converts Preferred Shares into Common Stock (with respect only to Preferred Shares being converted). The Company coud have paid such dividends, at its option, in cash, Common Stock or a combination thereof. Payment of dividends in shares of Common Stock was subject to the satisfaction of certain equity conditions set forth in the Certificate of Designations. Upon the conversion of Preferred Shares prior to November 3, 2020, the Company was to also pay to the Holders of the Preferred Shares so converted cash, or at the Company’s option, Common Stock or a combination thereof, with respect to the Preferred Shares so converted in an amount equal to $270 per $1,000 of Stated Value of the Preferred Shares being converted, less the amount of all prior dividends paid on such converted Preferred Shares before the relevant date of conversion.
On November 3, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company sold an aggregate of 1,334 shares (the “Preferred Shares”) of its Series D Preferred Stock, par value $0.001 per share, and Class A Warrants to purchase an aggregate of 266,800 shares of the Company’s common stock, par value $0.001 per share at an exercise price of $4.375 per share (the “Class A Warrants”), in exchange for aggregate net cash proceeds of $1,929,960, net of expenses of $70,040. Contemporaneously with the entry into the Purchase Agreement, the Company and the Purchasers agreed to exchange outstanding warrants to purchase 312,203 shares of the Common Stock at an exercise price of $3.75 per share for new Class B Warrants to purchase an equal number of shares of common stock at the same exercise price (the “Class B Warrants”). Class A Warrants are exercisable immediately and expire on May 3, 2021, and have an exercise price of $4.375 per share. The Class B Warrants are exercisable immediately and expire on November 3, 2020, and have an exercise price of $3.75. The Class A Warrants and Class B Warrants otherwise have similar terms, including, a “full ratchet” anti-dilution adjustment in the event that the Company issues any common stock at a per share price lower than the applicable exercise price then in effect.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
On November 6, 2017, the terms of the Class A Warrants automatically adjusted due to the full-ratchet anti-dilution protection provision contained in such warrants. As a result of the adjustment, the exercise price applicable to the Class A Warrants decreased to $3.75 per share from $4.375 per share, and the number of shares issuable under each warrant was increased such that the aggregate exercise price payable under such warrant, after taking into account the decrease in the exercise price, is equal to the aggregate exercise price prior to such adjustment. An additional 44,467 shares of common stock may be issued upon exercise of the Class A Warrants due to the adjustment.
In connection with the Company’s private placement of Series D Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series D Preferred Stock and exercise of the warrants issued to holders of Series D Preferred Stock. Specifically, the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon conversion of the Series D Preferred Stock and exercise of the warrants on or before December 18, 2017 and to cause such registration statement to be declared effective by the Securities and Exchange Commission, in the event that the registration statement is not reviewed by the Securities and Exchange Commission, within five trading days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, and by March 18, 2018 in the event that the registration statement is reviewed by the Securities and Exchange Commission and the Securities and Exchange Commission issues comments. On December 18, 2017, the Company filed the required registration statement and on December 29, 2017 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2018.
2018 Conversions:
In January 2018, the Company issued an aggregate of 94,364 shares of its common stock in exchange for 180 shares of the Company’s Series D Preferred Stock and accrued dividends.
In February 2018, the Company issued an aggregate of 52,573 shares of its common stock in exchange for 100 shares of the Company’s Series D Preferred Stock and accrued dividends.
In March 2018, the Company issued an aggregate of 195,692 shares of its common stock in exchange for 367 shares of the Company’s Series D Preferred Stock and accrued dividends.
In April 2018, the Company issued an aggregate of 230,936 shares of its common stock in exchange for 454 shares of the Company’s Series D Preferred Stock and accrued dividends.
In May 2018, the Company issued an aggregate of 104,684 shares of its common stock in exchange for 206 shares of the Company’s Series D Preferred Stock and accrued dividends.
In June 2018, the Company issued an aggregate of 13,716 shares of its common stock in exchange for 27 shares of the Company’s Series D Preferred Stock and accrued dividends.
In summary, the Company issued an aggregate of 691,965 shares of its common stock in exchange for 1,334 shares of the Company’s Series D Preferred stock (stated value of $2,001,000) and $540,271 accrued dividends for the year ended December 31, 2018.
As of December 31, 2019, and 2018, the Company had 0 Series D Preferred Stock issued and outstanding and has accrued $0 dividends payable on the Series D Preferred stock.
Series E Preferred Stock
On February 1, 2018, the Board of Directors authorized the issuance of up to 1,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred Stock”) and accordingly, the Company filed the Certificate of Designations for the Series E Preferred Stock with the Secretary of State of the State of Delaware. Pursuant to such Certificate of Designations, in the event of the Company’s liquidation or winding up of its affairs, the holders of Preferred Shares were entitled to a liquidation preference of the stated value per Preferred Share of $1,500 (the “Stated Value”) plus any accrued but unpaid dividends or any other fees due the holder.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
A holder of Preferred Shares was entitled at any time to convert any whole or partial number of shares of Preferred Shares into shares of Common Stock determined by dividing the Stated Value of the Preferred Shares being converted by the conversion price of $3.75 per share (the “Conversion Price”). The Conversion Price was subject to “full ratchet” anti-dilution price protection upon the issuance of equity or equity-linked securities at a price lower than the Conversion Price as well as other customary anti-dilution protection.
A holder of the Preferred Shares was entitled to receive cumulative dividends at the rate per Preferred Share (as a percentage of the Stated Value per Preferred Share) of 7% per annum, with respect to the Series E Preferred Stock on each date that such Holder converts Preferred Shares into Common stock (with respect only to Preferred Shares being converted). The Company could have paid such dividends, at its option, in cash, Common Stock or a combination thereof. Payment of dividends in shares of Common Stock is subject to the satisfaction of certain equity conditions set forth in the Certificate of Designations. Upon the conversion of Preferred Shares prior to issuance, the Company was to also pay to the Holders of the Preferred Shares so converted cash, or at the Company’s option, Common Stock or a combination thereof, with respect to the Preferred Shares so converted in an amount equal to $210 per $1,000 of Stated Value of the Preferred Shares being converted, less the amount of all prior dividends paid on such converted Preferred Shares before the relevant date of conversion.
On February 16, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company sold to the Investors an aggregate of 1,000 shares (the “Preferred Shares”) of its Series E Preferred Stock, par value $0.001 per share, and warrants to purchase an aggregate of 200,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an exercise price of $3.75 per share (the “Warrants”), in exchange for aggregate consideration of $1,492,969, net of transaction expenses of $7,031 (the “Transaction”).
The Purchase Agreement contains representations and warranties of the Company and the Investors that are typical for transactions of this type. The Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type. For a period of twelve months after the closing date of Transaction, the Investors are entitled to a right of first refusal (the “ROFR”) with respect to subsequent sales of securities by the Company (other than with respect to issuances of Excluded Securities (as defined in the Purchase Agreement)) Pursuant to the ROFR, each Investor will have the opportunity to elect to purchase its pro rata portion of thirty percent (30%) of any securities being offered by the Company in the subsequent offering.
In connection with the entry into the Purchase Agreement, the Investors and the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) whereby the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) within 90 days of the closing of the transactions contemplated by the Purchase Agreement (the “Filing Date”) covering the resale of (a) all shares of Common Stock Issuable upon conversion of the Preferred Shares, (b) all shares of Common Stock issuable upon exercise of the Warrants, (c) all other shares of Common Stock issued pursuant to any transaction documents which have been, or which may, from time to time be issued or become issuable to the Investors under the Transaction Documents (without regard to any limitation or restriction on purchases), and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event (“Registrable Securities”), not then registered.
The Company will use its reasonable best efforts to keep the registrations statement effective pursuant to Rule 415 under the Securities Act until the earlier of (i) the date on which the Investors shall have sold all the Registrable Securities covered thereby and (ii) that date that all Registrable Securities may be sold pursuant to Rule 144 without any public information requirement or volume or manner of sale limitations.
The Warrants are exercisable immediately and expire on August 16, 2021 and have an exercise price of $4.38 per share. The Warrants include a “full ratchet” anti-dilution adjustment in the event that the Company issues any common stock or common stock equivalent at a per share price lower than the applicable exercise price then in effect.
As a result of sale of the Company’s common stock in April 2018, the full-ratchet anti-dilution protection provision of the warrants decreased the exercise price of the warrants from $4.38 per share to $3.75 per share and increased the aggregate number of shares issuable under the warrants from 200,000 to 233,334.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
In connection with its entry into the Purchase Agreement, on February 14, 2018, the Company entered into a consent agreement (the “Consent”) with the holders of the Company’s Series D Convertible Preferred Stock (the “Series D Holders”). Pursuant to the Consent, the Series D Holders consented to the Transaction and are entitled at any time on or before April 17, 2018, to elect to receive the more favorable terms of the Transaction. In consideration for their entry into the Consent, the Company issued to the Series D Holders warrants to purchase up to an aggregate of 40,000 shares of Common Stock (the “Consent Warrants”). The Consent Warrants are exercisable immediately and expire on February 14, 2021 and have an exercise price of $3.75 per share. The Consent Warrants include a “full ratchet” anti-dilution adjustment in the event that the Company issues any common stock or common stock equivalent at a per share price lower than the applicable exercise price then in effect.
2018 Conversions:
In August 2018, the Company issued an aggregate of 141,852 shares of its common stock in exchange for 307 shares of the Company’s Series E Preferred Stock and accrued dividends.
In September 2018, the Company issued an aggregate of 150,504 shares of its common stock in exchange for 318 shares of the Company’s Series E Preferred Stock and accrued dividends.
In November 2018, the Company issued an aggregate of 184,920 shares of its common stock in exchange for 375 shares of the Company’s Series E Preferred Stock and accrued dividends.
In summary, the Company issued an aggregate of 477,276 shares of its common stock in exchange for 1,000 shares of the Company’s Series E Preferred stock (stated value of $1,500,000) and $315,000 accrued dividends for the year ended December 31, 2018.
As of December 31, 2019, and 2018, the Company had 0 Series E Preferred Stock issued and outstanding and has accrued $0 dividends payable on the Series E Preferred stock.
Common stock
On September 10, 2018, the Company amended its Articles of Incorporation to implement a reverse stock split in the ratio of 1 share for every 2.5 shares of common stock. No fractional shares were issued from such aggregation of common stock, upon the reverse split; any fractional share was rounded up and converted to the nearest whole share of common stock. As a result, 40,333,758 of the Company’s common stock were exchanged for 16,133,544 of the Company's common stock resulting in the transfer of $24,200 from common stock to additional paid in capital. These consolidated financial statements have been retroactively restated to reflect the reverse stock split.
The Company is authorized to issue 200,000,000 shares of $0.001 par value common stock. As of December 31, 2019 and 2018, the Company had 23,323,087 and 16,868,783 shares issued and outstanding, respectively.
During the year ended December 31, 2018, the Company issued 897,050 shares of its common stock for services totaling $4,243,345 ($4.730 per share).
During the year ended December 31, 2018, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 2,115,078 shares of common stock and 1,090,040 warrants for aggregate proceeds of $9,139,721.
During the year ended December 31, 2018, the Company issued 8,000 shares of common stock and 4,000 warrants for a previously received common stock subscription of $29,985.
During the year ended December 31, 2018, the Company issued 583,328 shares of common stock in exchange for proceeds of $2,217,397 from the exercise of warrants.
During the year ended December 31, 2018, the Company issued 35,601 shares of common stock in exchange for the exercise of 187,389 cashless exercises of warrants.
During the year ended December 31, 2018, the Company issued 140,001 shares of common stock in exchange for proceeds of $615,600 from the exercise of options.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
During the year ended December 31, 2019, the Company issued an aggregate of 1,558,317 shares of its common stock for services totaling $9,675,328 ($6.21 per share).
During the year ended December 31, 2019, the Company issued an aggregate of 113,332 shares of its common stock for vested restricted stock units as stock-based compensation.
On March 14, 2019, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 2,155,127 shares of common stock for aggregate proceeds of $8,619,278, net of $1,230 in expenses.
On December 31, 2019, the Company entered into securities purchase agreements with investors pursuant to which the Company issued 231,335 shares of common stock for aggregate proceeds of $1,387,910, net of $100 in expenses.
During the year ended December 31, 2019, the Company issued 1,860,479 shares of common stock in exchange for proceeds of $7,470,807 from the exercise of warrants.
During the year ended December 31, 2019, the Company issued 162,592 shares of common stock in exchange for the exercise of 309,926 cashless exercises of warrants.
During the year ended December 31, 2019, the Company issued 189,620 shares of common stock in exchange for proceeds of $938,034 from the exercise of options.
During the year ended December 31, 2019, the Company issued 92,788 shares of common stock in exchange for the exercise of 360,457 cashless exercises of options.
During the year ended December 31, 2019, NeuroClear, a previous wholly-owned subsidiary, sold 739,000 shares of its common stock (“Subsidiary Stock”) for net proceeds of $3,694,645 ($5.00 per share). In connection with the sale, the Company provided that in the event that (i) the Subsidiary Stock is not listed on a national securities exchange by October 31, 2020, or (ii) a change of control, as defined in the stock purchase agreement, of NeuroClear occurs, whichever is earlier, at the option of the holder of Subsidiary Stock, each share of Subsidiary Stock may be exchanged into 0.9 of a share of common stock of the Company.
During the year ended December 31, 2019, NeuroClear, a previous wholly-owned subsidiary, sold 157,690 shares of Subsidiary Stock for net proceeds of $1,316,664 ($8.35 per share). In connection with the sale, the Company provided that in the event that (i) the Subsidiary Stock is not listed on a national securities exchange by October 31, 2020, or (ii) a change of control, as defined in the stock purchase agreement, of NeuroClear occurs, whichever is earlier, at the option of the holder of Subsidiary Stock, each share of Subsidiary Stock may be exchanged into 1.1 of a share of common stock of the Company.
In connection with certain Company 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 CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
If (i) the registration statement is not filed within 45 days of the applicable termination date, (ii) the registration statement is not declared effective by the Securities and Exchange Commission within 30 calendar days after the Company is notified that registration statement is not being reviewed by the Securities and Exchange Commission, in the case of a no review, (iii) the registration statement is not declared effective by the Securities and Exchange Commission within 180 calendar days of the initial filing date of the registration statement in the case of a review by the Securities and Exchange Commission pursuant to which the Securities and Exchange Commission issues comments or (iv) the registration statement ceases to remain continuously effective for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period after its first effective date, then the Company is subject to liquidated damage payments to the holders of the shares sold in the private placement in an amount equal to 1.0% of the aggregate purchase price paid by such purchasers per month of delinquency, provided, however, that the Company will not be required to make any payments any of the foregoing events occurred at such time that all securities registered or to be registered in the registration statement are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and provided, further, that the Company will not be required to make any liquidated damage payments with respect to any securities registered or to be registered in the registration statement that the Company is unable to register due to limits imposed by the Securities and Exchange Commission’s interpretation of Rule 415 under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, (i) the maximum aggregate liquidated damages due under the registration rights agreements shall be 3% to 6% of the aggregate purchase price paid by the purchasers and (iii) if any partial amount of liquidated damages remains unpaid for more than seven days, the Company shall pay interest of 18% per annum, accruing daily, on such unpaid amount.
Pursuant to the registration rights agreements, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, subject to the right to suspend or defer the use of the registration statement in certain events.
The Company filed registration statements, which was declared effective to satisfy the requirements under the registration rights agreements with the purchasers of its common stock and warrants prior to April 6, 2017. The final closing under the April 6, 2017 Private Placement occurred on December 31, 2017. On February 28, 2018, the Company filed the required registration statement and on March 26, 2018 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
On November 3, 2017, in connection with the Company’s private placement of Series D Preferred Stock and warrants, the Company entered into a registration rights agreement with the purchasers pursuant to which the Company agreed to provide certain registration rights with respect to the common stock issuable upon conversion of Series D Preferred Stock and exercise of the warrants issued to holders of Series D Preferred Stock. On December 18, 2017, the Company filed the required registration statement and on December 29, 2017 was declared effective. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019 and 2018.
On February 16, 2018, in connection with the Company’s private placement of Series E Preferred Stock and warrants, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) whereby the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) within 90 days of the closing of the transactions contemplated by the Purchase Agreement (the “Filing Date”) covering the resale of (a) all shares of Common Stock Issuable upon conversion of the Preferred Shares, (b) all shares of Common Stock issuable upon exercise of the Warrants, (c) all other shares of Common Stock issued pursuant to any transaction documents which have been, or which may, from time to time be issued or become issuable to the Investors under the Transaction Documents (without regard to any limitation or restriction on purchases), and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event (“Registrable Securities”), not then registered.
On May 16, 2018, the Company filed the required registration statement. The Company has estimated the liability under the registration rights agreement at $-0- as of December 31, 2019.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 10 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
BioSig Technologies, Inc.
2012 Equity Incentive Plan
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, stock appreciation rights, restricted stock and restricted stock units to purchase up to 9,474,450 (as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.
However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.
Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 1,303,951 shares of its common stock for future issuance under the terms of the Plan.
During the year ended December 31, 2018, the Company granted an aggregate of 559,698 options to officers, directors and key consultants.
During the year ended December 31, 2018, the Company granted an aggregate of 897,050 stock grants to officers, employees and key consultants under the plan. See Note 9.
During the year ended December 31, 2019, the Company granted an aggregate of 1,599,053 options to officers, directors and key consultants.
During the year ended December 31, 2019, the Company granted an aggregate of 1,558,317 stock grants to officers, employees and key consultants under the plan. See Note 9.
Options
The following table presents information related to stock options at December 31, 2019:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$
|
2.51-5.00
|
|
|
|
1,533,361
|
|
|
|
7.7
|
|
|
$
|
1,168,361
|
|
|
5.01-7.50
|
|
|
|
2,124,110
|
|
|
|
5.1
|
|
|
|
1,552,044
|
|
|
7.51-10.00
|
|
|
|
323,333
|
|
|
|
8.0
|
|
|
|
153,612
|
|
|
|
|
|
|
3,980,804
|
|
|
|
6.3
|
|
|
|
2,874,017
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
A summary of the stock option activity and related information for the 2012 Plan for the years ended December 31, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2018
|
|
|
3,404,131
|
|
|
$
|
5.28
|
|
|
|
5.7
|
|
|
$
|
-
|
|
Grants
|
|
|
559,698
|
|
|
$
|
4.65
|
|
|
|
10.0
|
|
|
$
|
-
|
|
Exercised
|
|
|
(140,001
|
)
|
|
$
|
4.40
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
(688,000
|
)
|
|
$
|
4.64
|
|
|
|
|
|
|
|
-
|
|
Outstanding at December 31, 2018
|
|
|
3,135,828
|
|
|
$
|
5.34
|
|
|
|
5.2
|
|
|
$
|
-
|
|
Grants
|
|
|
1,599,053
|
|
|
|
5.99
|
|
|
|
10.0
|
|
|
$
|
-
|
|
Exercised
|
|
|
(550,077
|
)
|
|
$
|
5.44
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(204,000
|
)
|
|
$
|
5.51
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
3,980,804
|
|
|
$
|
5.58
|
|
|
|
6.3
|
|
|
$
|
3,130,791
|
|
Exercisable at December 31, 2019
|
|
|
2,874,017
|
|
|
$
|
5.47
|
|
|
|
5.1
|
|
|
$
|
2,469,138
|
|
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 $5.92 as of December 31, 2019, 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 using the Company’s own historical stock prices. 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, 2019 and 2018 was estimated using the Black-Scholes pricing model.
On February 15, 2018, the Company granted 20,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $3.55 per share for a term of ten years with vesting immediately.
On May 4, 2018, the Company granted 226,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.43 per share for a term of ten years with vesting immediately.
On May 14, 2018, the Company granted 100,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.43 per share for a term of ten years with vesting immediately.
On October 16, 2018, the Company granted 34,566 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years with 17,283 vesting immediately and 17,283 vesting January 1, 2019.
On October 16, 2018, the Company granted 69,132 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years with 17,283 vesting immediately and 17,283 vesting January 1, 2019, 17,283 vesting January 1, 2020 and 17,283 vesting January 1, 2021.
On October 16, 2018, the Company granted 110,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.09 per share for a term of ten years vesting immediately.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
The following assumptions were used in determining the fair value of employee options for the year ended December 31, 2018:
|
|
|
|
|
Risk-free interest rate
|
|
|
2.65% to 3.16
|
%
|
Dividend yield
|
|
|
0
|
%
|
Stock price volatility
|
|
|
92.08% to 94.10
|
%
|
Expected life
|
|
|
5 to 10 years
|
|
Weighted average grant date fair value
|
|
$
|
3.37
|
|
On January 22, 2019, the Company granted 460,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.33 per share for a term of ten years with quarterly vesting beginning April 1, 2019 for three years.
On March 14, 2019, the Company granted 345,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $6.66 per share for a term of ten years with 20,000 options vesting on March 14, 2020, 175,000 options vesting quarterly beginning April 1, 2019 for three years and 150,000 options vesting one third on anniversary for three years.
On July 2, 2019, the Company granted 158,333 options to purchase the Company stock in connection with the services rendered at the exercise price of $9.056 per share for a term of ten years with 133,333 options vesting quarterly beginning September 30, 2019 for three years, and 25,000 vesting as follows: 1/6th on vesting date, then remaining options quarterly vesting beginning September 30, 2019 for three years.
On October 8, 2019, the Company granted 45,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $8.00 per share for a term of ten years with quarterly vesting beginning December 31, 2019 for three years.
On October 30, 2019, the Company granted 195,720 options to purchase the Company stock in connection with the services rendered at the exercise price of $7.15 per share for a term of ten years vesting immediately.
On December 27, 2019, the Company granted 395,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $6.16 per share for a term of ten years with 15,000 vesting immediately and 380,000 vesting quarterly beginning March 31, 2020 for three years.
The following assumptions were used in determining the fair value of employee options for the year ended December 31, 2019:
|
|
|
|
|
Risk-free interest rate
|
|
|
1.45% to 2.74
|
%
|
Dividend yield
|
|
|
0
|
%
|
Stock price volatility
|
|
|
86.74% to 91.55
|
%
|
Expected life
|
|
|
5 to 10 years
|
|
Weighted average grant date fair value
|
|
$
|
5.75
|
|
On May 17, 2019, in connection with the retirement of two members of the Company’s board of directors, the Company extended the life of 628,905 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life up or May 17, 2021. The change in estimated fair value of the modified options of $666,062 was charged to current period operations.
The following assumptions were used in determining the change in fair value of the modified options at May 17, 2019:
Risk-free interest rate
|
|
|
2.33% - 2.40
|
%
|
Dividend yield
|
|
|
0
|
%
|
Stock price volatility
|
|
|
89.97
|
%
|
Expected life
|
|
0.12– 2 years
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
The fair value of all options vesting during the year ended December 31, 2019 and 2018 of $2,165,810 and $2,357,242, respectively, was charged to current period operations. Unrecognized compensation expense of $4,513,290 and $173,446 at December 31, 2019 and 2018, respectively, will be expensed in future periods.
Restricted Stock
The following table summarizes the restricted stock activity for the two years ended December 31, 2019:
Restricted shares issued as of January 1, 2018
|
|
|
-
|
|
Granted
|
|
|
-
|
|
Vested
|
|
|
-
|
|
Total restricted shares issued as of December 31, 2018
|
|
|
-
|
|
Granted
|
|
|
376,000
|
|
Vested
|
|
|
(113,332
|
)
|
Vested restricted shares as of December 31, 2019
|
|
|
25,000
|
|
Unvested restricted shares as of December 31, 2019
|
|
|
262,668
|
|
On February 28, 2019, the Company granted an aggregate of 70,000 restricted stock grants for services with 23,332 vested immediately; 23,334 vesting at one-year anniversary and 23,334 vesting at two-year anniversary.
On March 20, 2019, the Company granted an aggregate of 120,000 restricted stock grants for services vesting quarterly beginning on April 1, 2019 over one year.
On June 21, 2019, the Company granted 50,000 restricted stock units for services with 25,000 vesting at one-year anniversary and 25,000 at two-year anniversary.
On August 7, 2019, the Company granted 40,000 restricted stock grants for services vesting at one-year anniversary.
On September 24, 2019, the Company granted 40,000 restricted stock grants for services with 20,000 vesting at one-year anniversary and 20,000 at two-year anniversary.
On December 12, 2019, the Company granted 6,000 restricted stock grants for services with 3,000 vesting on February 2, 2020 and 3,000 on May 2, 2020.
On December 26, 2019, the Company granted 50,000 restricted stock grants for services with 25,000 vesting immediately and 25,000 on June 30, 2020.
Stock based compensation expense related to restricted stock grants was $1,586,736 and $0 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the stock-based compensation relating to restricted stock of $1,017,983 remains unamortized.
NeuroClear Technologies, Inc.
2019 Long-Term Incentive Plan
On September 24, 2019, NeuroClear Technologies, Inc.’s Board of Directors approved the 2019 Long-Term Incentive Plan (the “NeuroClear Plan”), subject to NeuroClear’s stockholders. The Plan provides for the issuance of options, stock appreciation rights, restricted stock and restricted stock units to purchase up to 1,750,000 shares of NeuroClear’s common stock to officers, directors, employees and consultants of the NeuroClear. Under the terms of the Plan, NeuroClear may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of NeuroClear only and nonstatutory options. The Board of Directors of NeuroClear or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.
However, the exercise price of an Incentive Stock Option should not be less than 110% of fair market value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair market value for a grantee who is not 10% stockholder. The fair market 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.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Additionally, the vesting period of the grants under the NeuroClear Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years.
NeuroClear Options
On October 11, 2019, the Company granted 575,000 options to purchase NeuroClear common stock in connection with services rendered at an exercise price of $5.00 per share, for a term of 10 years, vesting immediately.
The fair value of the 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 with the market value of stock price based on recent sales. 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 following assumptions were used in determining the change in fair value of the NeuroClear options at October 11, 2019:
Risk-free interest rate
|
|
|
1.56
|
%
|
Dividend yield
|
|
|
0
|
%
|
Stock price volatility
|
|
|
71.0
|
%
|
Expected life
|
|
5 years
|
|
The fair value of the granted NeuroClear options of $1,696,250 was charged to current period operations.
Restricted stock units (NeuroClear)
On September 24, 2019, the Company granted 40,000 restricted stock units for services vesting monthly over one year.
Stock based compensation expense related to restricted stock unit grants of NeuroClear was $53,552 and $0 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the stock-based compensation relating to restricted stock of $146,448 remains unamortized.
Warrants
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at December 31, 2019:
Exercise
|
|
|
Number
|
|
Expiration
|
Price
|
|
|
Outstanding
|
|
Date
|
$
|
0.0025
|
|
|
|
153,328
|
|
January 2020
|
$
|
3.75
|
|
|
|
715,844
|
|
February 2020 to January 2021
|
$
|
4.375
|
|
|
|
602,272
|
|
April 2021 to May 2021
|
$
|
4.60
|
|
|
|
9,167
|
|
January 2020
|
$
|
5.05
|
|
|
|
8,566
|
|
January 2020
|
$
|
6.16
|
|
|
|
568,910
|
|
November 2027
|
$
|
6.85
|
|
|
|
205,523
|
|
July 2021 to August 2021
|
$
|
9.375
|
|
|
|
481,108
|
|
March 2020
|
|
|
|
|
|
2,744,718
|
|
|
On January 5, 2018, the Company issued 40,000 warrants to purchase the Company’s common stock at $3.75 per share, expiring on January 5, 2021, in connection with the sale of the Company’s common stock.
On February 14, 2018, the Company entered into a consent agreement with the holders of the Company’s Series D Convertible Preferred Stock. Pursuant to the consent, the Series D Holders consented to the Series E Preferred Stock transaction and are entitled at any time on or before April 17, 2018, to elect to receive the more favorable terms of the transaction. In consideration for their entry into the consent, the Company issued to the Series D Holders warrants to purchase up to an aggregate of 40,000 shares of common stock. The consent warrants are exercisable immediately and expire on February 14, 2021 and have an exercise price of $3.75 per share. The warrants contain certain anti-dilutive provisions (see Note 8).
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
On February 16, 2018, the Company issued an aggregate of 200,000 warrants to purchase the Company’s common stock at $4.375 per share, expiring on August 16, 2021, in connection with the sale of the Company’s Series E preferred stock. The warrants contain certain anti-dilutive provisions. On April 30, 2018, the exercise prices of the previously issued 200,000 warrants were reset to $3.75 and an additional 33,334 warrants were issued at $3.75 per share due to reset provisions (see Note 8).
On April 30, 2018, the Company issued 638,606 warrants to purchase the Company’s common stock at $4.375 per share, expiring on April 30, 2021, in connection with the sale of the Company’s common stock.
On May 11, 2018, the Company issued 28,000 warrants to purchase the Company’s common stock at $4.375 per share, expiring on May 11, 2021, in connection with the sale of the Company’s common stock.
On July 31, 2018, the Company issued 41,174 and 41,174 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on April 30, 2019 and July 30, 2021, respectively, in connection with the sale of the Company’s common stock.
On August 7, 2018, the Company issued 40,482 warrants to purchase the Company’s common stock at $6.85 per share, expiring on August 7, 2021 in connection with placement services provided for the sale of our common stock.
On August 16, 2018, the Company issued 82,266 and 82,266 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on May 16, 2019 and August 16, 2021, respectively, in connection with the sale of the Company’s common stock.
On August 17, 2018, the Company issued 54,036 and 54,036 warrants to purchase the Company’s common stock at $3.75 and $6.85 per share, expiring on May 17, 2019 and August 17, 2021, respectively, in connection with the sale of the Company’s common stock. In addition, in connection with the sale, the Company issued on August 7, 2018, 40,482 warrants to purchase the Company’s common stock at $6.85 per share, expiring on August 7, 2021 for placement agent services.
On November 20, 2019, the Company issued an aggregate of 568,910 warrants to purchase the Company’s common stock at $6.16 per share, expiring on November 20, 2027, to Mayo Foundation in connection with two know-how licensing agreements (See Note 13). The fair value of the of the issued warrants of $1,886,894, determined using the Black-Scholes option model with an estimated volatility of 71%, risk free rate of 1.69%, dividend yield of -0- and fair value of the Company’s common stock of $6.16, was charged to current period operations as acquired research and development.
A summary of the warrant activity for the years ended December 31, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic Value
|
|
Outstanding at January 1, 2018
|
|
|
5,115,805
|
|
|
$
|
4.55
|
|
|
|
1.7
|
|
|
$
|
551,636
|
|
Grants
|
|
|
1,375,374
|
|
|
$
|
4.54
|
|
|
|
3.0
|
|
|
|
-
|
|
Exercised
|
|
|
(770,717
|
)
|
|
$
|
3.99
|
|
|
|
-
|
|
|
|
-
|
|
Canceled/Expired
|
|
|
(1,140,951
|
)
|
|
$
|
4.23
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2018
|
|
|
4,579,511
|
|
|
$
|
4.73
|
|
|
|
1.5
|
|
|
$
|
1,924,388
|
|
Grants
|
|
|
568,910
|
|
|
|
6.16
|
|
|
|
7.0
|
|
|
|
-
|
|
Exercised
|
|
|
(2,170,406
|
)
|
|
$
|
3.99
|
|
|
|
|
|
|
|
|
|
Canceled/Expired
|
|
|
(233,297
|
)
|
|
$
|
7.24
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
2,744,718
|
|
|
$
|
5.40
|
|
|
|
2.2
|
|
|
$
|
3,410,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2019
|
|
|
2,744,718
|
|
|
$
|
5.40
|
|
|
|
2.2
|
|
|
$
|
3,410,763
|
|
Exercisable at December 31, 2019
|
|
|
2,744,718
|
|
|
$
|
5.40
|
|
|
|
2.2
|
|
|
$
|
3,410,763
|
|
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
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 $5.92 as of December 31, 2019, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.
Warrants (NeuroClear)
On November 20, 2019, NeuroClear issued 473,772 warrants to purchase the Company’s common stock at $5.00 per share, expiring on November 20, 2027, to Mayo Foundation in connection with a know-how licensing agreement (See Note 13). The fair value of the of the issued warrants of $1,275,448, determined using the Black-Scholes option model with an estimated volatility of 71%, risk free rate of 1.69%, dividend yield of -0- and the estimate fair value of NeuroClear’ s common stock of $5.00, based on recent sales activity, was charged to current period operations as acquired research and development.
NOTE 11 – NON-CONTROLLING INTEREST
On November 7, 2018, the Company formed NeuroClear, a Delaware Corporation, for the purpose to pursue additional applications of the PURE EP™ signal processing technology outside of electrophysiology. In 2019, NeuroClear sold an aggregate of 896,690 shares of its common stock for net proceeds of $5,011,309 to fund initial operations. As of December 31, 2019, the Company had a majority interest in NeuroClear of 87.8%.
A reconciliation of the NeuroClear Technologies, Inc. non-controlling loss attributable to the Company:
Net loss attributable to the non-controlling interest for the year ended December 31, 2019:
Net loss
|
|
$
|
(3,807,763
|
)
|
Average Non-controlling interest percentage of profit/losses
|
|
|
10.92
|
%
|
Net loss attributable to the non-controlling interest
|
|
$
|
(415,849
|
)
|
The following table summarizes the changes in non-controlling interest for the nine months ended September 30, 2019:
Balance, December 31, 2018
|
|
$
|
-
|
|
Allocation of equity to non-controlling interest due to sale of subsidiary stock
|
|
|
930,677
|
|
Net loss attributable to non-controlling interest
|
|
|
(415,849
|
)
|
Balance, December 31, 2019
|
|
$
|
514,828
|
|
NOTE 12 – 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 CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
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.
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 31,2019, and 2018, the Company did not have any items that would be classified as level 1, 2 or 3 disclosures.
As of December 31, 2019, and 2018, the Company did not have any derivative instruments that were designated as hedges.
There were no derivative and warrant liability as of December 31, 2019 and 2018.
The following table provides a summary of changes in fair value of the Company’s level 3 financial liabilities as of December 31, 2019:
|
|
Warrant
Liability
|
|
|
Derivative
|
|
Balance, January 1, 2018
|
|
$
|
2,358,240
|
|
|
$
|
685,922
|
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Transfers out due to the adoption of ASU 2017-11 effective January 1, 2018
|
|
|
(2,358,240
|
)
|
|
|
(685,922
|
)
|
Balance, December 31, 2018 and 2019
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Operating leases
See Note 5 for operating lease discussion
Licensing agreements
2017 Know-how License Agreement
On March 15, 2017, the Company entered into a know-how license agreement with Mayo Foundation for Medical Education and Research whereby the Company was granted an exclusive license, with the right to sublicense, certain know how and patent applications in the field of signal processing, physiologic recording, electrophysiology recording, electrophysiology software and autonomics to develop, make and offer for sale. The agreement expires in ten years from the effective date.
The Company is obligated to pay to Mayo Foundation a 1% or 2% royalty payment on net sales of licensed products, as defined.
In consideration, the Company issued 252,000 warrants to acquire the Company’s common stock at an exercise price of $3.75, expiring on March 15, 2020. The warrant fully exercised in 2019.
Patent and Know-How License Agreement
On November 20, 2019, the Company entered into a patent and know-how license agreement (the “EP Software Agreement”) with Mayo Foundation for Medical Education and Research (“Mayo”). The EP Software Agreement grants to the Company an exclusive worldwide license, with the right to sublicense, within the field of electrophysiology software and under certain patent rights as described in the EP Software Agreement (the “Patent Rights”), to make, have made, use, offer for sale, sell and import licensed products and a non-exclusive license to the Company to use the research and development information, materials, technical data, unpatented inventions, trade secrets, know-how and supportive information of Mayo to develop, make, have made, use, offer for sale, sell, and import licensed products. The EP Software Agreement will expire upon the later of either (a) the expiration of the Patent Rights or (b) the 10th anniversary of the date of the first commercial sale of a licensed product, unless earlier terminated by Mayo for the Company’s failure to cure a material breach of the EP Software Agreement, the Company’s or a sublicensee’s commencement of any action or proceedings against Mayo or its affiliates other than for an uncured material breach of the EP Software Agreement by Mayo, or insolvency of the Company.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
In connection with the EP Software Agreement, the Company issued to Mayo an 8-year warrant (the “EP Software Warrant”) to purchase 284,455 shares of the Company’s common stock at an exercise price of $6.16. The EP Software Warrant is immediately exercisable and may be exercised on a cashless basis if there is no effective registration statement registering or a current prospectus available for the resale of the shares underlying the EP Software Warrant. The Company agreed to pay Mayo an upfront consideration of $25,000. The Company also agreed to make earned royalty payments to Mayo in connection with the Company’s sales of the licensed products to third parties and sublicense income received by the Company and to make milestone payments of up to $625,000 in aggregate.
Amended and Restated Patent and Know-How License Agreement
On November 20, 2019, the Company entered into an amended and restated patent and know-how license agreement (the “Tools Agreement”) with Mayo. The Tools Agreement contains terms of license grant substantially identical to the EP Software Agreement, although it is for different patent rights and covers the field of electrophysiology systems.
In connection with the Tools Agreement, the Company issued to Mayo an 8-year warrant (the “Tools Warrant”) to purchase 284,455 shares of the Company’s common stock at an exercise price of $6.16. The Tools Warrant is immediately exercisable and may be exercised on a cashless basis if there is no effective registration statement registering or a current prospectus available for the resale of the shares underlying the Tools Warrant. The Company agreed to pay Mayo an upfront consideration of $100,000. The Company also agreed to make earned royalty payments to Mayo in connection with the Company’s sales of the licensed products to third parties and sublicense income received by the Company and to make milestone payments of up to $550,000 in aggregate.
NeuroClear Patent and Know-How License Agreement
On November 20, 2019, the Company’s majority-owned subsidiary, NeuroClear, entered into a patent and know-how license agreement (the “NeuroClear Agreement”) with Mayo. The NeuroClear Agreement contains terms of license grant substantially identical to the EP Software Agreement and the Tools Agreement, although it is for different patent rights and covers the field of stimulation and electroporation for hypotension/syncope management, renal and non-renal denervation for hypertension treatment, and for use in treatment of arrhythmias in the autonomic nervous system.
In connection with the NeuroClear Agreement, NeuroClear issued to Mayo an 8-year warrant (the “NeuroClear Warrant”) to purchase 473,772 shares of NeuroClear’s common stock at an exercise price of $5.00 per share. The NeuroClear Warrant is immediately exercisable and may be exercised on a cashless basis if there is no effective registration statement registering or a current prospectus available for the resale of the shares underlying the NeuroClear Warrant. NeuroClear agreed to pay Mayo an upfront consideration of $50,000. NeuroClear also agreed to make earned royalty payments to Mayo in connection with NeuroClear’s sales of the licensed products to third parties and sublicense income received by the Company and to make milestone payments of up to $700,000 in aggregate.
Employment agreements
As of December 31, 2019, and 2018, there are no outstanding employment agreements.
Defined Contribution Plan
Effective January 1, 2019, the Company established a qualified defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby all eligible employees may participate. Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) plan, subject to defined limitations. The Company is required to make contributions to the 401(k) Plan equal to 3 percent of each participant’s eligible compensation, subject to limitations under the Code. For the year ended December 31, 2019, the Company charged operations $110,443 for contributions under the 401(k) Plan.
Litigation
The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. There was no outstanding litigation as of December 31, 2019.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 14 – INCOME TAXES
At December 31, 2019, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $64,000,000, expiring in the year 2037, 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, 2019, the Company has increased the valuation allowance by $6,300,000 from $7,200,000 to $13,500,000.We have adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.
Tax position that meet the more likely than not threshold is then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.
The Company is required to file income tax returns in the U.S. Federal various State jurisdictions. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2013.
The effective rate differs from the statutory rate of 21% as of December 31, 2019 and 2018 due to the following:
|
|
2019
|
|
|
2018
|
|
Statutory rate on pre-tax book loss
|
|
|
(21.00
|
)%
|
|
|
(21.00
|
)%
|
(Gain) loss on change in fair value of derivatives
|
|
|
-
|
%
|
|
|
-
|
%
|
Stock based compensation
|
|
|
3.35
|
%
|
|
|
8.25
|
%
|
Fair value of warrant to acquire research and development
|
|
|
1.93
|
%
|
|
|
-
|
%
|
Other
|
|
|
0.04
|
%
|
|
|
0.04
|
%
|
Valuation allowance
|
|
|
15.68
|
%
|
|
|
12.71
|
%
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The Company’s deferred taxes as of December 31, 2019 and 2018 consist of the following:
|
|
2019
|
|
|
2018
|
|
Non-Current deferred tax asset:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
13,500,000
|
|
|
$
|
7,200,000
|
|
Valuation allowance
|
|
|
(13,500,000
|
)
|
|
|
(7,200,000
|
)
|
Net non-current deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affect 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21% effective January 1, 2018. For certain deferred tax assets and deferred tax liabilities, we have recorded a provisional decrease of $3,200,000 with a corresponding net adjustment to valuation allowance of $3,200,000 as of January 1, 2018.
NOTE 15 – SUBSEQUENT EVENTS
Equity Financing
On February 21, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Laidlaw & Company (UK) Ltd. (the “Underwriter”), relating to an underwritten public offering of 2,500,000 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”) with final closing on February 25, 2020. All of the Shares were sold by the Company. The public offering price of the Shares is $4.00 per share, and the Underwriter has agreed to purchase the Shares from the Company pursuant to the Underwriting Agreement at a price of $3.68 per share. After the underwriting discount, but before offering expenses payable by it, the Company received net proceeds from the offering of $9,200,000.
BIOSIG TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
Pursuant to the Underwriting Agreement, the Company issued to the Underwriter or its designees warrants to purchase up to an aggregate 125,000 shares of Common Stock, or 5% of the number of Shares sold in the offering (the “Underwriter Warrants” and together with the Common Stock issuable upon exercise of the Underwriter Warrants, the “Underwriter Securities”). The Underwriter Warrants will be exercisable following the date of issuance and ending five years from the date of the execution of the Underwriting Agreement, at a price per share equal to $4.80 (120% of the public offering price per Share) and are exercisable on a “cashless” basis. The Company also agreed to reimburse the Underwriter for certain of their out-of-pocket expenses incurred in connection with the offering, including, among other things, the reasonable fees and expenses of counsel, which fees and expenses may not exceed $100,000.
Common stock issuances
In January 2020, the Company issued an aggregate of 55,000 shares of the Company’s common stock for vested restricted stock units.
In January 2020, the Company issued 3,750 shares of the Company’s common stock in exchange for 10 shares of Series C preferred stock and accrued dividends.
In January 2020, the Company issued an aggregate of 11,141 shares of the Company’s common stock in exchange for the cashless exercise of 309,630 options.
In January 2020, the Company issued an aggregate of 10,574 shares of the Company’s common stock in exchange for the cashless exercise of 32,360 warrants.
In January 2020, the Company issued 3,800 shares of the Company’s common stock in exchange for proceeds of $14,246 from the exercise of warrants
In February 2020, the Company issued an aggregate of 26,334 shares of the Company’s common stock for vested restricted stock units.
In February 2020, the Company issued an aggregate of 31,732 shares of the Company’s common stock in exchange for proceeds of $118,995 from the exercise of warrants.
Option issuances
On January 10, 2020, the Company granted an aggregate of 60,000 options to purchase shares of the Company’s common stock to consultants. The options are exercisable at $6.00 for ten years and vested quarterly over three years.